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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NUMBER 1-9335
SCHAWK, INC.
(Exact name of Registrant
as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
36-2545354
(I.R.S. Employer Identification No.)
1695 RIVER ROAD
DES PLAINES, ILLINOIS
(Address of principal executive office)
60018
(Zip Code)
847-827-9494
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH REGISTERED
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CLASS A COMMON STOCK, NEW YORK STOCK EXCHANGE
$.008 PAR VALUE
Indicated 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 / /
Indicated by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value on March 18, 1996, of the voting stock held by
non-affiliates of the Registrants was approximately $53,827,804.
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The number of shares outstanding of each of the issuer's classes of common stock as of March 18, 1996, are:
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19,315,107 shares, Common Stock, $.008 par value 135,310 shares, Class B Common Stock, $.05 par value
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DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
DOCUMENT PART AND ITEM NUMBER OF FORM 10-K INTO WHICH INCORPORATED.
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1. Joint Proxy Statement for the 1996 Annual Part III, Items 10, 11, 12 and 13.
Meeting of Stockholders to be held May 15,
1996 (the "Joint Proxy Statement").
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SCHAWK, INC.
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
DECEMBER 31, 1995
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PART I PAGE
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Item 1. Business 1
Item 2. Properties 16
Item 3. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of Security Holders 17
PART II
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Item 5. Market for the Registrants'
Common Stock and Related Stockholder Matters 18
Item 6. Selected Financial Data 19
Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations 20
Item 8. Financial Statements and Supplementary Data 25
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures 49
PART III
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Item 10. Directors and Executive Officers of the Registrant 49
Item 11. Executive Compensation 49
Item 12. Security Ownership of Certain Beneficial Owners and Management 49
Item 13. Certain Transactions 49
PART IV
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Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 49
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PART 1
ITEM 1. BUSINESS
THE COMPANY
Schawk, Inc. ("Schawk" or the "Company") has two operating divisions, the
Imaging and Information Technologies Group (the "Imaging Group") and the
Plastics Group (the "Plastics Group"). The Imaging Group is a leader in the
prepress industry in the United States primarily serving consumer products
businesses. The Imaging Group offers a complete line of prepress services, art
design and products for the production of consumer product packaging and
related marketing and advertising materials. The Plastics Group manufactures
injection molded plastic filtration, custom specialty plastic and thermoformed
products.
Schawk was founded in 1953 as a small platemaking venture operating from
one location in Chicago, Illinois. Under the direction of Clarence W. Schawk
and his son, David A. Schawk, Schawk grew to a diversified international
corporation with operations in the United States, Puerto Rico and Europe
employing more than 1,600 personnel. Over the past 21 years, Schawk developed
an active acquisition program and successfully integrated more than 25
businesses into Schawk's operations while streamlining overhead. The Company
intends to continue to expand through acquisitions of well-managed companies
with solid market positions, established customer relationships and new
technologies.
In 1992, Schawk acquired controlling interest in Filtertek, Inc.
("Filtertek"). Effective December 30, 1994, the corporation previously known as
Schawk, Inc. ("Old Schawk") and certain affiliated corporations (collectively
with Old Schawk, the "Old Schawk Companies") were merged into Filtertek in a
transaction accounted for as a purchase transaction. The surviving corporation
in the merger was Filtertek which then changed its name to Schawk, Inc.;
however, under applicable accounting rules the historical financial statements
of the Old Schawk Companies, rather than the Filtertek statements, are treated
as the financial statements of the Company. The Plastics Group is comprised
primarily of what had been the business of Filtertek prior to the merger and
the Imaging Group is comprised primarily of what had been the business of the
Old Schawk Companies.
The Company's principal executive offices are located at 1695 River Road,
Des Plaines, Illinois 60018, and its telephone number is (847) 827-9494.
IMAGING AND INFORMATION TECHNOLOGIES GROUP
The Company has grown the Imaging Group through a combination of internal
growth, new products and services and a series of acquisitions. The Company
believes that its Imaging Group is the leading producer of color prepress
imaging arts services for the consumer products packaging industry in the
United States, particularly for food and beverage producers. For more than 40
years, the Imaging Group has provided comprehensive prepress products and
services, including but not limited to conventional, electronic and desktop
color separations, electronic production design, film preparation, platemaking
and press proofs for the three main printing processes: lithography,
flexography and gravure.
The Imaging Group has particular expertise in preparing color images for
multimillion-unit production runs of consumer products packaging. The Imaging
Group functions as a vital interface between its Fortune 500 consumer products
clients, their creative designs and their converters in assuring the production
of consistent, high quality packaging materials in increasingly shorter
turnaround times. The Imaging Group's ability to provide high quality prepress
work in a short time frame makes it a valued player in new product introduction
and promotional activity. The Imaging Group also maintains archives of product
package layouts and designs, further improving its efficiency in accommodating
clients' packaging design changes and product line extensions. By continuing to
provide such high-end, value-added services, the Imaging Group commands a
significant share of the market for prepress services for the food and beverage
industry which uniquely positions it to benefit from positive industry
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trends, such as repetitive labeling changes, the increased number of SKU and
the use of packaging as a means of product promotion and differentiation.
PLASTICS GROUP
The Plastics Group includes Filtertek, Plastic Molded Concepts, Inc.
("PMC") and Tek Packaging Group, Inc. (formerly known as Robinson Industries,
Inc. ["Robinson"], Fuzere Manufacturing Company, Inc., and the Fuzere Midwest
division). The Company has announced the sale of PMC to PMC's management. The
transaction is anticipated to be completed by the end of April 1996.
The formation of the Plastics Group began in 1984 when Schawk acquired
Robinson, a supplier of visual packaging products. Because it capitalized on
Schawk's expertise in production package design and increased Schawk's
packaging capabilities, Robinson's visual or blister packaging business was a
natural extension for Schawk. Subsequently, Schawk expanded its plastic
packaging capabilities with various acquisitions and start-up ventures. As
Robinson was a supplier, Schawk became familiar with Filtertek. Building on its
experience in dealing with a large multinational Fortune 500 client base,
Schawk effectively acquired a controlling interest in Filtertek in 1992.
Management believes that one of the Plastics Group's key competitive
advantages lies in its advanced designs and patented manufacturing processes,
which have enabled the Group to occupy strong positions in each of the niche
markets it serves. New product applications provide opportunities for growth in
the various markets served by the Plastics Group, and the Plastics Group also
seeks to diversify into new markets for its products and services. For example,
through strategic alliances, the Plastics Group has recently achieved unique
access to the dental and aftermarket automotive market segments.
BUSINESS
The Imaging Group is one of the leading providers of prepress graphic arts
products and services in the United States for consumer products businesses.
The Imaging Group offers a complete line of prepress services and products,
including electronic production design, color separations, film proofs, plate
and laser-engraved rollers for the manufacture of product packaging and related
marketing and advertising materials.
The Plastics Group manufactures injection molded plastic filtration,
custom specialty plastic and thermoformed products.
Financial information concerning the Imaging Group and Plastics Group is
provided in Note 14, "Segment Data," in the Company's financial statements.
INDUSTRY BACKGROUND
IMAGING GROUP. Prepress services are generally defined as those tasks
involved in preparing an image for reproduction by any of several types of
printing processes. Providers of prepress services, such as the Company's
Imaging Group, interface between consumer products manufacturers and the
creative designers and converters used by those businesses to produce
packaging, for example, product cartons, boxes, trays, cans, containers,
packaging labels and related point-of-sale and promotional materials.
PREPRESS SERVICES DO NOT ENTAIL THE ACTUAL PRINTING OR PRODUCTION OF SUCH
PACKAGING MATERIALS, BUT RATHER INCLUDE THE VARIOUS PREPARATORY STEPS SUCH AS
ART PRODUCTION DESIGN, COLOR SEPARATION AND OTHER PHOTOPLATEMAKING SERVICES,
FOR USE IN LITHOGRAPHY, FLEXOGRAPHY AND GRAVURE, WHICH ARE THE PRINCIPAL
PRINTING PROCESSES CURRENTLY USED IN THE GRAPHIC ARTS INDUSTRY. "COLOR
SEPARATION" REFERS TO PREPARING COLOR IMAGES, TEXT AND LAYOUT FOR THE PRINTING
PROCESS.
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The Imaging Group's services consist principally of the electronic and
digital production, to customer specifications, of art production of design,
color separations and color proofs. These products are an intermediate step
between creative artwork and the actual printing of graphic materials. The
production of color separations requires skilled, highly trained technicians
applying various image manipulation, assembly and color filtering techniques in
order to preserve the integrity of the original image when translated into
print and to ensure consistency of the printed materials.
Prepress services such as color separation work have traditionally been
performed by skilled craftsmen almost entirely by hand, using what is known as
the "conventional" method. With the development of electronic technology,
prepress firms such as the Imaging Group have become increasingly computerized,
relying instead on digitized imaging, in which artwork is scanned using laser
optics, digitized, then output to film, tape, or disc, according to customer
specifications. On an increasing basis, the material being supplied by the
clients is presented in a digitized format on a variety of removable media,
including tape, floppy disk and CD ROM. The image can also be manipulated
electronically (as, for example, to substitute a different background in a
particular picture or to enhance shading or lighting of the graphics).
Additionally, with its expansion into electronic art production design, the
Imaging Group is utilizing its technical expertise to serve clients'
requirements. Given the increased computerization of the prepress services
industry, highly trained technicians are essential to the quality of the end
product.
The prepress services industry is highly fragmented among many market
participants, which tend to be smaller companies. Providers of prepress
services include independent color separators, such as the Imaging Group, and
converters. The Imaging Group specializes in prepress services relating to the
packaging and promotional needs of customers in the food and beverage industry,
particularly high-end clients who need to ensure nationwide consistency in the
packaging of their products.
Each time a manufacturer redesigns its packaging or wishes to use
packaging as a promotional vehicle, new art production color separation work is
required. Product extensions and a high level of packaging redesign, prompted
by several trends, have contributed to an increasing volume of color separation
work for the consumer products industry. These trends include: (i) consumer
products companies are producing increasing numbers of SKUs in order to gain
shelf space and market share; (ii) food and beverage producers are increasingly
utilizing package design and point-of-purchase promotions to market their
products; (iii) the disclosure requirements of the Food and Drug
Administration, which have heightened consumer awareness of product
ingredients; and (iv) consumers' increasing preferences for healthier,
reformulated food and beverage products. To capitalize on these trends,
management believes that the Imaging Group must continue to be able to afford
clients the ability to make numerous changes and enhancements with shorter
turnaround times than ever before. Accordingly, the Imaging Group continues to
invest in the rapidly emerging technology and is committed to the continuing
education of its employees and clients.
The development of lower cost desktop publishing systems has increased the
potential for competition in the prepress industry by lowering barriers to
entry relating to equipment costs. However, this development has also resulted
in the proliferation of software packages, many of which create new
capabilities for the equipment. This frequent change in industry software
necessitates constant training and education. The Imaging Group has addressed
this issue through the formation of its Client Services Consulting Group, which
trains and educates employees, designers and clients on the ever-increasing
changes in imaging technologies and practices. As technology advances in the
imaging industry, speed is becoming a significant differentiator. The Imaging
Group believes that its ability to provide quick turnaround time, dependability
and value-added training and education programs will continue to give it a
competitive advantage in serving clients who require high volume, high quality
product imagery.
PLASTICS GROUP. The business of the Plastics Group consists primarily of
the design, manufacture and sale of specialty plastic insert injected
filtration devices, custom injection molded components and thermoform packaging
for automotive, healthcare, consumer, industrial and other markets. The
industry is highly fragmented with many niche players, many of which lack the
technical skills and expertise to produce large volumes of high tech products.
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Prior the mid-1960s, most filters were manufactured from metal components
by stamping, assembling, crimping and welding metal frames to form filter
elements. These metal filters were relatively expensive, excessively heavy, of
varying levels of quality, and subject to fatigue and corrosion. However, in
the mid-1960s, fabricated metal filter products began to be replaced with
lighter weight, more efficient plastic filter products. The development of new
membranes and synthetic media, such as polyester and nylon, paralleled the
rapidly developing technology of thermoplastic resins to provide significantly
improved filters. These new materials made possible low cost, disposable
filters with high filtration levels that were compatible with a wider range of
fluids and gasses. These enhancements expanded the demand for lightweight, high
filtration devices. The Plastics Group has introduced numerous new products and
entered several new markets to capitalize on this increased demand. The
Plastics Group's volume is also growing as new applications for filtration
devices are being developed on an ongoing basis in response to recent
developments for healthcare, automotive and environmental applications.
The insert injection molding techniques used by the Plastics Group involve
inserting filter media, such as woven screen, membrane or felt which have been
preformed and precut, into an injection mold. The mold is closed and
thermoplastic resin is injected, framing and bonding the media to form a
unitized filter. The Plastics Group's molds are able to produce as many as 128
filters per cycle, depending on size, complexity and cost targets. Other
processing technologies exist whereby injection molded component parts are
subjected to a secondary process, such as sonic, vibration or spin welding,
that assembles media into component parts to form completed filtration devices.
Other devices, such as light gauge thermoform products and packages, are
manufactured from raw materials with highly sensitive properties that require
special handling.
The synthetic fiber, filter paper, membrane and metallic cloth media that
the Plastics Group works with satisfy a wide range of customer requirements for
particle control, tensile strength, flow rates and corrosion resistance.
Thermoplastic resins also are used in designing custom molded frames. The
selected resin is often coated with additives to augment certain desired
properties. Advanced design and manufacturing techniques employed by the
Plastics Group, including such patented processes as overmolding multilayer
encapsulation and two-piece, in-line filter construction, provide greater
latitude, structural integrity, and the cost-effectiveness required by today's
zero-defect markets.
In order to protect their equipment and to ensure the efficiency of the
devices being protected or the effectiveness of the device itself, a number of
the Plastics Group's customers, particularly in the automotive and healthcare
markets, require inspection of each filtration device produced, as opposed to
random sample inspections. Because of the time and expense involved in
establishing manufacturing processes compatible with such requirements,
competitors of the Plastics Group face a potential barrier to entry in these
markets which require a high volume of precision devices coupled with short
cycle times and 100% inspection.
The Plastics Group also provides visual packaging products, including
blister packaging, which is an increasingly popular means of displaying
consumer products for sale in hardware, convenience, warehouse and drug stores
and other similar retail outlets. Batteries, cosmetics, hardware items,
electrical components, razor blades and toys are among the large variety of
products sold in clear plastic blisters. The Plastics Group believes that the
visual packaging market offers considerable growth opportunity.
STRATEGIC OUTLOOK
The Company's primary goals involve enhancing its leadership positions in
the prepress imaging and plastic injection molded filtration device markets,
and strengthening its positions in the specialty plastics and thermoforming
markets. Key aspects of the Company's business strategy to achieve these goals
include the following:
- ACQUISITIONS. To create the economies of scale required to
support the cost of its business strategy, the Company has developed
an active acquisition program. The Company's sustained profitability
and ready access to capital have enabled it to make strategic
acquisitions. In its 42-year history, the Company has successfully
integrated more than 25 acquired businesses into its operations
while streamlining overhead. These successful acquisitions are
elements of a strategic plan to acquire market
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niche companies with Fortune 500 customer lists, excellent customer
service or proprietary products and solid management which receives
performance incentives to continue to grow the business. The Company
intends to continue expanding through acquisitions of well-managed
companies with solid market positions and established client lists
and new technologies. The Company believes that emphasis on
complementary acquisitions of companies serving targeted markets
will allow it to broaden its product offerings and provide its
clients with a single source for prepress and/or plastics products.
The Company believes it has greater versatility in manufacturing and
in serving its customers than smaller, less integrated competitors
lacking technical expertise, and that this versatility will result
in greater opportunities for internal growth as well as enhancing
the Company's image as an attractive purchaser for potential
acquisition candidates. The Company believes that there continue to
be a number of attractive acquisition candidates in the fragmented
consolidating industries in which it operates, particularly
packaging, filtration and specialty plastics. The Company expects to
strengthen its market positions by applying its management and
operational practices, which have been successful in its graphic
arts businesses, to newly acquired businesses.
- MANAGEMENT PHILOSOPHY. The Company believes that its
management philosophy has resulted in improved market share and
margin performance in its Imaging Group. The Company has instilled
this same philosophy in the Plastics Group which, it believes, has
contributed to recent performance improvement. This philosophy
incorporates the following key concepts:
- TOTAL QUALITY MANAGEMENT. A cornerstone of the
Company's management philosophy is its emphasis on high
quality. The Company is committed to the principles of TQM and
stresses to all employees, regardless of level, the importance
of striving to meet or exceed customer expectations.
Historically, the Imaging Group has made the necessary
investments in employee training and technological
improvements to achieve this level of performance. Since the
formation of the Plastics Group, one of management's primary
initiatives has been to instill this philosophy in the Group.
Through the Company's application of TQM, employees have
adopted the necessary commitment to customer service that is
essential to quick turnaround and consistent delivery of high
quality products and services. Management believes that the
Company's commitment to TQM is essential to customer
satisfaction by decreasing the likelihood of a defect in or
failure of any of the Company's products or services which
could prove costly to a customer. Such increased quality
results in decreased costs to customers and the Company in the
long run. Consequently, the Company is driven to make the
necessary investments to ensure that these products and
services continue to meet the highest quality standards.
- CLIENT SERVICE. Another key to the Company's
management philosophy has been its commitment to client
service. The Imaging Group believes that this commitment has
contributed the confidence and loyalty its clients have shown.
Use of the latest computer equipment and software, while
providing the opportunity for quicker turnaround, has placed
greater reliance upon the accuracy of formatting and
information input methodologies. In order to ensure this
accuracy as early in the process as possible, well-trained,
highly efficient customer service personnel are vital. The
Company's emphasis on on-site client representatives, along
with a "whatever it takes" attitude, has further solidified
existing imaging client relationships. Management believes
that the Plastics Group is beginning to reap similar rewards
for its focus on customer service.
- EMPLOYEE TRAINING AND INCENTIVES. The Company
believes that its most valuable assets are its employees
because its ability to provide clients with high quality
products and services depends upon their dedication and
expertise. The Company provides extensive and frequent
training to keep its employees abreast of the latest
technological developments in the graphics arts and plastics
industries. During 1995, for example, the Imaging Group
provided an estimated 4,564 hours of in-house training to its
employees, clients and their suppliers. Since 1992, in order
to facilitate its employees' familiarity with the latest
technological
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developments, the Company established a program
pursuant to which all employees were eligible to receive
interest-free loans of up to $2,500 for the purchase of
personal computers. By maintaining high levels of employee
satisfaction, the Company has secured consistently high levels
of responsiveness to its customers. In order to reward
employees for superior performance, the Company has developed
incentive compensation programs, including the Company match
for its retirement 401k program, an economic value-added
("EVA") bonus program.
- TECHNICAL EXPERTISE. The Company is able to
provide its customers with high quality products and services
and quick response time because of its efficient utilization
of state-of-the-art equipment and systems. The Company is
dedicated to remaining ahead of the curve of imaging and
plastics molding technologies by participating in innovations
in operations and equipment. As part of this commitment to
changing technology, the Company has historically worked with
software developers to create software that fully addresses
the Company's and its clients' needs and currently acts as a
test site for numerous hardware and software products. In
order to facilitate the exchange of information among its
various facilities, in 1991, the Imaging Group established the
Schawk Technical Advisory Board for the purpose of
coordinating the research and evaluation of new technologies
in the graphic arts market industry. This group continues to
be recognized for its effort by being invited to present
numerous national and international symposiums and
conferences.
- EXPLOITATION OF INDUSTRY TRENDS. The Company
enjoys a successful history of strengthening its market
positions by identifying and exploiting industry trends. As a
consequence, the Imaging Group was uniquely positioned, as a
premium single-source provider of prepress services, to
benefit as consumer products manufacturers began to outsource
imaging functions and reduce the number of suppliers. This
unique position has enabled the Imaging Group to capitalize on
the increased use of packaging as a means of product
differentiation and promotion. Further, the Imaging Group
believes that its commitment to customer service and its broad
array of premium services demonstrate to its clients the value
of using the Imaging Group as its primary prepress supplier.
The Imaging Group, in the past, has benefited from the trends
in the food and beverage packaging industry toward extended
product lines and increased SKUs to capture additional shelf
space and market share and increased use of packaging for
promotional purposes. In 1995, while the Company saw a notable
slowdown in new product releases, it also laid the foundation
for the expansion of art production services. The Company
believes that trends in the healthcare and consumer products
industries present significant opportunities for the Plastics
Group. For example, recent heightened awareness of potential
air, water and blood contamination provides new product
opportunities for the Plastics Group's filtration business,
including but not limited to its needle-free access devices.
PRODUCTS AND SERVICES
IMAGING GROUP. The Imaging Group offers comprehensive, high quality
prepress services and products. The Imaging Group's facilities produce
conventional, electronic and desktop color separations, electronic production
design, film preparation, platemaking and press proofs for the three main
printing processes: lithography, flexography and gravure. The Imaging Group's
services consist principally of the production, to customer specifications, of
art production design, color separations and color proofs produced
electronically and digitally. These products are an intermediate step between
creative artwork and the actual printing of graphic materials. The production
of electronic art production and color separations requires skilled, highly
trained technicians applying various computerized design, manipulation and
assembly techniques.
The preparation of film, digital tape and press proofs for lithography,
flexography and other printing processes related to packaging accounted for
approximately 75% of the Imaging Group's net sales in 1995. The balance of the
Imaging Group's business consisted of the production of similar product and
services for point of
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sale, advertising and direct mail. The Imaging Group focuses on clients in the
consumer products industry, where its ability to provide a high degree of image
quality and consistency affords it a competitive advantage. Image quality and
consistency and ever-shortening response time are becoming increasingly
important to consumer products manufacturers as packaging assumes a greater
role in product promotion. While prepress work represents a relatively small
percentage of overall packaging costs, the visual impact (and, consequently,
the effectiveness) of product packaging is largely dependent upon the quality
of the prepress work.
As technology has created opportunities for quicker production
turnarounds, most of the Imaging Group's Fortune 500 consumer products clients
have capitalized on this opportunity to modify their packaging more frequently
in order to customize their promotional activities on a regional, seasonal or
sporting event basis. This activity has greatly increased the importance of
maintaining the integrity of the electronic image design and text data for each
package variation. The Imaging Group has the capacity to maintain past, current
and future package design data and, accordingly, serves as a quick access
library of accurate file data for its customers.
The Imaging Group's services are distinguished by a combination of the
following core competencies:
- TECHNICAL EXPERTISE. The Imaging Group emphasizes continuing
training and development of its employees to ensure their effective
utilization of state-of-the-art equipment and systems. Through
programs offered at the Company-owned training center, at clients'
on-site locations and at various national and regional seminars, the
Imaging Group has had success in elevating its clients' standards
and opportunities to levels requiring the superior technical
expertise and capabilities that distinguish its services.
- ACTIVE INTERFACE WITH CONVERTERS. The Imaging Group
coordinates extensively with the converters for its customers'
product packages to ensure uniformity in color and appearance. Over
40 years of service to the industry has enabled the Company to
develop a reputation of superior performance and confidence with the
converter. Individual printing presses may vary in the application
of ink, affecting the quality of the color image. In order to
minimize the effects of these variations, the Imaging Group makes
necessary adjustments to its color separation work to account for
irregularities or idiosyncrasies in the printing presses of its
clients' converters. The Imaging Group strives to afford its clients
total control over their imaging arts processes with customized and
coordinated service designed to ensure that the color quality,
accuracy and consistency of a client's printed matter is maintained.
- QUICK RESPONSE TIME. The ability to complete prepress
services for packaging designs in a short period of time is
essential to the Imaging Group's success. In connection with the
introduction of a new or reformulated product, the Imaging Group is
often required to complete prepress packaging work in as little as
24 hours. The Imaging Group is able to provide its clients with
quick turnaround time largely because of its state-of-the-art
prepress technologies as well as its extensive archive of its
clients' package designs. The Imaging Group also places its
employees on-site with clients to facilitate development of
packaging designs which will convert easily into attractive
packaging.
PLASTICS GROUP. The Plastics Group currently produces more than 800
different filtration products ranging from highly sophisticated disposable
medical and automotive filters to simple filters used to protect equipment from
dust and water contamination. Most of the Plastics Group's filters are produced
utilizing insert injection molding techniques, in which the filtration media is
encapsulated in a plastic housing. The Plastics Group believes it is one of the
leading producers in the world of filtration devices manufactured through the
insert injection molding process.
The market for filtration devices has grown consistently as end-users
develop new applications in which filtration provides protection for people and
equipment and improves product safety and performance. Management believes that
one of the Plastics Group's primary strengths is its use and development of
advanced design and manufacturing techniques, which provide broader latitude,
greater structural integrity and increased cost-effectiveness compared to more
conventional techniques.
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Consistent with its emphasis on technological innovations, the Plastics
Group has focused on the development of numerous proprietary products and
processes designed to enhance the Plastics Group's competitive position. The
Plastics Group owns outright and/or has exclusive manufacturing rights to
several significant patents, including a claim for the encapsulation of
membrane filters, a two-piece filter design, the encapsulation of multiple
layers of membrane, fuel injection nozzle filters, a process to hermetically
seal sump transmission filters, a design for European in-tank fuel filters, a
friction welding process, a needle-free access device for medical applications,
a dental waterline filter, a medical check valve and a manufacturing component
tray.
The Plastics Group's products are sold primarily to manufacturers in the
following four markets:
- AUTOMOTIVE. As the complexity of automotive systems has increased,
so has the demand for filtration. The two fastest growing
filtration applications for automobiles involve anti-lock braking
("ABS") and powertrain-related systems. It is estimated that by the
mid-to-late 1990s, ABS systems will be installed on almost all
domestically produced cars. The Plastics Group has made significant
penetration in the ABS market and will continue to have
opportunities for additional market share as these systems become
required standard devices. The Plastics Group's newly patented
vibration welding process for automatic transmission sump filters is
becoming more widely accepted at the original equipment manufacturer
("OEM") level given the increased design flexibility, weight
savings, recyclability and increased performance the process
provides over other technologies. Given the lead time from design to
introduction of new car models, the Plastics Group projects realize
significant revenue from these filters in the 1997 and 1998 fiscal
years. Our products in this niche have increased from four vehicle
platforms in 1994 to vehicle platform penetration of 24 vehicles for
which new filters are currently being qualified. The Plastics Group
has elected to focus on those products which are unique or
proprietary in nature and not the low margin, "me too" variety of
product.
- HEALTHCARE. The Plastics Group's healthcare filters and devices are
mainly sold to OEMs in the industry. These products are incorporated
into finished products by the Plastics Group's customers and sold to
end-users. The Plastics Group currently manufactures an extensive
range of healthcare products, from simple vent filter devices to
complex blood filters. The heightened awareness of disease
transmittal and contamination associated with blood transfer has
increased demand for blood filtration devices. The Plastics Group's
filter media encapsulation process is particularly important in that
it achieves the required uniform and complete sealing of delicate
filter media within the plastic housing. This process also allows
the sealing of plastic materials such as nylon and polypropylene,
which are difficult to seal with other types of processes. Patent
protection has been granted for a new family of needle-free access
connectors which can be used in drug infusion therapy as well as in
numerous other medical applications. In addition, in April 1995, the
Plastics Group entered into an alliance with Solopak Pharmaceuticals
of Elk Grove Village, Illinois, to market a new, patented
needle-free access family of products to the I.V. infusion market.
Solopak has licensed this product and purchased tooling and
automation to establish an initial capacity of 20 million units
annually. The Plastics Group has completed a new manufacturing cell
for these products, and production is scheduled to begin in the
second quarter of 1996.
The Plastics Group also serves the healthcare market through the
design and production of thermoform packaging products meeting
specified sterilization requirements. In addition, the Plastics
Group produces light gauge thermoform products, including components
manufactured from raw materials with highly sensitive properties
requiring special handling, environmentally controlled clean-room
manufacturing facilities or sterilization processes, for the
healthcare market.
- CONSUMER PRODUCTS. The Plastics Group's products sold to consumer
products manufacturers are principally point-of-purchase visual
packaging. "Blister" packaging, another product of the Plastics
Group, is an increasingly popular means of displaying consumer
products for sale in hardware, convenience, warehouse and drug
stores and other similar retail outlets. Thermoformed blister
packaging is produced by heat-sealing a clear plastic bubble, or
blister, which the Plastics Group's technicians have shaped and
designed, onto coated cardboard, or by sealing two-sided packages
9
<PAGE> 11
through heat or microwave application. Batteries, cosmetics,
hardware items, electrical components, sporting goods and toys are
among the large variety of products sold in clear, thermoformed
plastic packages. The Plastics Group designs and manufactures a
complete selection of visual packaging in such forms as blisters,
cards, clam shells, tri-folds, trays and header and display cards.
In addition, under the trade name "Plasti-Chain," the Plastics Group
manufactures finished products such as plastic chains, stanchions,
posts, brick and log border edgings and other lawn and garden items,
which it distributes directly to retailers.
- INDUSTRIAL AND OTHER PRODUCTS. The Plastics Group sells more
than 550 different products to OEMs for use in a variety of
applications, including appliances, computers, scientific equipment
and farm machinery. Specific products include filters for coffee
makers, dishwashers, tertiary water purification systems, lawn
mowers, outboard motors, small engines and numerous other diverse
applications. The Plastics Group also produces certain light gauge
thermoform products for the electronics industry. The Plastics Group
has capabilities in product design, tool design, prototype tool
construction, molding of production and prototype parts, and various
decorating and post molding operations.
RESEARCH AND DEVELOPMENT
IMAGING GROUP. The Imaging Group is dedicated to keeping abreast of and,
in a number of cases, initiating technological process developments in its
industry. To build upon its leadership position, the Imaging Group is actively
involved in system and software technical evaluations of various computer and
software manufacturers and also independently pursues software development for
implementation at its operating facilities. The Imaging Group continually
invests in new technology designed to support its high quality prepress
services. The Imaging Group concentrates its efforts in understanding systems
and tools available in the marketplace and creating solutions for off the shelf
products.
The Imaging Group has established the Schawk Technical Advisory Board for
the purpose of researching and evaluating new technologies in the graphic arts
industry. The Advisory Board, which formally meets quarterly to review new
equipment and programs, facilitates the exchange of information among the
various facilities in the Imaging Group, thereby conserving time and money
spent in researching new technologies. Informal review and discussion of
technological developments, however, is ongoing.
The Imaging Group provides training to clients and employees alike on a
regular basis. In 1992, the Imaging Group established the Schawk Client Service
Consulting Group to offer customers desktop software training, proprietary
software development, and technical training designed for the packaging
industry. In 1993, the Imaging Group opened the Schawk Technical Training and
Education Center to offer industry desktop software training to customers,
certain vendors and employees. During 1995, the Imaging Group presented at 22
events, publishing 56 technical reports and quarterly newsletters, which were
distributed to our clients as well as to our internal imaging operations. The
group provided an estimated 3,199 hours of in-house training to its employees
and 1,365 hours of in-house training to customers and to many of their
designers and converters.
PLASTICS GROUP. An important component of the Plastics Group's research
and development efforts involves coordination with customers in developing new
products designed to suit customer needs. In 1993, 1994 and 1995, research and
development expenditures were approximately $3.7 million, $3.4 million and $3.5
million, respectively, substantially all of which amounts were effectively
reimbursed by customers. Development of a new product typically begins with
customer contact by the Plastics Group's sales engineers to identify a product
need. The sales engineers work closely with a customer to define the customer's
requirements and expectations. The Plastics Group develops a product design,
mold and automation design. After the Plastics Group reviews the design with
the customer, tooling and automation are built using state-of-the-art CAD/CAM
systems and machining centers. The Plastics Group added dedicated research and
development equipment in an effort to reduce product development time.
In most cases, a prototype is produced to aid in the development of a
product and to identify unknown factors in process and product design. Field
trials may be conducted with the prototype product to verify that the
10
<PAGE> 12
product meets customer requirements. Testing and specifications are developed
cooperatively with customers so that specified requirements are consistently
understood and met.
The Plastics Group has expanded its design and development capabilities to
include 3D design and rapid prototype modeling and has invested in advanced
equipment devices (ultrasonic welding, laser machines and robots) and computer
control systems to ensure process and quality control in its manufacturing
operations. In many cases, the Plastics Group will use specialized outside
suppliers to assist in building equipment components that cannot be
economically built by the group, as well as to ensure that the newest
technologies are being used to maintain the Plastics Group's technological edge
in the marketplace. The cost of tooling for a new product is often borne by the
customer, in which case the customer owns, and has a proprietary interest in,
the mold. The cost of tooling for a typical new product may range from as low
as $5,000 to more than $200,000. If automation is involved, the total project
could be $1 million or more. The customer often shares in costs of automation
in addition to the tooling. Management believes that strong, long-term customer
partnerships develop as a result of this shared financial commitment where the
customer participates in the costs of tooling and/or automation.
The Plastics Group has a number of standard products which, in many cases,
assist the customer in developing its own unique products, thereby shortening
the development process. Standard products require no tooling or automation
investment by the customer. The Plastics Group is also actively involved in the
development of new product applications, such as improved check valves, drug
infusion filters and needle-free connectors, in anticipation of customer needs
and independent of customer funding. To date, these products have been
primarily in the healthcare area.
As another means of accessing new technologies, the Plastics Group has
pursued strategic alliances with customers in an effort to improve its
competitive position.
Resources are devoted to new products on the basis of rate of return and a
market and economic analysis which indicates a long-term product usage
potential. Product development and qualification can take from six months to
three years before final product release.
MARKETING AND DISTRIBUTION
IMAGING GROUP. The Imaging Group markets its services nationally,
including through seminars, newsletters and training sessions targeted at
existing and potential customers. The Imaging Group sells its services through
a group of approximately 80 direct salespersons and 100 customer service
technicians who call on consumer products manufacturers, including those in the
food and beverage, home products, pharmaceutical and cosmetics industries and
direct mail. The Imaging Group has marketing agreements with four European
companies and one company in the Far East.
PLASTICS GROUP. The Plastics Group sells its products to OEMs in North
America and Europe through a combination of direct sales professionals and
manufacturers' representatives. At year-end, North American operations had 12
full-time direct sales professionals and European operations had four full-time
direct sales professionals and had contracted with three independent sales
representatives. Recently, the European operations' sales and marketing efforts
were reorganized to centralize reporting responsibility directly to the
President of European operations, based in France. Sales representatives are
based at each manufacturing plant. In 1995, the Plastics Group's foreign
operations accounted for approximately 19% of the Group's net sales and were
generated primarily in France, Germany, the United Kingdom and Italy.
CUSTOMERS
IMAGING GROUP. As part of its increasing focus on being the agent for
those parties to whom it provides products and services, the Imaging Group
considers those parties to be clients and not just customers. The Imaging
Group's clients consist of: (i) direct purchasers of color separations,
including end-use consumer products manufacturers; (ii) converters; and (iii)
advertising agencies. Many of the Imaging Group's clients, a large percentage
of which are Fortune 500 companies, are multinational in scope and often use
numerous converters
11
<PAGE> 13
throughout the country. Because these clients desire uniformity of color and
image quality across a variety of media, the Imaging Group plays a very
important role in coordinating their printing activities by maintaining current
specifications of each of its clients' converters. Management believes that
this role has enabled the Imaging Group to establish closer and more stable
relationships with these clients. End-use clients often select and utilize the
Imaging Group to ensure better control of their packaging or other needs and
depend upon the Imaging Group to act as their agent to ensure consistency among
numerous converters and packaging media. The Imaging Group also has several
employees working at selected client facilities to maximize the efficiency and
quality of the Imaging Group's services to those clients. As its new art
production services continue to expand, the Imaging Group anticipates that it
will be well positioned to further develop its efforts in providing
telecommunication services.
Many of the Imaging Group's clients place orders on a daily and weekly
basis and work closely with the Group year round as they frequently redesign
product packaging or introduce new products. While certain promotional
activities are seasonal, such as those relating to back-to-school time and
holidays, shorter technology-driven prepress cycle time has enabled consumer
products manufacturers to tie their promotional activities to current events
(such as sporting events), prompting such manufacturers to redesign their
packages more frequently and resulting in a correspondingly higher number of
packaging redesign assignments. This technology-driven trend towards more
frequent packaging changes has offset previous seasonal fluctuations in the
volume of the Imaging Group's business. In addition, consumer products
manufacturers have a tendency to sole-source their prepress work with respect
to a particular product line, so that changes to the basic design can be made
more efficiently. As a result, the Imaging Group has developed a base of steady
clients in the food and beverage industry. During 1995, no single customer
accounted for more than 7% of the Imaging Group's net sales, and the 10 largest
customers in the aggregate accounted for less than 38% of net sales.
The Imaging Group's reputation for high quality services is in large part
due to its emphasis on client service and TQM. Each client is assigned to a
designated technician (large accounts may be assigned to two or more service
representatives) to promote continuity in a client's relations with the Imaging
Group. Client relations are generally handled through the facility providing
services to the particular Clients Service Group representatives typically
monitor the production of a client's project throughout the production process
to ensure compliance with client specifications and completion of the project
in a timely manner.
PLASTICS GROUP. The Plastics Group primarily sells its products to
manufacturers for incorporation into finished products subsequently sold to
end-users. The Plastics Group sells most of its automotive filters directly to
OEMs both domestically and in Europe, as well as to the automotive suppliers
who require filters in the subsystems they supply to the automobile
manufacturers. The Plastics Group supplies its healthcare product filters and
devices to customers in the U.S. and Europe. Many of the Plastics Group's
customers in the automotive and healthcare industries sole-source their
production work with the company which originally designed the product. Thus,
the Plastics Group frequently gets contracts from customers for whom it has
performed design work. The Plastics Group also supplies many other smaller
customers in the U.S. and Europe with a wide range of filters and devices. The
Plastics Group's thermoforming business has targeted the consumer, custom
electronics and medical packaging market segments. During 1995, no single
customer accounted for more than 6% of the Plastics Group's net sales, and the
10 largest customers in the aggregate accounted for approximately 22% of net
sales.
12
<PAGE> 14
The following is an alphabetical listing of a representative sample of
current clients and customers of the Company:
IMAGING GROUP PLASTICS GROUP
------------------------------------- -----------------------------
Bayer Corporation Abbott Laboratories
Campbell Soup Company Baxter International Inc.
ConAgra, Inc. Bendix
General Mills, Inc. Robert Bosch Corporation
Hershey Foods Corporation Braun, Inc.
Hunt-Wesson, Inc. Chrysler Corporation
Leaf Inc. Emerson Electric
Leo Burnett Company, Inc. Ford Motor Company
Lever Brothers G.D. Searle & Company Ltd.
Lipton Tea Company, Ltd. General Motors Corporation
M&M/Mars Gerber Products Company
Nabisco Foods Group Haemonetics Corporation
Pillsbury Inc. IGA, Inc.
The Procter & Gamble Company IMED
Publishers Clearing House ITT Teves America
The Quaker Oats Company M&M/Mars
The Reader's Digest Association, Inc. Marwal European
SmithKline Beecham Motorola, Inc.
Stouffer Foods Corporation Pall Corporation
Renault V.I. and Peugeot S.A.
BACKLOG
The Company's backlog of unfilled orders was approximately $22.0 million
on December 31, 1995, compared with approximately $22.8 million on December 31,
1994. Most orders are filled within 90 days of receipt. It is anticipated that
substantially all of the orders on hand on December 31, 1995 will be filled
during 1996. Although orders are subject to cancellation by the purchaser, the
Company's experience has been that the impact of such cancellations is not
significant.
COMPETITION
IMAGING GROUP. The Imaging Group's competition comes from three sources:
other independent color separators, converters which have prepress service
capabilities, and customers who are able to use developing technologies to
perform in-house the services previously provided by the Imaging Group.
Independent color separators are companies whose business is performing
prepress services for one or more of the principal printing processes. The
Imaging Group believes that only one firm, Wace Group U.S.A., a subsidiary of
Wace P.L.C., competes with it on a national basis and that only one other firm,
Southern Graphics, a subsidiary of Reynolds Aluminum, competes with it on a
regional basis. The remaining independent color separators are local firms that
compete in specific markets. To remain competitive, each firm must maintain
customer relationships and recognize, develop and exploit state-of-the-art
technology.
Some converters with prepress service capabilities compete with the
Imaging Group by performing such services in connection with printing work.
Independent color separators such as the Imaging Group, however, may offer
greater technical capabilities and speed of delivery. In addition, converters
may also utilize the services of the Imaging Group because of their own limited
productive capacities and technical skills. Increasingly dependent upon
technology, converters have exhibited growing reluctance to provide prepress
services.
Finally, until recently, the Imaging Group faced continuing competition
from some of its own clients who sought to reduce costs by performing color
separation services in-house. To counter this threat, the Imaging Group
13
<PAGE> 15
continues to use clients' education programs to demonstrate the value added by
the Imaging Group's continual investments in rapidly changing technology and
training. The Imaging Group believes that its skilled personnel and the ongoing
training provided to employees and clients will continue to distinguish the
Group from its competitors. Furthermore, there is a growing trend for clients
to outsource more work to the Imaging Group.
PLASTICS GROUP. The Plastics Group competes in the filter, visual
packaging and specialty plastics markets. The filter industry is characterized
by a wide range of specialty products. The Plastics Group's market niche
developed from its ability to insert mold and overmold a wide variety of woven
screens, non-woven media and membranes. The Plastics Group competes on the
basis of service, cost, quality, design, manufacturing process and timeliness
of delivery. A recent focus of the Plastics Group is to reduce competitive
pressures through a more focused effort to develop patent protection products.
The Plastics Group has five principal competitors in the insert molding
business of filter manufacturing in the United States: the Filtran Division of
SPX Corporation; ITW-Deltar Division; the Kuss Division of Fleetguard
Corporation; Arbor Technologies; and Gelman Sciences. Each of these companies
competes only in certain market segments and none competes in every market
segment against the Plastics Group.
The thermoforming market is fairly fragmented with no company having a
dominant share of the market. The printing market is similarly fragmented. Very
few competitors have both thermoforming and printing capabilities.
PURCHASING AND RAW MATERIALS
IMAGING GROUP. The Imaging Group purchases photographic film and
chemicals, paper, ink, plate materials, and various other supplies and
chemicals for use in its business. These items are purchased from a variety of
sources and are available from a number of producers, both foreign and
domestic. Materials and supplies account for only a small portion of the
Imaging Group's costs of production, and no shortage is anticipated.
Furthermore, as a growing proportion of the workflow is digital, the already
low percentage of materials will continue to reduce. Historically, the Imaging
Group has negotiated and enjoys significant volume discounts on materials and
supplies from most of its suppliers.
PLASTICS GROUP. The Plastics Group's major raw materials are thermoplastic
resins, filtration media and purchased components. Supplies of these materials
are available from both domestic and foreign sources. Recently, the Plastics
Group entered into several strategic alliances in an effort to intensify
supplier competition. The Plastics Group believes these alliances will reduce
its costs of raw material in the future. The purchased filtration media
generally requires special processing before its use in the manufacturing
process. In the past, the majority of this specialty processing was performed
in the Plastics Group's Hebron, Illinois and France facilities. The Plastics
Group recently has expanded this specialty process to each of its filter
manufacturing locations and believes that this expansion will reduce scrap and
inventories.
PATENTS AND TRADEMARKS
IMAGING GROUP. The Imaging Group owns no significant patents. The
trademarks "Schawk" and "Clockface and Creole" and the trade names "Amber
Design," "Color Data East," "Schawkgraphics," "Schawk Client Services Group and
Schawk Prep," "Lincoln Graphics," "Litho Colorplate," "LSI/Atlanta,"
"LSI/Kala," "Process Color Plate," "Total Reproductions" and "Weston Engraving"
are the most significant trademarks and trade names used by the Imaging Group.
PLASTICS GROUP. The Plastics Group owns several significant patents. They
include the encapsulation of membrane filters, a two-piece filter design, the
encapsulation of multiple layers of membrane, fuel injection nozzle filters, a
process to hermetically seal sump transmission filters, a design for European
in-tank fuel filters, a friction welding process, a medical check valve and a
manufacturing component tray. Patents are material to the competitiveness of
the business. The trademarks "Filtertek" and "Plasti-Chain" are the most
significant trademarks
14
<PAGE> 16
2:54 PM 3/25/96
used by the Plastics Group. In 1995, there were 18 new product patent
applications filed, more than half the amount of patents the Company has had
in its history.
EMPLOYEES
IMAGING GROUP. As of December 31, 1995, the Imaging Group had 642
full-time employees. Of this number, 70% are production employees of which 198
are represented by local units of the Graphic Arts International Union. The
Imaging Group's craft employees are crucial to its operations. Seven contracts
covering the Imaging Group's craft employees in five facilities are subject to
renegotiation in 1997. All contracts are area-wide agreements bargained by
groups of employers. The Imaging Group considers its relationships with its
employees to be good.
PLASTICS GROUP. As of December 31, 1995, the Plastics Group employed 1,063
full-time employees. Substantially all of the Plastics Group's employees are
engaged in production. Filtertek Ireland has 95 employees, including 71
employees covered by collective bargaining agreements. No other employees in
the Plastics Group are covered by collective bargaining agreements. The
Plastics Group considers its relationship with its employees to be good.
15
<PAGE> 17
ITEM 2. PROPERTIES
FACILITIES
The Company owns or leases the following office and manufacturing
facilities:
<TABLE>
<CAPTION>
LEASE
OWNED/ EXPIRATION
LOCATION SQUARE FEET LEASED PURPOSE DATE
- --------------------------- ----------- ------------- ------------------ ------------
(APPROXIMATE)
<S> <C> <C> <C> <C>
IMAGING GROUP:
Armonk, New York .......... 10,000 Leased General Offices, Month to
Manufacturing month
Carmel, Indiana ........... 782 Leased General Offices October 1998
Cherry Hill, New Jersey ... 35,000 Owned General Offices, N/A
Manufacturing
Chicago, Illinois ......... 42,000 Leased General Offices, June 2002
Manufacturing
Des Plaines, Illinois ..... 3,500 Leased Warehouse March 1998
Des Plaines, Illinois ..... 20,000 Owned Executive Offices, N/A
Customer Training
Center
Des Plaines, Illinois ..... 60,000 Leased General Offices, N/A
Manufacturing
Hackettstown, New Jersey .. 2,000 Leased General Offices, October 1997
Manufacturing
Kalamazoo, Michigan ....... 67,000 Owned General Offices, N/A
Manufacturing
Minneapolis, Minnesota .... 31,000 Owned General Offices, N/A
Manufacturing
Roseville, Minnesota ...... 16,000 Leased General Offices, May 1997
Manufacturing
Smyrna, Georgia ........... 20,000 Leased General Offices, October 1998
Manufacturing
PLASTICS GROUP:
County Limerick, Ireland .. 37,000 Owned General Offices, N/A
Manufacturing
Eagle, Wisconsin .......... 55,000 Owned General Offices, N/A
Manufacturing
Gustorf, Germany .......... 1,200 Leased General Offices, Month to
Sales Product month
Development
Hebron, Illinois .......... 108,000 Owned Executive Offices, N/A
Manufacturing
Huntley, Illinois ......... 98,000 Owned General Offices, N/A
Manufacturing
Huntley, Illinois ......... 40,000 Owned General Offices, N/A
Manufacturing
Patillas, Puerto Rico ..... 100,000 Owned General Offices, N/A
Manufacturing
Plailly, France ........... 33,000 Owned General Offices, N/A
European
Headquarters,
Manufacturing
Stockton, California ...... 54,000 Leased/ General Offices, May 2003
Option Manufacturing
to Purchase
</TABLE>
16
<PAGE> 18
ITEM 3. LEGAL PROCEEDINGS
LEGAL PROCEEDINGS
From time to time, the Company has been a party to routine pending or
threatened legal proceedings and arbitrations. The Company insures some, but
not all, of its exposure with respect to such proceedings. Based upon
information presently available, and in light of legal and other defenses
available to the Company, management does not consider liability from any
threatened or pending litigation to be material to the Company. The Company has
not experienced any material environmental problems.
Prior to the Merger, three stockholders of Filtertek filed separate
lawsuits, each seeking to bring a class action relating to the Merger. Two of
the suits were filed on October 18, 1994, and one was filed on October 25,
1994. The suits, brought against Filtertek, Schawk and the directors of
Filtertek in the Court of Chancery for the State of Delaware on behalf of
stockholders of Filtertek other than the defendants, allege, in pertinent part,
that the defendants breached their fiduciary and other common law duties by
entering into and approving the Merger. Subsequent to the filing of these
complaints, the Merger received the requisite approval by more than 66 2/3% of
the independent stockholders at a special meeting of stockholders of Filtertek
held on December 23, 1994.
On November 29, 1995, the same three stockholders of Filtertek filed a
lawsuit against Schawk and certain of Filtertek's directors seeking to bring a
class action to recover damages on behalf of all Filtertek public shareholders
on December 30, 1994, the date when the merger became effective. The Compliant
alleges that the proxy statement disseminated in connection with the merger
contained material misstatements and omissions, in violation of Sections 14(a)
and 20(a) of the Exchange Act, 15 U.S.C. Section 78n(a), which led the minority
public shareholders to approve the merger, resulting in damages to these
shareholders. The Compliant also alleges that the individual defendants
breached their fiduciary duties as directors of Filtertek to the public
stockholders to act independently to protect the public shareholders'
interests, to ensure no conflicts of interest existed or that any such
conflicts were resolved in the best interests of the public shareholders and to
provide public shareholders with adequate information with respect to the
merger. The Company has and intends to continue to vigorously defend against
the lawsuits and believes that they are without merit. Management does not
consider the actions to be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No items were submitted to a vote of security holders for the year ended
December 31, 1995.
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<PAGE> 19
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
SCHAWK, INC. SUPPLEMENTAL STOCKHOLDER INFORMATION
QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
(Thousands of Dollars, Except Per Share Amounts)
- ---------------------------------------------------------------------------------------------------------------------
Pro Forma Net
Income Adjusted Primary and Fully
Only for Income Diluted Earnings
Net Sales Cost of Sales Net Income (Loss) Taxes (a) Per Share
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 Quarter Ended:
March 31 $ 45,420 $ 31,159 $ 1,611 $ .07
June 30 45,348 31,830 1,997 .09
September 30 40,681 29,539 947 .03
December 31 40,841 29,862 2,381 .11
-------------- -------------- ----------------- -------------------- --------------------
Total $172,290 $122,390 $ 6,936 -------------------- $ 0.29
============== ============== ================= ==================== ====================
1994 Quarter Ended:
March 31 $ 46,430 $ 28,667 $ 5,361 $ 3,395 $ 6.69
June 30 48,839 31,084 4,548 2,848 5.61
September 30 44,630 27,929 4,764 2,983 5.88
December 31 46,246 32,284 (1,204) 1,021 2.02
-------------- -------------- ----------------- -------------------- --------------------
Total $186,145 $119,964 $13,469 $10,247 $ 20.20 (d)
============== ================= ============== ==================== ====================
DIVIDENDS DECLARED
- ---------------------------------------------------------------------------------------------------------------------
Per Class A Common Share Amount
Quarter Ended: 1995 1994 (b) 1995 1994 (b)
- ---------------------------------------------------------------------------------------------------------------------
March 31 $ 0.065 $ 1,246 $ --
June 30 0.065 1,247 5,789
September 30 0.065 1,240 5,809
December 31 0.065 1,243 8,800
-------------- -------------- -------------------- --------------------
Total $ 0.260 $ 4,976 $ 20,398
============== ============== ==================== ====================
STOCK PRICES
- ---------------------------------------------------------------------------------------------------------------------
Quarter Ended: 1995 High/Low 1994 High/Low (c)
- ---------------------------------------------------------------------------------------------------------------------
March 31 11 - 8 1/4 9 7/8 - 8 1/2
June 30 9 1/ 8 - 7 3/8 10 3/4 - 8 1/4
September 30 8 3/4 - 7 1/8 13 3/8 - 9 5/8
December 31 7 3/4 - 5 7/8 13 1/8 - 9 3/8
</TABLE>
(a) Adjusted only for pro forma income taxes in 1994. (See Note 15 to the
Schawk, Inc. audited financial statements.)
(b) Dividends declared are for the Old Schawk Companies, and do not include
amounts of the former Registrant, Filtertek, Inc. Prior to the Merger with
Filtertek, Inc. on December 30, 1994, the Old Schawk Companies were
privately held S Corporations with a limited number of shares outstanding.
Dividends were declared on the basis of stockholder cash requirements and
not necessarily on the basis of earnings. Dividends declared per share
computations have not been presented because management does not consider
this information to be meaningful prior to 1995.
(c) Stock prices for 1994 are for the former Company Filtertek, Inc. The
Registrant had 2,083 stockholders of record on November 15, 1995. The
Company's stock is listed on the NYSE.
(d) Because of the limited number of stockholders prior to the merger in
December 30, 1994, earnings per share data is not meaningful for
comparative purposes.
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<PAGE> 20
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
(Thousands of Dollars, Except Per 1995 1994 1993 1994 1993 1992 1991
Share Amounts) Historical Pro Forma (a) Pro Forma (a) Historical Historical Historical (d) Historical
- -----------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATED INCOME STATEMENT
INFORMATION
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales $172,290 $186,145 $169,038 $186,145 $169,038 $110,999 $79,432
Operating Income 13,637 26,254 21,820 24,273 19,965 14,331 12,325
Income Before Income Taxes and
Minority Interest 8,090 21,016 17,640 19,035 15,785 12,854 11,706
Income Taxes 1,154 (b) 7,071 6,400 3,849 (c) 840 571 248
Net Income 6,936 12,585 9,907 13,469 14,616 12,466 11,458
Net Income Per Share $0.29 -- -- -- -- -- --
PRO FORMA INFORMATION
Pro forma Income Taxes -- -- -- 7,071 6,400 5,300 4,700
Pro forma Net Income Adjusted Only
for Income Taxes -- -- -- 10,247 9,056 7,737 7,006
Pro forma Net Income
Per Share -- $0.64 $0.49 -- -- -- --
CONSOLIDATED BALANCE SHEET
INFORMATION
Working Capital $26,875 -- $-- $25,753 $30,049 $26,186 $12,984
Total Assets 184,463 -- -- 193,925 180,193 155,756 55,401
Long-Term Debt, Capital Lease
Obligations and Redeemable
Preferred Stock 75,582 -- -- 81,090 83,271 70,803 7,172
Stockholders' Equity 76,429 -- -- 75,590 51,119 44,183 36,630
OTHER DATA
Cash Dividends per Common Share (e) $0.26 -- -- -- -- -- --
Depreciation and Amortization 16,219 -- -- 14,866 15,336 7,784 4,485
Capital Expenditures $11,027 -- -- $13,882 $19,066 $11,060 $3,747
</TABLE>
(a) Pro forma net income includes adjustments for the Merger, purchase
accounting, and income taxes. See Note 15 to the Schawk, Inc. audited
financial statements.
(b) The 1995 tax provision includes a benefit of $1,632 for utilization of
net operating loss carryforwards.
(c) Includes a one time deferred tax charge of $3,000 for termination of S
Corporation tax election.
(d) On September 21, 1992, Old Schawk effectively acquired a controlling
interest in Filtertek which was accounted for as a purchase.
(e) Because of the limited number of stockholders prior to the Merger on
December 30, 1994, dividends per share data is not meaningful and has not
been presented prior to 1995.
19
<PAGE> 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BACKGROUND
Schawk has grown through a series of strategic acquisitions over the last
21 years in which many owner-manager teams of acquired firms have been
retained. Purchase terms have typically involved cash, notes and
performance-based future compensation. These acquisitions have been assimilated
and in nearly every instance have been accretive to future earnings growth.
These successful acquisitions are elements of a strategic plan to acquire
market niche companies with Fortune 500 customer lists, excellent customer
service or proprietary products and solid management which receives performance
incentives to continue to grow the business. All of Schawk's acquisitions were
in strong markets serving customers with both technological and quality
advantages. The Company believes that continued emphasis on complementary
acquisitions of companies serving targeted markets will allow it to broaden its
imaging and information technologies and plastics product offerings. The
Company also believes it has greater versatility in manufacturing and serving
its customers than smaller, less capitalized and less integrated competitors,
and that this versatility will result in greater opportunities for internal
growth and consolidation.
Schawk acquired or initiated the start-up of the following companies
during the last four years. In May 1992, Schawk acquired Lincoln Graphics, Inc.
in Cherry Hill, New Jersey. Lincoln Graphics gives the Imaging Group a strong
East Coast presence in the prepress packaging markets. In July 1992, Schawk
acquired Flexo Graphics, Inc. in Roseville, Minnesota. Flexo Graphics, Weston
Engraving and Litho Colorplate are three Imaging Group companies servicing the
Minneapolis-St. Paul packaging markets. Schawk Client Services Consulting Group
was formed during the third quarter of 1992 to service the graphic arts
software, hardware and training needs of the Imaging Group's customers. In
1994, Schawk Client Services Consulting Group was enhanced when the previous
owners of Clockface and Creole, a well-known graphic arts training company,
agreed to liquidate its operation, join the group and further develop the
technical training and education division of Schawk. In 1995, Schawk's Imaging
Group completed the acquisition of the Noral Company. The Imaging Group
combined this operation with its Total Reproductions and subsquently merged
both operations into its Schawkgraphics operation. During the first quarter of
1996, Schawk announced the intent to acquire Waselle Graphics, Inc. Waselle is
a graphics design and print production studio located in Chicago. This
acquisition will strengthen Schawk's strategy of being "closer to the
customer," through integrated services.
Schawk effectively acquired a controlling interest of the outstanding
equity of Filtertek in September 1992. On June 1, 1993, Filtertek purchased
Plastic Molded Concepts (PMC) in Eagle, Wisconsin. PMC is a manufacturer of
specialty plastic components for the healthcare and industrial industries. On
October 2, 1993, Filtertek purchased three plastics thermoforming operations:
Robinson Industries and Fuzere Midwest, both located in Huntley, Illinois, from
Schawk, and Fuzere Manufacturing Company, Inc., located in Stockton,
California, from the stockholders of Schawk (collectively, the "Robinson/Fuzere
transaction"). These thermoforming companies are now operated as the Tek
Packaging Group, Inc. The Plastics Group, during the first quarter 1996, has
executed a letter of intent to purchase 60% ownership in Acoplast, a plastic
injected molded automotive filter manufacturer in Sao Paulo, Brazil. Acoplast
will give us additional products for our automotive line as well as provide a
conduit to South American customers for our healthcare products.
During a strategic review of operations during late 1995, the Schawk, Inc.
Executive Management Team made the decision to divest PMC in Eagle, WI. PMC no
longer fits into the realigned product focus. PMC is being sold to a management
led group of employees. During the 1995 strategic review, Schawk also merged
Total Reproductions/Noral into Schawkgraphics to further increase our product
offerings and improve the operating margins of these two separate companies.
Filtertek and Schawk had been operating under common control and
management since September 1992. During that time, it became apparent to
management that combining the companies would simplify and enhance the
operations, management, and strategic direction. In November 1994, Filtertek
and Schawk agreed to merge, and,
20
<PAGE> 22
following receipt of the requisite stockholder approval by more than 66 2/3% of
the independent stockholders of Filtertek, Schawk merged with and into
Filtertek effective as of December 30, 1994 (the "Merger"). Filtertek's name
was changed then to Schawk, Inc.
BASIS OF PRESENTATION
The Merger was accounted for using the purchase method of accounting.
Because Schawk owned a controlling interest in Filtertek prior to the Merger,
under AICPA Accounting Interpretation 26 of Accounting Principles Board Opinion
No. 16, the Merger was required to be accounted for as if Schawk had acquired
the minority interest in Filtertek's Class A common stock outstanding at the
effective time of the Merger. Accordingly, the consolidated financial
statements of Schawk are treated as the Company's historical financial
statements in future financial reporting. Such historical financial statements
of Schawk include the results of Filtertek since Schawk's acquisition of its
controlling interest in September 1992.
In light of the changes made in accounting presentations in 1995, the
following discussion of periods prior to the consummation of the Merger
includes an analysis of (i) pro forma consolidated income statement data for
the Company; and (ii) the historical consolidated results of operations and
financial condition of Schawk, which include 100% of sales but only 60% of
earnings for 1993 and 1994, since Schawk's controlling interest in Filtertek
beginning September 1992.
Pro forma calculations:
The earnings per share presented for 1994 and 1993 are pro forma calculations.
The Company believes that the pro forma presentation best represents the actual
results of the combined operations as if they had been merged for the
comparable periods of 1994 and 1993. The actual earnings per share for Schawk
are not informative because Schawk was a privately owned S Corporation and had
a limited number of outstanding shares prior to the Merger with Filtertek on
December 30, 1994. Further, as an S Corporation, taxation of the corporate
entity was minimal. The shares outstanding in the pro forma earnings per share
calculations account for the shares exchanged in the Merger as if the exchange
occurred at the beginning of each of the periods presented. Consequently, the
minority interest in the earnings of Filtertek has been eliminated. In
addition, pro forma purchase accounting adjustments for increased goodwill
amortization, increased depreciation for fair value adjustments to property and
equipment, and reductions in compensation expense for new employee/stockholder
agreements effective January 1, 1995 have also been made to present pro forma
earnings per share. Additionally, the earnings have been adjusted as if the
Imaging Group had been taxed at regular corporate income tax rates instead of S
Corporation rates. Schawk terminated S Corporation tax status on December 30,
1994.
MANAGEMENT'S DISCUSSION AND ANALYSIS
CONSOLIDATED RESULTS -- 1995 VERSUS 1994
NET SALES. Sales were $172.3 million for 1995 versus 1994 sales of $186.1
million. 1994 revenue was a record level due in part to labeling law changes
required by the NLEA (National Labeling and Education Act). This 7.4% decrease
in sales was due to a 16.1% decline in Imaging Group sales as clients adjusted
their typical package redesign cycles as a result of the 1994 deadline of NLEA
combined with large increases in paper prices. The result was that many of the
Imaging Group clients elected to postpone package changes from the record 1994
levels in order to use up existing packaging inventories. The Company does not
anticipate that these two factors will be repeated in the future. The Plastics
Group's sales were up 3.4% as higher healthcare and consumer sales offset a
decline in OEM automotive sales during the last half of 1995.
OPERATING INCOME AND MARGIN. Operating income for 1995 was $13.6 million, a
43.8% decrease from historical 1994 operating income of $24.3 million (a 48.1%
decrease from pro forma operating income of $26.3 million). The operating
margin declined to 7.9 % in 1995, from historical 13.0% in 1994 (pro forma
operating margin in 1994 was 14.1%). This margin decline resulted primarily
from lower sales for the Imaging Group, a high fixed cost business. The Imaging
Group took multiple steps during 1995 to lower its cost base including: a
consolidation of its operating units, a reduction in workforce and a reduction
in sales, general and administrative costs. The Plastics
21
<PAGE> 23
Group's operating margin also declined as a result of lower annual automotive
volume on fixed costs in the domestic filter operations, increased research and
development costs and higher material and labor costs in the packaging
operations. The Plastics Group also initiated a cost reduction program in 1995
and had a reduction in workforce and similar cutback in sales, general and
administrative costs. Higher labor content work was moved to plants with lower
direct labor costs. On a positive note, the Plastics Group's international
operations were profitable during 1995 for the first time in several years.
Additional cost measures are anticipated to continue at both product groups
during the first half of 1996.
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST. Income before income taxes
and minority interest for 1995 was $8.1 million compared with historical of
$19.0 million for the same period in 1994 (pro forma income before income taxes
and minority interest was $21.0 million in 1994). This was a 57.5% decrease in
historical income before income taxes and minority interest (a pro forma
decrease of 61.5%). Interest expense increased from $5.2 million in 1994 to
$6.3 million in 1995 due to marginally higher average interest rates and higher
average outstanding debt in 1995.
NET INCOME. Net income for 1995 declined by 48.5% to $6.9 million as compared
to historical income of $13.5 million in 1994 (pro forma income declined by
44.9% from $12.6 million). This decline was the result of the above mentioned
factors. Additionally, the 1995 tax provision contains a benefit of $1.6
million for utilization of net operating loss carryforwards for which no tax
benefit was previously recorded and 1994 contains a $1.0 million charge to
other expense for the write-off of stock offering costs.
PRO FORMA FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PRO FORMA CONSOLIDATED RESULTS -- 1994 VERSUS 1993
NET SALES. Sales were $186.1 million for 1994 versus 1993 sales of $169.0
million. This was a 10.1% increase due to steady internal growth of the
Company's existing customer base.
OPERATING INCOME AND MARGIN. Pro forma operating income for 1994 was $26.3
million, a 20.3% increase over 1993 operating income of $21.8 million. The
operating margin increased to 14.1% in 1994, from 12.9% in 1993. This margin
improvement resulted from imaging operating efficiencies, the closure of excess
manufacturing capacity in Germany, and continued improvements through
automation of manufacturing processes.
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST. Pro forma income before
income taxes and minority interest for 1994 was $21.0 million compared with
$17.6 million for the same period in 1993. This was a 19.1% increase in income
before income taxes. Interest expense increased from $4.9 million in 1993 to
$5.2 million in 1994 due to rising interest rates. The Company also recorded in
the fourth quarter a $1.0 million pre-tax charge to income related to the
proposed offering of Schawk, Inc. Class A common stock which was withdrawn from
the Securities and Exchange Commission (SEC) in March 1995.
NET INCOME. Pro forma primary and fully diluted earnings per share adjusted
for the Merger, purchase accounting, and income taxes (see Note 15 to the
Schawk, Inc. audited financial statements) for Schawk, Inc. was $0.64 for 1994,
a 30.6% increase over pro forma primary and fully diluted 1993 earnings per
share adjusted for the Merger, purchase accounting and income taxes of $0.49.
Pro forma net income increased to $12.6 million in 1994 from $9.9 million in
1993. The Company also recorded in the fourth quarter of 1994 a $0.6 million
after-tax charge to income related to the proposed offering of Schawk, Inc.
Class A common stock which was withdrawn from the SEC in March 1995.
PRO FORMA IMAGING GROUP -- 1994 VERSUS 1993
NET SALES. Sales increased 8.4% to $103.9 million in 1994 from $95.8 million
in 1993. The largest sales increases were seen in the flexographics operations
with more food and consumer products moving towards flexible packaging. This
increase was due to continued product extensions, increased product entries
into the market, and packaging label changes required by federal law.
22
<PAGE> 24
OPERATING INCOME AND MARGIN. Operating income rose 24.6% to $20.4 million for
1994 as compared with $16.4 million for 1993. The 1994 operating margin was
19.6% as compared to the 1993 operating margin of 17.1%. This increase reflects
higher gross margins on increased sales with only modest increases in selling,
general and administrative expenses. Technology gains and enhanced training for
production personnel have improved gross margins because work moves more
quickly through the manufacturing sites.
PRO FORMA PLASTICS GROUP -- 1994 VERSUS 1993
NET SALES. Sales for the Plastics Group for 1994 increased 12.3% to $82.3
million compared with $73.2 million for 1993. The Plastics Group's sales growth
was primarily due to increases at the Tek Packaging Group's Robinson facility,
the Filtertek U.S. and French divisions and PMC.
Year over year automotive filter product sales were up 24%, consumer sales were
up 10% and industrial sales were up 30%. Healthcare filter product sales
declined 9% due in part to a significant drop in orders during the fourth
quarter 1994 as healthcare customers reduced inventories.
OPERATING INCOME AND MARGIN. Operating income for 1994 increased 7.9% to $4.1
million in 1994 from $3.8 million in 1993. The 1994 operating margin for this
group was 5.0% as compared with the 1993 operating margin of 5.2%. Margins
continued to lag in Europe from pricing pressures and the closing of the German
manufacturing facility and assimilation of much of its volume into other
operations. Margins also were impacted by the greater percentage of automotive
product orders which have lower product margins than the healthcare, industrial
and consumer segments.
MANAGEMENT'S DISCUSSION AND ANALYSIS
HISTORICAL FINANCIAL CONDITION AND RESULTS OF OPERATIONS
HISTORICAL CONSOLIDATED RESULTS -- 1994 VERSUS 1993
NET SALES. Historical sales for this period were identical to the pro forma
sales (see page 21).
OPERATING INCOME AND MARGIN. Operating income increased by 21.6% from $20.0
million in 1993 to $24.3 million in 1994. Operating margin improved from 11.8%
in 1993 to 13.0% in 1994. This increase reflects higher gross margins on
increased sales with only modest increases in selling, general and
administrative expenses. A faster generation of equipment and a well-trained
workforce which can take advantage of such technology advances has improved
gross margins because work moves more quickly through the manufacturing sites.
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST. Income before income taxes
and minority interest for 1994 was $19.0 million, up 20.6% from $15.8 million
in 1993 as a result of the above discussion regarding net sales and operating
income and margin.
NET INCOME. Net income for 1994 was $13.5 million, down 7.8% from $14.6
million in 1993. The 1994 income tax provision includes a $3.0 million
adjustment to reflect the termination of the S Corporation status of Schawk.
Additionally, 1994 reflects a $0.6 million after-tax charge related to the
proposed offering of Schawk, Inc. Class A common stock which was withdrawn from
the SEC in March 1995.
LIQUIDITY AND CAPITAL RESOURCES
Schawk has a $55.0 million multicurrency Revolving Credit Agreement (reduced
voluntarily by the Company from $100.0 million at inception as a result of
entering private debt placement, see below) to provide financing, acquisition
funding and working capital flexibility. The agreement was effective in June
1995 and matures in June 2000. Advances under the revolver bear interest at an
annual rate equal to either the Eurodollar interest rate plus a scaled premium
or at the election of the Company, the lender's prime rate. The blended
interest rate for the year ended December 31, 1995 was 6.6%. On December 31,
1995, advances under the revolver were $28.8 million, down from the December
31, 1994 level of $74.3 million. Amounts borrowed and repaid under the facility
may be borrowed again from time to time up to the current maximum of $55.0
million.
23
<PAGE> 25
Schawk has an interest rate swap (floating to fixed) which sets the rate of
interest on the revolving credit facility at 5.81%. See Note 8 to the Schawk,
Inc. audited financial statements. The swap amount at December 31, 1995 was
$16.0 million. If the swap was terminated at December 31, 1995, Schawk would
owe the bank $75,000.
In connection with the Merger, Schawk issued notes payable in payment of the
$8.8 million S Corporation dividend to the Schawk Family. These notes bear
interest at 5% per annum and are payable on demand. At December 31, 1995, the
amount owing on these notes was $5.8 million.
The Company entered into a private placement of debt on August 18, 1995, for
$40.0 million with a term from 1999 through 2004 (averaging seven years) at an
average rate of 6.85%. This long-term debt agreement replaced part of the
revolving credit agreement (see above).
CASH FLOWS
The Company's working capital at December 31, 1995 was $26.9 million,
representing a 4.4% increase over the 1994 year-end level of $25.8 million.
Management believes that the level of working capital is adequate for the
Company's liquidity needs related to normal operations both currently and in
the foreseeable future, and that the Company has sufficient resources to
support its growth, either through currently available cash, through cash
generated from future operations, or through short-term or long-term financing.
The Company currently pays a regular quarterly dividend on the Class A common
stock of $0.065 per share, or $0.26 per share annually. The Company also pays a
5% dividend on its preferred stock.
The Company had combined capital expenditures for 1995 of $11.0 million. The
Schawk combined capital expenditures during 1994 were $13.9 million, and $19.1
million during 1993. The expenditures were primarily due to acquisitions,
building renovations, the purchase of several properties and new equipment.
Capital expenditures were reduced during 1995 due to slower sales.
Combined depreciation and amortization for Schawk was $15.3 million in 1993,
$14.9 million in 1994 and $16.2 million for the year ended 1995. Acquisitions
during 1994 and 1995 were negligible.
In 1995, the Company repaid $9.0 million on its debt to both the notes payable
and on its long-term debt. Additionally, $1.7 million of common stock were
repurchased on the open market under authorization from the Company's buyback
program.
24
<PAGE> 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements Covered by Report of Independent Auditors
Page
----
Management's Responsibilities for Financial Reporting 26
Reports of Independent Auditors 27
FINANCIAL STATEMENTS
Consolidated Balance Sheets --
December 31, 1995 and 1994 30
Consolidated Statements of Income -- Years Ended
December 31, 1995, 1994 and 1993 31
Consolidated Statements of Stockholders' Equity --Years Ended
December 31, 1995, 1994 and 1993 32
Consolidated Statements of Cash Flows --Years Ended
December 31, 1995, 1994 and 1993 33
Notes to Consolidated Financial Statements 34
FINANCIAL STATEMENT SCHEDULES:
SCHEDULE II -- Valuation Reserves 55
Financial Data Schedule Exhibit 27
25
<PAGE> 27
MANAGEMENT'S RESPONSIBILITIES FOR FINANCIAL REPORTING
The management of Schawk, Inc. is responsible for the preparation and
integrity of all financial statements and other information contained in the
Schawk, Inc. Annual Report to Stockholders. The consolidated financial
statements have been prepared in conformity with generally accepted accounting
principles and necessarily include amounts based on judgments and estimates by
management giving due consideration to materiality. The Company maintains
internal control systems designed to provide reasonable assurance that the
Company's financial records reflect the transactions of the Company and that
its assets are protected from loss or unauthorized use.
The Company's financial statements have been audited by Ernst & Young LLP,
independent auditors, whose report thereon follows. Their report relies on the
report of Arthur Andersen LLP, which audited the Company's Plastics Groups in
1994 and 1993. As part of their audit of the Company's financial statements,
Ernst & Young LLP and Arthur Andersen LLP considered the Company's system of
internal control to the extent they deemed necessary to determine the nature,
timing and extent of their audit tests. Management has made available to Ernst
& Young LLP and Arthur Andersen LLP the Company's financial records and related
data.
The Audit Committee of the Board of Directors is responsible for reviewing
and evaluating the overall performance of the Company's financial reporting and
accounting practices. The Committee meets periodically and independently with
management and the independent accountants to discuss the Company's internal
accounting controls, auditing and financial reporting matters. The independent
accountants have unrestricted access to the Audit Committee.
_______________________________ _______________________________
David A. Schawk Marie Meisenbach Graul
President and Chief Executive Officer Chief Financial Officer and Treasurer
26
<PAGE> 28
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Schawk, Inc.
We have audited the accompanying consolidated balance sheets of Schawk, Inc. as
of December 31, 1995 and 1994, and the related consolidated statements of
income, stockholders' equity, and cash flows for each of the three years in the
period ended December 31, 1995. Our audits also included the financial
statement schedules listed in the index at item 14a. These financial statements
and schedules are the responsibility of Schawk, Inc. management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the 1994 and 1993 financial statements of
Filtertek, Inc. (the Plastics Group of Schawk, Inc.), which statements reflect
total assets of $77,723,000 as of December 30, 1994 and total revenues of
$82,257,000 and $73,183,000 for the period ended December 30, 1994 and the year
ended December 31, 1993, respectively. Those statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to 1994 and 1993 data included for the Plastics Group, is based solely
on the report of other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Schawk, Inc. at
December 31, 1995 and 1994, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles. Also in
our opinion, the related financial statement schedules, when considered in
relation to the basic financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
Chicago, Illinois
February 9, 1996 Ernst & Young LLP
27
<PAGE> 29
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Schawk, Inc.
We have audited the consolidated balance sheets of Filtertek, Inc. and
subsidiaries (a Delaware corporation and subsidiary of Schawk, Inc.; previously
a combined entity of Filtertek, Inc. and Filtertek de Puerto Rico, Inc., see
Note 1) as of December 30, 1994 and December 31, 1993, and the related
consolidated statements of income, cash flows and stockholders' equity for the
period ended December 30, 1994 and for the years ended December 31, 1993 and
1992, not separately presented herein. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. As discussed in Note
2, on October 2, 1993, the Company acquired Fuzere Manufacturing Company, Inc.,
Fuzere Midwest, and Robinson Industries ("Robinson/Fuzere") in a purchase
transaction between companies under common control and accounted for it as
though it was effective September 22, 1992, in a manner similar to
pooling-of-interests accounting. We did not audit the statements of income of
Robinson/Fuzere for the nine months ended September 30, 1993. Such statements
are included in the consolidated financial statements of Filtertek, Inc. and
subsidiaries. The net sales and net income of Robinson/Fuzere for the period
covered by the report of the other auditors represent 17 percent and 35
percent, respectively, of the total consolidated net sales and net income for
the year ended December 31, 1993. These financial statements were audited by
other auditors whose report has been furnished to us, and our opinion, insofar
as it relates to the amounts included in those financial statements, is based
solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits and the report of the other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Filtertek, Inc. and
subsidiaries as of December 30, 1994 and December 31, 1993, and the
consolidated results of operations and cash flows for the period ended December
30, 1994 and for the years ended December 31, 1993, and 1992 in conformity with
generally accepted accounting principles.
Chicago, Illinois ARTHUR ANDERSEN LLP
February 17, 1995
28
<PAGE> 30
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Fuzere Manufacturing Company, Inc.
Robinson Industries, and Fuzere Midwest
We have audited the combined balance sheet of Fuzere Manufacturing
Company, Inc., Robinson Industries, and Fuzere Midwest (Companies) as of
September 30, 1993, and the related combined statements of income and retained
earnings, and cash flows for the nine months ended September 30, 1993 (not
presented separately herein). These financial statements are the responsibility
of the Companies' management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Fuzere
Manufacturing Company, Inc., Robinson Industries, and Fuzere Midwest at
September 30, 1993 and the combined results of their operations and their cash
flows for the nine months ended September 30, 1993, in conformity with
generally accepted accounting principles.
Chicago, Illinois ERNST & YOUNG LLP
November 12, 1993
29
<PAGE> 31
Schawk, Inc.
Consolidated Balance Sheets
(Thousands of Dollars)
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
--------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,917 $ 2,288
Trade accounts receivable, less allowance for doubtful accounts
of $984 in 1995 and $947 in 1994 29,865 31,221
Inventories 16,806 19,078
Prepaid expenses and other 3,463 3,464
Deferred income taxes 1,504 1,184
--------------------
Total current assets 53,555 57,235
Property and equipment - net 76,540 81,450
Excess of cost over net assets acquired, less accumulated amortization
of $6,331 in 1995 and $4,516 in 1994 47,858 48,287
Other intangible assets, less accumulated amortization of $2,336 in 1995
and $1,788 in 1994 873 1,321
Other 5,637 5,632
--------------------
Total assets $184,463 $193,925
====================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 7,943 $ 6,719
Accrued expenses 11,750 13,908
Notes payable to stockholders 5,765 8,780
Current portion of long-term debt and capital lease obligations 1,222 2,075
--------------------
Total current liabilities 26,680 31,482
Long-term debt 69,907 75,059
Capital lease obligations 5,675 6,031
Other 1,036 1,209
Deferred income taxes 4,736 4,554
Commitments and contingencies
Stockholders' equity:
Common stock 165 164
Preferred stock -- --
Additional paid-in capital 75,506 75,412
Retained earnings 4,573 3,971
Cumulative foreign currency translation adjustment (450) (947)
--------------------
79,794 78,600
Treasury stock, at cost (2,695) (2,325)
Notes receivable from employees (670) (685)
--------------------
76,429 75,590
--------------------
Total liabilities and stockholders' equity $184,463 $193,925
====================
</TABLE>
See accompanying notes.
30
<PAGE> 32
Schawk, Inc.
Consolidated Statements of Income
(Thousands of Dollars, Except Per Share Amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1995 1994 1993
---------------------------------
<S> <C> <C> <C>
Net sales $172,290 $186,145 $169,038
Cost of sales 122,390 119,964 109,549
Selling, general, and administrative expenses 36,263 41,908 39,524
---------------------------------
Operating income 13,637 24,273 19,965
Other income (expense):
Interest and dividend income 737 997 627
Interest expense (6,279) (5,231) (4,922)
Other (5) (1,004) 115
---------------------------------
(5,547) (5,238) (4,180)
---------------------------------
Income before income taxes and minority interest 8,090 19,035 15,785
Income tax provision:
Subsequent to termination of S Corporation status 1,154 -- --
Prior to termination of S Corporation status -- 849 840
Deferred income tax charge related to termination of
S Corporation status -- 3,000 --
---------------------------------
Income before minority interest 6,936 15,186 14,945
Minority interest in net income of consolidated subsidiary -- (1,717) (329)
---------------------------------
Net income $ 6,936 $ 13,469 $ 14,616
=================================
Primary and fully diluted earnings per share $ 0.29
Weighted average number of common and common equivalent
shares outstanding 19,203
PRO FORMA DATA (unaudited):
Pro forma income taxes $ 7,071 $ 6,400
Pro forma net income adjusted only for income taxes 10,247 9,056
Pro forma net income adjusted for merger, purchase accounting
and income taxes (Note 15) 12,585 9,907
Pro forma primary and fully diluted earnings per share
adjusted for merger, purchase accounting, and income
taxes 0.64 0.49
Pro forma weighted average number of common and common
equivalent shares outstanding 19,543 20,105
</TABLE>
See accompanying notes.
31
<PAGE> 33
<TABLE>
<CAPTION>
Schawk, Inc.
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1993, 1994, and 1995
(Thousands of Dollars)
SCHAWK, INC.
----------------------------------------------
OLD
SCHAWK
COMPANIES CLASS A CLASS B SERIES A SERIES B
COMMON COMMON COMMON PREFERRED PREFERRED
STOCK STOCK STOCK STOCK STOCK
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 $ 108 $ -- $ -- $ -- $--
Net income -- -- -- -- --
Capital contribution to Fuzere
Manufacturing Company, Inc. -- -- -- -- --
Capital contribution to Flexo Graphics, Inc. -- -- -- -- --
Dividends -- -- -- -- --
Cumulative foreign currency translation
adjustment -- -- -- -- --
Other -- -- -- -- --
---------------------------------------------------------------------------------
Balance at December 31, 1993 108 -- -- -- --
Net income -- -- -- -- --
Capital contribution to Flexo Graphics, Inc. -- -- -- -- --
Dividends -- -- -- -- --
Cumulative foreign currency translation
adjustment -- -- -- -- --
Issuance of Series A preferred stock -- -- -- -- --
Issuance of Series B preferred stock -- -- -- -- --
Deemed purchase of minority interest -- -- -- -- --
Recapitalization for merger (108) 155 9 -- --
---------------------------------------------------------------------------------
Balance at December 31, 1994 -- 155 9 -- --
Net income -- -- -- -- --
Sale of Class A and B common stock -- -- -- -- --
Purchase of Class A and B treasury stock -- -- -- -- --
Cumulative foreign currency translation
adjustment -- -- -- -- --
Conversion of Series A preferred stock -- 1 -- -- --
Issuance of Class A common stock under
dividend reinvestment program -- -- -- -- --
Cash dividends -- -- -- -- --
---------------------------------------------------------------------------------
Balance at December 31, 1995 $ -- $ 156 $ 9 $ -- $--
=================================================================================
<CAPTION>
CUMULATIVE
FOREIGN NOTES
ADDITIONAL CURRENCY RECEIVABLE
PAID-IN RETAINED TRANSLATION TREASURY FROM
CAPITAL EARNINGS ADJUSTMENT STOCK EMPLOYEES
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 $14,849 $32,304 $ (816) $(2,262) $ --
Net income -- 14,616 -- -- --
Capital contribution to Fuzere
Manufacturing Company, Inc. 1,550 -- -- -- --
Capital contribution to Flexo Graphics, Inc. 198 -- -- -- --
Dividends -- (8,801) -- -- --
Cumulative foreign currency translation
adjustment -- -- (577) -- --
Other (38) (12) -- -- --
---------------------------------------------------------------------------------
Balance at December 31, 1993 16,559 38,107 (1,393) (2,262) --
Net income -- 13,469 -- -- --
Capital contribution to Flexo Graphics, Inc. 198 -- -- -- --
Dividends -- (20,398) -- -- --
Cumulative foreign currency translation
adjustment -- -- 446 -- --
Issuance of Series A preferred stock 22,000 (22,000) -- -- --
Issuance of Series B preferred stock 5,207 (5,207) -- -- --
Deemed purchase of minority interest 31,502 -- -- -- --
Recapitalization for merger (54) -- -- (63) (685)
---------------------------------------------------------------------------------
Balance at December 31, 1994 75,412 3,971 (947) (2,325) (685)
Net income -- 6,936 -- -- --
Sale of Class A and B common stock 95 -- -- 130 (130)
Purchase of Class A and B treasury stock -- -- -- (1,833) 145
Cumulative foreign currency translation
adjustment -- -- 497 -- --
Conversion of Series A preferred stock (1) -- -- -- --
Issuance of Class A common stock under
dividend reinvestment program -- -- -- 1,333 --
Cash dividends -- (6,334) -- -- --
---------------------------------------------------------------------------------
Balance at December 31, 1995 $75,506 $ 4,573 $ (450) $(2,695) $(670)
=================================================================================
</TABLE>
See accompanying notes.
32
<PAGE> 34
Schawk, Inc.
Consolidated Statements of Cash Flows
(Thousands of Dollars)
<TABLE>
YEAR ENDED DECEMBER 31,
1995 1994 1993
-------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $6,936 $13,469 $ 14,616
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 16,219 14,866 15,336
Deferred income taxes (138) 3,051 (13)
Other 243 (147) (1,291)
Changes in operating assets and liabilities, net of
effects from acquisitions:
Trade accounts receivable 1,356 (1,146) (2,018)
Inventories 2,272 (1,509) (715)
Prepaid expenses and other 1 (169) (1,058)
Trade accounts payable and accrued expenses (934) 285 1,682
-------------------------------------
Net cash provided by operating activities 25,955 28,700 26,539
INVESTING ACTIVITIES
Purchases of property and equipment (11,027) (13,882) (19,066)
Cash proceeds from disposals of property and equipment 96 1,423 333
Advances from (to) related parties -- 1,238 (410)
Acquisitions, net of cash acquired (395) (618) (13,414)
Other 475 (401) 347
-------------------------------------
Net cash used in investing activities (10,851) (12,240) (32,210)
FINANCING ACTIVITIES
Proceeds from debt 44,500 22,495 45,253
Principal payments on debt (50,538) (25,035) (32,434)
Principal payments on capital lease obligations (323) (293) (192)
Principal payments on notes payable to stockholders (3,015) -- --
Cash dividends (5,002) (12,878) (9,165)
Purchase of common stock (1,688) (1,960) --
Issuance of common stock 94 57 1,085
Increase in additional paid-in capital, net -- 198 1,748
Capital contribution to Fuzere Manufacturing Company, Inc. -- -- 1,578
Effect of foreign currency exchange rates (179) (175) (99)
Other 676 (114) --
-------------------------------------
Net cash (used in) provided by financing activities (15,475) (17,705) 7,774
-------------------------------------
Net (decrease) increase in cash and cash equivalents (371) (1,245) 2,103
Cash and cash equivalents beginning of year 2,288 3,533 1,430
-------------------------------------
Cash and cash equivalents end of year $1,917 $2,288 $ 3,533
=====================================
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Issuance of note in connection with acquisition $ 807 -- --
Dividends issued in the form of Class A common stock 1,333 -- --
</TABLE>
See accompanying notes.
33
<PAGE> 35
Schawk, Inc.
Notes to Consolidated Financial Statements
(Thousands of Dollars, Except Per Share Amounts)
NOTE 1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
Schawk, Inc. (the Company) operates in two business segments, imaging and
plastics. The imaging segment provides prepress imaging arts services primarily
to the consumer products industries located in the United States. The plastics
segment develops and manufactures insert injection molded plastic filtration
elements and custom specialty plastic products for the automotive, healthcare
and industrial markets. The plastics segment also manufactures thermoform
visual and specialty packaging for the general commercial, healthcare, and
consumer markets. The Company operates plastics manufacturing facilities in the
United States, Puerto Rico, Ireland, and France.
The imaging segment consists of the company known as Schawk, Inc. (Old Schawk)
and companies previously affiliated through common ownership, Lincoln Graphics,
Inc. and Flexo Graphics, Inc., collectively, the Old Schawk Companies. The
plastics segment consists of the previously 60% owned subsidiaries, Filtertek,
Inc. and subsidiaries (Filtertek or the Filtertek Companies).
On December 30, 1994, the Old Schawk Companies merged with and into Filtertek
(the Merger). Pursuant to the Merger, Filtertek issued an aggregate of
16,245,399 shares of Class A common stock, 22,000 shares of Series A preferred
stock, and 5,207 shares of Series B preferred stock to the stockholders of the
Old Schawk Companies, and the shares of Filtertek's Class A common stock
previously held by Old Schawk (which had a controlling interest prior to the
Merger) were cancelled. The new Company was renamed Schawk, Inc.
Because Old Schawk owned a controlling interest of Filtertek prior to the
Merger, AICPA Accounting Interpretation 26 of Accounting Principles Board
Opinion No. 16 requires that the Merger be accounted for as if the Old Schawk
Companies acquired all the remaining Class A common stock of Filtertek.
The accompanying consolidated financial statements include the accounts of the
Old Schawk Companies and the Filtertek Companies based upon Old Schawk's
effective control as of September 21, 1992. All significant intercompany
balances and transactions have been eliminated. The Company's consolidated
balance sheet beginning December 31, 1994 reflects the accounting as described
in the previous paragraph as of the date of the Merger and includes purchase
accounting adjustments for the portion of Filtertek (40%) not owned by Old
Schawk prior to the Merger.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
Cash equivalents include highly liquid debt instruments and time deposits with
an original maturity of three months or less. Cash equivalents are stated at
cost, which approximates market.
INVENTORIES
Inventories are stated at the lower of cost or market. Certain inventories,
which approximate 10% in 1995, and 11% in 1994, respectively, of total
inventories, are determined on the last in, first out (LIFO) cost basis. The
remaining inventories are determined on the first in, first out (FIFO) cost
basis.
34
<PAGE> 36
Schawk, Inc.
Notes to Consolidated Financial Statements
(Thousands of Dollars, Except Per Share Amounts)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment, including capitalized leases, are stated at cost, less
accumulated depreciation and amortization and are being depreciated and
amortized using the straight-line method over the estimated useful lives of the
assets or the term of the leases, ranging from 3 to 40 years.
INTANGIBLE ASSETS
Intangible assets are comprised primarily of excess of cost over net assets
acquired (goodwill) and noncompete agreements. Goodwill acquired is being
amortized using the straight-line method over periods ranging from 5 to 40
years. The Company continually evaluates the existence of goodwill impairment
on the basis of whether the goodwill is fully recoverable from projected,
undiscounted net cash flows of the related business unit. Noncompete agreements
are being amortized using the straight-line method over the terms of the
agreements ranging from 1 to 5 years.
FOREIGN CURRENCY TRANSLATION
Foreign currency assets and liabilities are translated at the rate of exchange
existing at year-end, and income amounts are translated at the average of the
monthly exchange rates. Gains and losses resulting from the translation of
foreign currency financial statements are deferred and classified as a separate
component of stockholders' equity.
INCOME TAXES
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse. A valuation allowance is provided when it is more likely than not
that some portion of the deferred tax assets arising from temporary differences
and net operating losses will not be realized.
The Old Schawk Companies elected to be taxed as S Corporations under applicable
provisions of the Internal Revenue Code (IRC). S Corporation income for federal
income tax purposes is treated substantially as if the company were a
partnership, and, therefore, is not ordinarily subject to federal income tax.
Upon consummation of the Merger, Schawk, Inc. recorded a provision for deferred
income taxes of $3,000 to reflect the termination of the S Corporation status
of the Old Schawk Companies. For informational purposes, the statements of
income for 1993 and 1994 include an unaudited pro forma adjustment for income
taxes which would have been recorded if these companies had been C
Corporations, based on the tax laws in effect during those periods. Filtertek
is a C Corporation under applicable provisions of the Internal Revenue Code.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
35
<PAGE> 37
Schawk, Inc.
Notes to Consolidated Financial Statements
(Thousands of Dollars, Except Per Share Amounts)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATIONS
Certain amounts in the 1993 and 1994 financial statements have been
reclassified to conform to the 1995 presentation.
NOTE 3. ACQUISITIONS
The following acquisitions have been accounted for using the purchase method of
accounting. Accordingly, the purchase price has been allocated to the
respective net assets acquired based on the fair value of such assets,
including certain noncompete agreements and liabilities as of the date of the
acquisitions, and the results of operations have been included in the
accompanying consolidated statements of income from the effective date of the
acquisitions.
FILTERTEK
On September 21, 1992, Old Schawk acquired 2,884,596 shares of Class A common
stock and 254,363 stock options of Filtertek for approximately $43,573 in cash.
On January 5, 1993, Old Schawk acquired an additional 744,939 shares of Class A
common stock of Filtertek for $10,770 in cash. As a result, Schawk had
effective control of Filtertek as of September 21, 1992. The following
summarizes the purchase price allocation and cash paid. The fair value of
assets acquired includes a step up in basis by Old Schawk's ownership interest
(60%) of the excess of fair value of the related assets over their net book
values at the date of acquisition.
<TABLE>
<S> <C>
Fair value of assets acquired $ 31,416
Fair value of stock options acquired 1,065
Cost in excess of net assets acquired 34,505
Liabilities assumed (12,643)
--------
Cash paid $ 54,343
========
</TABLE>
During 1994, Old Schawk acquired approximately 51,000 additional shares of
Filtertek for $618. On December 30, 1994, the Old Schawk Companies merged with
and into Filtertek. As described in Note 1, the Merger was accounted for as if
the Old Schawk Companies had acquired all the remaining Class A common stock of
Filtertek. The following summarizes the purchase price allocation in
connection with the Merger:
<TABLE>
<S> <C>
Fair value of remaining Filtertek Class A common stock $ 31,502
Elimination of minority interest (18,017)
--------
13,485
Increase of property and equipment to fair value (4,252)
--------
Increase to cost in excess of net assets acquired $ 9,233
========
</TABLE>
The cost in excess of net assets acquired is being amortized over 40 years.
All of Class A common stock and stock options acquired by the Old Schawk
Companies on September 21, 1992, were cancelled pursuant to the terms of the
Merger.
36
<PAGE> 38
Schawk, Inc.
Notes to Consolidated Financial Statements
(Thousands of Dollars, Except Per Share Amounts)
NOTE 4. RELATED PARTY TRANSACTIONS
Included in prepaid expenses and other at December 31, 1995 and 1994, was
approximately $362 and $141, respectively, of advances to Geneva Waterfront,
Inc., which is owned by a stockholder of the Company. Interest is charged on
these balances at the prime rate.
Stockholders' equity has been reduced by approximately $670 and $685 for notes
receivable from employees at December 31, 1995 and 1994, respectively. The
notes are non-interest-bearing demand notes collateralized by Class B common
stock.
The Company has approximately $5,765 and $8,780 in notes payable at December
31, 1995 and 1994, respectively, payable to certain stockholders. The notes
bear interest at 5%. Interest expense related to these notes was $328, $100 and
$108 for 1995, 1994 and 1993, respectively.
NOTE 5. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
------- -------
<S> <C> <C>
Raw materials $ 6,432 $ 7,633
Work in process 6,565 6,792
Finished goods 4,522 5,298
------- -------
17,519 19,723
Less: LIFO reserve (713) (645)
------- -------
$16,806 $19,078
======= =======
</TABLE>
NOTE 6. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
-------- --------
<S> <C> <C>
Land and improvements $ 2,315 $ 2,315
Buildings and improvements 35,998 35,390
Machinery and equipment 85,067 81,782
Leasehold improvements 2,786 3,167
Building and improvements under capital leases 7,500 7,500
-------- --------
133,666 130,154
Accumulated depreciation and amortization 57,126 48,704
-------- --------
$ 76,540 $ 81,450
======== ========
</TABLE>
37
<PAGE> 39
Schawk, Inc.
Notes to Consolidated Financial Statements
(Thousands of Dollars, Except Per Share Amounts)
NOTE 6. PROPERTY AND EQUIPMENT (CONTINUED)
Accumulated depreciation and amortization includes $1,916 and $1,501 for
building and improvements under capital leases at December 31, 1995 and 1994,
respectively. Depreciation and amortization expense for property and equipment
was $13,937, $12,868 and $13,089 in 1995, 1994 and 1993, respectively.
NOTE 7. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
------- -------
<S> <C> <C>
Accrued compensation and payroll taxes $ 6,970 $ 8,805
Accrued income taxes 879 557
Other 3,901 4,546
------- -------
$11,750 $13,908
======= =======
</TABLE>
NOTE 8. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
------- -------
<S> <C> <C>
SCHAWK, INC.
Revolving credit facility $28,800
Series A senior note payable 10,000
Series B senior note payable 30,000
Other 1,974
OLD SCHAWK
Revolving credit facility $46,000
Other 1,654
FILTERTEK
Revolving credit facility 28,300
Deutsche Mark line of
credit, due April 1995
(interest at Eurodeutsche
mark rate plus 0.5%) 645
Other 213
------- -------
70,774 76,812
Less: Current portion (867) (1,753)
------- -------
$69,907 $75,059
======= =======
</TABLE>
38
<PAGE> 40
Schawk, Inc.
Notes to Consolidated Financial Statements
(Thousands of Dollars, Except Per Share Amounts)
NOTE 8. LONG-TERM DEBT (CONTINUED)
SCHAWK, INC.
On June 30, 1995, Schawk, Inc. entered into a revolving credit facility with
four participating banks replacing the Company's revolving credit facility in
its entirety. The maximum borrowing amount of $80,000 was reduced voluntarily
by the Company to $55,000 at December 31, 1995. The borrowing limit will be
further reduced by $7,500 annually until its termination date on June 30, 2000.
The revolving credit facility bears interest at the offshore borrowing rate
(5.6875% to 5.9375% at December 31, 1995) of the lead lender plus .625% through
June 30, 1996 or the Lender's alternative base rate (8.5% at December 31,
1995), as determined by the Company. After June 30, 1996, the rate may range
from the offshore borrowing rate plus .40% to .875% based on financial
statement ratios of the Company. The unused facility carries an annual .20%
commitment fee. Borrowings under the revolving credit facility are unsecured
but are subject to certain restrictive covenants including, among other things,
restrictions on the payment of dividends or other distributions to
stockholders. The Company may pay cash dividends to its stockholders in an
amount not in excess of $0.26 per common share per year through June 30, 1996
and thereafter redeem or otherwise acquire shares of its common stock for cash
solely out of 50% of consolidated net income accrued during the period
beginning July 1, 1996 to the end of the most recent fiscal quarter ending at
least 45 days prior to the date of such payment. The Company may declare or pay
cash dividends on preferred stock not to exceed $2,000 in any year. In
addition, the facility requires the Company to maintain certain net worth,
interest coverage, fixed charge coverage and other financial ratio
requirements. At December 31, 1995, there was approximately $16,200 of unused
credit available under the terms of the credit facility.
In November 1992, Old Schawk entered into an interest rate swap agreement to
hedge the impact of changes in interest rates on its revolving credit facility.
The agreement converts the interest rate on the revolving credit facility to a
fixed rate of 5.81%. The agreement applies to $16,000 of the outstanding
principal balance, decreasing by $2,000 each quarter until termination in
October 1997. If the swap was terminated at December 31, 1995, it would result
in a net payment by the Company of approximately $75. Net amounts paid or
received on interest rate swap agreements that qualify as hedges are recognized
over the term of the agreement as an adjustment to interest expense. Realized
gains and losses resulting from the termination of interest rate swap
agreements are recognized in the period the agreement is terminated.
On August 18, 1995, the Company entered into a senior note agreement for
$10,000 Series A senior notes and $30,000 Series B senior notes. The proceeds
from these notes were used to repay a $20 million short-term credit agreement
and a portion of the $80 million revolving credit facility. The Series A notes
bear interest at 6.58% and are payable in installments of $5 million in 1999
and 2000. The Series B notes bear interest at 6.98% and are payable in
installments of $6 million from 2001 to 2004. The notes are subject to
prepayment in whole or in part on or after August 18, 1996. Borrowings under
the Series A and B senior notes are unsecured but are subject to certain
restrictive covenants. In addition, the agreement requires the Company to
maintain certain net worth and other financial ratio requirements. The fair
value of the senior notes approximates the carrying value at December 31, 1995.
39
<PAGE> 41
Schawk, Inc.
Notes to Consolidated Financial Statements
(Thousands of Dollars, Except Per Share Amounts)
NOTE 8. LONG-TERM DEBT (CONTINUED)
Annual maturities of all long-term debt at December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996 $ 867
1997 452
1998 193
1999 5,199
2000 33,941
Thereafter 30,122
-------
$70,774
=======
</TABLE>
OLD SCHAWK AND FILTERTEK
At December 31, 1994, Old Schawk had available a revolving credit agreement
bearing interest at the Eurodollar interest rate plus .625% (6.10% at December
31, 1994), as defined, or the Lenders' alternate base rate (6.5% at December
31, 1994), as defined, as determined by the Company. Also, at December 31,
1994, Filtertek had available a revolving credit agreement bearing interest at
an average banking rate which approximates prime (8.5% at December 31, 1994),
or LIBOR plus 0.5% (6.5% at December 31, 1994) as determined by Filtertek.
These facilities were terminated in conjunction with entering into the Schawk,
Inc. revolving credit facility on June 30, 1995.
Interest paid on long-term debt during the years ended December 31, 1995, 1994
and 1993 was approximately $5,071, $5,375 and $5,803, respectively.
40
<PAGE> 42
Schawk, Inc.
Notes to Consolidated Financial Statements
(Thousands of Dollars, Except Per Share Amounts)
NOTE 9. STOCKHOLDERS' EQUITY
Stockholders' equity includes the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
------------------------
<S> <C> <C>
Common stock:
Class A voting, $0.008 par value, 40,000,000 shares
authorized; 19,559,771 and 19,388,852 shares issued at
December 31, 1995 and 1994, respectively; 19,310,840 and
19,175,840 shares outstanding at December 31, 1995 and 1994,
respectively $ 156 $ 155
Class B nonvoting, $0.05 par value, 200,000 shares
authorized; 172,281 shares issued; 135,310 and 138,432 shares
outstanding at December 31, 1995 and 1994, respectively 9 9
------------------------
$ 165 $ 164
========================
Preferred stock, 1,000,000 shares authorized:
Series A, $0.01 par value, 19,800 and 22,000 shares issued
and outstanding at December 31, 1995 and 1994, respectively $ -- $ --
Series B, $0.01 par value, 5,207 shares issued and outstanding -- --
------------------------
$ -- $ --
========================
Treasury stock:
248,931 and 213,012 shares Class A at December 31, 1995 and
1994, respectively, and 36,971 and 33,849 shares Class B at
December 31, 1995 and 1994, respectively, at cost $ 2,695 $ 2,325
========================
</TABLE>
In December 1994, prior to the Merger, the Old Schawk Companies paid a dividend
of previously taxed and undistributed S Corporation earnings of the Old Schawk
Companies to the existing stockholders in the form of notes payable in the
aggregate amount of $8,800 plus an aggregate of 27,207 shares of preferred
stock.
On December 30, 1994, the Company issued 22,000 shares of Series A preferred
stock and 5,207 shares of Series B preferred stock. The Series A preferred
shares are mandatorily redeemable by the Company on December 31, 2004, or, at
the option of the Board, on any December 31, through December 31, 2003, by
issuing to the holder the number of shares of Class A common stock equal to the
sum of $1,000 plus an amount equal to all accumulated and unpaid dividends per
share divided by $13.80, or cash in the amount of the fair market value, as
defined, of the number of shares of Class A common stock. On December 30, 1995,
the Company issued 159,420 Class A common shares in exchange for 2,200 shares
of Series A preferred stock. The Series B preferred shares are mandatorily
redeemable by the Company on December 31,1999 under the same redemption formula
as Series A. The Series B shares are also mandatorily redeemable on the date of
the consummation of any offering or private placement of the Company's debt or
equity the gross proceeds of which exceed $25,000. The Company shall redeem all
outstanding shares of Series B preferred stock with respect to each such share
$1,000 in cash plus all accumulated and unpaid dividends per share. Dividends
shall accrue on each share of preferred stock at the rate of 5.0% per year and
are payable quarterly. Holders of preferred shares are entitled to limited
voting rights.
41
<PAGE> 43
Schawk, Inc.
Notes to Consolidated Financial Statements
(Thousands of Dollars, Except Per Share Amounts)
NOTE 9. STOCKHOLDERS' EQUITY (CONTINUED)
In the event of liquidation, dissolution or winding up of the Company, the
holders of Series A preferred stock are entitled to be paid out of the assets
of the Company available for distribution to its stockholders, before any
payment to any holders of common stock or any holders of Series B preferred
stock, an amount equal to $1,000 per share plus all accumulated and unpaid
dividends.
Upon the liquidation, dissolution or winding up of the Company, the holders of
Class A common and Class B common stock are entitled to receive ratably the net
assets of the Company available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding preferred stock,
until the holders of Class B common stock have received distributions (maximum
amount of $10) equal to the par value of their shares. Thereafter, all
distributions shall be made for the benefit of the holders of Class A common
stock.
NOTE 10. INCOME TAXES
The provision (credit) for income taxes is comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
-----------------------------
<S> <C> <C> <C>
Current:
U.S./Puerto Rico $ 1,099 $ 76 $ 212
State 193 722 635
Foreign -- -- 6
-----------------------------
1,292 798 853
Deferred:
U.S./Puerto Rico (131) 2,404 87
State (23) 390 --
Foreign 16 257 (100)
-----------------------------
(138) 3,051 (13)
-----------------------------
Total $ 1,154 $ 3,849 $840
=============================
</TABLE>
On December 30, 1994, the effective date of the Merger, Schawk, Inc. recorded a
$3,000 deferred income tax charge related to the termination of the S
Corporation status of the Old Schawk Companies. The 1995 income tax provision
includes a benefit of $1,632 for utilization of net operating loss
carryforwards for which no tax benefit was previously recorded.
42
<PAGE> 44
Schawk, Inc.
Notes to Consolidated Financial Statements
(Thousands of Dollars, Except Per Share Amounts)
NOTE 10. INCOME TAXES (CONTINUED)
Components of deferred income tax assets and liabilities (tax affected) are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
-----------------
<S> <C> <C>
Current deferred income taxes:
Inventory $ 256 $ 82
Accruals and reserves not currently deductible 2,045 702
Offering costs -- 400
Other (797) --
-----------------
Net current asset $ 1,504 $ 1,184
=================
Noncurrent deferred income taxes:
Depreciation $(1,253) $(1,228)
Property and equipment acquisition
basis differences (3,040) (3,419)
Net operating losses and other credit carryforwards 1,100 4,680
Other (993) 93
Valuation allowance (550) (4,680)
-----------------
Noncurrent liability (4,736) $(4,554)
=================
</TABLE>
A reconciliation between the provision for income taxes computed by applying
the Federal statutory tax rate to income before income taxes and minority
interest and the actual provision is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
------------------------
<S> <C> <C> <C>
Income taxes at statutory rate 34.0% 34.0% 34.0%
Difference between foreign and statutory tax rate (11.8) (39.8) (131.6)
Net operating loss carryforward not previously benefited (20.2) -- --
Nondeductible expenses 9.3 6.9 10.1
State income taxes 2.2 3.8 4.0
European operating losses not benefited -- -- 98.0
S Corporation earnings of acquired entities -- -- (10.7)
Deferred tax related to S Corporation termination -- 15.8 --
Other 0.8 (0.5) 1.5
------------------------
14.3% 20.2% 5.3%
========================
</TABLE>
The Company's Puerto Rican operation is exempt from the payment of Puerto Rico
income taxes on 90% of its income from the manufacture and sale of all products
in Puerto Rico until January 2010. This exemption was received from the
government of Puerto Rico in January 1974 and amended in June 1981, June 1983,
and December 1990, under the Puerto Rico Industrial Incentive Acts of 1963 and
1987. In addition, 90% of the dividends paid to residents of Puerto Rico are
exempt from tax under grant.
43
<PAGE> 45
Schawk, Inc.
Notes to Consolidated Financial Statements
(Thousands of Dollars, Except Per Share Amounts)
NOTE 10. INCOME TAXES (CONTINUED)
The Company's operation in the Republic of Ireland is subject to a 10% income
tax.
The approximate impact of the low effective tax rates in Ireland and Puerto
Rico was to increase net income by $955, $1,334 and $1,420 in 1995, 1994 and
1993, respectively, and to increase earnings per share by $0.05 in 1995 and pro
forma earnings per share by $0.07 and $0.07 in 1994 and 1993, respectively.
The Company qualifies under Section 936 of the Internal Revenue Code to receive
a credit equal to its United States tax on income from sources in Puerto Rico.
As a result, no United States income tax has been provided on the exempt
income.
Tax loss carryforwards at December 31, 1995 are approximately $2,400 and $1,300
in the United States and France, respectively. These loss carryforwards can be
recognized through future taxable income in the United States through the years
2003 through 2007, and in France for an indefinite period of years.
The undistributed earnings of foreign subsidiaries were approximately $4,838 at
December 31, 1995. No income taxes are provided on the distribution of such
earnings because they are considered permanently invested. The foreign
component of income (losses) before income taxes and minority interest was $92,
($745) and ($4,036) for the years 1995, 1994 and 1993, respectively.
Income taxes paid during the years ended December 31, 1995, 1994 and 1993 were
approximately $1,379, $959 and $654, respectively.
NOTE 11. LEASES AND COMMITMENTS
The Company leases land and a building from an unrelated party. This lease
requires monthly installments of approximately $48 through January 2010. A
related party has an option to purchase the land and building in January 2000.
The Company also leases land and a building from a related party, with monthly
installments of approximately $32 through June 2002. The agreement contains an
option to purchase the land and building at the end of the lease for 90% of
fair market value at the end of the lease. The Company is required to pay
utilities, real estate taxes, and insurance on the property on both leases.
These leases are recorded as capital leases.
The Company also leases various plant facilities and equipment under
noncancellable operating leases that expire at various dates through February
2010. Total rent expense incurred under all operating leases was approximately
$1,076, $808 and $1,099 for the years ended December 31, 1995, 1994 and 1993,
respectively.
44
<PAGE> 46
Schawk, Inc.
Notes to Consolidated Financial Statements
(Thousands of Dollars, Except Per Share Amounts)
NOTE 11. LEASES AND COMMITMENTS (CONTINUED)
Future minimum payments under leases with terms of one year or more are as
follows at December 31, 1995:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
---------------------------
<S> <C> <C>
1996 $ 959 $ 505
1997 959 349
1998 959 284
1999 959 220
2000 959 220
Thereafter 5,819 660
---------------------------
10,614 $2,238
======
Less: Amounts representing interest 4,584
-------
6,030
Less: Current portion 355
-------
$ 5,675
=======
</TABLE>
NOTE 12. EMPLOYEE BENEFIT PLANS
The Company has various defined-contribution plans for the benefit of its
employees. The plans provide a 100% match of employee contributions ranging
from 2% to 5% of wages (as defined) depending on the division. Contributions to
the plans were $1,534, $1,516 and $1,381 in 1995, 1994 and 1993, respectively.
The Company is required to contribute to certain defined-contribution union
pension plans under various labor contracts covering union employees. Pension
expense related to the union plans, which is determined based upon payroll
data, was approximately $566, $558, and $587 in 1995, 1994 and 1993,
respectively.
NOTE 13. STOCK/EQUITY OPTION PLANS
The Company has an Equity Option Plan which provides for the granting to key
employees of options to purchase up to 2,252,250 shares of Class A common
stock. The Company also adopted an Outside Directors' Formula Stock Option Plan
authorizing grants thereunder to nonemployee directors of options to purchase
shares of Class A common stock. In addition, options totaling 236,226 shares
were granted to former employees.
Options granted under all of these plans are at market price at date of grant
and are exercisable for a period of ten years from the date of grant. The
Company follows APB 25 "Accounting for Employees Stock Options." In accordance
with APB 25, no compensation expense is recorded for options where the exercise
price is equal to the market price at the date of grant.
45
<PAGE> 47
Schawk, Inc.
Notes to Consolidated Financial Statements
(Thousands of Dollars, Except Per Share Amounts)
NOTE 13. STOCK/EQUITY OPTION PLANS (CONTINUED)
A summary of options outstanding at each of the three years ended December 31,
1995, 1994 and 1993, and other data for the three years then ended under all
option plans, including options granted to the Employees Stock Bonus Plan and
Trust, is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
-------------------------------
<S> <C> <C> <C>
Outstanding January 1, . . . . . . . 930,688 846,033 1,153,288
Granted . . . . . . . . . . . . . . 146,550 364,984 35,000
Exercised . . . . . . . . . . . . . 0 (21,966) (334,182)
Cancelled. . . . . . . . . . . . . . (27,325) (258,363) (8,073)
--------- ------- -------
Outstanding December 31, . . . . . . 1,049,913 930,688 846,033
========= ======= =======
Average price of options
exercised . . . . . . . . . . . . -- $6.00 $6.00
Average price of options
outstanding . . . . . . . . . . . . $9.11 $9.37 $8.17
Available for grant
December 31, . . . . . . . . . . . 773,131 919,681 58,481
========= ======= =======
</TABLE>
46
<PAGE> 48
Schawk, Inc.
Notes to Consolidated Financial Statements
(Thousands of Dollars, Except Per Share Amounts)
NOTE 14. SEGMENT DATA
The Company operates in two industry segments, imaging and plastics as
described in Note 1. Net sales, operating income (loss), capital
expenditures, depreciation and amortization, and identifiable assets, by
segment, are summarized as follows:
<TABLE>
<CAPTION>
Imaging Plastics General
Group Group Corporate
-----------------------------------
<S> <C> <C> <C>
1995
- ----
Net sales $ 87,204 $ 85,086 $ --
Operating income (loss) 11,340 2,615 (318)
Capital expenditures 5,245 5,691 91
Depreciation and amortization 7,512 8,707 --
Identifiable assets 40,297 128,464 15,702
1994
- ----
Net sales $103,889 $ 82,256 $ --
Operating income (loss) 20,380 4,087 (194)
Capital expenditures 4,551 8,750 581
Depreciation and amortization 7,192 7,674 --
Identifiable assets 44,965 129,903 19,057
1993
- ----
Net sales $ 95,809 $ 73,229 $ --
Operating income (loss) 16,356 3,789 (180)
Capital expenditures 6,138 9,100 3,828
Depreciation and amortization 8,906 6,430 --
Identifiable assets 46,332 111,940 21,921
</TABLE>
General corporate identifiable assets consist primarily of cash, property and
equipment, and miscellaneous other assets.
47
<PAGE> 49
Schawk, Inc.
Notes to Consolidated Financial Statements
(Thousands of Dollars, Except Per Share Amounts)
NOTE 15. EARNINGS PER SHARE
Earnings per share for 1995 is computed by dividing net income less preferred
dividends (of $1,360) by the weighted average number of common shares
outstanding and common stock equivalents which are primarily stock options.
Fully diluted earnings per share is not different than primary earnings per
share.
Historical earnings per share for 1994 and 1993 are computed by dividing net
income adjusted only for pro forma income taxes by the historical weighted
average number of common shares outstanding of the Old Schawk Companies.
The historical earnings per share adjusted only for pro forma income
taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1993
----------------------------
<S> <C> <C>
Net income $13,469 $14,616
Pro forma income taxes 7,071 6,400
Pro forma net income adjusted only for
income taxes 10,247 9,056
Primary and fully diluted common shares
outstanding 507,328 507,328
Primary and fully diluted earnings per share
adjusted only for income taxes $20.20 $17.85
</TABLE>
Because of the Merger with Filtertek on December 30, 1994, the Company does
not consider the historical earnings per share calculation shown for 1994 and
1993 above to be meaningful information. Pro forma earnings per share
information shown on the statements of income is presented to compare net
income and earnings per share as if the Merger had occurred at the beginning of
each of the periods presented. The following pro forma adjustments have been
made to each of the periods. Increased depreciation and amortization was
recorded to reflect the increased basis in property and equipment and goodwill
amortization resulting from the Merger. Compensation expense was reduced to
reflect the terms of employee/stockholder agreements in effect at January 1,
1995. Income tax expense was adjusted to reflect taxation at regular income tax
rates instead of S Corporation rates. Preferred stock dividends were recorded
to reflect the issuance of preferred stock in connection with the Merger. Pro
forma primary and fully diluted earnings per share is computed by dividing net
income, adjusted as described above, by the pro forma weighted average number
of common and common equivalent shares outstanding as a result of the Merger.
48
<PAGE> 50
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has no items to report under item 9 of this Annual Report on
Form 10-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding Directors and persons nominated to become Directors,
and information regarding Executive Officers of the Registrant is included in
the Joint Proxy Statement for the Annual Meeting of Stockholders to be held
Wednesday, May 15, 1996 and is to be filed with the Securities and Exchange
Commission on or before March 31, 1996 ("the Proxy Statement"), and such
information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item is included in the Proxy Statement
under the heading "Executive Compensation" and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to this item is included in the Proxy Statement
under the heading of "Security Ownership of Certain Beneficial Owners and
Management" and is incorporated herein by reference.
ITEM 13. CERTAIN TRANSACTIONS
Information with respect to this item is included in the Proxy Statement
under the heading of "Certain Transactions" and is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following financial statements are included in Item 8:
1. All financial statements
Reports of Independent Auditors
FINANCIAL STATEMENTS:
Consolidated Balance Sheets--Years Ended
December 31, 1995 and 1994
Consolidated Statements of Income--Years Ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows--Years Ended
December 31, 1995, 1994 and 1993
Consolidated Statements of Stockholders' Equity--Years Ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
49
<PAGE> 51
2. The following financial schedules for the years 1995, 1994 and 1993 are
submitted herewith:
SCHEDULE II--Valuation Reserves
Financial Data Schedule
All other schedules are omitted because they are not applicable or not
required.
(b) Reports on Form 8-K
The following Reports on Form 8-K were filed by Filtertek, Inc., the
former Registrant, during 1995 and are incorporated herein by reference:
Form 8-K dated January 16, 1995
Form 8-K dated February 8, 1995
Form 8-K dated March 27, 1995
Form 8-K dated April 26, 1995
Form 8-K dated July 28, 1995
(c) Exhibits
<TABLE>
<CAPTION>
INCORPORATED
----------------------
<S> <C> <C>
2.1 Amended and Restated Agreement and Plan of Reorganization Registration Statement
dated November 23, 1994, by and among Filtertek, Inc., No. 33-85152
Schawk, Inc., Flexo Graphics, Inc., Lincoln Graphics, Inc.
and Filtertek USA, Inc., as amended.
2.2 Amended and Restated Plan of Merger dated November 23, Registration Statement
1994, by and among Filtertek, Inc., Schawk, Inc., Flexo No. 33-85152
Graphics, Inc., Lincoln Graphics, Inc. and Filtertek USA,
Inc., as amended.
3.1 Certificate of Incorporation of Schawk, Inc., as amended. Registration Statement
No. 33-85152
3.3 By-Laws of Filtertek, Inc. as amended. Registration Statement
No. 2-83456
4.1 Specimen Class A Common Stock Certificate. Registration Statement
No. 33-85152
4.2 Certificate of Registration of Series A Preferred Stock. Registration Statement
No. 33-85152
4.3 Certificate of Registration of Series B Preferred Stock. Registration Statement
No. 33-85152
10.1(a) Filtertek/Filtertek P.R. Service Agreement. Registration Statement
No. 2-83456
10.1(b) Amendment to Service Agreement. 1986 10-K
10.2(a) Filtertek/Filtertek P.R. Distribution Agreement. Registration Statement
No. 2-83456
</TABLE>
50
<PAGE> 52
<TABLE>
<CAPTION>
INCORPORATED
------------
<S> <C> <C>
10.2(b) Amendment to Distribution Agreement. 1986 10-K
10.3 IDA Grant and Tax Exemption Letter. Registration Statement
No. 2-83456
10.7 Filtertek P.R. Restricted Stock Ownership Plan for Key Registration Statement
Employees. No. 2-83456
10.12 Filtertek, Inc. 1988 Equity Option Plan. 1988 10-K
10.13(a) First Amendment to Filtertek, Inc. 1988 Equity Option Plan. 1992 10-K
10.13(b) Second Amendment to Filtertek, Inc. 1988 Equity Option Registration Statement
Plan. No. 33-85152
10.14 Acquisition Agreement of Robinson Industries and Fuzere 1993 10-K
Midwest Divisions of Schawk, Inc. and Fuzere Manufacturing
Co., Inc.
10.15 Management Agreement Re: Administrative Services. 1993 10-K
10.16 Retirement Savings Plan First Amendment and Restatement 1993 10-K
effective January 1, 1993.
10.17 German Severance Agreement dated March 9, 1993. 1993 10-K
10.18 Credit Agreement dated December 22, 1993 by and among Registration Statement
Filtertek, Inc., Filtertek de Puerto Rico, Inc. and the No. 33-85152
lenders named therein and the Northern Trust Company, as
agent.
10.18(a) Consent, Waiver and Amendment dated as of December 28, Registration Statement
1994 by and among Filtertek, Inc., Filtertek USA, Inc. and No. 33-85152
the lenders named therein and the Northern Trust Company,
as agent.
10.19 $3,500,000 Credit Facility dated June 2, 1994 between Registration Statement
Filtertek, B.V. and The First National Bank of Chicago. No. 33-85152
10.20 Credit Agreement dated September 21, 1992 by and between Registration Statement
Schawk, Inc. and First National Bank of Chicago, as No. 33-85152
amended through May 5, 1994.
10.21 Interest Rate and Currency Exchange Agreement dated April Registration Statement
1, 1992, by and between Schawk, Inc. and First National No. 33-85152
Bank of Chicago.
10.22 Lease Agreement dated as of July 1, 1987 and between Registration Statement
Process Color Plate, a division of Schawk, Inc. and The No. 33-85152
Clarence W. Schawk 1979 Children's Trust.
10.23 Lease Agreement dated as of June 1, 1989 by and between Registration Statement
Schawk Graphics, Inc. a division of Schawk, Inc. and C.W. No. 33-85152
Properties.
10.24 Employment Agreement between Ronald J. Kay and Filtertek, 1993 10-K
Inc.
</TABLE>
51
<PAGE> 53
<TABLE>
<CAPTION>
INCORPORATED
------------
<S> <C> <C>
10.25 Employment Agreement between Denis C. Singery and 1993 10-K
Filtertek, Inc.
10.26 Filtertek, Inc. 1991 Outside Directors' Formula Stock Registration Statement
Option Plan, as amended. No. 33-85152
10.27 Form of Clarence W. Schawk Amended and Restated Employment Registration Statement
Agreement between Clarence W. Schawk and Schawk, Inc. No. 33-85152
10.28 Form of David A. Schawk Amended and Restated Employment Registration Statement
Agreement between David A. Schawk and Schawk, Inc. No. 33-85152
10.29 Manufacturing and Sales Agreement between Filtertek, Inc. Registration Statement
and SciTech Dental, Inc., dated as of May 25, 1994. No. 33-85152
10.30 Strategic Alliance and Distribution Agreement between Registration Statement
Filtertek, Inc. and Allomatic Products Company dated No. 33-85152
November 15, 1993.
10.31 Form of Registration Rights Agreement dated December 30, Registration Statement
1994 by and among Schawk, Inc. and certain investors. No. 33-85152
10.32 Money Market Demand Note dated December 22, 1994 from Registration Statement
Schawk, Inc., borrower, to the Northern Trust Company, No. 33-85152
lender.
10.33 Description of bonus arrangements with Messrs. Kay, Registration Statement
Singery, Larkin and Soltwedel. No. 33-85152
10.34 Notes payable to certain stockholders in connection with S Registration Statement
Corporation Dividend. No. 33-85152
10.35 Letter of agreement dated September 21, 1992 by and Registration Statement
between Schawk, Inc. and Judith W. McCue. No. 33-85152
10.36 Acquisition Agreement by and among Noral Color Registration Statement
Acquisition, the Stockholders of Noral Color Corporation No. 33-85152
and Schawk, Inc. dated as of November 14, 1994.
10.37 Schawk, Inc. Retirement Trust effective January 1, 1996.
10.38 Schawk, Inc. Retirement Plan for Imaging Employees Amended
and Restated effective January 1, 1996.
10.39 Schawk, Inc. Retirement Plan for Plastics Employees
Amended and Restated effective January 1, 1996.
10.40 $80,000,000 Multicurrency Credit Agreement dated as of
June 30, 1995.
10.41 $20,000,000 Multicurrency Short Term Credit Agreement
dated as of June 30, 1995.
10.42 Filtertek USA, Inc. Note Agreement dated as of August 18,
1995.
10.43 Stockholder Investment Program dated July 28, 1995 Registration Statement
11 Statement Re-Computation of Per Share Earnings.
</TABLE>
52
<PAGE> 54
<TABLE>
<CAPTION>
INCORPORATAED
-------------
<S> <C> <C>
21 List of Subsidiaries. Registration Statement
No. 33-85152
23(a) Consent of Expert.
23(b) Consent of Expert.
27 Financial Data Schedule.
99.1(a) Puerto Rico Tax Grant. Registration Statement
No. 2-83456
99.1(b) Amended Puerto Rico Tax Grant. Registration Statement
No. 2-83456
99.1(c) Puerto Rico Tax Grant, December 10, 1990. 1990 10-K
</TABLE>
53
<PAGE> 55
Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrants have duly caused this report to be signed on their
behalf by the undersigned, thereunto duly authorized, in Cook County, State of
Illinois, on the 28th day of March, 1996.
Schawk, Inc.
By: /s/Clarence W. Schawk
---------------------
Clarence W. Schawk
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 30th day of March, 1996.
<TABLE>
<S> <C>
/s/Clarence W. Schawk Chairman of the Board and Director
- --------------------------
Clarence W. Schawk
/s/David A. Schawk President, Chief Executive Officer, and Director
- --------------------------
David A. Schawk
/s/Ronald J. Kay President, Plastics Group North American Operations,
- --------------------------
Ronald J. Kay and Director
/s/Larry Larkin Executive Vice President, Plastics Group, and Director
- --------------------------
Larry Larkin
/s/A. Alex Sarkisian, Esq. President, Imaging Group, Executive Vice President,
- --------------------------
A. Alex Sarkisian, Esq. Corporate Secretary and Director
/s/Marie Meisenbach Graul Chief Financial Officer, Treasurer, Public Information Officer,
- -------------------------
Marie Meisenbach Graul and Director
/s/John T. McEnroe, Esq. General Counsel, Assistant Secretary, and Director
- -------------------------
John T. McEnroe, Esq.
/s/Judith W. McCue, Esq. Director
- -------------------------
Judith W. McCue, Esq.
/s/Robert F. Meinken Director
- -------------------------
Robert F. Meinken
/s/Hollis W. Rademacher Director
- -------------------------
Hollis W. Rademacher
54
</TABLE>
<PAGE> 56
SCHAWK, INC.
SCHEDULE II --VALUATION RESERVES
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
----------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Balance beginning of
year $947 $791 $564
Provision 217 448 379
Deductions (180) (1) (292) (1) (152) (1)
----------------------------------------------------------------------------
Balance end of year $984 $947 $791
(1) Uncollectible accounts written-off, net of recoveries.
</TABLE>
INCOME TAX VALUATION ALLOWANCE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
----------------------------------------------------------------------------
<S> <C> <C> <C>
Balance beginning of
year $4,680 $7,216 5,845
Provision -- -- 1,298
Deduction (1,632) (1) -- --
Other (2,498) (2,536) (1) 73 (1)
----------------------------------------------------------------------------
Balance end of year $550 $4,680 $7,216
(1) Includes effect of foreign currency fluctuations and utilization of net operating losses.
</TABLE>
55
<PAGE> 1
EXHIBIT 10.37
SCHAWK, INC. RETIREMENT TRUST
Effective January 1, 1996
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I: NAME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II: FIDUCIARY RESPONSIBILITY . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III: THE TRUST FUND AND ITS ADMINISTRATION . . . . . . . . . . . . . 5
ARTICLE IV: INVESTMENT FUNDS . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE V: GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI: CHANGES IN TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VII: AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . 26
ARTICLE VIII: INCORPORATION OF COLLECTIVE INVESTMENT TRUSTS . . . . . . . . . 27
i
<PAGE> 3
SCHAWK, INC. RETIREMENT TRUST
THIS AGREEMENT, made this ____ day of __________, 19___, by
and between Schawk, Inc., a Delaware corporation (the "Company") and The
Chicago Trust Company, located at Chicago, Illinois, (the "Trustee"),
WITNESSETH THAT:
WHEREAS, the Trustee currently serves as the trustee of the
Filtertek Retirement Savings Plan (the "Filtertek Plan") effective August 1,
1988; and
WHEREAS, the Company has amended the Filtertek Plan, effective
as of January 1, 1996, to merge into it the Plastic Molded Concepts, Inc.
401(k) Plan (the "PMC Plan"), and to rename it as the Schawk, Inc. Retirement
Plan for Plastics Employees (the "Plastics Plan"); and
WHEREAS, the Company established the Schawk, Inc. Retirement
Savings Plan (the "Schawk Plan") originally effective January 1, 1960, which is
being amended and restated effective January 1, 1996 as the Schawk, Inc.
Retirement Plan for Imaging Employees (the "Imaging Plan") (collectively with
the Plastics Plan, the "Plans"); and
WHEREAS, effective December 1, 1995, the Company appointed the
Trustee to be the custodian of the assets of the Schawk Plan;
<PAGE> 4
WHEREAS, the Company has appointed the Trustee to serve as
successor Trustee under the Imaging Plan, and the Trustee has accepted such
appointment, effective as of the date of this agreement; and
WHEREAS, this agreement is an amendment and continuation of
the trust provisions found in the Plans and in the PMC Plan, and is intended to
implement the Plans and form a part of them;
NOW, THEREFORE, IT IS AGREED, that this agreement, on and
after the day and year first above written, shall constitute the sole trust
agreement between the Company and the Trustee in connection with the Plans.
FURTHER AGREED, that the execution of this agreement by the
parties hereto evidences the Company's appointment of the Trustee to serve as
successor Trustee of the Imaging Plan and the PMC Plan effective as of the date
of this agreement, the Trustee's acceptance of such appointment, and the
acknowledgement of each Employer under the Plan other than the Company (the
term "Employers" as used herein shall refer to the Company and each related
adopting Employer) of the appointment of the Trustee and the terms of this
agreement
2
<PAGE> 5
ARTICLE I: NAME
This agreement and the trust hereby evidenced may be referred
to as the Schawk, Inc. Retirement Trust (the "Trust") and is hereby intended by
the Company to continue carrying out the purposes of the Plans.
3
<PAGE> 6
ARTICLE II: FIDUCIARY RESPONSIBILITY
The Company representatives, the Trustee, any investment
manager appointed pursuant to paragraph III-4, and any other fiduciaries with
respect to the Plans or Trust shall discharge their duties thereunder solely in
the interest of Participants and their beneficiaries, for the exclusive purpose
of providing their benefits and defraying reasonable expenses of Plan and Trust
administration, with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims.
4
<PAGE> 7
ARTICLE III: THE TRUST FUND AND ITS ADMINISTRATION
III-1. The Trust Fund. The "Trust Fund" as at any date
means all property then held by the Trustee under this agreement, and shall
consist of contributions received by the Trustee, assets transferred from any
prior trustee, life insurance company or custodian, investments and
reinvestments thereof, and the earnings and income thereon, less disbursements
therefrom.
III-2. Certificate of Authority. The Plans are
administered by the Company. The Plans provide for the appointment of a
committee to serve as administrator and as a named fiduciary of each Plan (the
"Committee"). Benefits payable under the Plans are distributed by the Trustee
as directed by the Company. The Secretary of the Company will certify to the
Trustee from time to time the person or persons who are authorized to
communicate to the Trustee the decisions and directions of the Committee, and
any other person or persons who are authorized to act for the Company (the
"Company representatives"). The Secretary of the Company shall notify the
Trustee of any change in the membership of the Committee or in the authority of
such Company representatives. The Trustee may rely on the latest certificate
received without further inquiry or verification. The Trustee shall be
responsible for the property received by it as Trustee, but shall not be
responsible for the administration of the Plan or for those assets of the Plan
which have not been delivered to and accepted by the Trustee. The Trustee
shall not have the duty or obligation to determine the
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<PAGE> 8
adequacy of the Trust Fund or whether contributions received by it comply with
the provisions of the Plan or with any resolution of the Board of Directors or
to enforce the collection from the Employers of any contribution to the Trust.
III-3. General Powers. The Trustee shall have exclusive
authority and discretion to manage and control the Trust Fund except to the
extent that authority to manage investments has been allocated to one or more
investment managers pursuant to paragraph III-4. The Trustee shall have the
following powers, rights and duties in addition to those provided elsewhere in
this agreement, the Plans or by law:
(a) To manage, sell, contract to sell, grant options to
purchase, convey, exchange, transfer, abandon,
improve, repair, insure, lease for any term (although
commencing in the future or extending beyond the term
of this Trust) and otherwise deal with all property,
real or personal, in such way, for such
considerations, and on such terms and conditions as
the Trustee decides.
(b) To retain in cash such amounts as the Trustee
considers advisable and as are permitted by
applicable law; to invest and reinvest part or all of
the balance of the Trust Fund in stocks, bonds,
notes, mortgages, mutual fund shares or other
property of any kind, real or personal, including
units of collective trusts; and to diversify such
investments so as to minimize the risk of large
losses, unless under the circumstances it is clearly
prudent not to do so.
(c) To deposit cash in any depositary without liability
for interest and, without limiting the generality of
the foregoing, to invest cash in savings accounts or
time certificates of deposit bearing a reasonable
rate of interest.
(d) To make any payment or distribution from the Trust
Fund as directed by the Company without inquiring as
to whether it is proper, and the Trustee shall not be
liable for a payment or distribution that is
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<PAGE> 9
not proper under the terms of the Plans or this
agreement; and to notify the Company if a payment or
distribution is returned to the Trustee, and the
Trustee shall have no obligation to search for or
ascertain the whereabouts of a payee or distributee.
(e) To the extent permitted by law, to borrow from
anyone, with the Company's approval, such sum or sums
from time to time as the Trustee considers desirable
to carry out this Trust.
(f) To retain any funds or property subject to any
dispute without liability for interest and to decline
to make payment or delivery thereof until final
adjudication by a court of competent jurisdiction or
until an appropriate release is obtained.
(g) To begin, maintain or defend any litigation necessary
in connection with the administration of the Plans or
this Trust, except that, unless otherwise required by
law, the Trustee shall not be obliged or required to
do so unless indemnified to the Trustee's
satisfaction.
(h) To compromise, contest, arbitrate or abandon claims
or demands.
(i) To give proxies to vote stocks and other voting
securities, to join in or oppose (alone or jointly
with others) voting trusts, mergers, consolidations,
foreclosures, reorganizations, liquidations, or other
changes in the financial structure of any
corporation, and to exercise or sell stock
subscription or conversion rights.
(j) To hold securities or other property in the name of a
nominee, in a depositary, or in any other way, with
or without disclosing the trust relationship;
provided however, that except as authorized by
regulations issued by the Secretary of Labor, the
indicia of ownership of the assets of the Trust Fund
shall not be maintained outside the jurisdiction of
the district courts of the United States.
(k) To report to the Company on each accounting date
under the Plans (the last day of each calendar
quarter), or as soon thereafter as practicable, or at
such other times as the Company may request, the then
net worth of the Trust Fund (that is, the fair
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<PAGE> 10
market value of all assets comprising the Trust
Fund, less liabilities, if any, other than
liabilities to persons entitled to benefit under the
Plan) determined on the basis of such evidence, data
or information as the Trustee considers pertinent and
reliable and subject to the provisions of paragraph
III-7 below.
(l) To furnish to the Company an annual account or an
account for such other period as the Company may
specify or as may be required under this agreement or
the Plans, showing all investments, receipts,
disbursements, and other transactions involving the
Trust during the accounting period, and also showing
the assets of the Trust Fund held at the end of the
period, which, to the extent permitted by law, shall
be conclusive on all persons, including the
Employers, except as to any act or transaction as to
which an Employer files with the Trustee written
exceptions or objections within one hundred eighty
days after receipt of the account.
(m) To pay any estate, inheritance, income or other tax,
charge or assessment attributable to any benefit
payable under the Plans out of such benefit after
giving the Company notice as far in advance as
practicable; to defer making payment of any such tax,
charge or assessment if it is indemnified to its
satisfaction in the premises; to withhold from any
distribution which the Trustee is directed to make,
or require the withholding of, such sum as the
Trustee may reasonably estimate as necessary to cover
any taxes for which the Trustee may be liable and
which may be assessed with regard to such
distribution; and to require before making any
payment of taxes or any distribution of amounts
withheld to cover taxes, such release or other
document from any lawful taxing authority and such
indemnity from the intended payee as the Trustee
considers necessary for its protection.
(n) To maintain records and accounts reflecting all
receipts and disbursements under this agreement and
such other records and accounts as the Company may
specify, all of which shall be open to the inspection
of any Employer at all reasonable times, and may be
audited from time to time by anyone named by the
Company.
(o) To employ agents, accountants or other persons (who
also may be employed by the Employers) and to
delegate to them such powers as the Trustee
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<PAGE> 11
considers desirable (except that the Trustee
may not delegate its responsibilities as to the
management or control of the assets of the Trust
Fund), provided that such delegation, and the
acceptance thereof, by such agents, attorneys,
accountants or other persons, shall be in writing;
and, to the extent permitted by law, the Trustee
shall be protected in acting or refraining from
acting on the advice of persons so employed without
court action.
(p) To appoint a bank, trust company, or broker or dealer
registered under the Securities Exchange Act of 1934
to act as custodian with respect to any portion of
the Trust Fund, contingent upon the prior approval of
the Company; and a custodian so appointed shall have
custody of such assets as are deposited with it and
as custodian such rights, powers and duties with
respect thereto as shall be agreed upon from time to
time by the Company, the Trustee and such custodian.
(q) To furnish the Employers with such information in the
Trustee's possession as the Employers may need for
tax or other purposes.
(r) At the direction of the Company, to receive, hold and
invest any funds or other property transferred to the
Trustee from:
(i) any other trust forming a part of a plan
intended to meet the requirements of Section
401(a) of the Internal Revenue Code (and, if
applicable, Section 165(a) of the Puerto Rico
Income Tax Act);
(ii) an employee of an Employer if such funds or
property qualify as a rollover amount
described in Section 402(a)(5) of the
Internal Revenue Code; or
(iii) an individual retirement account or
individual retirement annuity maintained by
an employee of an Employer, if such funds or
property qualify as a rollover contribution
described in Section 408(d)(3) of the
Internal Revenue Code;
and to allocate, credit and distribute any such funds
and other property so transferred in accordance with
the terms of the Plans.
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<PAGE> 12
(s) To transfer all or any portion of the Trust Fund to
another trust or trusts forming a part of a plan or
plans that are intended to meet the requirements of
Section 401(a) of the Internal Revenue Code, as
directed by the Company.
(t) To perform any and all other acts which in the
Trustee's judgment are appropriate for the proper
management, investment and distribution of the Trust
Fund.
(u) Effective until Trustee's telephone transfer system
is operational for participants in the Imaging Plan,
to invest such amounts in the Vanguard/Wellesley
Income Fund maintained by The Vanguard Group.
(v) Effective until Trustee's telephone transfer system
is operational for participants in the Plastics Plan
who are former PMC Plan participants, to invest such
amounts as follows:
(1) Amounts previously invested in the Strong
Money Market Fund shall be invested in The
Chicago Trust Company Money Market Fund;
(2) Amounts previously invested in the Strong
Government Securities Fund shall be invested
in The Chicago Trust Company Government Bond
Fund;
(3) Amounts previously invested in the Strong
Total Return Fund shall be invested in the
Vanguard Institutional Index Fund; and
(4) Amounts previously invested in the CGM Mutual
Fund shall be invested in the Dodge and Cox
Balanced Fund.
III-4. Investment Managers. The Company may appoint one
or more investment managers to manage the investment of any part of the assets
of the Trust Fund. Except as otherwise provided by law, the Trustee shall have
no obligation for investment of any assets of the Trust Fund which are subject
to management by an investment manager. Appointment of an investment
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<PAGE> 13
manager shall be made by written notice to the investment manager and the
Trustee, which notice shall specify those powers, rights and duties of the
Trustee under this agreement that are allocated to the investment manager and
that portion of the assets of the Trust Fund subject to investment management.
An investment manager so appointed pursuant to this paragraph shall be either a
registered investment adviser under the Investment Advisers Act of 1940, a
bank, as defined in said Act, or an insurance company qualified to manage,
acquire and dispose of the assets of the Plan under the laws of more than one
state of the United States. Any such investment manager shall acknowledge to
the Company in writing that it accepts such appointment and that it is a
fiduciary with respect to the Plans and Trust. An investment manager may
resign at any time upon written notice to the Trustee and the Company. The
Company may remove an investment manager at any time by written notice to the
investment manager and the Trustee.
III-5. Compensation and Expenses. Except as otherwise
provided below in this agreement, all reasonable costs, charges, and expenses
incurred in the administration of this Trust and the Plans, including
compensation to the Trustee (as agreed upon between the Company and the
Trustee), compensation to an investment manager (as agreed upon between the
Company and the investment manager), and any compensation to agents, attorneys,
accountants and other persons employed by the Trustee, will be paid from the
Trust Fund, or, to the extent not paid from the Trust Fund, will be paid by the
Company. Expenses incurred in connection
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<PAGE> 14
with the sale, investment and reinvestment of the Trust Fund (such as
brokerage, postage, express and insurance charges and transfer taxes, as agreed
upon in advance between the Company and the Trustee) shall be paid from the
Trust Fund. As of the last day of each Plan Year, the Trustee shall furnish to
the Company an annual account showing all fees and expenses charged to the
Trust Fund, both in general and with respect to individual Participant
accounts, as well as any fees and expenses charged to the Company.
III-6. Common Fund. The Trustee shall not be required to
make any separate investment of the Trust Fund for the account of the Plans as
applied to multiple employers and may administer and invest all contributions
made under the Plans as one Trust Fund. If, for any purpose, it becomes
necessary to determine as of any date the portion of the Trust Fund allocable
to all or any group of Participants employed by any one of the Employers, the
Company, through the Company representatives, may, in its sole discretion,
designate any date as an interim allocation date for the purpose of valuing the
trust fund and allocating earnings or losses to Participant accounts. The
Company shall designate interim allocation dates in a fair, uniform and
non-discriminatory manner. After all adjustments required as of an interim
allocation date have been made, such portion of the Trust Fund shall be an
amount equal to the aggregate of the account balances of such Participants.
Any such determination by the Company shall be binding upon all of the
Employers, Participants and all other persons. The Trustee will have no duty
or responsibility to
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<PAGE> 15
question any determination or direction by the Company under this paragraph
III-6.
III-7. Trust Accounting. For purposes of determining
the value of assets in the Trust, the Trustee shall value such assets in
accordance with the Trustee's procedures for determining the fair market value
as of any date for which such valuation or accounting is required and in
accordance with the procedures for valuation of any interests in any collective
investment trust described in Article VII. According to such procedures, while
allocations of contributions to individual Participant accounts or transfers of
amounts among investment funds are pending, the Trustee may hold any such
amounts on an interim basis in a cash management account invested in a money
market fund. In such event, Participants will receive an allocation of any
earnings or losses attributable to the period such amounts were so invested.
III-8. Limit of Trustee's Responsibility. No power, duty or
responsibility is imposed upon the Trustee under the Plans, except as set forth
in this agreement. Until they determine or are advised to the contrary, the
Trustee and any investment manager (appointed as provided in paragraph III-4)
may assume that this Trust is qualified under Section 401(a), and is entitled
to tax exemption under Section 501(a), of the Internal Revenue Code, and that
this Trust meets the qualification and tax exemption requirements of Section
165(a) of the Puerto Rico Income Tax Act.
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<PAGE> 16
ARTICLE IV: INVESTMENT FUNDS
IV-1. Investment Funds. The Company has authorized
the establishment of investment funds to be offered under the Plans, and the
Company shall direct the Trustee as to the type of investment funds to be
offered and shall establish written guidelines and objectives for each fund
under the Plans from time to time.
In addition to the other investment funds established under the Plans,
the Trustee shall, to the extent necessary, continue to maintain a life
insurance fund under the Plans. The life insurance fund shall consist of
individual life insurance policies which were purchased pursuant to
Participants' directions under the Filtertek Plan prior to November 12, 1992,
the date on which this investment option was frozen by resolutions of the
Boards of Directors of the Filtertek, Inc. Each Participant for whom an
individual life insurance policy is maintained under a Plan may elect either to
leave his individual life insurance policy in force and have the annual
premiums paid by deduction from his Plan account balance, or to cancel his
individual life insurance policy and have the cash value of such policy added
to his Plan account balance, whereupon the Participant may elect to have such
amount invested in one or more of the other investment funds maintained under
the Plan in which he is a Participant.
The Plans permit Participants to direct the investment of their Plan
accounts (except as noted above with respect to the Life
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<PAGE> 17
Insurance Fund) in 5% increments among one or more of the investment funds
maintained under the Plan in which they are Participants, at such times in
accordance with procedures and limitations established by the Committee. The
Trustee shall invest or reinvest contributions and account balances among the
investment funds upon receiving from the Company representatives the specific
directions of the Participants (or, once the Trustee's telephone transfer
system is operational for a Participant, upon receiving from the Participant
his specific directions) in accordance with the provisions of the Plans, but
shall have no duty to verify such directions and shall not have any
responsibility or liability for any loss to any Participant or beneficiary
which results from following such directions, unless such loss results from the
Trustee's own willful misconduct.
IV-2. Trustee's Investment of Amounts Credited to
Individually Directed Investment Accounts. If the Company has provided
for Participants to individually direct the investment of contributions and/or
account balances in one or more investment funds ("investment accounts"), the
Trustee shall, except as provided in paragraphs III-3(u) and (v), upon written
direction from an Employer (or, once the Trustee's telephone transfer system is
operational for a Participant, upon receiving from the Participant his specific
directions) made in accordance with the provisions of the Plan, invest and
reinvest amounts credited to each such Participant's investment account as
directed by the Participant, subject to the following:
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<PAGE> 18
(a) Except as otherwise provided below, the Trustee shall
make investments in such investment funds only as the
Participant's Employer directs in writing (or, once
the Trustee's telephone transfer system is
operational for a Participant, as the Participant
directs in accordance with such telephone transfer
system) and the Trustee shall be under no obligation
to inquire as to the propriety of such direction or
as to the amount to be invested in each such
investment account on behalf of such Participant.
(b) The Trustee shall have the power to invest any
portion of the assets in a Participant's investment
account which is held in cash or cash equivalents in
short term, fixed income investments pending receipt
of instructions from the Participant's Employer
regarding the investment of a Participant's accounts.
While an investment fund transfer is pending, a
Participant will not share in any gains or losses in
the fund to which such amount is transferred until
the trade into such fund is settled by the Trustee.
(c) The Company shall indemnify and hold the Trustee
harmless for any losses suffered as a result of
investments and reinvestments made by the Trustee in
good faith reliance upon any investment direction
given by such Participant under the Plan. The
Trustee shall not be indemnified or held harmless by
the Company for any losses incurred by a Participant
as a result of the Trustee's breach of fiduciary duty
with respect to the Trustee's management of any
investment account or collective investment trust
under Article VIII of the Trust. A Participant shall
not direct the Trustee to enter into any prohibited
transaction (as defined in Code Section 4975).
(d) The Trustee shall determine and report to the Company
for each Plan on each accounting date or as soon
thereafter as practicable the fair market value (as
determined in the sole discretion of the Trustee in
accordance with paragraph III-7) of the assets held
for the benefit of each Participant in an investment
fund in accordance with this paragraph. The Trustee
shall have the right to rely on any valuations and
fair market valuations prepared by third parties as
to assets held by any such third party.
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<PAGE> 19
(e) The Trustee shall provide to the Company for each
Plan on each accounting date or as soon thereafter as
practicable a statement showing the assets held for
the benefit of each Participant in such investment
funds and any expenses attributable to the
acquisition and maintenance of such assets and
expenses attributable to any assets disposed of since
the last preceding accounting date.
(f) On the written direction of a Participant given to
the Trustee by the Company in accordance with the
Plans, the Trustee shall liquidate for their fair
market value (as determined by the Trustee) all of
the assets held for the benefit of the Participant in
an investment fund(s) and report the amount realized
on such liquidation.
(g) Notwithstanding paragraph III-5, all expenses
incurred in connection with the sale, investment and
reinvestment of assets in a Participant's investment
fund (such as brokerage, postage, express and
insurance charges and transfer taxes) shall be
charged to the appropriate investment fund, provided
that the Trustee shall make every effort to limit the
amount and avoid duplication of expenses.
(h) If required by law, the Trustee reserves the right to
disapprove any investment direction filed with the
Trustee.
(i) Except to the extent otherwise required by law, the
Trustee shall not be liable or responsible for any
loss resulting to an investment fund by reason of any
investment or reinvestment made by the Trustee at the
direction of the Participant through the Company, and
the Trustee is relieved of any duty to review from
time to time such amounts or property held in any
investment fund.
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ARTICLE V: GENERAL PROVISIONS
V-1. Action by Employers. Any action required
or permitted to be taken by any Employer under the Trust shall be by resolution
of its Board of Directors, by resolution of a duly authorized committee of its
Board of Directors, or by a person or persons authorized by resolution of its
Board of Directors or such committee.
V-2. Warranty. The Company warrants that
all directions or authorizations by the Company representatives, whether for
the payment of money or otherwise, will comply with the Plan and this Trust.
V-3. Disagreement as to Acts. If there is a
disagreement between the Trustee and anyone as to any act or transaction
reported in any accounting, the Trustee shall have the right to a settlement of
its account by any proper court.
V-4. Courts. Except as otherwise provided by law,
in case of any court proceedings involving an Employer, the Trustee or the
Trust Fund, only the Employer concerned and the Trustee shall be necessary
parties to the proceedings, and no other person shall be entitled to notice of
process. A final judgment entered in any such proceedings shall be conclusive.
V-5. Evidence. Evidence required of anyone
under this agreement may be by certificate, affidavit, document or other
information which the person acting on it considers pertinent and
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<PAGE> 21
reliable, and signed, made or presented by the proper party or parties.
V-6. Third Parties. Except as otherwise provided
by law, the Trustee's exercise or non-exercise of its powers and discretions in
good faith shall be conclusive on all persons. No one shall be obliged to see
to the application of any money paid or property delivered to the Trustee,
except to the extent such person is acting as an investment manager as respects
such money or property. The certificate of the Trustee that it is acting
according to this agreement will fully protect all persons dealing with the
Trustee. An insurance company may assume that this agreement and the Plans
have not been amended or changed unless notice of such amendment or change is
received by the insurance company at its home office.
V-7. No Reversion in Employers. The
Employers shall have no right, title or interest in the Trust Fund, nor shall
any part of the Trust Fund revert or be repaid to an Employer, directly or
indirectly, except that an Employer shall upon written request have a right to
recover:
(a) the contributions made to a Plan by such Employer, in
the event that either the Internal Revenue Service or
the Puerto Rico Treasury Department initially
determines that the Plan, as applied to such
Employer, does not meet the requirements of either
Section 401(a) of the Internal Revenue Code, as
amended, or Section 165(a) of the Puerto Rico Income
Tax Act, as amended;
(b) within one year of the date of payment to the Trustee
of a contribution by such Employer, any amount (less
any losses attributable thereto) contributed through
a mistake of fact; or
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<PAGE> 22
(c) within one year of the date on which any deduction
for a contribution by an Employer under either
Internal Revenue Code Section 404 or Puerto Rico
Income Tax Act Section 23(p) is disallowed, an amount
equal to the amount disallowed (less any losses
attributable thereto).
The amount of any contribution that may be returned to an Employer pursuant to
subparagraph (b) or (c) above must be reduced by any portion thereof previously
distributed from the Trust Fund and by any losses of the Trust Fund allocable
thereto, and in no event may the return of such contribution cause any
Participant's account balances to be less than the amount of such balances had
the contribution not been made under the Plans.
V-8. Interests Not Transferable. The
interests of persons entitled to benefits under the Plans are not subject to
their debts or other obligations and, except as may be required by the tax
withholding provisions of the Internal Revenue Code or any state's income tax
act or pursuant to a qualified domestic relations order as defined in Section
414(p) of the Internal Revenue Code, may not be voluntarily or involuntarily
sold, transferred, alienated, assigned or encumbered.
V-9. Indemnification. To the extent
permitted by law, none of the Trustee, any present or former Company
representative, nor any person who is or was a director, officer, or employee
of any Employer, shall be personally liable for any act done or omitted to be
done in good faith in the administration of the Plan or this Trust. Any
employee of an Employer to whom the Company has delegated any portion of its
responsibilities under the Plan, any person who is or was a director or officer
of an
20
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Employer, present and former Company representatives, and each of them, shall,
to the extent permitted by law, be indemnified and saved harmless by the
Employers (to the extent not indemnified or saved harmless under any liability
insurance or other indemnification arrangement with respect to the Plan or this
Trust) from and against any and all liability or claim of liability to which
they may be subjected by reason of any act done or omitted to be done in good
faith in connection with the administration of the Plan or this Trust or the
investment of the Trust Fund, including all expenses reasonably incurred in
their defense if the Employers fail to provide such defense after having been
requested to do so in writing. The Trustee shall be indemnified and saved
harmless by the Employers (to the extent not indemnified or saved harmless
under any liability insurance or other indemnification arrangement with respect
to the Plan or this Trust) only with respect to liability or claim of liability
to which the Trustee shall be subjected by reason of its good faith compliance
with any directions given in accordance with the provisions of the Plan or this
Trust by an investment manager, the Company, or any person duly authorized by
the Company, or by reason of its failure to take any action with respect to any
assets of the Trust Fund which are subject to investment direction from an
investment manager in the absence of direction from the investment manager,
including all expenses reasonably incurred in its defense if the Employers fail
to provide such defense after having been requested to do so in writing.
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V-10. Litigation by Participants. If a legal action
begun against the Trustee, an Employer or the Company by or on behalf of any
person results adversely to that person, or if a legal action arises because of
conflicting claims to a Participant's or other person's benefits, the cost to
the Trustee, the Employer or the Company of defending the action will be
charged to the extent permitted by law to the sums, if any, which were involved
in the action or were payable to the person concerned.
V-11. Liabilities Mutually Exclusive. To the extent
permitted by law, the Trustee, an investment manager and each Employer shall be
responsible only for its own acts or omissions and the Trustee shall not be
required to collect any contribution from an Employer or any other person or to
verify that it is in the proper amount. No insurance company shall be a party
to this agreement for any purpose or be responsible for the validity of this
agreement, it being intended that an insurance company shall be liable only for
the obligations set forth in the contracts issued by it.
V-12. Waiver of Notice. Any notice required under
this agreement may be waived by the person entitled to such notice.
V-13. Counterparts. This agreement may be executed in
two or more counterparts, any one of which will be an original without
reference to the others.
V-14. Controlling Law. Except to the extent
superseded by laws of the United States, the laws of Illinois shall be
controlling in all matters relating to this agreement.
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V-15. Gender and Number. Where the context admits,
words in the masculine gender shall include the feminine and neuter genders,
the singular shall include the plural, and the plural shall include the
singular.
V-16. Successors. This agreement shall be binding on
all persons entitled to benefits under the Plan and their respective heirs and
legal representatives, on the Employers and their successors and assigns and on
the Trustee and its successors. The term "Employer" as used in the Plans and
this agreement includes any entity that continues the Plans and this Trust in
effect, as provided in the Plans; and, if the Employer concerned is the
Company, the term "Company" also shall include such entity.
V-17. Severability. If any provision of the Plan or this
agreement is held to be illegal or invalid, such illegality or invalidity shall
not affect the remaining provisions of the Plans and this agreement, and they
shall be construed and enforced as if such illegal or invalid provision had
never been inserted therein.
V-18. Statutory References. Any references in the Plan
or this agreement to a Section of the Internal Revenue Code of 1986 (the
"Code") or the Employee Retirement Income Security Act of 1974 ("ERISA") or the
Puerto Rico Income Tax Act shall include any comparable section or sections of
any future legislation which amends, supplements or supersedes said Section.
23
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ARTICLE VI: CHANGES IN TRUSTEE
VI-1. Resignation or Removal of Trustee. The
Trustee may resign at any time by giving thirty days' advance written notice to
the Company. The Company may remove a Trustee by written notice to the
Trustee.
VI-2. Appointment of Successor Trustee. The Company
shall fill any vacancy in the office of Trustee as soon as practicable and
shall give prompt written notice thereof to the person or corporation appointed
to fill the vacancy and the other Employers.
VI-3. Duties of Resigning or Removed Trustee and of
Successor Trustee. A Trustee that resigns or is removed shall furnish
promptly to the Company and the successor Trustee an account of its
administration of the Trust from the date of its last account. Each successor
Trustee shall succeed to the title to the Trust Fund vested in its predecessor
without the signing or filing of any instrument, but each predecessor Trustee
shall execute all documents and do all acts necessary to vest such title of
record in the successor Trustee. Each successor Trustee shall have all the
powers conferred by this agreement as if originally named Trustee. No
successor Trustee shall be personally liable for any act or failure to act of a
predecessor Trustee. With the approval of the Company, a successor Trustee may
accept the account furnished and the property delivered by a predecessor
Trustee without incurring any liability for so doing, and, to the extent
24
<PAGE> 27
permitted by law, the acceptance will be a complete discharge to the
predecessor Trustee.
25
<PAGE> 28
ARTICLE VII: AMENDMENT AND TERMINATION
VII-1. Amendment. This Trust may be amended from time
to time by the Company, except as follows:
(a) The duties and liabilities of the Trustee cannot be
changed without its consent.
(b) Except as provided in paragraph IV-7, under no
condition shall an amendment result in the return or
repayment to an Employer of any part of the Trust
Fund or the income from it or result in the
distribution of the Trust Fund for the benefit of
anyone other than persons entitled to benefits under
the Plan.
VII-2. Termination. If a Plan is terminated, this Trust,
including all rights, titles, powers, duties, discretions and immunities
imposed on or reserved to the Trustee and the Employers nevertheless shall
continue in effect until all assets have been distributed by the Trustee as
directed by the Company under the Plans.
26
<PAGE> 29
ARTICLE VIII: INCORPORATION OF COLLECTIVE INVESTMENT TRUSTS
VIII-1. The Declaration of Trust, executed by Chicago Title
and Trust Company on January 17, 1968, establishing "Chicago Title and Trust
Company Investment Trust for the Employee Benefit Plans," as it may be amended
from time to time, is hereby adopted as a part of this agreement.
Notwithstanding any other provision of this agreement, the Trustee may cause
any part or all of the assets held hereunder to be commingled with the assets
of other trusts by investment as part of any fund established under said
Declaration of Trust, and the assets so invested shall be subject to all of the
provisions of said Declaration of Trust as it may be amended from time to time.
VIII-2. The Declaration of Trust executed by Chicago Title
and Trust Company on July 22, 1981, establishing "Chicago Title and Trust
Company Short Term Investment Fund for Employee Benefit Plans," as it may be
amended from time to time, is hereby adopted as a part of this agreement.
Notwithstanding any other provisions of this agreement, the Trustee may cause
any part or all of the assets held hereunder to be commingled with the assets
of other trusts by investment as part of any fund established under said
Declaration of Trust, and the assets so invested shall be subject to all of the
provisions of said Declaration of Trust as it may be amended from time to time.
VIII-3. The Declaration of Trust executed by Chicago Title
and Trust Company on April 24, 1985, establishing "Chicago
27
<PAGE> 30
Title and Trust Company Stated Principal Value Investment Trust for Employee
Benefit Plans," as it may be amended from time to time, is hereby adopted as a
part of this agreement.
Notwithstanding any other provisions of this agreement, the Trustee may cause
any part or all of the assets held hereunder to be commingled with the assets
of other trusts by investment as part of any fund established under said
Declaration of Trust, and the assets so invested shall be subject to all of the
provisions of said Declaration of Trust as it may be amended from time to time.
* * *
IN WITNESS WHEREOF, the parties hereto have caused this
agreement to be signed and their respective corporate seals affixed and
attested by their respective officers, the day and year first above written;
the Trustee hereby evidencing its acceptance of the
28
<PAGE> 31
Trust, and its agreement to perform the duties given to or required of it by
the Trust.
SCHAWK, INC.
By ____________________________
Its _______________________
(Corporate Seal)
ATTEST:
__________________________
Its ______________________
THE CHICAGO TRUST COMPANY
By _____________________________
Its _______________________
(Corporate Seal)
ATTEST:
__________________________
Its ______________________
29
<PAGE> 1
EXHIBIT 10.38
SCHAWK, INC. RETIREMENT PLAN
FOR IMAGING EMPLOYEES
Amended and Restated Effective January 1, 1996
(Except as Specifically Provided Otherwise)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE 1
<S> <C>
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Source of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
Eligibility and Participation . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 Eligibility Requirements . . . . . . . . . . . . . . . . . . . . . . 11
2.2 Leaves of Absence . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 3
Contributions by Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1 Employer Contributions . . . . . . . . . . . . . . . . . . . . . . . 12
3.2 Before-Tax Contributions . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Limitations on Before-Tax Contributions . . . . . . . . . . . . . . . 13
3.4 Employer Matching Contribution . . . . . . . . . . . . . . . . . . . 16
3.5 Code Section 401(m) Limitation on Employer Matching Contributions . . 17
3.6 Multiple Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 4
Participant Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.1 No After-Tax Contributions . . . . . . . . . . . . . . . . . . . . . 21
4.2 Rollover Contribution . . . . . . . . . . . . . . . . . . . . . . . . 21
4.3 Trustee-to-Trustee Transfers . . . . . . . . . . . . . . . . . . . . 21
4.4 Allocation of Trustee-to-Trustee Transfers and Rollover Contributions 22
ARTICLE 5
Accounting Provisions and Allocations . . . . . . . . . . . . . . . . . . . . . 23
5.1 Participant's Accounts . . . . . . . . . . . . . . . . . . . . . . . 23
5.2 Investment Funds . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.3 Allocation Procedure . . . . . . . . . . . . . . . . . . . . . . . . 23
5.4 Determination of Value of Trust Fund . . . . . . . . . . . . . . . . 24
5.5 Allocation of Net Earnings or Losses . . . . . . . . . . . . . . . . 24
5.6 Allocation of Before-Tax Contributions . . . . . . . . . . . . . . . 24
5.7 Allocation of Employer Matching Contributions . . . . . . . . . . . . 24
5.8 Provisional Annual Addition . . . . . . . . . . . . . . . . . . . . . 25
5.9 Limitation on Annual Additions . . . . . . . . . . . . . . . . . . . 25
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
ARTICLE 6
<S> <C>
Amount of Payments to Participants . . . . . . . . . . . . . . . . . . . . . . 27
6.1 General Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.2 Age 55 and Normal Retirement . . . . . . . . . . . . . . . . . . . . 27
6.3 Death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.4 Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.5 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.6 Resignation or Dismissal . . . . . . . . . . . . . . . . . . . . . . 28
6.7 Computation of Period of Service . . . . . . . . . . . . . . . . . . 28
6.8 Treatment of Forfeitures . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 7
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.1 Commencement and Form of Distributions . . . . . . . . . . . . . . . 30
7.2 Distributions to Beneficiaries . . . . . . . . . . . . . . . . . . . 33
7.3 Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.4 Installment or Deferred Distributions . . . . . . . . . . . . . . . . 35
7.5 Form of Elections and Applications for Benefits . . . . . . . . . . . 35
7.6 Unclaimed Distributions . . . . . . . . . . . . . . . . . . . . . . . 35
7.7 Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.8 Withdrawals From Before-Tax Account Prior to Termination of
Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.9 Withdrawals From Other Accounts Prior to Termination of Employment . 38
7.10 Facility of Payment . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.11 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 8
Top-Heavy Plan Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.2 Top-Heavy Plan Requirements . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 9
Powers and Duties of Plan Administrative Committee . . . . . . . . . . . . . . 45
9.1 Appointment of Plan Administrative Committee . . . . . . . . . . . . 45
9.2 Powers and Duties of Administrative Committee . . . . . . . . . . . . 45
9.3 Administrative Committee Procedures . . . . . . . . . . . . . . . . . 46
9.4 Consultation with Advisors . . . . . . . . . . . . . . . . . . . . . 46
9.5 Administrative Committee Members as Participants . . . . . . . . . . 47
9.6 Records and Reports . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.7 Investment Policy . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.8 Designation of Other Fiduciaries . . . . . . . . . . . . . . . . . . 47
9.9 Obligations of Administrative Committee . . . . . . . . . . . . . . . 48
9.10 Indemnification of Administrative Committee . . . . . . . . . . . . . 48
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE 10
<S> <C>
Trustee and Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.1 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
10.2 Payments to Trust Fund and Expenses . . . . . . . . . . . . . . . . . 50
10.3 Trustee's Responsibilities . . . . . . . . . . . . . . . . . . . . . 50
10.4 Reversion to an Employer . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 11
Amendment or Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.3 Form of Amendment, Discontinuance of Employer Contributions, and
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
11.4 Limitations on Amendments . . . . . . . . . . . . . . . . . . . . . . 51
11.5 Level of Benefits Upon Merger . . . . . . . . . . . . . . . . . . . . 52
11.6 Vesting Upon Termination or Discontinuance of Employer Contributions;
Liquidation of Trust . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 12
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
12.1 No Guarantee of Employment, Etc . . . . . . . . . . . . . . . . . . . 54
12.2 Nonalienation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
12.3 Qualified Domestic Relations Order . . . . . . . . . . . . . . . . . 54
12.4 Controlling Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
12.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
12.6 Notification of Addresses . . . . . . . . . . . . . . . . . . . . . . 54
12.7 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE 13
Adoption by Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
13.1 Adoption of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 56
13.2 The Plan Sponsor as Agent for Employer . . . . . . . . . . . . . . . 56
13.3 Adoption of Amendments . . . . . . . . . . . . . . . . . . . . . . . 56
13.4 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
13.5 Data to Be Furnished by Employers . . . . . . . . . . . . . . . . . . 56
13.6 Joint Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
13.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
13.8 Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
13.9 Prior Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
iii
<PAGE> 5
ARTICLE 1
General
1.1 Purpose. It is the intention of the Employer to continue to
provide for the administration of the Schawk, Inc. Retirement Plan for
Imaging Employees and a Trust Fund in conjunction therewith for the benefit
of eligible employees of the Employer, in accordance with the provisions
of Code Sections 401 and 501 and in accordance with other provisions of law
relating to profit sharing plans containing a Code Section 401(k) arrangement.
Schawk, Inc. originally established the Plan as of January 1, 1980, and the
Plan was most recently amended and restated effective January 1, 1992.
Except as otherwise provided in this Plan or the Trust, upon the transfer by
the Employer of any funds to the Trust Fund in accordance with the
provisions of this Plan, all interest of the Employer therein shall
cease and terminate, and no part of the Trust Fund shall be used for, or
diverted to, purposes other than the exclusive benefit of Participants and
their beneficiaries.
1.2 Source of Funds. The Trust Fund shall be created, funded and
maintained by contributions of the Employer, by salary deferral
contributions elected by the Participants, and by such net earnings as are
obtained from the investment of the funds of the Trust Fund.
1.3 Effective Date. The provisions of the Plan as amended and restated
shall be effective as of January 1, 1996, except for certain provisions
the effective dates of which are set forth herein. Except as may be
required by ERISA or the Code, the rights of any person whose status as an
employee of the Employer and all Affiliates has terminated shall be
determined pursuant to the Plan as in effect on the date such employment
terminated, unless a subsequently adopted provision of the Plan is made
specifically applicable to such person.
1.4 Definitions. Certain terms are capitalized and have the
respective meanings set forth in the Plan.
"Account" means each of the individual accounts established pursuant to
Article 5 representing a Participant's allocable share of the Trust Fund.
"Accounts" means the collective individual accounts established
pursuant to Article 5.
"Actual Deferral Percentage" and "Actual Deferral Percentage
Tests" are described in Section 3.3, both as applicable to employees of the
Plan Sponsor and its Affiliates generally.
"Administrative Committee" means the plan administrator and named
fiduciary appointed pursuant to Section 9.1.
1
<PAGE> 6
"Affiliate" means any corporation or enterprise, other than the Plan
Sponsor, which, as of a given date, is a member of the same controlled group
of corporations, the same group of trades or businesses under common control
or the same affiliated service group, determined in accordance with Code
Sections 414(b), (c), (m) or (o), as is the Plan Sponsor. For purposes of
determining the amount of a Participant's Annual Addition or Section 415
Compensation and applying the limitations of Code Section 415 set forth in
Article 5, "Affiliate" shall include any corporation or enterprise, other
than the Plan Sponsor, which, as of a given date, is a member of the same
controlled group of corporations or the same group of trades or businesses
under common control, determined in accordance with Code Sections 414(b) or
(c) as modified by Code Section 415(h), as is the Plan Sponsor.
"Annual Addition" means for any Limitation Year, the sum of (a) all
Before-Tax Contributions and Employer Matching Contributions allocated to
the Accounts of a Participant under this Plan; (b) any employer
contributions, forfeitures and employee after-tax contributions allocated
to such Participant under any other defined contribution plan maintained
by the Employer or an Affiliate; and (c) amounts allocated to an
individual medical account as defined in Code Section 415(l)(2) and amounts
attributable to post-retirement medical benefits allocated to an account
described in Code Section 419A(d)(2) maintained by the Employer or an
Affiliate.
"Basic Before-Tax Contributions" and "Supplemental Before-Tax
Contributions" mean with respect to a Participant, the contributions made
on behalf of such Participant by the Employer as described in Section 3.2
and, with respect to the Employer, mean the sum of all such contributions
made on behalf of all Participants. "Before-Tax Contributions" means, with
respect to a Participant, the sum of the Basic Before-Tax Contributions and
the Supplemental Before-Tax Contributions made on behalf of such Participant
by the Employer as described in Section 3.2 and, with respect to the
Employer, means the sum of all such contributions made on behalf of all
Participants.
"Business Day" means any day on which the Federal Reserve, the New York
Stock Exchange and the Trustee are all open for business.
"Code" means the Internal Revenue Code of 1986, as from time to time
amended.
"Compensation" means a Participant's "Considered Compensation,"
"Section 415 Compensation," or "Total Compensation," as follows:
(a) "Considered Compensation" is the Participant's Total
Compensation for the Plan Year paid while he/she was a Participant;
provided, however, that Considered Compensation shall not include any
amount in excess of $150,000 (as adjusted annually by the Secretary of the
Treasury for increases in the cost of living); provided, further, that
for purposes of the preceding clause, the Considered Compensation of a
Participant who is a Highly Compensated Employee and who at any
2
<PAGE> 7
time during the Plan Year is a Five-Percent Owner or a member of the
group consisting of the 10 employees of the Employer and all Affiliates paid
the greatest Section 415 Compensation for the Plan Year shall include the
Considered Compensation of the Participant's spouse or the Participant's
child or grandchild under the age of 19 and the $150,000 (as adjusted)
limitation shall be applied as if such Participant, spouse, child and
grandchild constituted a single Participant and allocated among such
individuals pro rata on the basis of Considered Compensation determined
before application of the $150,000 (as adjusted) limitation; provided
further, that for the first Plan Year in which an employee is a Participant
in the Plan, such employee's Total Compensation shall be computed on the
basis of the employee's compensation from the Employer for the entire Plan
Year.
(b) "Section 415 Compensation" for a period is the
Participant's compensation (as described in Treasury Regulation Section
1.415-2(d)(1)) paid during the period for personal services actually rendered
in the course of employment with the Employer and all Affiliates, excluding
deferred compensation and other amounts which receive special tax treatment
(as described in Treasury Regulation Section 1.415-2(d)(2)).
(c) "Total Compensation" for a period is the Participant's
wages as defined in Code Section 3401(a) for purposes of income tax
withholding at the source, and all other payments of compensation to the
Participant by the Employer for which the Employer is required to furnish
the Participant a written statement under Code Sections 6041(d) and
6051(a)(3), but determined without regard to any rules under Code Section
3401(a) that limit the remuneration included in wages based on the nature or
location of the employment or the services performed.
"Contribution Percentage" and "Contribution Percentage Tests" are
described in Section 3.5.
"Defined Benefit Dollar Limitation" means an amount equal to $90,000,
or, if greater, the amount in effect as of the last day of the Limitation
Year under Code Section 415(b)(1)(A), as adjusted by the Secretary of the
Treasury pursuant to Code Section 415(d).
"Defined Contribution Dollar Limitation" means an amount equal to
$30,000 or, if greater, one-fourth of the Defined Benefit Dollar Limitation,
prorated for any Limitation Year of less than 12 months; provided that,
for purposes of Section 5.10(a)(ii), such amount shall be reduced by the
amounts allocated to any medical accounts described in subsection (c) of
"Annual Addition."
"Determination Date" is the applicable Valuation Date (as determined
below) on which the balance of a Participant's Accounts in the Trust Fund
shall be determined for
3
<PAGE> 8
purposes of determining the amount distributable from the Trust Fund
to the Participant, or in the event of his/her death, his/her
beneficiary pursuant to Articles 6 and 7:
(a) In the case where the balance of a Participant's Accounts is
to be determined upon his/her termination of employment for purposes of
distribution, the applicable Valuation Date shall be the Valuation Date
coinciding with such termination of employment; provided, however, that if
the Participant or beneficiary does not elect to commence distribution of such
Accounts until after the termination of employment, then the applicable
Valuation Date shall be the Valuation Date immediately preceding the date
such distribution is made.
(b) In the case where the balance of a Participant's Account or
Accounts is to be determined prior to his/her termination of employment for
purposes of a distribution to the Participant in accordance with
Article 7 or because of termination of the Plan in accordance with Article
11, the applicable Valuation Date shall be the Valuation Date immediately
preceding the date of such determination.
"Eligible Employee" means any employee of the Employer employed
in a participating company, division or unit as set forth in Exhibit A
who is not a Leased Employee or a Member of a Collective Bargaining Unit.
"Eligibility Period" is a one-year period used for the purpose of
determining when an employee is eligible to participate in the Plan. An
employee's first "Eligibility Period" shall commence on the date on which
he/she first completes an Hour of Service. Subsequent Eligibility Periods
shall commence on the first day of each Plan Year which begins after said
date. Notwithstanding the foregoing, the initial Eligibility Period of a
former employee who is reemployed after incurring one or more One-Year
Breaks in Service and who is not eligible for immediate participation
pursuant to Section 2.1(c), shall commence on the date on which he/she first
completes an Hour of Service after such One-Year Break in Service, and
subsequent Eligibility Periods shall commence on the first day of each Plan
Year which begins after said date.
"Employer" means the Plan Sponsor and any Affiliate which adopts this
Plan pursuant to Article 13.
"Entry Date" means each January 1 and each July 1.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
from time to time amended.
"Excess Forfeiture Suspense Account" is the account described in Section
5.9.
"Excess Tentative Employer Contribution" is the excess contribution
described in Section 5.9.
4
<PAGE> 9
"Family Group" means all Family Members of a Highly Compensated Employee
who is a Five-Percent Owner or who is a member of the group consisting of the
10 employees of the Employer and all Affiliates paid the greatest Section 415
Compensation during the Plan Year. If two or more Family Groups include
common Family Members, such Family Groups shall be aggregated as one Family
Group.
"Family Member" means a Highly Compensated Employee who is a Five-Percent
Owner or who is a member of the group consisting of the 10 employees of the
Employer and all Affiliates paid the greatest Section 415 Compensation during
the Plan Year, and any individual who is the spouse, lineal ascendant or
descendant, or the spouse of a lineal ascendant or descendant, of such
Five-Percent Owner or such member.
"Five-Percent Owner" means an employee described in Code Section
416(i)(1).
"Highly Compensated Employee" means, for the Determination Year, an
employee of the Employer or an Affiliate who was a Participant eligible
during the Plan Year to make Before-Tax Contributions and who:
(a) during the Lookback Year:
(i) was a Five-Percent Owner; or
(ii) received Section 415 Compensation in excess of
$75,000 (as adjusted annually for increases in the cost of living
by the Secretary of the Treasury); or
(iii) received Section 415 Compensation in excess of
$50,000 (as adjusted annually for increases in the cost of living
by the Secretary of the Treasury) and was among the top 20% of the
employees (including those employees excludable under Code
Section 414(q)(8)) when ranked on the basis of Section 415
Compensation paid for that year; or
(iv) was an officer of the Employer or an Affiliate and
received Section 415 Compensation in excess of one-half of the
Defined Benefit Dollar Limitation for that year, provided that for
this purpose, no more than 50 employees (or if lesser the greater
of 3 or 10% of all employees) shall be treated as officers, or if
there is no such officer, was the highest paid officer of the
Employer or an Affiliate for that year; or
(b) at any time during the Determination Year:
(i) is a Five-Percent Owner; or
5
<PAGE> 10
(ii) is a member of a group consisting of the 100 employees who
received the greatest Section 415 Compensation during that Plan Year
and would be a member of the group of employees described in subsection
(a)(ii), (iii) or (iv) above for the Determination Year. For any
Plan Year, the Administrative Committee may, to the extent permitted by
law, elect to apply the provisions of this subsection (b)(ii) without
regard to the limitation of the group to 100 employees.
For purposes of this definition, "Determination Year" means the current
Plan Year and "Lookback Year" means the preceding Plan Year or, at the
election of the Plan Sponsor, the calendar year ending with or within the
Determination Year.
To the extent required by Code Section 414(q)(9), a former employee who
was a Highly Compensated Employee when he/she separated from service with the
Employer and all Affiliates or at any time after attaining age 55 shall be
treated as a Highly Compensated Employee.
For purposes of determining a Highly Compensated Employee,
Section 415 Compensation shall be determined without regard to Code
Sections 125, 402(a)(8), 402(h)(1)(B), and employee contributions made
pursuant to a salary reduction agreement under Code Section 403(b).
"Highly Compensated Family Member" means a Family Member who is a
Highly Compensated Employee without application of the family aggregation
rules of Code Section 414(q)(6).
"Hour of Service" is:
(a) each hour for which an employee is paid or entitled to
payment for the performance of duties for the Employer or an Affiliate;
(b) each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer or an Affiliate; and
(c) each hour for which an employee is paid or entitled to payment
for a period during which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation, holiday, illness,
incapacity, layoff, jury duty, military duty, or leave of absence. In
crediting Hours of Service pursuant to this subparagraph (c), all payments
made or due shall be taken into account, whether such payments are made
directly by the Employer or an Affiliate or indirectly (e.g., through a
trust fund or insurer to which the Employer or an Affiliate makes
payments, or otherwise), except that:
6
<PAGE> 11
(i) no more than 501 such Hours of Service shall be credited
for any continuous period during which the employee performs no
duties;
(ii) no such Hours of Service shall be credited if payments
are made or due under a plan maintained solely for the purpose of
complying with any workers' compensation, unemployment
compensation or disability insurance laws; and
(iii) no such Hours of Service shall be credited for
payments which are made solely to reimburse the employee for
medical or medically related expenses.
The Hours of Service, if any, for which an employee is credited for a
period in which he/she performs no duties shall be computed and
credited to computation periods in accordance with 29 C.F.R. 2530.200b-2 and
other applicable regulations promulgated by the Secretary of Labor. For
purposes of computing the Hours of Service to be credited to an employee
for whom a record of hours worked is not maintained, an employee shall be
credited with 45 Hours of Service for each week in which he/she completes at
least one Hour of Service. In addition, an employee shall be credited with
Hours of Service for each week the employee is on a leave of absence in
accordance with Section 2.2.
"Individual Beneficiary" means a natural person designated by the
Participant in accordance with Section 7.3 to receive all or any
portion of the amounts remaining in the Participant's Accounts at the time
of the Participant's death. "Individual Beneficiary" also means a natural
person who is a beneficiary of a trust designated by the Participant in
accordance with Section 7.3 to receive all or a portion of such amount,
provided the trust complies with the requirements of Code Section 401(a)(9)
and regulations promulgated thereunder, including that the trust is
irrevocable, the beneficiaries with respect to the trust's interest in
the Participant's Accounts are identifiable from the trust agreement and a
copy of the trust agreement is provided to the Administrative Committee.
"Leased Employee" means any individual who is not an employee of the
Employer or an Affiliate and who provides services for the Employer or an
Affiliate if:
(a) such services are provided pursuant to an agreement
between the Employer or an Affiliate and any other person;
(b) such individual has performed such services for the Employer
or an Affiliate (or a related person within the meaning of Code Section
144(a)(3)) on a substantially full-time basis for a period of at least one
year; and
(c) such services are of a type historically performed by
employees in the business field of the Employer or an Affiliate.
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<PAGE> 12
"Limitation Year" means the Plan Year.
"Employer Matching Contributions" means the contributions
described in Section 3.4.
"Member of a Collective Bargaining Unit" means any employee who is
included in a collective bargaining unit and whose terms and conditions of
employment are or were covered by a collective bargaining agreement if
there is evidence that retirement benefits were the subject of
good-faith bargaining between representatives of such employee and the
Employer, unless such collective bargaining agreement makes this Plan
applicable to such employee.
"Multiple Use" is defined in Section 3.6(a).
"Non-Highly Compensated Employee" means, for any Plan Year, any employee
of the Employer or Affiliate who (a) at any time during the Plan Year was a
Participant eligible to make Before-Tax Contributions and (b) was not a
Highly Compensated Employee for such Plan Year.
"Normal Retirement Date" means a Participant's 65th birthday.
"One-Percent Owner" means an employee described in Code Section 416(i)(1).
"One-Year Break in Service" is a Plan Year in which an employee
completes 500 Hours of Service or less, and on the last day of which the
Participant is not employed by the Employer or an Affiliate. Solely for
purposes of determining whether a One-Year Break in Service has occurred,
"Hours of Service" shall also include each hour for which the employee
otherwise would normally have been credited but for the employee's absence on
a maternity or paternity absence. A maternity or paternity absence is an
absence from work:
(a) by reason of the pregnancy of the employee;
(b) by reason of the birth of a child of the employee;
(c) by reason of the placement of a child with the employee in
connection with the adoption of such child by the employee; or
(d) for purposes of caring for such child for a period
beginning immediately following such birth or placement.
Any employee requesting such credit shall promptly furnish the
Administrative Committee such information as the Administrative Committee
requires to show that the absence from work is a maternity or paternity
absence and the number of days for which there
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<PAGE> 13
was such an absence. No more than 501 hours shall be credited for a
maternity or paternity absence. All such hours shall be credited in the Plan
Year in which the absence begins if necessary to prevent a One-Year Break
in Service in such Plan Year. If such hours are not necessary to prevent
a One-Year Break in Service in such Plan Year, the hours shall be credited
in the succeeding Plan Year if necessary to prevent a One-Year Break in
Service in such Plan Year. In the event the Administrative Committee
is unable to determine the hours which otherwise would normally have been
credited for such absence, the employee shall be credited with 8 hours per
day.
"Participant" means:
(a) a current employee of the Employer or an Affiliate who has
become a Participant in the Plan pursuant to Section 2.1; or
(b) a former employee for whose benefit an Account in the Trust
Fund is maintained.
"Plan" means the Schawk, Inc. Retirement Plan for Imaging Employees.
"Plan Sponsor" means Schawk, Inc.
"Plan Year" means the calendar year.
"Provisional Annual Addition" is the amount described in Section 5.8.
"Required Beginning Date" means:
(a) for a Participant whose 70th birthday occurs on or after
July 1, 1988, the April 1 following the calendar year in which the
Participant attains age 70-1/2;
(b) for a Participant whose 70th birthday occurred prior to July 1,
1987, the April 1 following the later of the calendar year in which the
Participant attains age 70-1/2 or the calendar year in which the
Participant terminates employment; or
(c) for a Participant whose 70th birthday occurred prior to July
1, 1987 and who at any time during or after the calendar year in which he/she
attained age 66-1/2 was or became a Five-Percent Owner, the April 1
following the later of (i) the calendar year in which he/she attained age
70-1/2 or (ii) the earlier of the calendar year in which he/she became a
Five-Percent Owner or his/her employment terminates.
"Rollover Contribution" means (a) all or a portion of a qualified
total distribution received by an employee from another qualified plan which
is eligible for tax-free rollover to a qualified plan and which is
transferred by the employee to this Plan within 60 days following
his/her receipt thereof; (b) amounts transferred to this Plan from a conduit
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<PAGE> 14
individual retirement account which has no assets other than assets
(and the earnings thereon) which were (i) previously distributed to the
employee by another qualified plan as a qualified total distribution,
(ii) eligible for tax-free rollover to a qualified plan and (iii)
deposited in such conduit individual retirement account within 60 days of
receipt thereof; (c) amounts distributed to the employee from a conduit
individual retirement account meeting the requirements of (b) above, and
transferred by the employee to this Plan within 60 days of his/her receipt
thereof from such conduit individual retirement account; and (d) amounts
transferred directly to this Plan by the trustee of another qualified plan
pursuant to the provisions of Code Section 401(a)(31) and to any other
related laws and regulations as in effect at the time of such transfer.
"Tentative Employer Contribution" is the contribution described in Section
3.1.
"The 1.25 Test" is the test described in Sections 3.3(b)(i)(A) and
3.5(a)(i).
"The 2.0 Test" is the test described in Sections 3.3(b)(i)(B) and
3.5(a)(ii).
"Trust" or "Trust Fund" means the Trust established in accordance with
Article 10.
"Trustee" means the Trustee or Trustees under the Trust referred to in
Article 10.
"Trustee-to-Trustee Transfer" means a transfer to the Trustee from the
trustee of a pension benefit plan qualified under Code Section 401(a), or a
plan treated as qualified under Code Section 401(a), which plan provides for
such transfers for the benefit of a Participant who is a participant in said
plan.
"Valuation Date" means any Business Day.
"Year of Service" is any Plan Year in which an employee completes 1,000
or more Hours of Service, including any Plan Year prior to the date the
employee first participates in the Plan.
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<PAGE> 15
ARTICLE 2
Eligibility and Participation
2.1 Eligibility Requirements.
(a) Every Participant who is employed by the Employer on January
1, 1996 shall continue to be eligible to participate in the Plan as of such
date.
(b) An Eligible Employee shall first be eligible to
participate, if he/she is then employed by the Employer, on the Entry Date
coinciding with or next following the later of:
(i) the completion of 1000 Hours of Service during an
Eligibility Period; or
(ii) his/her 18th birthday.
(c) Any former employee of the Employer or an Affiliate who
was a Participant or could have become a Participant under subsection (b)
above had he/she been employed on a prior Entry Date, and is reemployed
by the Employer as an Eligible Employee, shall be eligible to participate
on the Entry Date coincident with or next following such reemployment if such
employee:
(i) has not incurred a One-Year Break in Service; or
(ii) had a nonforfeitable right to any part of the balance in
his/her Matching Account on the date his/her most recent employment
with the Employer and all Affiliates terminated (or would have had such
right if he/she had been a Participant); or
(iii) has attained age 18 and the number of consecutive
One-Year Breaks in Service which such employee incurred since
his/her most recent termination of employment with the Employer and all
Affiliates is less than the greater of 5 or the aggregate number of
Eligibility Periods in which he/she completed 1,000 Hours of Service
before such One-Year Breaks in Service (excluding any Eligibility
Periods previously disregarded).
2.2 Leaves of Absence. An employee shall be credited with 45 Hours of
Service for each full week the employee is on a leave of absence, if he/she is
not otherwise credited with such Hours of Service. Any such leave of absence
must be granted in writing and pursuant to the Employer's established
leave policy, which shall be administered in a uniform and
nondiscriminatory manner to similarly situated employees.
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<PAGE> 16
ARTICLE 3
Contributions by Employer
3.1 Employer Contributions.
(a) Subject to the right reserved to the Employer to alter,
amend or discontinue this Plan and the Trust, the Employer shall for
each Plan Year contribute to the Trust Fund an amount equal to the sum of:
(i) the Before-Tax Contributions; and
(ii) the Employer Matching Contribution.
Such sum, which is known as the Tentative Employer Contribution, shall be
reduced by an amount equal to the Excess Tentative Employer Contribution
(as provided in Section 5.9).
(b) In the event that the Tentative Employer Contribution, as
reduced by the Excess Tentative Employer Contribution, exceeds the amount
deductible by the Employer for said year for federal income tax purposes,
then such Tentative Employer Contribution shall be further reduced in an
amount equal to such excess (the "Employer Excess Contribution") as
follows:
(i) first, the Supplemental Before-Tax Contributions
allocated to the Before-Tax Accounts of Participants for such Plan
Year shall be reduced by the lesser of an amount equal to the
Employer Excess Contribution or such Supplemental Before-Tax
Contributions. A Participant's share of such reduction for such Plan
Year shall be in the same ratio that his/her share in the
Supplemental Before-Tax Contributions (before reduction) bears to the
shares of all Participants in the Supplemental Before-Tax
Contributions (before reduction) for such Plan Year; and
(ii) second, to the extent that any Employer Excess
Contribution remains after application of (i) above, then the
Employer Matching Contribution allocated to the Matching Accounts of
Participants and the Basic Before-Tax Contributions allocated to the
Before-Tax Accounts of Participants for such Plan Year will each be
reduced proportionately in an amount equal to the lesser of the
Employer Excess Contribution for such Plan Year less the reduction
determined in (i) above for such Plan Year and the sum of the Employer
Matching Contribution and Basic Before-Tax Contribution for such
Plan Year. A Participant's share of such reduction for such Plan
Year shall be in the same ratio that his/her share in the
Employer Matching Contribution and Basic Before-Tax Contributions
(before reduction) bears to the shares of all Participants in
such contributions (before reduction) for such Plan Year.
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<PAGE> 17
3.2 Before-Tax Contributions. Subject to the provisions of Sections
3.1 and 3.3, each Participant may for each Plan Year elect to have the
Employer make a Basic Before-Tax Contribution on his/her behalf in an amount
not in excess of the amount designated to be matched by the Employer
pursuant to Section 3.4 (rounded to the nearest dollar) of his/her
Considered Compensation. Each Participant may in addition to his/her
Basic Before-Tax Contributions elect to have the Employer make a Supplemental
Before-Tax Contribution on his/her behalf in an amount which, when added
to the amount of the Basic Before-Tax Contribution, does not exceed 18%
(rounded to the nearest dollar) of the full amount of his/her
Considered Compensation. Such elections shall be subject to change as of any
January 1 or July 1, upon advance written notice to the Administrative
Committee in accordance with such procedures as the Administrative Committee
shall require. A Participant may elect to suspend his/her Before-Tax
Contributions prospectively, upon advance written notice to the
Administrative Committee in accordance with such procedures as the
Administrative Committee shall require; provided, however, that a
Participant who suspends his/her Before-Tax Contributions shall not be
permitted to elect to resume his/her Before-Tax Contributions until the
next January 1 or July 1. Notwithstanding the foregoing, the Employer
may, in accordance with Internal Revenue Service regulations, elect to permit
Participants in any division or unit of that Employer to elect to have the
Employer make a Basic Before-Tax Contribution on his/her behalf in an
amount not in excess of the percentage designated by such Employer.
Further notwithstanding the foregoing, for any succeeding Plan Year, the
Employer may change the level of, or eliminate, such Basic
Before-Tax and Supplemental Before-Tax Contributions by announcing the change
to Participants on or before the first day of any such Plan Year.
3.3 Limitations on Before-Tax Contributions.
(a) In no event shall a Participant's Before-Tax Contributions
during any calendar year exceed the dollar limitation contained in Code
Section 402(g) in effect at the beginning of such calendar year. If a
Participant's Before-Tax Contributions, together with any additional
elective contributions to a qualified cash or deferred arrangement, and
any elective deferrals under a tax-sheltered annuity program or a
simplified employee pension plan, exceed such dollar limitation for any
calendar year, such excess, and any earnings allocable thereto, shall be
distributed to the Participant by April 15 of the following year; provided
that, if such excess contributions were made to a plan or arrangement not
maintained by the Employer or an Affiliate, the Participant must first
notify the Administrative Committee of the amount of such excess allocable
to this Plan by March 1 of the following year.
(b) Notwithstanding any other provision of this Plan to the
contrary, the Before-Tax Contributions for the Highly Compensated Employees
for the Plan Year shall be reduced in accordance with the following
provisions:
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<PAGE> 18
(i) The Before-Tax Contributions and Employer Matching Contributions
of the Highly Compensated Employees shall be reduced if neither of the
Actual Deferral Percentage Tests set forth in (A) or (B) below is satisfied:
(A) The 1.25 Test. The Actual Deferral Percentage of the
Highly Compensated Employees is not more than the Actual Deferral
Percentage of the Non-Highly Compensated Employees multiplied by 1.25.
(B) The 2.0 Test. The Actual Deferral Percentage of the
Highly Compensated Employees is not more than 2 percentage points
greater than the Actual Deferral Percentage of the Non-Highly
Compensated Employees and the Actual Deferral Percentage of the Highly
Compensated Employees is not more than the Actual Deferral Percentage
of the Non-Highly Compensated Employees multiplied by 2.0.
(ii) (A) As used in this subsection, "Actual Deferral Percentage"
means the average of the ratios of each Highly Compensated Employee's
or Non-Highly Compensated Employee's, as the case may be, Before-Tax
Contributions which were allocated to the Participant's Before-Tax
Account with respect to the Plan Year, to each such Participant's
Considered Compensation for the Plan Year.
(B) If a Highly Compensated Employee is a member of a Family
Group, such Family Group shall constitute a single Highly Compensated
Employee. The Actual Deferral Percentage of such Family Group shall be
the aggregate Actual Deferral Percentage of all Family Members, and the
Actual Deferral Percentage of each Family Member shall be disregarded
for purposes of the Actual Deferral Percentage Tests.
(C) All Before-Tax Contributions made under this Plan and all
before-tax and fully-vested matching contributions made under any
other plan that is aggregated with this Plan for purposes of Code
Sections 401(a)(4) and 410(b) shall be treated as made under a single
plan. If any plan is permissively aggregated with this Plan for
purposes of Code Section 401(k), the aggregated plans must also satisfy
Code Sections 401(a)(4) and 410(b) as though they were a single plan.
The Actual Deferral Percentage ratios of any Highly Compensated Employee
will be determined by treating all plans subject to Code Section
401(k) under which the Highly Compensated Employee is eligible as a
single plan.
(iii) If neither Actual Deferral Percentage Test is satisfied as of
the end of the Plan Year, the Administrative Committee shall cause
the Before-Tax Contributions for the Highly Compensated Employees to be
reduced and refunded to each such Highly Compensated Employee until either
Actual Deferred
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<PAGE> 19
Percentage Test is satisfied. The sequence of such reductions and
refunds shall begin with Highly Compensated Employees who elected to
defer the greatest percentage, starting with the Supplemental Before-Tax
Contributions, then the second greatest percentage, continuing until
either Actual Deferred Percentage Test is satisfied. For example, all
Highly Compensated Employees who elected an 18% contribution shall
have their Supplemental Before-Tax Contributions reduced from 18% to
17%. If neither Actual Deferral Percentage Test is then satisfied, all
Highly Compensated Employees who elected Supplemental Before-Tax
Contributions of 17% shall have their Supplemental Before-Tax
Contributions reduced from 17% to 16%. This process shall continue
through the Supplemental Before-Tax Contributions and continuing with the
Basic Before-Tax Contributions and Employer Matching Contributions on a
pro rata basis until either Actual Deferral Percentage Test is
satisfied. Once either Actual Deferral Percentage Test is satisfied,
the Administrative Committee shall direct the Trustee to distribute to
the appropriate Highly Compensated Employees the amount of the
reduction of the Before-Tax Contributions of each such Highly
Compensated Employee and to treat as forfeitures the appropriate
amount of Employer Matching Contributions, together with the net
earnings or losses allocable thereto. The Administrative Committee
shall designate such distribution and forfeiture as a distribution and
forfeiture of excess contributions, determine the amount of the
allocable net earnings or losses to be distributed in accordance
with subsection (c) below, and cause such distributions and
forfeitures to occur prior to the end of the Plan Year following the
Plan Year in which the excess Before-Tax Contributions were made.
(iv) Notwithstanding anything in this subsection (b) to the
contrary, the provisions of this subsection shall apply separately with
respect to each group of employees who are Members of a Collective
Bargaining Unit (if any) and the group of employees who are not Members
of a Collective Bargaining Unit.
(c) (i) Net earnings or losses to be refunded with the excess
Before-Tax Contributions shall be equal to the net earnings or
losses on such contributions for the Plan Year in which the
contributions were made.
(ii) The net earnings or losses allocable to the excess
Before-Tax Contributions for the Plan Year shall be determined in the
manner set forth in Section 5.5.
(d) Net earnings or losses to be treated as forfeitures together
with the Employer Matching Contributions shall be equal to the net earnings or
losses on such contributions for the Plan Year in which the contributions
were made. Net earnings or losses on Employer Matching Contributions shall be
determined in the same manner as in subsection (c) above, except that the
phrases "Employer Matching Contribution" and
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<PAGE> 20
"Matching Account" shall be substituted for the phrases "Before-Tax
Contribution" and "Before-Tax Account" wherever used therein.
(e) Any excess contributions distributed to a Family Group and
treated as forfeitures pursuant to the reductions in subsection (b)(iii)
above shall be allocated to each Family Member in the same proportion that
such Family Member's Before-Tax Contributions and Employer Matching
Contributions bear to the aggregate Before-Tax Contributions and Employer
Matching Contributions of the Family Group.
(f) Any Employer Matching Contribution treated as a forfeiture
pursuant to subsection (b) above shall be used to reduce the Employer
Matching Contribution in Section 3.4.
(g) The Administrative Committee may adopt such rules as it
deems necessary or desirable to:
(i) impose limitations during a Plan Year on the
percentage of Before-Tax Contributions elected by Participants pursuant
to Section 3.2 for the purpose of avoiding the necessity of adjustments
pursuant to this Section or Section 5.9; or
(ii) increase during a Plan Year the percentage of
Considered Compensation with respect to which a Participant may
elect a Before-Tax Contribution for the purpose of providing
Participants with the opportunity to increase their Before-Tax
Contributions within the limitations of this Section 3.3.
(h) The amount of the Before-Tax Contributions to be made
pursuant to a Participant's election shall reduce the compensation otherwise
payable to him/her by the Employer.
(i) The amount of each Participant's Basic Before-Tax
Contributions and Supplemental Before-Tax Contributions as determined
under this Section 3.3 is subject to the provisions of Section 5.9.
3.4 Employer Matching Contribution. Subject to the provisions of
Section 3.1, each Employer shall pay to the Trustee for the Plan Year
beginning January 1, 1996, $1 for each $1 of Basic Before-Tax Contributions
(as determined by the Employer for each Plan Year) made on behalf of each
Participant employed by such Employer. Notwithstanding the foregoing, for
any succeeding Plan Year, the Employer may change the rate of, or eliminate,
such contribution by announcing the change to the Participants on or
before the first day of any such Plan Year. Such contribution is known as the
"Matching Employer Contribution."
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<PAGE> 21
3.5 Code Section 401(m) Limitation on Employer Matching
Contributions. Notwithstanding any other provision to the contrary,
the Employer Matching Contributions of the Highly Compensated Employees
(after any reduction under Section 3.3(b)(iii)) shall be reduced in
accordance with the following provisions:
(a) The Employer Matching Contributions of the Highly
Compensated Employees shall be reduced if neither of the Contribution
Percentage Tests set forth in (i) or (ii) below is satisfied:
(i) The 1.25 Test. The Contribution Percentage of the Highly
Compensated Employees is not more than the Contribution Percentage
of all Non-Highly Compensated Employees multiplied by 1.25.
(ii) The 2.0 Test. The Contribution Percentage of the Highly
Compensated Employees is not more than 2 percentage points greater than
the Contribution Percentage of all Non-Highly Compensated Employees,
and the Contribution Percentage of the Highly Compensated
Employees is not more than the Contribution Percentage of all
Non-Highly Compensated Employees multiplied by 2.0.
(b) (i) As used in this Section 3.5, "Contribution Percentage"
means the average of the ratios of each Highly Compensated Employee's
or Non-Highly Compensated Employee's, as the case may be, share of
the Employer Matching Contributions which were allocated to the
Participant's appropriate Account with respect to the Plan Year,
to each such Participant's Considered Compensation for the Plan Year.
(ii) If a Highly Compensated Employee is a member of a Family
Group, such Family Group shall constitute a single Highly Compensated
Employee. The Contribution Percentage of such Family Group shall
be the aggregate Contribution Percentage of all Family Members and
the Contribution Percentage of each Family Member shall be disregarded
for purposes of the Contribution Percentage Tests.
(iii) All Employer Matching Contributions made under this
Plan and all employee contributions and matching contributions made under
any other plan that is aggregated with this Plan for purposes of Code
Sections 401(a)(4) and 410(b) shall be treated as made under a single
plan. If any plan is permissively aggregated with this Plan for
purposes of Code Section 401(m), the aggregated plans must also satisfy
Code Sections 401(a)(4) and 410(b) as though they were a single plan.
The Contribution Percentage ratio of any Highly Compensated Employee
will be determined by treating all plans subject to Code Section 401(m)
under which the Highly Compensated Employee is eligible as a single
plan.
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<PAGE> 22
(c) If neither Contribution Percentage Test is satisfied as of the
end of the Plan Year, the Administrative Committee shall cause the
Employer Matching Contributions of the Highly Compensated Employees to be
reduced and refunded or forfeited until either Contribution Percentage Test
is satisfied. The sequence of such reductions and refunds or forfeitures
shall begin with Highly Compensated Employees who received the greatest
percentage of Employer Matching Contributions and then shall proceed with
each lesser percentage until either Contribution Percentage Test is
satisfied. For example, all Highly Compensated Employees who received a
3% Employer Matching Contribution shall have their Employer Matching
Contributions reduced from 3% to 2%. If neither Contribution Percentage
Test is then satisfied, all Highly Compensated Employees who received a 2%
Employer Matching Contribution (including those reduced to 2% as provided
above) shall have their Employer Matching Contributions reduced from 2%
to 1%. This process shall be applied through any and all remaining
Employer Matching Contributions until either Contribution Percentage Test is
satisfied. Once either Contribution Percentage Test is satisfied, the
Administrative Committee shall direct the Trustee to refund the appropriate
amount of vested Employer Matching Contributions, together with the net
earnings or losses allocable thereto, and to treat as a forfeiture the
appropriate amount of non-vested Employer Matching Contributions, together
with the net earnings or losses allocable thereto. The Administrative
Committee shall designate such refunds and forfeitures as refunds and
forfeitures of excess contributions, determine the amount of the allocable
net earnings or losses to be distributed in accordance with subsection (d)
below, and cause such refunds and forfeitures to occur prior to the end of
the Plan Year following the Plan Year in which such excess Employer Matching
Contributions were made.
(d) Notwithstanding anything in this Section 3.5 to the
contrary, the provisions of subsection (a) shall apply separately with
respect to each group of employees who are Members of a Collective Bargaining
Unit (if any) and the group of employees who are not Members of a Collective
Bargaining Unit.
(e) Net earnings or losses to be refunded or treated as
forfeitures together with the Employer Matching Contributions shall be equal to
the net earnings or losses on such contributions for the Plan Year in which
the contributions were made. Net earnings or losses shall be determined in
the same manner as in Section 3.3(c), except that the phrases "Employer
Matching Contribution" and "Matching Account" shall be substituted for
the phrases "Before-Tax Contribution" and "Before-Tax Account" wherever
used therein.
(f) Excess Employer Matching Contributions refunded or
treated as forfeitures with respect to a Family Group shall be allocated to
each Family Member in the same proportion that such Family Member's
Employer Matching Contributions bear to the aggregate Employer Matching
Contributions of the Family Group.
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<PAGE> 23
(g) Any Employer Matching Contributions which are treated as
forfeitures pursuant to subsection (c) above shall be used to reduce the
Employer Matching Contribution in Section 3.4.
3.6 Multiple Use.
(a) This Section 3.6 will be applicable if The 2.0 Test is
used to satisfy both the Actual Deferral Percentage Test and the
Contribution Percentage Test. If this Section 3.6 is applicable, the
Administrative Committee shall determine whether a "Multiple Use" has
occurred, and if such a Multiple Use has occurred, the Employer Matching
Contributions of the Highly Compensated Employees shall be reduced in
accordance with the provisions of subsection (c) below.
(b) A Multiple Use occurs when for the Highly Compensated Employees,
the sum of the Actual Deferral Percentage used to satisfy The 2.0 Test plus
the Contribution Percentage used to satisfy The 2.0 Test exceeds the
"Aggregate Limit." The Aggregate Limit is the greater of (i) or (ii) below,
determined as follows:
(i) (A) First, multiply 1.25 by the greater of (I) the Actual
Deferral Percentage, or (II) the Contribution Percentage of the
Non-Highly Compensated Employees;
(B) Second, add 2.0 to the lesser of (I) or (II) above
provided that such sum shall not exceed 2 times the lesser of (I) or (II)
above; and
(C) Finally, add the results from (A) and (B) to
determine the Aggregate Limit; or
(ii) (A) First, multiply 1.25 by the lesser of (I) the Actual
Deferral Percentage, or (II) the Contribution Percentage of the
Non-Highly Compensated Employees;
(B) Second, add 2.0 to the greater of (I) or (II) above
provided that such sum shall not exceed 2 times the greater of (I) or (II)
above; and
(C) Finally, add the results from (A) and (B) to
determine the Aggregate Limit.
(c) If a Multiple Use has occurred, such Multiple Use shall be
corrected by reducing the Contribution Percentage of Highly
Compensated Employees in accordance with the provisions of Section 3.5(d)
until the sum of the Actual Deferral
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<PAGE> 24
Percentage plus the Contribution Percentage for the Highly Compensated
Employees equals the Aggregate Limit.
(d) Net earnings or losses to be refunded or treated as
forfeitures together with the excess Employer Matching Contributions shall be
equal to the net earnings or losses on such contributions for the
Plan Year in which the contributions were made. Net earnings or losses
shall be determined in the same manner as in Section 3.3(c) except that the
phrases "Employer Matching Contribution" and "Matching Account" shall be
substituted for the phrases "Before-Tax Contribution" and "Before-Tax
Account" wherever used therein.
(e) Any Employer Matching Contributions which are treated as
forfeitures pursuant to subsection (c) above shall be used to reduce the
Employer Matching Contribution in Section 3.4.
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<PAGE> 25
ARTICLE 4
Participant Contributions
4.1 No After-Tax Contributions. No Participant shall be required or
permitted to make any after-tax contributions to the Plan.
4.2 Rollover Contribution.
(a) A Rollover Contribution may be transferred in cash to the
Trust Fund for the benefit of an Eligible Employee with the permission of
the Administrative Committee. Prior to accepting any transfer which is
intended to be a Rollover Contribution, the Administrative Committee may
require the Eligible Employee to establish that the amount to be
transferred meets the definition of a Rollover Contribution and any other
limitations of the Code applicable to such transfers.
(b) An Eligible Employee who is not eligible to participate in the
Plan solely by reason of failing to meet the eligibility requirements of
Article 2 and who reasonably expects to become a Participant when such
requirements are met, may be a Participant in the Plan solely for the
limited purposes of making a Rollover Contribution, and taking actions with
respect to his/her Rollover Account for the purpose of investment options
in accordance with Section 5.2, subject to the same conditions as any other
Participant.
(c) If the Administrative Committee determines after a
Rollover Contribution has been made that such Rollover Contribution did
not in fact constitute a Rollover Contribution as defined in Section 1.4,
the amount of such Rollover Contribution and any earnings thereon shall be
returned to the Eligible Employee.
(d) Each Eligible Employee's Rollover Contribution shall be
credited to his/her Rollover Account and invested in accordance with
Section 5.2. A Participant's Rollover Account shall be fully vested and
nonforfeitable.
(e) Subject to the provisions of Article 7, a Participant's
Rollover Account shall be distributed to the Participant (or his/her
beneficiary in the event of his/her death) at the time and in the manner
directed by the Participant.
4.3 Trustee-to-Trustee Transfers.
(a) If permitted by the Administrative Committee, an Eligible
Employee may elect to have a Trustee-to-Trustee Transfer made to the Trust
consisting of (i) employer contributions made on his/her behalf and (ii) all
earnings related to employer and employee contributions (to the extent
earnings related to employee contributions may be legally transferred
without the transfer of the underlying employee contributions).
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<PAGE> 26
(b) An Eligible Employee on whose behalf a Trustee-to-Trustee
Transfer is made to the Trust, who is ineligible to be a Participant solely by
reason of failing to meet the eligibility requirements of Article 2 and
who reasonably expects to become a Participant when such requirements are
met, may be a Participant solely for the limited purposes of making a
Trustee-to-Trustee Transfer, and taking action with respect to such Trustee
Transfer Account for the purpose of investment options in accordance with
Section 5.2 subject to the same conditions as other Participants.
(c) Trustee-to-Trustee Transfers shall only be permitted as
the Administrative Committee shall from time to time determine in
accordance with uniform and non-discriminatory circumstances. Prior to
the acceptance of a Trustee-to-Trustee Transfer, the Administrative
Committee may require the submission of evidence so that it may be reasonably
satisfied that such transfer qualifies as a Trustee-to-Trustee Transfer. If
the Administrative Committee determines, subsequent to any Trustee-to-Trustee
Transfer, that such transfer did not in fact constitute a Trustee-to-Trustee
Transfer as defined in Section 1.4 or did not otherwise satisfy the rules
of the Administrative Committee, the amount of such transfer may be
returned (at the discretion of the Administrative Committee) to the
transferor or Participant.
(d) Each Eligible Employee's Trustee-to-Trustee Transfer
shall be credited to his/her Trustee Transfer Account and invested in
accordance with Section 5.2. All amounts received in a Trustee-to-Trustee
Transfer shall be fully vested and nonforfeitable.
(e) Subject to the provisions of Article 7, a Participant's
Trustee Transfer Account shall be distributed to the Participant (or his/her
beneficiary in the event of his/her death) at the time and in the
manner directed by the Participant; provided, that any portion of a
Participant's Trustee Transfer Account attributable to employer contributions
made to a plan which met the requirements of Code Section 401(k) and
which was transferred from such plan prior to such Participant's
attainment of age 59-1/2, having a disability or for reasons other than
the Participant's separation from service or the termination of the plan,
shall not be distributed prior to the earliest of the Participant's
retirement, death, disability or termination of employment.
4.4 Allocation of Trustee-to-Trustee Transfers and Rollover
Contributions. The Trustee-to-Trustee Transfer and Rollover Contribution of
an Eligible Employee shall be allocated to his/her Trustee Transfer
Account and Rollover Account, respectively, as of the Valuation Date
next succeeding the date on which such amounts are received by the Trustee.
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<PAGE> 27
ARTICLE 5
Accounting Provisions and Allocations
5.1 Participant's Accounts. For each Participant there shall be
maintained as appropriate a separate Before-Tax Account, Matching Account,
After-Tax Account (for pre-1996 after-tax contributions), Rollover Account
and Trustee Transfer Account. Each Account shall be credited with the
amount of contributions, forfeitures, interest and earnings of the Trust
Fund allocated to such Account and shall be charged with all distributions,
withdrawals and losses of the Trust Fund allocated to such Account.
5.2 Investment Funds.
(a) The Trust Fund shall be divided into separate investment funds
(each a "Fund") as provided in this Section 5.2. Each Fund as may from time
to time be established shall be a common fund in which each Participant shall
have an undivided interest in the respective assets of the Fund. Except as
otherwise provided, the value of each Participant's Accounts in such
Funds shall be measured by the proportion that the net credits to his/her
Accounts bear to the total net credits to the Accounts of all Participants and
beneficiaries as of the date that such share is being determined. For
purposes of allocation of income and valuation, each Fund shall be
considered separately. No Fund shall share in the gains and losses of any
other, and no Fund shall be valued by taking into account any
assets or distributions from any other.
(b) Each Fund shall be established and invested by the
Trustee in accordance with investment policies determined, or as the Trustee
may be directed, from time to time by the Administrative Committee. The
Administrative Committee may from time to time also direct that Funds
with similar investment objectives be consolidated.
(c) A Participant may from time to time elect to have a
uniform percentage of his/her Accounts credited in increments of 5% to one
or more of the Funds. All contributions to his/her Accounts shall be
credited to such Funds in accordance with such election. Subject to any
restriction on transfer which results from the investment medium chosen for a
Fund, a Participant may elect to transfer in multiples of 5%, a uniform
percentage of his/her Accounts held in any Fund to one or more different
Funds. Elections under this Section shall be made at such times and in
accordance with procedures and limitations established by the
Administrative Committee.
5.3 Allocation Procedure. As of each Valuation Date, the
Administrative Committee shall:
(a) first, allocate the net earnings or losses of the Trust Fund
pursuant to Section 5.5;
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<PAGE> 28
(b) second, allocate Before-Tax Contributions pursuant to
Section 5.6; and
(c) third, if the Valuation Date is the last Business Day of any
calendar quarter, allocate Employer Matching Contributions pursuant to Section
5.7.
5.4 Determination of Value of Trust Fund. As of each Valuation
Date the Trustee shall determine for the period then ended the sum of the
net earnings or losses of the Trust Fund which shall reflect accrued but
unpaid interest, dividends, gains or losses realized from the sale, exchange
or collection of assets, other income received, appreciation or
depreciation in the fair market value of assets, administration expenses,
and taxes and other expenses paid in accordance with prior agreement between
the Plan Sponsor and the Trustee. Gains or losses realized and adjustments
for appreciation or depreciation in fair market value shall be computed with
respect to the difference between such value as of the preceding Valuation
Date or date of purchase, whichever is later, and the value as of the date of
disposition or the current Valuation Date, whichever is earlier. To the
extent that any assets of the Trust have been invested in one or more
separate investment trusts, mutual funds, investment contracts or similar
investment media, the net earnings or losses distributable to such
investments shall be determined in accordance with the procedures of
such investment media.
5.5 Allocation of Net Earnings or Losses.
As of each Valuation Date the net earnings or losses of the Trust Fund
for the period then ending shall be allocated to the Accounts of all
Participants (or beneficiaries of deceased Participants) having credits in
the Fund both on such date and at the beginning of such period. Such
allocation shall be in the ratio that (i) the net credits to each such
Account of each such Participant on the first day of such period, less the
total amount of any distributions from such Account to such Participant
during such period, bears to (ii) the total net credits to all such
Accounts of all Participants on said first day of the period, less the total
amount of distributions from all such Accounts to all Participants during
such period. Notwithstanding the foregoing, to the extent the assets of
the Trust have been invested in one or more separate investment trusts,
mutual funds, investment contracts or similar investment media, the net
earnings or losses attributable to such investments shall be allocated to the
Accounts of Participants or beneficiaries on the basis of the balances of such
Accounts but in accordance with the procedures of the respective investment
media in which such assets are invested.
5.6 Allocation of Before-Tax Contributions. As of each Valuation Date
which is the last Business Day of any calendar month, the Before-Tax
Contributions made on behalf of each Participant shall be allocated to
such Participant's Before-Tax Account.
5.7 Allocation of Employer Matching Contributions. As of each
Valuation Date which is the last Business Day of a calendar quarter, the
Employer Matching
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<PAGE> 29
Contribution, if any is in effect, shall be allocated to the Matching
Account of each Participant.
5.8 Provisional Annual Addition. The sum of the amounts allocated
to the Accounts of the Participants pursuant to Sections 5.6 and 5.7 for a
Plan Year shall be known as the "Provisional Annual Addition" and shall be
subject to the limitation on Annual Additions in Section 5.9.
5.9 Limitation on Annual Additions.
(a) For the purpose of complying with the restrictions on
Annual Additions to defined contribution plans imposed by Code Section
415, for each Eligible Participant and each other Participant who
has made Before-Tax Contributions during the Plan Year, there shall be
computed a Maximum Annual Addition, which shall be the lesser of
(i) 25% of his/her Section 415 Compensation for the Plan Year;
or
(ii) the Defined Contribution Dollar Limitation for the Plan
Year.
(b) If the Maximum Annual Addition for a Participant equals or
exceeds the Provisional Annual Addition for that Participant, an amount
equal to the Provisional Annual Addition shall be allocated to the
Participant's respective Accounts.
(c) If the Provisional Annual Addition exceeds the Maximum
Annual Addition for that Participant, the Provisional Annual Addition
shall be reduced until the Provisional Annual Addition as so reduced
equals the Maximum Annual Addition for such Participant, as follows:
the Tentative Employer Contribution allocable to such Participant's
respective Accounts shall be reduced by reducing (A) the Employer
Supplemental Contribution, if any, (B) the Supplemental Before-Tax
Contributions, and (C) the Basic Before-Tax Contributions and Employer
Matching Contributions, proportionately, in that order. The Provisional
Annual Addition remaining after such reductions shall be allocated to the
Participant's respective Accounts.
(d) Any forfeiture which cannot be used to reduce the Employer
Matching Contribution under the Plan because of the application of the
above limit (or because the forfeiture exceeds the Employer Matching
Contribution in Section 3.5) shall be carried in the Excess Forfeiture
Suspense Account for such Plan Year. In the next succeeding Plan Year the
amounts included in such Account shall be treated as a forfeiture for such
Plan Year and shall be used to reduce the Employer Matching Contribution in
Section 3.4 (and as such will be again subject to the limitations of this
Section 5.9 for such Plan Year). Amounts which are included in the
Excess Forfeiture Suspense Account as of the end of a Plan Year shall be
treated as a liability of the Trust
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<PAGE> 30
Fund. Upon termination of the Plan, amounts then held in the Excess
Forfeiture Suspense Account which cannot be allocated pursuant to this Section
shall revert to the Employer.
(e) The Excess Tentative Employer Contribution is an amount equal
to the sum of the reductions in the Tentative Employer Contribution
allocable to the Accounts of Participants pursuant to subsection (c) above.
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<PAGE> 31
ARTICLE 6
Amount of Payments to Participants
6.1 General Rule. Upon the retirement, disability, resignation or
dismissal of a Participant, he, or in the event of his/her death, his/her
beneficiary, shall be entitled to receive from his/her respective Accounts
in the Trust Fund as of his/her Determination Date:
(a) an amount equal to the Participant's Before-Tax Account,
After-Tax Account, Rollover Account, Trustee Transfer Account, plus any of
the Participant's Before-Tax Contributions made to the Trust Fund but
not allocated to the Participant's Accounts as of his/her Determination
Date; and
(b) the nonforfeitable portion of the Participant's Matching
Account determined as hereafter set forth.
The time and manner of distribution of a Participant's Accounts shall be
determined in accordance with Article 7.
6.2 Age 55 and Normal Retirement. Any Participant may retire on or
after the date on which he/she attains age 55, at which date the forfeitable
portion, if any, of his/her Matching Account shall become nonforfeitable.
If the retirement of a Participant is deferred beyond his/her Normal
Retirement Date, he/she shall continue in full participation in the Plan and
Trust Fund.
6.3 Death. As of the date any Participant shall die while in the
employ of the Employer or an Affiliate, the forfeitable portion, if any, of
his/her Matching Account shall become nonforfeitable.
6.4 Disability.
(a) As of the date any Participant shall be determined
by the Administrative Committee to have become totally and permanently
disabled because of physical or mental infirmity while in the employ of the
Employer or an Affiliate and his/her employment shall have terminated, the
forfeitable portion, if any, of his/her Matching Account shall become
nonforfeitable.
(b) A Participant shall be deemed totally and permanently disabled
when, on the basis of qualified medical evidence, the Administrative
Committee finds such Participant to be totally and presumably permanently
prevented from engaging in any occupation or employment available with the
Employer or an Affiliate as a result of physical or mental infirmity,
injury, or disease, either occupational or nonoccupational in cause;
provided, however, that disability hereunder shall not include any
disability incurred or resulting from the Participant having engaged in a
criminal enterprise, or any
27
<PAGE> 32
disability consisting of or resulting from the Participant's chronic
alcoholism, addiction to narcotics or an intentionally self-inflicted injury.
6.5 Vesting. A Participant's interest in his/her Before-Tax Account,
After- Tax Account, Rollover Account and Trustee-Transfer Account shall be
nonforfeitable at all times. Except as otherwise provided in this
Article 6, a Participant's nonforfeitable interest in his/her Matching
Account at any point in time shall be determined under Section 6.6.
6.6 Resignation or Dismissal. If any Participant shall resign or be
dismissed from the service of the Employer and all Affiliates,
there shall become nonforfeitable a portion or all of his/her Matching
Account determined as of his/her Determination Date in accordance with the
following schedule, subject to Section 6.7:
<TABLE>
<CAPTION>
Nonforfeitable
Years of Service Percentage
---------------- --------------
<S> <C>
Less than 3 0%
3 but less than 4 20%
4 but less than 5 40%
5 but less than 6 60%
6 but less than 7 80%
7 or more 100%
</TABLE>
Any part of the Matching Account of such Participant which does not
become nonforfeitable shall be treated as a forfeiture pursuant to Section 6.8.
6.7 Computation of Period of Service. For purposes of
determining the nonforfeitable percentage of the Participant's Matching
Account, all Years of Service shall be taken into account, except that
Years of Service before a One-Year Break in Service shall be disregarded
until such Participant has completed one Year of Service after such One-Year
Break in Service.
6.8 Treatment of Forfeitures.
(a) Upon termination of a Participant's employment with the
Employer and all Affiliates, that part of his/her Matching Account which
becomes a forfeiture pursuant to Section 6.6 shall be applied to reduce
Employer Matching Contributions under Section 3.4 at the end of the Plan Year
in which the termination of employment occurred if the Participant is not then
reemployed by the Employer or an Affiliate.
(b) If a Participant is reemployed by the Employer or an
Affiliate without incurring 5 consecutive One-Year Breaks in Service, and
before distribution of the nonforfeitable portion of his/her Matching
Account, the amount of the forfeiture shall be
28
<PAGE> 33
restored to his/her Matching Account and Employer Account (if any) as of
the last day of the Plan Year in which he/she is reemployed.
(c) If the Participant is reemployed by the Employer or an
Affiliate without incurring 5 consecutive One-Year Breaks in Service but after
distribution of the nonforfeitable portion of his/her Matching Account,
and if the Participant repays the amount distributed before the earlier of
(i) 5 years from the date of such reemployment; or
(ii) the end of 5 consecutive One-Year Breaks in Service
following the date of such distribution,
the amount of the Matching Account distributed to him/her and the amount
of the forfeiture shall be restored to his/her Matching Account as of the
last day of the Plan Year in which such repayment is made.
(d) Amounts restored to a Participant's Matching Account pursuant
to (b) or (c) above shall be deducted from the forfeitures which
otherwise would be allocable for the Plan Year in which such reemployment
or repayment occurs or, to the extent such forfeitures are insufficient,
shall require a supplemental contribution from the Employer.
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<PAGE> 34
ARTICLE 7
Distributions
7.1 Commencement and Form of Distributions.
(a) Distribution of a Participant's Accounts in the Trust Fund
following termination of employment with the Employer and all Affiliates
shall commence on or as soon as practicable after the first to occur of:
(i) the date set forth in the Participant's request
for distribution; provided that the Committee has notified the
Participant of the availability of such distribution in a manner that
would satisfy the notice requirements of Section 1.411(a)-11(c) of the
income tax regulations, and such notification is given no less than 30
days and no more than 90 days prior to the distribution date requested
by the Participant; provided, further, that such distribution may
commence less than 30 days after the date the notice required under
Section 1.411(a)-11(c) of the income tax regulations is given, provided
that:
(1) the Committee clearly informs the Participant
that the Participant has a right to a period of at least 30 days
after receiving the notice to consider the decision of whether
or not to elect a distribution, and
(2) the Participant, after receiving the notice,
affirmatively elects a distribution; or
(ii) the 60th day after the close of the later of the Plan
Year in which the Participant attains his/her Normal Retirement Date or
terminates employment with the Employer and all Affiliates, unless the
Participant has requested to defer the distribution to a later date.
(b) In all events, distribution shall commence no later than the
Required Beginning Date, and subsequent distributions required to be made
each year for compliance with Code Section 401(a)(9) and the regulations
promulgated thereunder shall be made no later than December 31 of such year.
(c) A Participant may, in accordance with such conditions or rules
as the Committee shall prescribe, elect any one of the following
optional forms of distribution of the nonforfeitable balances of the
Participant's Accounts under the Plan, subject to applicable laws and
regulations:
(i) by payment in one lump sum; or
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<PAGE> 35
(ii) in substantially equal monthly, quarterly, semi-annual or
annual installments which, except for the final payment, shall not be
less than $100; or
(iii) by transfer, at the request of a Participant, to an
employees' trust in which he/she is a participant, which is described
in Code Section 401(a) and which is exempt from tax under Code Section
501(a); or
(iv) by distribution according to paragraph (d), below.
(d) This paragraph (d) contains the IRS model amendment as set forth
in Rev. Proc. 93-12, which may be used to amend plans to provide for the
requirement of section 401(a)(31) of the Code that plans permit the direct
rollover of eligible rollover distributions.
(i) This paragraph (d) applies to distributions made on or after
January 1, 1993. Notwithstanding any provision of the plan to the
contrary that would otherwise limit a distributee's election under
this paragraph (d), a distributee may elect, at the time and in the
manner prescribed by the plan administrator, to have any portion of an
eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover.
(ii) Definitions.
(A) Eligible rollover distribution: An eligible rollover
distribution is any distribution of all or any portion of the balance
to the credit of the distributee, except that an eligible rollover
distribution does not include: any distribution that is one of a
series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy)
of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's designated
beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under
section 401(a)(9) of the Code; and the portion of any distribution
that is not includable in gross income (determined without regard to
the exclusion for net unrealized appreciation with respect to employer
securities).
(B) Eligible retirement plan: An eligible retirement plan
is an individual retirement account described in section 408(a) of
the code, an individual retirement annuity described in section
408(b) of the Code, an annuity plan described in section 403(a)
of the Code, or a qualified trust described in section 401(a) of
the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan
is an individual retirement account or individual retirement annuity.
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<PAGE> 36
(C) Distributee: A distributee includes an
employee or former employee. In addition, the employee's
or former employee's surviving spouse and the employee's
or former employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations
order, as defined in section 414(p) of the Code, are
distributees with regard to the interest of the spouse or
former spouse.
(D) Direct rollover: A direct rollover is a payment
by the plan to the eligible retirement plan specified by
the distributee.
(e) The value of the Participant's Accounts shall be paid
to the Participant over a period not to exceed his/her life expectancy
or the joint life expectancy of the Participant and his/her Individual
Beneficiary. The minimum amount of any installment distribution and
determination of the life expectancy of a Participant and the joint
life expectancy of a Participant and his/her Individual Beneficiary
shall be determined in accordance with the regulations prescribed
under Code Section 401(a)(9); provided that the life expectancy of a
Participant or his/her spouse shall be redetermined annually. In no
event shall the amount distributable in any year be less that the amount
determined in accordance with the minimum distribution incidental
benefit requirements of Treasury Regulation Section 1.401(a)(9)-2.
(f) Notwithstanding anything in this Section 7.1 to the
contrary, if the vested balance of the Participant's Accounts does not
exceed $3,500 at the time a distribution is to be made from the Plan
and distribution pursuant to this Section 7.1 has not otherwise
commenced, the Committee shall direct the Trustee to distribute such
amount in a lump sum payment to the individual so entitled and the
payment thereof shall be in full satisfaction of any liability of the
Trust to such individual. If the vested balance of the Participant's
Accounts at the time of any distribution to the individual so entitled
exceeds $3,500, then the vested balance at any subsequent time shall
be deemed to exceed $3,500. Any Participant whose vested percentage
of his/her Matching Account is 0% shall be deemed to have received
a lump sum payment upon termination of employment.
(g) Notwithstanding anything in this Section 7.1 to the
contrary, if the amount of any distribution required to commence on a
certain date cannot be ascertained by such date, a payment retroactive
to such date may be made no later than 60 days after the earliest
date on which such amount can be ascertained.
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<PAGE> 37
7.2 Distributions to Beneficiaries.
(a) Except as otherwise provided in this Section 7.2, the balance
of a deceased Participant's Accounts which is distributable to a
beneficiary shall be distributed in one of the forms described in Section
7.1(c), in accordance with an effective designation filed by the Participant
with the Administrative Committee or, if no such designation has been filed,
in one of such forms as the beneficiaries shall request.
(b) In the event that the distribution of the Participant's
Accounts has begun in accordance with Section 7.1, any form of distribution
to a beneficiary under this Section 7.2 shall be designed to distribute the
balance of the deceased Participant's Accounts at least as rapidly as under
the method of distribution in effect at the time of the Participant's death.
(c) If the distribution of a Participant's Accounts has not
commenced at the time of his/her death, any form of distribution to a
beneficiary shall be designed to distribute the balance of the deceased
Participant's Accounts as follows:
(i) Any portion of the Accounts payable to or for the
benefit of an Individual Beneficiary may be distributed over a period not
to exceed the life expectancy of such Individual Beneficiary if such
payments commence not later than the December 31 coinciding with or next
following the first anniversary of the Participant's death, unless such
Individual Beneficiary is the surviving spouse of the Participant, in
which case such payments need not commence until the later of (1) the
December 31 coinciding with or next following the first anniversary of
the Participant's death, or (2) the December 31 of the calendar year in
which the Participant would have attained age 70-1/2.
(ii) If the Participant's surviving spouse is an Individual
Beneficiary and dies prior to the commencement of benefit payments
to such spouse, subsection (i) above shall be applied as if the
Participant's death had occurred on the date of such spouse's death.
(iii) Unless distribution is made in accordance with subsections
(i) or (ii) above, the balance of the Participant's Accounts shall be
distributed in full no later than the December 31 coinciding with or
next following the 5th anniversary of the Participant's death.
(d) If a beneficiary to whom payments have commenced dies prior to
receipt of all such payments, the remaining balance of the Participant's
Accounts shall be distributed to any contingent or successor beneficiary at
least as rapidly as under the method of distribution in effect at the time of
the beneficiary's death, or if there is no such contingent or successor
beneficiary, in a lump sum to the deceased beneficiary's estate.
33
<PAGE> 38
(e) The life expectancy of an Individual Beneficiary who is the
surviving spouse of the Participant shall be redetermined annually in
accordance with regulations prescribed under Code Section 401(a)(9).
(f) Notwithstanding the provisions of this Section 7.2, the
Accounts of a deceased Participant shall be distributed to a beneficiary in
such method or form of distribution and at such time as set forth in a
written designation filed with the Administrative Committee by the
Participant prior to January 1, 1984, in accordance with the provisions of the
Plan as in effect prior to that date.
7.3 Beneficiaries.
(a) Unless a Participant has effectively elected otherwise in
accordance with this Section 7.3, the distributable balance of a
deceased Participant's Accounts shall be paid to his/her surviving spouse.
(b) The balance of a deceased Participant's Accounts shall be
distributed to the persons effectively designated by the Participant as
his/her beneficiaries. To be effective, the designation shall be filed with
the Administrative Committee in such written form as the Administrative
Committee requires and may include contingent or successive
beneficiaries; provided that any designation by a Participant who is
married at the time of his/her death (or, if earlier, the date his/her
benefit payments commence) which fails to name his/her surviving spouse as
the sole primary beneficiary shall not be effective unless such surviving
spouse has consented to the designation in writing, witnessed by a Plan
representative or notary public, acknowledging the effect of the
designation and the specific non-spouse beneficiary, including any class
of beneficiaries or any contingent beneficiary. Such consent shall not be
required if, at the time of filing such designation, the Participant
established to the satisfaction of the Administrative Committee that the
consent of the Participant's spouse could not be obtained because there is no
spouse, such spouse could not be located or by reason of such other
circumstances as may be prescribed by regulations. Any consent (or
establishment that the consent could not be obtained) shall be effective only
with respect to such spouse. Any Participant may change his/her beneficiary
designation at any time by filing with the Administrative Committee a new
beneficiary designation (with such spousal consent as may be required).
(c) (i) If a Participant dies, and to the knowledge of
the Administrative Committee after reasonable inquiry leaves no
surviving spouse, has not filed an effective beneficiary designation
or has revoked all such designations, or has filed an effective
designation but the beneficiary or beneficiaries predeceased him, the
distributable portion of the Participant's Accounts shall be paid to
the executor or administrator of the Participant's estate.
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<PAGE> 39
(ii) If the beneficiary, having survived the Participant, shall die
prior to the final and complete distribution of the Participant's
Accounts, then the distributable portion of said Accounts shall be paid:
(A) to the contingent or successive beneficiary named
in the most recent effective beneficiary designation filed by the
Participant in accordance with such designation; or
(B) if no such beneficiary has been named, to the
executor or administrator of the beneficiary's estate.
7.4 Installment or Deferred Distributions. If distribution is made
to a Participant or to the beneficiary of a deceased Participant in
installments or is deferred, the undistributed vested balance shall share in
the net earnings or losses (including the net adjustments in the value of
the Trust Fund) as provided in Section 5.5.
7.5 Form of Elections and Applications for Benefits. Any election,
revocation of an election or application for benefits pursuant to the
Plan shall not be effective unless it is (a) made on such form, if
any, as the Administrative Committee may prescribe for such purpose; (b)
signed by the Participant and, if required by Section 7.3, by the
Participant's spouse; and (c) filed with the Administrative Committee.
7.6 Unclaimed Distributions. In the event any distribution cannot be
made because the person entitled thereto cannot be located and the
distribution remains unclaimed for 2 years after the distribution date
established by the Administrative Committee, then such amount shall be
treated as a forfeiture and used to reduce the Employer Matching Contributions
under Section 3.4.
7.7 Loans.
(a) Upon the submission by the Participant of a written loan
application form as prescribed by the Administrative Committee, the Committee
shall grant a loan to such Participant from his/her Accounts; provided,
however, that if the Committee reasonably believes that the Participant either
does not intend to repay the loan or lacks proper financial ability to repay
the loan, it shall not grant such a loan.
(b) Only one loan shall be outstanding at any time. The minimum
amount of any loan shall be $1,000, and the maximum amount of any loan shall
not exceed 50% of the amount which the Participant would be entitled to
receive from his/her Accounts if he/she had resigned from the service of the
Employer and all Affiliates and his/her Determination Date next preceded
the date of such authorization; provided, however, that the amount of such
loan shall not exceed $50,000 reduced by the greater of (i) the highest
outstanding balance of loans to the Participant from the Trust Fund during the
one-year period ending on the day before the date on which such loan is
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made or modified, or (ii) the outstanding balance of loans to the Participant
from the Trust Fund on the date on which such loan is made or modified.
(c) Such loans shall be made available on a reasonably equivalent
basis to all Participants and beneficiaries who either (i) are active
employees or (ii) are determined by the Committee to be "parties in interest"
as that term is defined in Section 3(14) of ERISA, so long as the making of
such loans does not discriminate in favor of Highly Compensated Employees.
(d) Loans shall be made on such terms as the Administrative
Committee may prescribe, provided that any such loan shall be evidenced by a
note, shall bear a rate of interest on the unpaid principal thereof
commensurate with the interest rates charged by persons in the business of
lending money for loans which would be made under similar circumstances,
and shall be secured by the Participant's segregated loan account and
such other security as the Administrative Committee in its discretion deems
appropriate.
(e) Loans shall be repaid by the Participant by payroll deduction
or any other method approved by the Committee which requires level
amortization of principal and repayments not less frequently than quarterly.
Such loans shall be repaid over a period not to exceed 5 years (15
years for the purchase of a participant's principal residence) in
accordance with procedures established by the Administrative Committee from
time to time.
(f) Loans shall be an asset of the Participant's Accounts and
shall be treated in the manner of a segregated account. Upon the failure of a
Participant to make loan payments or some other event of default set forth in
the promissory note, upon the Participant's termination of employment, or
upon termination of the Plan pursuant to Section 12.2, such loan shall
become due and payable, and the unpaid balance of such loan, including any
unpaid interest, may in the Administrative Committee's discretion be
charged against the Participant's segregated loan account; provided, that any
unpaid balance of such loan, including any unpaid interest, shall be charged
against the Participant's segregated loan account before any distribution to
the Participant. If after the Participant's segregated loan account has been
so charged, there remains an unpaid balance of any such loan and interest,
then the remaining unpaid balance of such loan shall be charged against any
property pledged as security with respect to such loan.
7.8 Withdrawals From Before-Tax Account Prior to Termination of
Employment.
(a) A Participant who has attained age 59-1/2 may elect to
withdraw from his/her Before-Tax Account any amount not in excess of the
balance of such Account determined as of the Determination Date coinciding
with or immediately preceding the date of such withdrawal.
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(b) A Participant who has not attained age 59-1/2 may
upon the determination by the Administrative Committee that he/she has
incurred a financial hardship, make a hardship withdrawal from his/her
Before-Tax Account. In any case where the Participant claims financial
hardship, he/she shall submit a written request for such distribution in
accordance with procedures prescribed by the Administrative Committee.
The Administrative Committee shall determine whether the Participant has a
"financial hardship" on the basis of such written request in accordance
with this Section 7.8, and such determination shall be made in a uniform and
nondiscriminatory manner. The Administrative Committee shall only make
a determination of "financial hardship" if the distribution is requested on
account of an immediate and heavy financial need of the Participant and
the funds to be distributed are necessary to satisfy the Participant's need.
(i) The determination of whether a Participant has an immediate and
heavy financial need is to be made by the Administrative Committee on
the basis of all relevant facts and circumstances. A distribution will
be deemed to be on account of an immediate and heavy financial need if
made on account of:
(A) expenses for medical care (as described in Code Section
213(d)) previously incurred by the Participant, the Participant's
spouse or any dependents of the Participant (as defined in
Code Section 152) or necessary for these persons to obtain such
medical care;
(B) the purchase (excluding mortgage payments) of a
principal residence for the Participant;
(C) tuition and related educational fees due for the next 12
months of post-secondary education for the Participant, the
Participant's spouse, children or dependents;
(D) the need to prevent the eviction of the Participant from
his/her principal residence or foreclosure on the mortgage of the
Participant's principal residence; or
(E) any other event or expense deemed an immediate and
heavy financial need by the Department of the Treasury.
(ii) The determination of whether a distribution is necessary to
satisfy the immediate and heavy financial need of the Participant shall
be made by the Administrative Committee on the basis of all relevant
facts and circumstances. The Administrative Committee shall determine
that a distribution is necessary to satisfy the financial need if the
Participant reasonably demonstrates that all of the following
requirements are satisfied:
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(A) the distribution is not in excess of the amount of the
immediate and heavy financial need of the Participant;
(B) the Participant has obtained all distributions
(other than hardship distributions) and all nontaxable loans currently
available under the Plan;
(C) the Participant will not make any Before-Tax
Contributions for twelve months after receiving the hardship distribution;
and
(D) the Participant's Before-Tax Contributions in the
Plan Year following the Plan Year of the hardship distribution do
not exceed the limitation in Section 3.3(b) applicable to such following
Plan Year, minus the amount of his/her Before-Tax Contributions for the
Plan Year of the hardship distribution.
(c) Distributions from the Participant's Before-Tax Account
because of hardship pursuant to (b) above shall not exceed the lesser of:
(i) the amount of the immediate and heavy financial need; or
(ii) the total balance of the Participant's Before-Tax
Account, Rollover Account and Trustee Transfer Account as of the
Determination Date coinciding with or immediately preceding the date of such
withdrawal.
7.9 Withdrawals From Other Accounts Prior to Termination of Employment.
(a) A Participant may at any time withdraw from his/her Rollover
Account, Trustee-Transfer Account and/or After-Tax Account any amount not in
excess of the balance of such Accounts determined as of the
Determination Date immediately preceding the date of such withdrawal.
(b) A Participant who has attained age 59 1/2 may elect to withdraw
from his/her Matching Account any amount not in excess of the nonforfeitable
balance of such Account determined as of the Determination Date immediately
preceding the date of such withdrawal.
7.10 Facility of Payment. When, in the Administrative Committee's
opinion, a Participant or beneficiary is under a legal disability or is
incapacitated in any way so as to be unable to manage his/her affairs, the
Administrative Committee may direct the Trustee to make payments:
(a) directly to the Participant or beneficiary;
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(b) to a duly appointed guardian or conservator of the
Participant or beneficiary;
(c) to a custodian for the Participant or beneficiary under the
Uniform Gifts to Minors Act;
(d) to an adult relative of the Participant or beneficiary; or
(e) directly for the benefit of the Participant or beneficiary.
Any such payment shall constitute a complete discharge thereof with respect
to the Trustee and the Administrative Committee.
7.11 Claims Procedure.
(a) Any person who believes that he/she is then entitled to
receive a benefit under the Plan, including one greater than that initially
determined by the Administrative Committee, may file a claim in writing
with the Administrative Committee.
(b) The Administrative Committee shall within 90 days of the
receipt of a claim either allow or deny the claim in writing. A denial
of a claim shall be written in a manner calculated to be understood by the
claimant and shall include:
(i) the specific reason or reasons for the denial;
(ii) specific references to pertinent Plan provisions on which
the denial is based;
(iii) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of
why such material or information is necessary; and
(iv) an explanation of the Plan's claim review procedure.
(c) A claimant whose claim is denied (or his/her duly authorized
representative) may, within 60 days after receipt of denial of his/her claim:
(i) submit a written request for review to the Administrative
Committee;
(ii) review pertinent documents; and
(iii)submit issues and comments in writing.
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(d) The Administrative Committee shall notify the claimant
of its decision on review within 60 days of receipt of a request for review.
The decision on review shall be written in a manner calculated to be
understood by the claimant and shall include specific reasons for the
decision and specific references to the pertinent Plan provisions on which the
decision is based.
(e) The 90-day and 60-day periods described in subsections (b)
and (d), respectively, may be extended at the discretion of the Administrative
Committee for a second 90- or 60-day period, as the case may be, provided
that written notice of the extension is furnished to the claimant prior to
the termination of the initial period, indicating the special circumstances
requiring such extension of time and the date by which a final decision is
expected.
(f) Participants and beneficiaries shall not be entitled to
challenge the Administrative Committee's determinations in judicial or
administrative proceedings without first complying with the procedures in
this Article. The Administrative Committee's decisions made pursuant to
this Section are intended to be final and binding on Participants,
beneficiaries and others.
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ARTICLE 8
Top-Heavy Plan Requirements
8.1 Definitions. For purposes of this Article 8:
(a) A "Key Employee" is any current or former employee (and the
beneficiaries of such employee) who at any time during the Determination Period
was an officer of the Employer or an Affiliate if such individual's annual
compensation exceeds 50% of the Defined Benefit Dollar Limitation, an owner (or
considered an owner under Code Section 318) of one of the 10 largest interests
in the Employer if such individual's compensation exceeds 100% of the Defined
Contribution Dollar Limitation, a Five-Percent Owner, or a One-Percent Owner of
the Employer who has an annual compensation of more than $150,000. Annual
compensation means Section 415 Compensation plus amounts contributed by the
Employer pursuant to a salary reduction agreement which are excludable from the
employee's gross income under Code Section 125, 402(a)(8), 402(h) or 403(b).
The "Determination Period" is the Plan Year containing the Top-Heavy
Determination Date and the 4 preceding Plan Years.
The determination of who is a Key Employee will be made in accordance
with Code Section 416(i)(1) and the regulations thereunder.
(b) For any Plan Year beginning after December 31, 1983, this Plan
is "Top-Heavy" if any of the following conditions exists:
(i) The Top-Heavy Ratio for this Plan exceeds 60% and this
Plan is not part of any Required Aggregation Group or Permissive
Aggregation Group of plans;
(ii) This Plan is a part of a Required Aggregation Group of
plans but not part of a Permissive Aggregation Group and the
Top-Heavy Ratio for the group of plans exceeds 60%;
(iii)This Plan is a part of a Required Aggregation Group and
part of a Permissive Aggregation Group of plans and the Top-Heavy
Ratio for the Permissive Aggregation Group exceeds 60%.
(c) The "Top-Heavy Ratio" shall be determined as follows:
(i) If the Employer maintains one or more defined contribution
plans and the Employer has not maintained any defined benefit
plan which during the 5-year period ending on the Top-Heavy
Determination Date(s) has or has had accrued benefits, the
Top-Heavy Ratio for this Plan alone or for the Required or
Permissive Aggregation Group as appropriate is a fraction, the
numerator of which is the sum of the account balances of all Key
Employees as of the Top-Heavy
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Determination Date(s) (including any part of any account balance
distributed in the 5-year period ending on the Top-Heavy Determination
Date(s)), and the denominator of which is the sum of all account balances
(including any part of any account balance distributed in the 5-year
period ending on the Top-Heavy Determination Date(s)), both computed in
accordance with Code Section 416 and the regulations thereunder. Both
the numerator and denominator of the Top-Heavy Ratio are increased to
reflect any contribution not actually made as of the Top-Heavy
Determination Date, but which is required to be taken into account on that
date under Code Section 416 and the regulations thereunder.
(ii) If the Employer maintains one or more defined contribution
plans and the Employer maintains or has maintained one or more
defined benefit plans which during the 5-year period ending on the
Top-Heavy Determination Date(s) has or has had any accrued benefits,
the Top-Heavy Ratio for any Required or Permissive Aggregation Group as
appropriate is a fraction, the numerator of which is the sum of
account balances under the aggregated defined contribution plan or plans
for all Key Employees, determined in accordance with (i) above, and the
Present Value of accrued benefits under the aggregated defined benefit
plan or plans for all Key Employees as of the Top-Heavy Determination
Date(s), and the denominator of which is the sum of the account
balances under the aggregated defined contribution plan or plans for all
Participants, determined in accordance with (i) above, and the Present
Value of accrued benefits under the aggregated defined benefit plan or
plans for all Participants as of the Top-Heavy Determination Date(s),
all determined in accordance with Code Section 416 and the regulations
thereunder. The accrued benefits under a defined benefit plan in
both the numerator and denominator of the Top-Heavy Ratio are increased
for any distribution of an accrued benefit made in the 5-year period
ending on the Top-Heavy Determination Date.
(iii)For purposes of (i) and (ii) above the value of account
balances and the Present Value of accrued benefits will be determined
as of the most recent valuation date that falls within or ends with the
12-month period ending on the Top-Heavy Determination Date, except as
provided in Code Section 416 and the regulations thereunder for the
first and second plan years of a defined benefit plan. The account
balances and accrued benefits of a Participant (A) who is not a Key
Employee but who was a Key Employee in a prior year, or (B) who has not
been credited with at least one hour of service with any employer
maintaining the Plan at any time during the 5-year period ending
on the Top-Heavy Determination Date will be disregarded. The
calculation of the Top- Heavy Ratio, and the extent to which
distributions, rollovers, and transfers are taken into account, will be
made in accordance with Code Section 416 and the regulations
thereunder. Deductible employee contributions will not be taken
into account for purposes of computing the Top-Heavy Ratio. When
aggregating plans the value of account balances and accrued benefits
will be calculated with
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reference to the Top-Heavy Determination Date(s) that fall within
the same calendar year. The accrued benefit of a Participant other than
a Key Employee shall be determined under (1) the method, if any, that
uniformly applies for accrual purposes under all defined benefit plans
maintained by the Employer, or (2) if there is no such method, as if
such benefit accrued not more rapidly than the slowest accrual rate
permitted under the fractional rule of Code Section 411(b)(1)(C).
(d) "Permissive Aggregation Group" means the Required Aggregation
Group of plans plus any other plan or plans of the Employer which, when
considered as a group with the Required Aggregation Group, would
continue to satisfy the requirements of Code Sections 401(a)(4) and 410.
(e) "Required Aggregation Group" means (i) each qualified plan
of the Employer in which at least one Key Employee participates or
participated at any time during the Determination Period (regardless of whether
the plan has terminated), and (ii) any other qualified plan of the Employer
which enables a plan described in (i) to meet the requirements of Code Section
401(a)(4) or 410.
(f) "Top-Heavy Determination Date" means, for any Plan Year
subsequent to the first Plan Year, the last day of the preceding Plan Year or,
for the first Plan Year of the Plan, the last day of that year.
(g) "Present Value" shall be based on the interest assumption
6% and post-retirement mortality assumption specified in any defined
benefit plan maintained by any Employer or Affiliate.
(h) "Employer" means the Employer and all Affiliates except for
purposes of determining ownership under Code Section 416(i)(1).
8.2 Top-Heavy Plan Requirements.
(a) (i) Except as otherwise provided in (ii), (iii)
and (iv) below, the Employer contributions and forfeitures allocated
on behalf of any Participant who is not a Key Employee shall not be
less than the lesser of three percent of such Participant's
Considered Compensation or in the case where the Employer has no
defined benefit plan which designates this Plan to satisfy Code
Section 401, the largest percentage of Employer contributions and
forfeitures, as a percentage of the Key Employee's Considered
Compensation, allocated on behalf of any Key Employee for that year.
The minimum allocation is determined without regard to any Social
Security contribution. This minimum allocation shall be made even
though, under other Plan provisions, the Participant would not
otherwise be entitled to receive an allocation, or would have
received a lesser allocation for the year because of (A) the
Participant's failure to complete 1,000 Hours of Service
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(or any equivalent provided in the Plan), (B) the Participant's failure to
make mandatory employee contributions to the Plan, or (C) Section 415
Compensation less than a stated amount.
(ii) The provision in (i) above shall not apply to any Participant
who was not employed by the Employer or an Affiliate on the last day of
the Plan Year.
(iii)The provision in (i) above shall not apply to any
Participant to the extent the Participant is covered under any other
plan or plans of the Employer and the Employer's contribution and
forfeitures allocated under such plan or plans are equal to or exceed
the amount required to be allocated under (i) above.
(b) The minimum allocation required (to the extent required
to be nonforfeitable under Code Section 416(b)) may not be forfeited under
Code Section 411(a)(3)(B) or 411(a)(3)(D).
(c) For any Plan Year in which this Plan is Top-Heavy, the
schedule set forth in Section 6.6 shall continue to apply, because it meets
the minimum vesting schedule requirements of Code Section 416.
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ARTICLE 9
Powers and Duties of Plan Administrative Committee
9.1 Appointment of Plan Administrative Committee.
(a) The Board of Directors of the Plan Sponsor (the "Board of
Directors") may name a Plan Administrative Committee (the "Administrative
Committee") to consist of not less than 3 persons to serve as administrator
and named fiduciary of the Plan. Any person, including members of the Board
of Directors, partners, directors, shareholders, officers and employees of the
Employers, shall be eligible to serve on the Administrative Committee. Every
person appointed a member of the Administrative Committee shall signify
his/her acceptance in writing to the Board of Directors. In the event the
Board of Directors does not appoint a Administrative Committee pursuant
to this Section 9.1, the Plan Sponsor shall act as the administrator and
named fiduciary of the Plan and all references to the Administrative Committee
shall mean references to the Plan Sponsor so acting as administrator and
named fiduciary of the Plan.
(b) Members of the Administrative Committee shall serve at the
pleasure of the Board of Directors and may be removed by the Board of
Directors at any time with or without cause. Any member of the
Administrative Committee may resign by delivering his/her written
resignation to the Board of Directors, and such resignation shall
become effective at delivery or at any later date specified therein.
Vacancies in the Administrative Committee shall be filled by the Board of
Directors.
(c) Usual and reasonable expenses of the Administrative Committee
may be paid in whole or in part by the Employer and any such expenses not
paid by the Employer shall be paid by the Trustee out of the principal or
income of the Trust Fund. The members of the Administrative Committee
shall not receive any compensation for their services as such.
9.2 Powers and Duties of Administrative Committee. The
Administrative Committee shall have final and binding discretionary authority
to control and manage the operation and administration of the Plan,
including all rights and powers necessary or convenient to the carrying out
of its functions hereunder, whether or not such rights and powers are
specifically enumerated herein. In exercising its responsibilities
hereunder, the Administrative Committee may manage and administer the Plan
through the use of agents who may include employees of the Employer.
Without limiting the generality of the foregoing, and in addition to the
other powers set forth in this Article 9, the Administrative Committee
shall have the following discretionary authorities:
(a) To construe and interpret the Plan, decide all
questions of eligibility and determine the amount, manner and time of
payment of any benefits hereunder.
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(b) To prescribe procedures to be followed by
Participants or beneficiaries filing applications for benefits.
(c) To prepare and distribute, in such manner as the
Administrative Committee determines to be appropriate, information explaining
the Plan.
(d) To request and receive from the Employer, Participants and
others such information as shall be necessary for the proper administration of
the Plan.
(e) To furnish the Employer upon request such annual and other
reports with respect to the administration of the Plan as are reasonable and
appropriate.
(f) To receive, review and maintain on file reports of the
financial condition and of the receipts and disbursements of the Trust Fund
from the Trustee.
9.3 Administrative Committee Procedures.
(a) The Administrative Committee may adopt such bylaws and
regulations as it deems desirable for the conduct of its affairs.
(b) A majority of the members of the Administrative Committee at
the time in office shall constitute a quorum for the transaction of
business. All resolutions or other actions taken by the Administrative
Committee at any meeting shall be by the vote of the majority of the members
of the Administrative Committee present at the meeting. The Administrative
Committee may act without a meeting by written consent of a majority of its
members.
(c) The Administrative Committee may elect one of its members as
chairman and may appoint a secretary, who may or may not be a
Administrative Committee member, and shall advise the Trustee and the
Employer of such actions in writing. The secretary shall keep a record of
all actions of the Administrative Committee and shall forward all necessary
communications to the Employer or the Trustee.
(d) Filing or delivery of any document with or to the secretary
of the Administrative Committee in person or by registered or certified mail,
addressed in care of the Employer, shall be deemed a filing with
or delivery to the Administrative Committee.
9.4 Consultation with Advisors. The Administrative Committee
(or any fiduciary designated by the Administrative Committee pursuant to
Section 9.8) may employ or consult with counsel, actuaries, accountants,
physicians or other advisors (who may be counsel, actuaries, accountants,
physicians or other advisors for the Employer).
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9.5 Administrative Committee Members as Participants. Any
Administrative Committee member may also be a Participant, but no
Administrative Committee member shall have power to take part in any
discretionary decision or action affecting his/her own interest as a
Participant under this Plan unless such decision or action is upon a matter
which affects all other Participants similarly situated and confers no special
right, benefit or privilege not simultaneously conferred upon all other such
Participants.
9.6 Records and Reports. The Administrative Committee shall take all
such action as it deems necessary or appropriate to comply with
governmental laws and regulations relating to the maintenance of records,
notifications to Participants, registrations with the Internal Revenue
Service, reports to the U.S. Department of Labor and all other requirements
applicable to the Plan.
9.7 Investment Policy.
(a) The Administrative Committee from time to time shall
determine the Plan's short-term and long-term financial needs, with which the
investment policy of the Trust shall be appropriately coordinated, and such
needs shall be communicated from time to time to the Trustee, Investment
Managers or others having any responsibility for management and control of
the Trust assets.
(b) Subject to (c) below, the Trustee shall have exclusive
authority and discretion to manage and control the assets of the Trust
pursuant to an investment policy coordinated with the needs of the Plan as
determined by the Administrative Committee.
(c) The Administrative Committee may in its discretion appoint
one or more Investment Managers to manage (including the power to direct
the Trustee to acquire and dispose of) any assets of the Plan pursuant to
an investment policy coordinated with the needs of the Plan as
determined by the Administrative Committee, in which event the Trustee
shall not be liable for the acts or omissions of any such Investment Manager
or be under an obligation to invest or otherwise manage any asset of the
Plan which is subject to the management of any such Investment Manager
except as directed. Any such Investment Manager shall acknowledge in
writing that he/she is a fiduciary with respect to the Plan.
(d) The term "Investment Manager" shall mean: (i) a
registered investment adviser under the Investment Advisers Act of 1940; (ii)
a bank as defined in the Investment Advisers Act of 1940; or (iii) an
insurance company qualified under the laws of more than one state to manage,
acquire and dispose of plan assets.
9.8 Designation of Other Fiduciaries. The Administrative
Committee may designate in writing other persons to carry out a specified
part or parts of its responsibilities hereunder (including the power to
designate other persons to carry out a part of such designated
responsibility), but not including the power to appoint
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<PAGE> 52
Investment Managers. Any such designation shall be accepted by the
designated person, who shall acknowledge in writing that he/she is a
fiduciary with respect to the Plan.
9.9 Obligations of Administrative Committee.
(a) The Administrative Committee or its properly authorized
delegate shall make such determinations as are necessary to accomplish the
purposes of the Plan with respect to individual Participants or classes of
such Participants. The Employer shall notify the Administrative Committee
of facts relevant to such determinations, including, without limitation,
length of service, compensation for services, dates of death, permanent
disability, granting or terminating of leaves of absence, ages, retirement and
termination of service for any reason (but indicating such reason), and
termination of participation. The Employer shall also be responsible
for notifying the Administrative Committee of any other facts which may be
necessary for the Administrative Committee to discharge its
responsibilities hereunder.
(b) The Administrative Committee is hereby authorized to act solely
upon the basis of such notifications from the Employer and to rely upon any
document or signature believed by the Administrative Committee to be genuine
and shall be fully protected in so doing. For the purpose of this Section,
a letter or other written instrument signed in the name of the Employer
by any officer thereof shall constitute a notification therefrom; except
that any action by the Plan Sponsor or its Board of Directors with respect to
the appointment or removal of a member of the Administrative Committee or the
amendment of the Plan and Trust or the designation of a group of employees
to which the Plan is applicable shall be evidenced by an instrument in
writing, signed by a duly authorized officer or officers, certifying that
said action has been authorized and directed by a resolution of the Board
of Directors of the Plan Sponsor.
(c) The Administrative Committee shall notify the Trustee of its
actions and determinations affecting the responsibilities of the Trustee and
shall give the Trustee directions as to payments or other distributions from
the Trust Fund to the extent they may be necessary for the Trustee to
fulfill the terms of the Trust Agreement.
(d) The Administrative Committee shall be under no obligation to
enforce payment of contributions hereunder or to determine whether
contributions delivered to the Trustee comply with the provisions hereof
relating to contributions, and is obligated only to administer this Plan
pursuant to the terms hereof.
9.10 Indemnification of Administrative Committee. The Plan Sponsor
shall indemnify members of the Administrative Committee and its authorized
delegates who are employees of the Employers for any liability or expenses,
including attorneys' fees, incurred in the defense of any threatened or
pending action, suit or proceeding by reason of their status as members of
the Administrative Committee or its authorized
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delegates, to the full extent permitted by the law of the Plan Sponsor's
state of incorporation.
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ARTICLE 10
Trustee and Trust Fund
10.1 Trust Fund. A Trust Fund to be known as the Schawk, Inc. Retirement
Trust (herein referred to as the "Trust" or the "Trust Fund") has been
established by the execution of an amendment and continuation of a trust
agreement with one or more Trustees and is maintained for the purposes of
this Plan. The assets of the Trust will be held, invested and disposed of by
the Trustee, in accordance with the terms of the Trust, for the benefit of the
Participants and their beneficiaries.
10.2 Payments to Trust Fund and Expenses. All contributions hereunder
will be paid into and credited to the Trust Fund and all benefits
hereunder and expenses chargeable thereto will be paid from the Trust Fund and
charged thereto.
10.3 Trustee's Responsibilities. The powers, duties and
responsibilities of the Trustee shall be as set forth in the Trust
Agreement and nothing contained in this Plan, either expressly or by
implication, shall impose any additional powers, duties or responsibilities
upon the Trustee.
10.4 Reversion to an Employer. An Employer has no beneficial interest
in the Trust Fund and no part of the Trust Fund shall ever revert or be
repaid to an Employer, directly or indirectly, except that an Employer shall
upon written request have a right to recover:
(a) within one year of the date of payment of a contribution by
such Employer, any amount (less any losses attributable thereto) contributed
through a mistake of fact;
(b) within one year of the date on which any deduction for a
contribution by such Employer under Code Section 404 is disallowed, an amount
equal to the amount disallowed (less any losses attributable thereto); and
(c) at the termination of the Plan, any amounts with respect
to its employees remaining in the Excess Forfeiture Suspense Account.
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ARTICLE 11
Amendment or Termination
11.1 Amendment. The Plan Sponsor reserves the right to amend this Plan
at any time to take effect retroactively or otherwise, in any manner
which it deems desirable including, but not by way of limitation, the right
to increase or diminish contributions to be made by the Employer hereunder,
to change or modify the method of allocation of its contributions, to
change any provision relating to the distribution or payment, or both, of
any assets of the Trust.
11.2 Termination. The Plan Sponsor further reserves the right to
terminate this Plan at any time, and each Employer reserves the right to
terminate the Plan with respect to its own employees at any time.
11.3 Form of Amendment, Discontinuance of Employer
Contributions, and Termination. Any such amendment, discontinuance of
Employer contributions or termination shall be made only by resolution of
the Board of Directors of the Plan Sponsor or by any person so duly authorized
by the Board of Directors.
11.4 Limitations on Amendments. The provisions of this Article are
subject to the following restrictions:
(a) Except as provided in Section 10.4, no amendment shall operate
either directly or indirectly to give the Employer any interest whatsoever in
any funds or property held by the Trustee under the terms hereof, or to
permit corpus or income of the Trust to be used for or diverted to purposes
other than the exclusive benefit of the Participants and their beneficiaries.
(b) Except to the extent necessary to conform to the laws and
regulations or to the extent permitted by any applicable law or regulation,
no amendment shall operate either directly or indirectly to deprive any
Participant of his/her nonforfeitable beneficial interest in his/her
Accounts as of the date of the amendment.
(c) No amendment shall change any vesting schedule unless
each Participant who has completed 3 or more Years of Service is permitted
to elect to have the nonforfeitable percentage of his/her Matching Account and
Employer Account (if any) computed under the Plan without regard to such
amendment. The period for making such election shall commence no later than
the date of the adoption of such amendment and shall expire no earlier than
60 days after the latest of the following dates: (i) the date the Plan
amendment is adopted, (ii) the date the Plan amendment becomes effective, or
(iii) the date the Participant is issued written notice of the Plan amendment
by the Administrative Committee. Notwithstanding the foregoing, no election
need be offered to a Participant whose nonforfeitable percentage of his/her
Matching Account and
51
<PAGE> 56
Employer Account (if any) cannot at any time be lower than such
percentage determined without regard to such amendment.
(d) Except as permitted by applicable law, no amendment shall
eliminate or reduce an early retirement benefit or a retirement-type subsidy
or eliminate an optional form of benefit.
11.5 Level of Benefits Upon Merger. This Plan shall not merge or
consolidate with, or transfer assets or liabilities to, any other plan, unless
each Participant shall be entitled to receive a benefit immediately after
said merger, consolidation or transfer (if such other plan were then
terminated) which shall be not less than the benefit he/she would have
been entitled to receive immediately before said merger, consolidation or
transfer (if this Plan were then terminated).
11.6 Vesting Upon Termination or Discontinuance of Employer
Contributions; Liquidation of Trust.
(a) This Plan shall be deemed terminated if and only if
the Plan terminates by operation of law or pursuant to Section 11.2. In
the event of any termination or partial termination within the meaning of the
Code, or in the event the Employer permanently discontinues the making of
contributions to the Plan, the Matching Account and Employer Account (if any)
of each affected Participant who is employed by the Employer on the date
of the occurrence of such event shall be nonforfeitable; provided,
however, that in no event shall any Participant or beneficiary have
recourse to other than the Trust Fund for the satisfaction of benefits
hereunder.
(b) In the event the Employer permanently discontinues the
making of contributions to the Plan, the Trustee shall make or commence
distribution to each Participant or his/her beneficiaries of the value of
such Participant's Accounts as provided herein within the time prescribed in
Article 7. However, if, after such discontinuance, the Plan Sponsor shall
determine it to be impracticable to continue the Trust any longer, the Plan
Sponsor may, in its discretion, declare a date to be the Determination Date
for all Participants whose Determination Date has not yet occurred. Such
date shall also constitute the final distribution date for each
Participant or beneficiary whose Accounts are being distributed in
installments.
(c) The liquidation of the Trust, if any, in connection with
any Plan termination shall be accomplished by the Administrative Committee
acting on behalf of the Plan Sponsor. After directing that sufficient funds
be set aside to provide for the payment of all expenses incurred in the
administration of the Plan and the Trust, to the extent not paid or provided
for by the Employer, the Administrative Committee shall, as promptly as
shall then be reasonable under the circumstances, liquidate the Trust assets
and distribute to each Participant or beneficiary his/her Accounts in the
Trust Fund. Notwithstanding the foregoing, if the Employer or an Affiliate
maintains another defined
52
<PAGE> 57
contribution plan, other than an employee stock ownership plan (as defined
in Code Section 4975(e) or 409) or a simplified employee pension plan (as
defined in Code Section 408(k)), the Accounts of such Participant shall be
transferred to such other plan unless the vested balance of such Accounts
does not exceed $3,500 or the Participant consents to distribution of such
Accounts. If the vested balance of a Participant's Accounts at the time of
any distribution to the Participant exceeds $3,500, then the vested balance
of a Participant's Accounts at any subsequent time shall be deemed to
exceed $3,500. Upon completion of such liquidation and distribution,
the Trust shall finally and completely terminate. In the event the
Administrative Committee is no longer in existence, the actions to be taken
by the Administrative Committee pursuant to this Section shall be taken by the
Trustee.
53
<PAGE> 58
ARTICLE 12
Miscellaneous
12.1 No Guarantee of Employment, Etc. Neither the creation of the
Plan nor anything contained in the Plan or trust agreement shall be construed
as a contract of employment between the Employer and the Participant or as
giving any Participant hereunder or other employee of the Employer any right
to remain in the employ of the Employer, any equity or other interest in
the assets, business or affairs of the Employer, or any right to complain
about any action taken or any policy adopted or pursued by the Employer.
12.2 Nonalienation.
(a) Except as may be provided in the Plan with respect to
loans to Participants, no Participant shall have any right to sell,
assign, pledge, hypothecate, anticipate or in any way create a lien upon any
part of the Trust Fund. Except to the extent required by law or provided in
the Plan, no interest in the Trust Fund, or any part thereof, shall be
assignable in or by operation of law, or be subject to liability in any way
for the debts or defaults of Participants, their beneficiaries, spouses or
heirs-at-law, whether to the Employer or to others.
(b) Prior to the time that distributions are to be made
hereunder, the Participants, their spouses, beneficiaries, heirs-at-law or
legal representatives shall have no right to receive cash or other things
of value from the Employer or the Trustee from or as a result of the Plan and
Trust.
12.3 Qualified Domestic Relations Order. Notwithstanding anything in
this Plan to the contrary, the Administrative Committee shall distribute
a Participant's Accounts, or any portion thereof, in accordance with the
terms of any domestic relations order entered on or after January 1,
1985, which the Administrative Committee determines to be a qualified
domestic relations order described in Code Section 414(p).
12.4 Controlling Law. To the extent not preempted by the laws of the
United States of America, the laws of the State of Illinois shall be
controlling state law in all matters relating to the Plan.
12.5 Severability. If any provision of this Plan shall be held
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining parts of this Plan, but this Plan shall be construed and
enforced as if said illegal or invalid provision had never been included
herein.
12.6 Notification of Addresses. Each Participant and each beneficiary
of a deceased Participant shall file with the Administrative Committee from
time to time in writing his/her post-office address and each change of
post-office address. Any
54
<PAGE> 59
communication, statement or notice addressed to the last post-office address
filed with the Administrative Committee, or if no such address was
filed with the Administrative Committee, then to the last post-office
address of the Participant or beneficiary as shown on the Employer's records,
will be binding on the Participant and his/her beneficiary for all purposes of
this Plan and neither the Administrative Committee nor the Employer shall
be obliged to search for or ascertain the whereabouts of any Participant
or beneficiary.
12.7 Gender and Number. Whenever the context requires or permits, the
gender and number of words shall be interchangeable.
55
<PAGE> 60
ARTICLE 13
Adoption by Affiliates
13.1 Adoption of Plan. Subject to any resolution or terms of any
agreement approved by the Board of Directors of the Plan Sponsor or a committee
thereof to the contrary, any Affiliate may adopt this Plan for the
benefit of its eligible employees if authorized to do so by the Board of
Directors of the Plan Sponsor. Such adoption shall be by resolution of
such Affiliate's board of directors, a certified copy of which shall be
filed with the Plan Sponsor, the Administrative Committee and the Trustee.
Upon such adoption, such Affiliate shall become an "Employer."
13.2 The Plan Sponsor as Agent for Employer. Each Employer which has
adopted this Plan pursuant to Section 13.1 hereby irrevocably gives and
grants to the Plan Sponsor full and exclusive power conferred upon it by
the terms of the Plan and Trust to take or refrain from taking any and
all action which such Employer might otherwise take or refrain from taking
with respect to the Plan, including sole and exclusive power to exercise,
enforce or waive any rights whatsoever which such Employer might otherwise
have with respect to the Trust, and each such Employer, by adopting this
Plan, irrevocably appoints the Plan Sponsor its agent for such
purposes. Neither the Trustee nor the Administrative Committee nor any other
person shall have any obligation to account to any such Employer or to
follow the instructions of or otherwise deal with any such Employer, the
intention being that all persons shall deal solely with the Plan Sponsor as
if it were the sole company which had adopted this Plan. Each such
Employer shall contribute such amounts as determined under Article 3.
13.3 Adoption of Amendments.
(a) Any Employer which adopts this Plan pursuant to Section
13.1 may amend this Plan with respect to its own employees by resolution
of its board of directors, if authorized to do so by the Board of Directors
of the Plan Sponsor or any person so duly authorized by the Board of Directors
of the Plan Sponsor.
(b) Any Employer shall be deemed conclusively to have assented
to any amendment of this Plan by the Plan Sponsor without the necessity of
any affirmative action on the part of such Employer.
13.4 Termination. Any Employer which adopts this Plan pursuant to
Section 13.1 may terminate this Plan with respect to its own employees by
resolution of its board of directors, if authorized to do so by the Board of
Directors of the Plan Sponsor, or any person so duly authorized by the Board of
Directors of the Plan Sponsor.
13.5 Data to Be Furnished by Employers. Each Employer which adopts
this Plan pursuant to Section 13.1 shall furnish information and maintain
such records with respect to its Participants as called for hereunder, and its
determinations and
56
<PAGE> 61
notifications with respect thereto shall have the same force and
effect as comparable determinations by the Plan Sponsor with respect to its
Participants.
13.6 Joint Employees. If a Participant receives Considered Compensation
during a Plan Year from more than one Employer, the total amount of
such Considered Compensation shall be considered for the purposes of the
Plan, and the respective Employers shall share in contributions to the Plan
on account of said Participant based on the Considered Compensation paid to
such Participant by the Employer.
13.7 Expenses. Each Employer shall pay such part of actuarial and
other necessary expenses incurred in the administration of the Plan as the
Plan Sponsor shall determine.
13.8 Withdrawal. An Employer may withdraw from the Plan by giving 60
days' written notice of its intention to the Plan Sponsor and the
Trustee, unless a shorter notice shall be agreed to by the Plan Sponsor.
13.9 Prior Plans. If an Employer adopting the Plan already maintains a
defined contribution plan covering employees who will be covered by this
Plan, it may, with the consent of the Plan Sponsor, provide in its
resolution adopting this Plan for the termination of its own plan or for the
merger, restatement and continuation, of its own plan by this Plan. In
either case, such Employer may, subject to the approval of the Plan Sponsor,
provide in its resolution of adoption of this Plan for the transfer of the
assets of such plan to the Trust for this Plan for the payment of benefits
accrued under such other plan.
57
<PAGE> 62
EXHIBIT A
List of Participating Employers:
Schawk, Inc. (Corporate Offices)
Schawkgraphics
Process Color Plate Co., Inc.
LSI/Kala
Flexo Graphics, Inc.
Litho Color Plate Company, Inc.
Weston Engraving Co.
Amber Design, Inc.
Color Data East, Inc.
Lincoln Graphics, Inc.
LSI/Atlanta
Geneva Inn
58
<PAGE> 1
EXHIBIT 10.39
SCHAWK, INC. RETIREMENT PLAN
FOR PLASTICS EMPLOYEES
Amended and Restated Effective January 1, 1996
(Except as Specifically Provided Otherwise)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Source of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
Eligibility and Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 Eligibility Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.2 Leaves of Absence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 3
Contributions by Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.1 Employer Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.2 Before-Tax Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.3 Limitations on Before-Tax Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.4 Employer Matching Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.5 Code Section 401(m) Limitation on Employer Matching Contributions . . . . . . . . . . . . . . . . 18
3.6 Multiple Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 4
Participant Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.1 No After-Tax Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2 Rollover Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.3 Trustee-to-Trustee Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.4 Allocation of Trustee-to-Trustee Transfers and Rollover Contributions . . . . . . . . . . . . . . 23
ARTICLE 5
Accounting Provisions and Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1 Participant's Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.2 Investment Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.3 Allocation Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.4 Determination of Value of Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.5 Allocation of Net Earnings or Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.6 Allocation of Before-Tax Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.7 Allocation of Employer Matching Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.8 Provisional Annual Addition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.9 Limitation on Annual Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
i
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<TABLE>
<S> <C>
ARTICLE 6
Amount of Payments to Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.1 General Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.2 Normal Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.3 Death . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.4 Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.5 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.6 Resignation or Dismissal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.7 Computation of Period of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.8 Treatment of Forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 7
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.1 Commencement and Form of Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2 Qualified Joint and Survivor Annuity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.3 Pre-Retirement Spouse's Survivor Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.4 Distributions to Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.5 Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.6 Installment or Deferred Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.7 Form of Elections and Applications for Benefits . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.8 Unclaimed Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.9 Loans (effective October 1, 1995). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.10 Withdrawals From Before-Tax Account Prior to Termination of Employment . . . . . . . . . . . . . . 40
7.11 Withdrawals From Other Accounts Prior to Termination of Employment . . . . . . . . . . . . . . . . 42
7.12 Facility of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.13 Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE 8
Top-Heavy Plan Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.2 Top-Heavy Plan Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 9
Powers and Duties of Plan Administrative Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.1 Appointment of Plan Administrative Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.2 Powers and Duties of Administrative Committee . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.3 Administrative Committee Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.4 Consultation with Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.5 Administrative Committee Members as Participants . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.6 Records and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.7 Investment Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.8 Designation of Other Fiduciaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
ii
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<TABLE>
<S> <C>
9.9 Obligations of Administrative Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.10 Indemnification of Administrative Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 10
Trustee and Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.1 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.2 Payments to Trust Fund and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.3 Trustee's Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.4 Reversion to an Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE 11
Amendment or Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.3 Form of Amendment, Discontinuance of Employer Contributions, and Termination . . . . . . . . . . . 55
11.4 Limitations on Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
11.5 Level of Benefits Upon Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
11.6 Vesting Upon Termination or Discontinuance of Employer Contributions; Liquidation of Trust . . . . 56
ARTICLE 12
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.1 No Guarantee of Employment, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.2 Nonalienation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.3 Qualified Domestic Relations Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.4 Controlling Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.6 Notification of Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
12.7 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE 13
Adoption by Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.1 Adoption of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.2 The Plan Sponsor as Agent for Employer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.3 Adoption of Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.4 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.5 Data to Be Furnished by Employers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
13.6 Joint Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.8 Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
13.9 Prior Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
</TABLE>
iii
<PAGE> 5
ARTICLE 1
General
1.1 Purpose. It is the intention of the Employer to continue to
provide for the administration of the Schawk, Inc. Retirement Plan for
Plastic's Employees and a Trust Fund in conjunction therewith for the benefit
of eligible employees of the Employer, in accordance with the provisions of
Code Sections 401 and 501 and in accordance with other provisions of law
relating to profit sharing plans containing a Code Section 401(k) arrangement.
Filtertek, Inc. originally established the Plan as a profit sharing plan as of
May 1, 1985, and added the Code Section 401(k) arrangement effective as of
August 1, 1989. Except as otherwise provided in this Plan or the Trust, upon
the transfer by the Employer of any funds to the Trust Fund in accordance with
the provisions of this Plan, all interest of the Employer therein shall cease
and terminate, and no part of the Trust Fund shall be used for, or diverted to,
purposes other than the exclusive benefit of Participants and their
beneficiaries.
1.2 Source of Funds. The Trust Fund shall be created, funded and
maintained by contributions of the Employer, by salary deferral contributions
elected by the Participants, and by such net earnings as are obtained from the
investment of the funds of the Trust Fund.
1.3 Effective Date. The provisions of the Plan as amended and
restated shall be effective as of January 1, 1996, except for certain
provisions the effective dates of which are set forth herein. Except as may be
required by ERISA or the Code, the rights of any person whose status as an
employee of the Employer and all Affiliates has terminated shall be determined
pursuant to the Plan as in effect on the date such employment terminated,
unless a subsequently adopted provision of the Plan is made specifically
applicable to such person.
1.4 Definitions. Certain terms are capitalized and have the
respective meanings set forth in the Plan.
"Account" means each of the individual accounts established pursuant
to Article 5 representing a Participant's allocable share of the Trust Fund.
"Accounts" means the collective individual accounts established
pursuant to Article 5.
"Actual Deferral Percentage" and "Actual Deferral Percentage Tests"
are described in Section 3.3, both as applicable to employees of the Plan
Sponsor and its Affiliates generally.
"Administrative Committee" means the plan administrator and named
fiduciary appointed pursuant to Section 9.1.
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"Affiliate" means any corporation or enterprise, other than the Plan
Sponsor, which, as of a given date, is a member of the same controlled group of
corporations, the same group of trades or businesses under common control or
the same affiliated service group, determined in accordance with Code Sections
414(b), (c), (m) or (o), as is the Plan Sponsor. For purposes of determining
the amount of a Participant's Annual Addition or Section 415 Compensation and
applying the limitations of Code Section 415 set forth in Article 5,
"Affiliate" shall include any corporation or enterprise, other than the Plan
Sponsor, which, as of a given date, is a member of the same controlled group of
corporations or the same group of trades or businesses under common control,
determined in accordance with Code Sections 414(b) or (c) as modified by Code
Section 415(h), as is the Plan Sponsor.
"Annual Addition" means for any Limitation Year, the sum of (a) all
Before-Tax Contributions and Employer Matching Contributions allocated to the
Accounts of a Participant under this Plan; (b) any employer contributions,
forfeitures and employee after-tax contributions allocated to such Participant
under any other defined contribution plan maintained by the Employer or an
Affiliate; and (c) amounts allocated to an individual medical account as
defined in Code Section 415(l)(2) and amounts attributable to post-retirement
medical benefits allocated to an account described in Code Section 419A(d)(2)
maintained by the Employer or an Affiliate.
"Basic Before-Tax Contributions" and "Supplemental Before-Tax
Contributions" mean with respect to a Participant, the contributions made on
behalf of such Participant by the Employer as described in Section 3.2 and,
with respect to the Employer, mean the sum of all such contributions made on
behalf of all Participants. "Before-Tax Contributions" means, with respect to
a Participant, the sum of the Basic Before-Tax Contributions and the
Supplemental Before-Tax Contributions made on behalf of such Participant by the
Employer as described in Section 3.2 and, with respect to the Employer, means
the sum of all such contributions made on behalf of all Participants.
"Business Day" means any day on which the Federal Reserve, the New
York Stock Exchange and the Trustee are all open for business.
"Code" means the Internal Revenue Code of 1986, as from time to time
amended.
"Compensation" means a Participant's "Considered Compensation,"
"Section 415 Compensation," or "Total Compensation," as follows:
(a) "Considered Compensation" is the Participant's Total
Compensation for the Plan Year paid while he/she was a Participant; provided,
however, that Considered Compensation shall not include any amount in excess of
$150,000 (as adjusted annually by the Secretary of the Treasury for increases
in the cost of living); provided, further, that for purposes of the preceding
clause, the Considered Compensation of a Participant who is a Highly
Compensated Employee and who at any
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<PAGE> 7
time during the Plan Year is a Five-Percent Owner or a member of the group
consisting of the 10 employees of the Employer and all Affiliates paid the
greatest Section 415 Compensation for the Plan Year shall include the
Considered Compensation of the Participant's spouse or the Participant's child
or grandchild under the age of 19 and the $150,000 (as adjusted) limitation
shall be applied as if such Participant, spouse, child and grandchild
constituted a single Participant and allocated among such individuals pro rata
on the basis of Considered Compensation determined before application of the
$150,000 (as adjusted) limitation; provided further, that for the first Plan
Year in which an employee is a Participant in the Plan, such employee's Total
Compensation shall be computed on the basis of the employee's compensation from
the Employer for the entire Plan Year.
(b) "Section 415 Compensation" for a period is the
Participant's compensation (as described in Treasury Regulation Section
1.415-2(d)(1)) paid during the period for personal services actually rendered
in the course of employment with the Employer and all Affiliates, excluding
deferred compensation and other amounts which receive special tax treatment (as
described in Treasury Regulation Section 1.415- 2(d)(2)).
(c) "Total Compensation" for a period is the
Participant's wages as defined in Code Section 3401(a) for purposes of income
tax withholding at the source, and all other payments of compensation to the
Participant by the Employer for which the Employer is required to furnish the
Participant a written statement under Code Sections 6041(d) and 6051(a)(3), but
determined without regard to any rules under Code Section 3401(a) that limit
the remuneration included in wages based on the nature or location of the
employment or the services performed.
"Contribution Percentage" and "Contribution Percentage Tests" are
described in Section 3.5.
"Defined Benefit Dollar Limitation" means an amount equal to $90,000,
or, if greater, the amount in effect as of the last day of the Limitation Year
under Code Section 415(b)(1)(A), as adjusted by the Secretary of the Treasury
pursuant to Code Section 415(d).
"Defined Contribution Dollar Limitation" means an amount equal to
$30,000 or, if greater, one-fourth of the Defined Benefit Dollar Limitation,
prorated for any Limitation Year of less than 12 months; provided that, for
purposes of Section 5.10(a)(ii), such amount shall be reduced by the amounts
allocated to any medical accounts described in subsection (c) of "Annual
Addition."
"Determination Date" is the applicable Valuation Date (as determined
below) on which the balance of a Participant's Accounts in the Trust Fund shall
be determined for
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<PAGE> 8
purposes of determining the amount distributable from the Trust Fund to the
Participant, or in the event of his/her death, his/her beneficiary pursuant to
Articles 6 and 7:
(a) In the case where the balance of a Participant's
Accounts is to be determined upon his/her termination of employment for
purposes of distribution, the applicable Valuation Date shall be the Valuation
Date coinciding with such termination of employment; provided, however, that if
the Participant or beneficiary does not elect to commence distribution of such
Accounts until after the termination of employment, then the applicable
Valuation Date shall be the Valuation Date immediately preceding the date such
distribution is made.
(b) In the case where the balance of a Participant's
Account or Accounts is to be determined prior to his/her termination of
employment for purposes of a distribution to the Participant in accordance with
Article 7 or because of termination of the Plan in accordance with Article 11,
the applicable Valuation Date shall be the Valuation Date immediately preceding
the date of such determination.
"Eligible Employee" means any employee of the Employer employed in a
participating company, division or unit as set forth in Exhibit A who is not a
Leased Employee or a Member of a Collective Bargaining Unit.
"Eligibility Period" is a one-year period used for the purpose of
determining when an employee is eligible to participate in the Plan. An
employee's first "Eligibility Period" shall commence on the date on which
he/she first completes an Hour of Service. Subsequent Eligibility Periods
shall commence on the first day of each Plan Year which begins after said date.
Notwithstanding the foregoing, the initial Eligibility Period of a former
employee who is reemployed after incurring one or more One-Year Breaks in
Service and who is not eligible for immediate participation pursuant to Section
2.1(c), shall commence on the date on which he/she first completes an Hour of
Service after such One-Year Break in Service, and subsequent Eligibility
Periods shall commence on the first day of each Plan Year which begins after
said date.
"Employer" means the Plan Sponsor and any Affiliate which adopts this
Plan pursuant to Article 13.
"Entry Date" means each January 1 and each July 1.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
from time to time amended.
"Excess Forfeiture Suspense Account" is the account described in
Section 5.9.
"Excess Tentative Employer Contribution" is the excess contribution
described in Section 5.9.
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"Family Group" means all Family Members of a Highly Compensated
Employee who is a Five-Percent Owner or who is a member of the group consisting
of the 10 employees of the Employer and all Affiliates paid the greatest
Section 415 Compensation during the Plan Year. If two or more Family Groups
include common Family Members, such Family Groups shall be aggregated as one
Family Group.
"Family Member" means a Highly Compensated Employee who is a
Five-Percent Owner or who is a member of the group consisting of the 10
employees of the Employer and all Affiliates paid the greatest Section 415
Compensation during the Plan Year, and any individual who is the spouse, lineal
ascendant or descendant, or the spouse of a lineal ascendant or descendant, of
such Five-Percent Owner or such member.
"Five-Percent Owner" means an employee described in Code Section
416(i)(1).
"Highly Compensated Employee" means, for the Determination Year, an
employee of the Employer or an Affiliate who was a Participant eligible during
the Plan Year to make Before-Tax Contributions and who:
(a) during the Lookback Year:
(i) was a Five-Percent Owner; or
(ii) received Section 415 Compensation in excess
of $75,000 (as adjusted annually for increases in the cost of living
by the Secretary of the Treasury); or
(iii) received Section 415 Compensation in excess
of $50,000 (as adjusted annually for increases in the cost of living
by the Secretary of the Treasury) and was among the top 20% of the
employees (including those employees excludable under Code Section
414(q)(8)) when ranked on the basis of Section 415 Compensation paid
for that year; or
(iv) was an officer of the Employer or an
Affiliate and received Section 415 Compensation in excess of one-half
of the Defined Benefit Dollar Limitation for that year, provided that
for this purpose, no more than 50 employees (or if lesser the greater
of 3 or 10% of all employees) shall be treated as officers, or if
there is no such officer, was the highest paid officer of the Employer
or an Affiliate for that year; or
(b) at any time during the Determination Year:
(i) is a Five-Percent Owner; or
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<PAGE> 10
(ii) is a member of a group consisting of the 100
employees who received the greatest Section 415 Compensation during
that Plan Year and would be a member of the group of employees
described in subsection (a)(ii), (iii) or (iv) above for the
Determination Year. For any Plan Year, the Administrative Committee
may, to the extent permitted by law, elect to apply the provisions of
this subsection (b)(ii) without regard to the limitation of the group
to 100 employees.
For purposes of this definition, "Determination Year" means the
current Plan Year and "Lookback Year" means the preceding Plan Year or, at the
election of the Plan Sponsor, the calendar year ending with or within the
Determination Year.
To the extent required by Code Section 414(q)(9), a former employee
who was a Highly Compensated Employee when he/she separated from service with
the Employer and all Affiliates or at any time after attaining age 55 shall be
treated as a Highly Compensated Employee.
For purposes of determining a Highly Compensated Employee, Section 415
Compensation shall be determined without regard to Code Sections 125,
402(a)(8), 402(h)(1)(B), and employee contributions made pursuant to a salary
reduction agreement under Code Section 403(b).
For purposes of applying the tests described in Sections 3.3(b)(i)(A)
and 3.3(b)(i)(B) separately with respect to the employees of Filtertek de
Puerto Rico, Inc., as provided in Section 3.3(b)(iv), "Highly Compensated
Employee" means any employee of Filtertek de Puerto Rico, Inc. who is more
highly compensated than two-thirds of all Eligible Employees employed by
Filtertek de Puerto Rico, Inc., on the basis of each such employee's own
Considered Compensation (but not including the Considered Compensation of
members of any such employee's Family Group), and "Non-Highly Compensated
Employee" means each other employee of Filtertek de Puerto Rico, Inc. who is
not a Highly Compensated Employee for these purposes.
"Highly Compensated Family Member" means a Family Member who is a
Highly Compensated Employee without application of the family aggregation rules
of Code Section 414(q)(6).
"Hour of Service" is:
(a) each hour for which an employee is paid or entitled
to payment for the performance of duties for the Employer or an Affiliate;
(b) each hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by the Employer or an
Affiliate; and
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(c) each hour for which an employee is paid or entitled
to payment for a period during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to vacation, holiday,
illness, incapacity, layoff, jury duty, military duty, or leave of absence. In
crediting Hours of Service pursuant to this subparagraph (c), all payments made
or due shall be taken into account, whether such payments are made directly by
the Employer or an Affiliate or indirectly (e.g., through a trust fund or
insurer to which the Employer or an Affiliate makes payments, or otherwise),
except that:
(i) no more than 501 such Hours of Service shall
be credited for any continuous period during which the employee
performs no duties;
(ii) no such Hours of Service shall be credited if
payments are made or due under a plan maintained solely for the
purpose of complying with any workers' compensation, unemployment
compensation or disability insurance laws; and
(iii) no such Hours of Service shall be credited
for payments which are made solely to reimburse the employee for
medical or medically related expenses.
The Hours of Service, if any, for which an employee is credited for a period in
which he/she performs no duties shall be computed and credited to computation
periods in accordance with 29 C.F.R. 2530.200b-2 and other applicable
regulations promulgated by the Secretary of Labor. For purposes of computing
the Hours of Service to be credited to an employee for whom a record of hours
worked is not maintained, an employee shall be credited with 45 Hours of
Service for each week in which he/she completes at least one Hour of Service.
In addition, an employee shall be credited with Hours of Service for each week
the employee is on a leave of absence in accordance with Section 2.2.
"Individual Beneficiary" means a natural person designated by the
Participant in accordance with Section 7.5 to receive all or any portion of the
amounts remaining in the Participant's Accounts at the time of the
Participant's death. "Individual Beneficiary" also means a natural person who
is a beneficiary of a trust designated by the Participant in accordance with
Section 7.5 to receive all or a portion of such amount, provided the trust
complies with the requirements of Code Section 401(a)(9) and regulations
promulgated thereunder, including that the trust is irrevocable, the
beneficiaries with respect to the trust's interest in the Participant's
Accounts are identifiable from the trust agreement and a copy of the trust
agreement is provided to the Administrative Committee.
"Leased Employee" means any individual who is not an employee of the
Employer or an Affiliate and who provides services for the Employer or an
Affiliate if:
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(a) such services are provided pursuant to an agreement
between the Employer or an Affiliate and any other person;
(b) such individual has performed such services for the
Employer or an Affiliate (or a related person within the meaning of Code
Section 144(a)(3)) on a substantially full-time basis for a period of at least
one year; and
(c) such services are of a type historically performed by
employees in the business field of the Employer or an Affiliate.
"Limitation Year" means the Plan Year.
"Employer Matching Contributions" means the contributions described in
Section 3.4.
"Member of a Collective Bargaining Unit" means any employee who is
included in a collective bargaining unit and whose terms and conditions of
employment are or were covered by a collective bargaining agreement if there is
evidence that retirement benefits were the subject of good-faith bargaining
between representatives of such employee and the Employer, unless such
collective bargaining agreement makes this Plan applicable to such employee.
"Multiple Use" is defined in Section 3.6(a).
"Non-Highly Compensated Employee" means, for any Plan Year, any
employee of the Employer or Affiliate who (a) at any time during the Plan Year
was a Participant eligible to make Before-Tax Contributions and (b) was not a
Highly Compensated Employee for such Plan Year.
"Normal Retirement Date" means a Participant's 65th birthday.
"One-Percent Owner" means an employee described in Code Section
416(i)(1).
"One-Year Break in Service" is a Plan Year in which an employee
completes 500 Hours of Service or less, and on the last day of which the
Participant is not employed by the Employer or an Affiliate. Solely for
purposes of determining whether a One-Year Break in Service has occurred,
"Hours of Service" shall also include each hour for which the employee
otherwise would normally have been credited but for the employee's absence on a
maternity or paternity absence. A maternity or paternity absence is an absence
from work:
(a) by reason of the pregnancy of the employee;
(b) by reason of the birth of a child of the employee;
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<PAGE> 13
(c) by reason of the placement of a child with the
employee in connection with the adoption of such child by the employee; or
(d) for purposes of caring for such child for a period
beginning immediately following such birth or placement.
Any employee requesting such credit shall promptly furnish the Administrative
Committee such information as the Administrative Committee requires to show
that the absence from work is a maternity or paternity absence and the number
of days for which there was such an absence. No more than 501 hours shall be
credited for a maternity or paternity absence. All such hours shall be
credited in the Plan Year in which the absence begins if necessary to prevent a
One-Year Break in Service in such Plan Year. If such hours are not necessary
to prevent a One-Year Break in Service in such Plan Year, the hours shall be
credited in the succeeding Plan Year if necessary to prevent a One-Year Break
in Service in such Plan Year. In the event the Administrative Committee is
unable to determine the hours which otherwise would normally have been credited
for such absence, the employee shall be credited with 8 hours per day.
"Participant" means:
(a) a current employee of the Employer or an Affiliate
who has become a Participant in the Plan pursuant to Section 2.1 or;
(b) a former employee for whose benefit an Account in the
Trust Fund is maintained.
"Plan" means the Schawk, Inc. Retirement Plan for Plastic's Employees.
"Plan Sponsor" means Schawk, Inc.
"Plan Year" means the calendar year.
"Provisional Annual Addition" is the amount described in Section 5.8.
"Required Beginning Date" means:
(a) for a Participant whose 70th birthday occurs on or
after July 1, 1988, the April 1 following the calendar year in which the
Participant attains age 70-1/2;
(b) for a Participant whose 70th birthday occurred prior
to July 1, 1987, the April 1 following the later of the calendar year in which
the Participant attains age 70-1/2 or the calendar year in which the
Participant terminates employment; or
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(c) for a Participant whose 70th birthday occurred prior
to July 1, 1987 and who at any time during or after the calendar year in which
he/she attained age 66-1/2 was or became a Five-Percent Owner, the April 1
following the later of (i) the calendar year in which he/she attained age
70-1/2 or (ii) the earlier of the calendar year in which he/she became a
Five-Percent Owner or his/her employment terminates.
"Rollover Contribution" means (a) all or a portion of a qualified
total distribution received by an employee from another qualified plan which is
eligible for tax-free rollover to a qualified plan and which is transferred by
the employee to this Plan within 60 days following his/her receipt thereof; (b)
amounts transferred to this Plan from a conduit individual retirement account
which has no assets other than assets (and the earnings thereon) which were (i)
previously distributed to the employee by another qualified plan as a qualified
total distribution, (ii) eligible for tax-free rollover to a qualified plan and
(iii) deposited in such conduit individual retirement account within 60 days of
receipt thereof; (c) amounts distributed to the employee from a conduit
individual retirement account meeting the requirements of (b) above, and
transferred by the employee to this Plan within 60 days of his/her receipt
thereof from such conduit individual retirement account; and (d) amounts
transferred directly to this Plan by the trustee of another qualified plan
pursuant to the provisions of Code Section 401(a)(31) and to any other related
laws and regulations as in effect at the time of such transfer.
"Tentative Employer Contribution" is the contribution described in
Section 3.1.
"The 1.25 Test" is the test described in Sections 3.3(b)(i)(A) and
3.5(a)(i).
"The 2.0 Test" is the test described in Sections 3.3(b)(i)(B) and
3.5(a)(ii).
"Trust" or "Trust Fund" means the Trust established in accordance with
Article 10.
"Trustee" means the Trustee or Trustees under the Trust referred to in
Article 10.
"Trustee-to-Trustee Transfer" means a transfer to the Trustee from the
trustee of a pension benefit plan qualified under Code Section 401(a), or a
plan treated as qualified under Code Section 401(a), which plan provides for
such transfers for the benefit of a Participant who is a participant in said
plan.
"Valuation Date" means any Business Day.
"Year of Service" is any Plan Year in which an employee completes
1,000 or more Hours of Service, including any Plan Year prior to the date the
employee first participates in the Plan.
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ARTICLE 2
Eligibility and Participation
2.1 Eligibility Requirements.
(a) Every Participant who is employed by the Employer or
Filtertek de Puerto Rico, Inc. on January 1, 1996 shall continue to be eligible
to participate in the Plan as of such date.
(b) An Eligible Employee shall first be eligible to
participate, if he/she is then employed by the Employer, on the Entry Date
coinciding with or next following the later of:
(i) the completion of 1000 Hours of Service
during an Eligibility Period; or
(ii) his/her 18th birthday.
(c) Any former employee of the Employer or an Affiliate
who was a Participant or could have become a Participant under subsection (b)
above had he/she been employed on a prior Entry Date, and is reemployed by the
Employer as an Eligible Employee, shall be eligible to participate on the Entry
Date coincident with or next following such reemployment if such employee:
(i) has not incurred a One-Year Break in Service;
or
(ii) had a nonforfeitable right to any part of the
balance in his/her Matching Account on the date his/her most recent
employment with the Employer and all Affiliates terminated (or would
have had such right if he/she had been a Participant); or
(iii) has attained age 18 and the number of
consecutive One-Year Breaks in Service which such employee incurred
since his/her most recent termination of employment with the Employer
and all Affiliates is less than the greater of 5 or the aggregate
number of Eligibility Periods in which he/she completed 1,000 Hours of
Service before such One-Year Breaks in Service (excluding any
Eligibility Periods previously disregarded).
2.2 Leaves of Absence. An employee shall be credited with 45
Hours of Service for each full week the employee is on a leave of absence, if
he/she is not otherwise credited with such Hours of Service. Any such leave of
absence must be granted in writing and pursuant to the Employer's established
leave policy, which shall
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be administered in a uniform and nondiscriminatory manner to similarly situated
employees.
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ARTICLE 3
Contributions by Employer
3.1 Employer Contributions.
(a) Subject to the right reserved to the Employer to
alter, amend or discontinue this Plan and the Trust, the Employer shall for
each Plan Year contribute to the Trust Fund an amount equal to the sum of:
(i) the Before-Tax Contributions; and
(ii) the Employer Matching Contribution.
Such sum, which is known as the Tentative Employer Contribution, shall be
reduced by an amount equal to the Excess Tentative Employer Contribution (as
provided in Section 5.9).
(b) In the event that the Tentative Employer
Contribution, as reduced by the Excess Tentative Employer Contribution, exceeds
the amount deductible by the Employer for said year for federal income tax
purposes, then such Tentative Employer Contribution shall be further reduced in
an amount equal to such excess (the "Employer Excess Contribution") as follows:
(i) first, the Supplemental Before-Tax
Contributions allocated to the Before-Tax Accounts of Participants for
such Plan Year shall be reduced by the lesser of an amount equal to
the Employer Excess Contribution or such Supplemental Before-Tax
Contributions. A Participant's share of such reduction for such Plan
Year shall be in the same ratio that his/her share in the Supplemental
Before-Tax Contributions (before reduction) bears to the shares of all
Participants in the Supplemental Before-Tax Contributions (before
reduction) for such Plan Year; and
(ii) second, to the extent that any Employer
Excess Contribution remains after application of (i) above, then the
Employer Matching Contribution allocated to the Matching Accounts of
Participants and the Basic Before-Tax Contributions allocated to the
Before-Tax Accounts of Participants for such Plan Year will each be
reduced proportionately in an amount equal to the lesser of the
Employer Excess Contribution for such Plan Year less the reduction
determined in (i) above for such Plan Year and the sum of the Employer
Matching Contribution and Basic Before-Tax Contribution for such Plan
Year. A Participant's share of such reduction for such Plan Year
shall be in the same ratio that his/her share in the Employer Matching
Contribution and Basic Before-Tax Contributions (before reduction)
bears to the shares of all Participants in such contributions (before
reduction) for such Plan Year.
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3.2 Before-Tax Contributions. Subject to the provisions of
Sections 3.1 and 3.3, each Participant may for each Plan Year elect to have the
Employer make a Basic Before-Tax Contribution on his/her behalf in an amount
not in excess of the amount designated to be matched by the Employer pursuant
to Section 3.4 (rounded to the nearest dollar) of his/her Considered
Compensation. Each Participant may in addition to his/her Basic Before-Tax
Contributions elect to have the Employer make a Supplemental Before-Tax
Contribution on his/her behalf in an amount which, when added to the amount of
the Basic Before-Tax Contribution, does not exceed 18% (rounded to the nearest
dollar) of the full amount of his/her Considered Compensation; provided,
however, that the Participants employed by Filtertek de Puerto Rico, Inc. may
not elect a Supplemental Before-Tax Contribution in excess of 8% (rounded to
the nearest dollar) of Considered Compensation (or such greater percentage as
may be permitted by the Puerto Rico Income Tax Act as in effect from time to
time). Such elections shall be subject to change as of any January 1 or July
1, upon advance written notice to the Administrative Committee in accordance
with such procedures as the Administrative Committee shall require. A
Participant may elect to suspend his/her Before-Tax Contributions
prospectively, upon advance written notice to the Administrative Committee in
accordance with such procedures as the Administrative Committee shall require;
provided, however, that a Participant who suspends his/her Before-Tax
Contributions shall not be permitted to elect to resume his/her Before-Tax
Contributions until the next January 1 or July 1. Notwithstanding the
foregoing, the Employer may, in accordance with Internal Revenue Service
regulations, elect to permit Participants in any division or unit of that
Employer to elect to have the Employer make a Basic Before-Tax Contribution on
his/her behalf in an amount not in excess of the percentage designated by such
Employer. Further notwithstanding the foregoing, for any succeeding Plan Year,
the Employer may change the level of, or eliminate, such Basic Before-Tax and
Supplemental Before-Tax Contributions by announcing the change to Participants
on or before the first day of any such Plan Year.
3.3 Limitations on Before-Tax Contributions.
(a) In no event shall a Participant's Before-Tax
Contributions during any calendar year exceed the dollar limitation contained
in Code Section 402(g) in effect at the beginning of such calendar year;
provided, however, that the Before-Tax Contributions of each Participant who is
employed by Filtertek de Puerto Rico, Inc. may not exceed $7,000 in any
calendar year (or such greater amount as may be permitted pursuant to the
Puerto Rico Income Tax Act as in effect from time to time). If a Participant's
Before-Tax Contributions, together with any additional elective contributions
to a qualified cash or deferred arrangement, and any elective deferrals under a
tax-sheltered annuity program or a simplified employee pension plan, exceed
such dollar limitation for any calendar year, such excess, and any earnings
allocable thereto, shall be distributed to the Participant by April 15 of the
following year; provided that, if such excess contributions were made to a plan
or arrangement not maintained by the
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<PAGE> 19
Employer or an Affiliate, the Participant must first notify the Administrative
Committee of the amount of such excess allocable to this Plan by March 1 of the
following year.
(b) Notwithstanding any other provision of this Plan to
the contrary, the Before-Tax Contributions for the Highly Compensated Employees
for the Plan Year shall be reduced in accordance with the following provisions:
(i) The Before-Tax Contributions and Employer
Matching Contributions of the Highly Compensated Employees shall be
reduced if neither of the Actual Deferral Percentage Tests set forth
in (A) or (B) below is satisfied:
(A) The 1.25 Test. The Actual Deferral
Percentage of the Highly Compensated Employees is not more
than the Actual Deferral Percentage of the Non-Highly
Compensated Employees multiplied by 1.25.
(B) The 2.0 Test. The Actual Deferral
Percentage of the Highly Compensated Employees is not more
than 2 percentage points greater than the Actual Deferral
Percentage of the Non-Highly Compensated Employees and the
Actual Deferral Percentage of the Highly Compensated Employees
is not more than the Actual Deferral Percentage of the
Non-Highly Compensated Employees multiplied by 2.0.
(ii) (A) As used in this subsection, "Actual
Deferral Percentage" means the average of the ratios of each Highly
Compensated Employee's or Non-Highly Compensated Employee's, as the
case may be, Before-Tax Contributions which were allocated to the
Participant's Before-Tax Account with respect to the Plan Year, to
each such Participant's Considered Compensation for the Plan Year.
(B) If a Highly Compensated Employee is
a member of a Family Group, such Family Group shall constitute
a single Highly Compensated Employee. The Actual Deferral
Percentage of such Family Group shall be the aggregate Actual
Deferral Percentage of all Family Members, and the Actual
Deferral Percentage of each Family Member shall be disregarded
for purposes of the Actual Deferral Percentage Tests.
Notwithstanding the foregoing, this clause (B) shall not apply
for purposes of applying the tests described in Sections
3.3(b)(i)(A) and 3.3(b)(i)(B) separately with respect to the
employees of Filtertek de Puerto Rico, Inc., as provided in
Section 3.3(b)(iv).
(C) All Before-Tax Contributions made
under this Plan and all before-tax and fully-vested matching
contributions made under any other plan that is aggregated
with this Plan for purposes of Code Sections 401(a)(4) and
410(b) shall be treated as made under a single plan. If any
15
<PAGE> 20
plan is permissively aggregated with this Plan for purposes of
Code Section 401(k), the aggregated plans must also satisfy
Code Sections 401(a)(4) and 410(b) as though they were a
single plan. The Actual Deferral Percentage ratios of any
Highly Compensated Employee will be determined by treating all
plans subject to Code Section 401(k) under which the Highly
Compensated Employee is eligible as a single plan.
(iii) If neither Actual Deferral Percentage Test is
satisfied as of the end of the Plan Year, the Administrative Committee
shall cause the Before-Tax Contributions for the Highly Compensated
Employees to be reduced and refunded to each such Highly Compensated
Employee until either Actual Deferred Percentage Test is satisfied.
The sequence of such reductions and refunds shall begin with Highly
Compensated Employees who elected to defer the greatest percentage,
starting with the Supplemental Before-Tax Contributions, then the
second greatest percentage, continuing until either Actual Deferred
Percentage Test is satisfied. For example, all Highly Compensated
Employees who elected an 18% contribution shall have their
Supplemental Before-Tax Contributions reduced from 18% to 17%. If
neither Actual Deferral Percentage Test is then satisfied, all Highly
Compensated Employees who elected Supplemental Before-Tax
Contributions of 17% shall have their Supplemental Before-Tax
Contributions reduced from 17% to 16%. This process shall continue
through the Supplemental Before-Tax Contributions and continuing with
the Basic Before-Tax Contributions and Employer Matching Contributions
on a pro rata basis until either Actual Deferral Percentage Test is
satisfied. Once either Actual Deferral Percentage Test is satisfied,
the Administrative Committee shall direct the Trustee to distribute to
the appropriate Highly Compensated Employees the amount of the
reduction of the Before-Tax Contributions of each such Highly
Compensated Employee and to treat as forfeitures the appropriate
amount of Employer Matching Contributions, together with the net
earnings or losses allocable thereto. The Administrative Committee
shall designate such distribution and forfeiture as a distribution and
forfeiture of excess contributions, determine the amount of the
allocable net earnings or losses to be distributed in accordance with
subsection (c) below, and cause such distributions and forfeitures to
occur prior to the end of the Plan Year following the Plan Year in
which the excess Before-Tax Contributions were made.
(iv) Notwithstanding anything in this subsection
(b) to the contrary, the provisions of this subsection shall apply
separately with respect to each group of employees who are Members of
a Collective Bargaining Unit (if any) and the group of employees who
are not Members of a Collective Bargaining Unit; provided further,
that the provisions of this subsection shall apply separately with
respect to the employees of Filtertek de Puerto Rico, Inc., with the
comparisons between Highly Compensated Employees and Non-highly
Compensated Employees made instead between the group consisting of the
one-third of
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<PAGE> 21
employees of Filtertek de Puerto Rico, Inc. with the highest
compensation, regardless of family aggregation, and the remaining two-
thirds of the employees of Filtertek de Puerto Rico, Inc., as
described in the definition of Highly Compensated Employee found in
Section 1.4.
(c) (i) Net earnings or losses to be
refunded with the excess Before-Tax Contributions shall be equal to
the net earnings or losses on such contributions for the Plan Year in
which the contributions were made.
(ii) The net earnings or losses allocable
to the excess Before-Tax Contributions for the Plan Year shall be
determined in the manner set forth in Section 5.5.
(d) Net earnings or losses to be treated as forfeitures
together with the Employer Matching Contributions shall be equal to the net
earnings or losses on such contributions for the Plan Year in which the
contributions were made. Net earnings or losses on Employer Matching
Contributions shall be determined in the same manner as in subsection (c)
above, except that the phrases "Employer Matching Contribution" and "Matching
Account" shall be substituted for the phrases "Before-Tax Contribution" and
"Before-Tax Account" wherever used therein.
(e) Any excess contributions distributed to a Family
Group and treated as forfeitures pursuant to the reductions in subsection
(b)(iii) above shall be allocated to each Family Member in the same proportion
that such Family Member's Before-Tax Contributions and Employer Matching
Contributions bear to the aggregate Before-Tax Contributions and Employer
Matching Contributions of the Family Group.
(f) Any Employer Matching Contribution treated as a
forfeiture pursuant to subsection (b) above shall be used to reduce the
Employer Matching Contribution in Section 3.4.
(g) The Administrative Committee may adopt such rules as
it deems necessary or desirable to:
(i) impose limitations during a Plan Year on the
percentage of Before-Tax Contributions elected by Participants
pursuant to Section 3.2 for the purpose of avoiding the necessity of
adjustments pursuant to this Section or Section 5.9; or
(ii) increase during a Plan Year the percentage of
Considered Compensation with respect to which a Participant may elect
a Before-Tax Contribution for the purpose of providing Participants
with the opportunity to increase their Before-Tax Contributions within
the limitations of this Section 3.3.
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<PAGE> 22
(h) The amount of the Before-Tax Contributions to be made
pursuant to a Participant's election shall reduce the compensation otherwise
payable to him/her by the Employer.
(i) The amount of each Participant's Basic Before-Tax
Contributions and Supplemental Before-Tax Contributions as determined under
this Section 3.3 is subject to the provisions of Section 5.9.
3.4 Employer Matching Contribution. Subject to the provisions of
Section 3.1, each Employer shall pay to the Trustee for the Plan Year beginning
January 1, 1996, $1 for each $1 of Basic Before-Tax Contributions (as
determined by the Employer for each Plan Year) made on behalf of each
Participant employed by such Employer. Notwithstanding the foregoing, for any
succeeding Plan Year, the Employer may change the rate of, or eliminate, such
contribution by announcing the change to the Participants on or before the
first day of any such Plan Year. Such contribution is known as the "Matching
Employer Contribution."
3.5 Code Section 401(m) Limitation on Employer Matching
Contributions. Notwithstanding any other provision to the contrary, the
Employer Matching Contributions of the Highly Compensated Employees (after any
reduction under Section 3.3(b)(iii)) shall be reduced in accordance with the
following provisions; provided, however, that to the extent not required by the
Puerto Rico Income Tax Act, such reductions shall not be made, nor shall such
provisions be applied separately, with respect to the employees of Filtertek de
Puerto Rico, Inc.:
(a) The Employer Matching Contributions of the Highly
Compensated Employees shall be reduced if neither of the Contribution
Percentage Tests set forth in (i) or (ii) below is satisfied:
(i) The 1.25 Test. The Contribution Percentage
of the Highly Compensated Employees is not more than the Contribution
Percentage of all Non-Highly Compensated Employees multiplied by 1.25.
(ii) The 2.0 Test. The Contribution Percentage of
the Highly Compensated Employees is not more than 2 percentage points
greater than the Contribution Percentage of all Non-Highly Compensated
Employees, and the Contribution Percentage of the Highly Compensated
Employees is not more than the Contribution Percentage of all
Non-Highly Compensated Employees multiplied by 2.0.
(b) (i) As used in this Section 3.5, "Contribution
Percentage" means the average of the ratios of each Highly Compensated
Employee's or Non-Highly Compensated Employee's, as the case may be,
share of the Employer Matching Contributions which were allocated to
the Participant's appropriate Account with
18
<PAGE> 23
respect to the Plan Year, to each such Participant's Considered
Compensation for the Plan Year.
(ii) If a Highly Compensated Employee is a member
of a Family Group, such Family Group shall constitute a single Highly
Compensated Employee. The Contribution Percentage of such Family
Group shall be the aggregate Contribution Percentage of all Family
Members and the Contribution Percentage of each Family Member shall be
disregarded for purposes of the Contribution Percentage Tests.
(iii) All Employer Matching Contributions made
under this Plan and all employee contributions and matching
contributions made under any other plan that is aggregated with this
Plan for purposes of Code Sections 401(a)(4) and 410(b) shall be
treated as made under a single plan. If any plan is permissively
aggregated with this Plan for purposes of Code Section 401(m), the
aggregated plans must also satisfy Code Sections 401(a)(4) and 410(b)
as though they were a single plan. The Contribution Percentage ratio
of any Highly Compensated Employee will be determined by treating all
plans subject to Code Section 401(m) under which the Highly
Compensated Employee is eligible as a single plan.
(c) If neither Contribution Percentage Test is satisfied
as of the end of the Plan Year, the Administrative Committee shall cause the
Employer Matching Contributions of the Highly Compensated Employees to be
reduced and refunded or forfeited until either Contribution Percentage Test is
satisfied. The sequence of such reductions and refunds or forfeitures shall
begin with Highly Compensated Employees who received the greatest percentage of
Employer Matching Contributions and then shall proceed with each lesser
percentage until either Contribution Percentage Test is satisfied. For
example, all Highly Compensated Employees who received a 3% Employer Matching
Contribution shall have their Employer Matching Contributions reduced from 3%
to 2%. If neither Contribution Percentage Test is then satisfied, all Highly
Compensated Employees who received a 2% Employer Matching Contribution
(including those reduced to 2% as provided above) shall have their Employer
Matching Contributions reduced from 2% to 1%. This process shall be applied
through any and all remaining Employer Matching Contributions until either
Contribution Percentage Test is satisfied. Once either Contribution Percentage
Test is satisfied, the Administrative Committee shall direct the Trustee to
refund the appropriate amount of vested Employer Matching Contributions,
together with the net earnings or losses allocable thereto, and to treat as a
forfeiture the appropriate amount of non-vested Employer Matching
Contributions, together with the net earnings or losses allocable thereto. The
Administrative Committee shall designate such refunds and forfeitures as
refunds and forfeitures of excess contributions, determine the amount of the
allocable net earnings or losses to be distributed in accordance with
subsection (d) below, and cause such
19
<PAGE> 24
refunds and forfeitures to occur prior to the end of the Plan Year following
the Plan Year in which such excess Employer Matching Contributions were made.
(d) Notwithstanding anything in this Section 3.5 to the
contrary, the provisions of subsection (a) shall apply separately with respect
to each group of employees who are Members of a Collective Bargaining Unit (if
any) and the group of employees who are not Members of a Collective Bargaining
Unit.
(e) Net earnings or losses to be refunded or treated as
forfeitures together with the Employer Matching Contributions shall be equal to
the net earnings or losses on such contributions for the Plan Year in which the
contributions were made. Net earnings or losses shall be determined in the
same manner as in Section 3.3(c), except that the phrases "Employer Matching
Contribution" and "Matching Account" shall be substituted for the phrases
"Before-Tax Contribution" and "Before-Tax Account" wherever used therein.
(f) Excess Employer Matching Contributions refunded or
treated as forfeitures with respect to a Family Group shall be allocated to
each Family Member in the same proportion that such Family Member's Employer
Matching Contributions bear to the aggregate Employer Matching Contributions of
the Family Group.
(g) Any Employer Matching Contributions which are treated
as forfeitures pursuant to subsection (c) above shall be used to reduce the
Employer Matching Contribution in Section 3.4.
3.6 Multiple Use.
(a) This Section 3.6 will be applicable if The 2.0 Test
is used to satisfy both the Actual Deferral Percentage Test and the
Contribution Percentage Test. If this Section 3.6 is applicable, the
Administrative Committee shall determine whether a "Multiple Use" has occurred,
and if such a Multiple Use has occurred, the Employer Matching Contributions of
the Highly Compensated Employees shall be reduced in accordance with the
provisions of subsection (c) below.
(b) A Multiple Use occurs when for the Highly Compensated
Employees, the sum of the Actual Deferral Percentage used to satisfy The 2.0
Test plus the Contribution Percentage used to satisfy The 2.0 Test exceeds the
"Aggregate Limit." The Aggregate Limit is the greater of (i) or (ii) below,
determined as follows:
(i) (A) First, multiply 1.25 by the greater
of (I) the Actual Deferral Percentage, or (II) the
Contribution Percentage of the Non-Highly Compensated
Employees;
20
<PAGE> 25
(B) Second, add 2.0 to the lesser of (I)
or (II) above provided that such sum shall not exceed 2 times
the lesser of (I) or (II) above; and
(C) Finally, add the results from (A)
and (B) to determine the Aggregate Limit; or
(ii) (A) First, multiply 1.25 by the lesser
of (I) the Actual Deferral Percentage, or (II) the
Contribution Percentage of the Non-Highly Compensated
Employees;
(B) Second, add 2.0 to the greater of
(I) or (II) above provided that such sum shall not exceed 2
times the greater of (I) or (II) above; and
(C) Finally, add the results from (A)
and (B) to determine the Aggregate Limit.
(c) If a Multiple Use has occurred, such Multiple Use
shall be corrected by reducing the Contribution Percentage of Highly
Compensated Employees in accordance with the provisions of Section 3.5(d) until
the sum of the Actual Deferral Percentage plus the Contribution Percentage for
the Highly Compensated Employees equals the Aggregate Limit.
(d) Net earnings or losses to be refunded or treated as
forfeitures together with the excess Employer Matching Contributions shall be
equal to the net earnings or losses on such contributions for the Plan Year in
which the contributions were made. Net earnings or losses shall be determined
in the same manner as in Section 3.3(c) except that the phrases "Employer
Matching Contribution" and "Matching Account" shall be substituted for the
phrases "Before-Tax Contribution" and "Before-Tax Account" wherever used
therein.
(e) Any Employer Matching Contributions which are treated
as forfeitures pursuant to subsection (c) above shall be used to reduce the
Employer Matching Contribution in Section 3.4.
21
<PAGE> 26
ARTICLE 4
Participant Contributions
4.1 No After-Tax Contributions. No Participant shall be required
or permitted to make any after-tax contributions to the Plan.
4.2 Rollover Contribution.
(a) A Rollover Contribution may be transferred in cash to
the Trust Fund for the benefit of an Eligible Employee with the permission of
the Administrative Committee. Prior to accepting any transfer which is
intended to be a Rollover Contribution, the Administrative Committee may
require the Eligible Employee to establish that the amount to be transferred
meets the definition of a Rollover Contribution and any other limitations of
the Code applicable to such transfers.
(b) An Eligible Employee who is not eligible to
participate in the Plan solely by reason of failing to meet the eligibility
requirements of Article 2 and who reasonably expects to become a Participant
when such requirements are met, may be a Participant in the Plan solely for the
limited purposes of making a Rollover Contribution, and taking actions with
respect to his/her Rollover Account for the purpose of investment options in
accordance with Section 5.2, subject to the same conditions as any other
Participant.
(c) If the Administrative Committee determines after a
Rollover Contribution has been made that such Rollover Contribution did not in
fact constitute a Rollover Contribution as defined in Section 1.4, the amount
of such Rollover Contribution and any earnings thereon shall be returned to the
Eligible Employee.
(d) Each Eligible Employee's Rollover Contribution shall
be credited to his/her Rollover Account and invested in accordance with Section
5.2. A Participant's Rollover Account shall be fully vested and
nonforfeitable.
(e) Subject to the provisions of Article 7, a
Participant's Rollover Account shall be distributed to the Participant (or
his/her beneficiary in the event of his/her death) at the time and in the
manner directed by the Participant.
4.3 Trustee-to-Trustee Transfers.
(a) If permitted by the Administrative Committee, an
Eligible Employee may elect to have a Trustee-to-Trustee Transfer made to the
Trust consisting of (i) employer contributions made on his/her behalf and (ii)
all earnings related to employer and employee contributions (to the extent
earnings related to employee contributions may be legally transferred without
the transfer of the underlying employee contributions).
22
<PAGE> 27
(b) An Eligible Employee on whose behalf a
Trustee-to-Trustee Transfer is made to the Trust, who is ineligible to be a
Participant solely by reason of failing to meet the eligibility requirements of
Article 2 and who reasonably expects to become a Participant when such
requirements are met, may be a Participant solely for the limited purposes of
making a Trustee-to-Trustee Transfer, and taking action with respect to such
Trustee Transfer Account for the purpose of investment options in accordance
with Section 5.2 subject to the same conditions as other Participants.
(c) Trustee-to-Trustee Transfers shall only be permitted
as the Administrative Committee shall from time to time determine in accordance
with uniform and non-discriminatory circumstances. Prior to the acceptance of
a Trustee-to-Trustee Transfer, the Administrative Committee may require the
submission of evidence so that it may be reasonably satisfied that such
transfer qualifies as a Trustee-to-Trustee Transfer. If the Administrative
Committee determines, subsequent to any Trustee-to-Trustee Transfer, that such
transfer did not in fact constitute a Trustee-to-Trustee Transfer as defined in
Section 1.4 or did not otherwise satisfy the rules of the Administrative
Committee, the amount of such transfer may be returned (at the discretion of
the Administrative Committee) to the transferor or Participant.
(d) Each Eligible Employee's Trustee-to-Trustee Transfer
shall be credited to his/her Trustee Transfer Account and invested in
accordance with Section 5.2. All amounts received in a Trustee-to-Trustee
Transfer shall be fully vested and nonforfeitable.
(e) Subject to the provisions of Article 7, a
Participant's Trustee Transfer Account shall be distributed to the Participant
(or his/her beneficiary in the event of his/her death) at the time and in the
manner directed by the Participant; provided, that any portion of a
Participant's Trustee Transfer Account attributable to employer contributions
made to a plan which met the requirements of Code Section 401(k) and which was
transferred from such plan prior to such Participant's attainment of age
59-1/2, having a disability or for reasons other than the Participant's
separation from service or the termination of the plan, shall not be
distributed prior to the earliest of the Participant's retirement, death,
disability or termination of employment.
4.4 Allocation of Trustee-to-Trustee Transfers and Rollover
Contributions. The Trustee-to-Trustee Transfer and Rollover Contribution of an
Eligible Employee shall be allocated to his/her Trustee Transfer Account and
Rollover Account, respectively, as of the Valuation Date next succeeding the
date on which such amounts are received by the Trustee.
23
<PAGE> 28
ARTICLE 5
Accounting Provisions and Allocations
5.1 Participant's Accounts. For each Participant there shall be
maintained as appropriate a separate Before-Tax Account, Matching Account,
After-Tax Account (for pre-1996 after-tax contributions), Rollover Account and
Trustee Transfer Account, Prior Plan Transfer Account and Life Insurance
Account. Each Account shall be credited with the amount of contributions,
forfeitures, interest and earnings of the Trust Fund allocated to such Account
and shall be charged with all distributions, withdrawals and losses of the
Trust Fund allocated to such Account.
5.2 Investment Funds.
(a) The Trust Fund shall be divided into separate
investment funds (each a "Fund") as provided in this Section 5.2. Each Fund as
may from time to time be established shall be a common fund in which each
Participant shall have an undivided interest in the respective assets of the
Fund. Except as otherwise provided, the value of each Participant's Accounts
in such Funds shall be measured by the proportion that the net credits to
his/her Accounts bear to the total net credits to the Accounts of all
Participants and beneficiaries as of the date that such share is being
determined. For purposes of allocation of income and valuation, each Fund
shall be considered separately. No Fund shall share in the gains and losses of
any other, and no Fund shall be valued by taking into account any assets or
distributions from any other.
(b) Each Fund shall be established and invested by the
Trustee in accordance with investment policies determined, or as the Trustee
may be directed, from time to time by the Administrative Committee. The
Administrative Committee may from time to time also direct that Funds with
similar investment objectives be consolidated.
(c) A Participant may from time to time elect to have a
uniform percentage of his/her Accounts (other than his/her Prior Plan Transfer
Account and his/her Life Insurance Account) credited in increments of 5% to one
or more of the Funds. All contributions to his/her Accounts shall be credited
to such Funds in accordance with such election. Subject to any restriction on
transfer which results from the investment medium chosen for a Fund, a
Participant may elect to transfer in multiples of 5%, a uniform percentage of
his/her Accounts held in any Fund to one or more different Funds. Elections
under this Section shall be made at such times and in accordance with
procedures and limitations established by the Administrative Committee.
(d) For any Participant who had elected prior to November
12, 1992 to apply a portion of his/her Accounts to purchase life insurance and
who elected to continue the life insurance in effect, the Trustee shall
maintain a Life Insurance Account, and shall transfer amounts, pro rata, from
the Participant's other Accounts to his/her Life
24
<PAGE> 29
Insurance Account as necessary to pay the premiums to maintain the life
insurance in effect. At such time as a Participant may elect, by written
election to the Administrative Committee, in such form as the Administrative
Committee may require, to cancel his/her life insurance, the Trustee shall
cause the cash value of the policy to be added to the Participant's Accounts in
proportion to his/her then current investment election.
5.3 Allocation Procedure. As of each Valuation Date, the
Administrative Committee shall:
(a) first, allocate the net earnings or losses of the
Trust Fund pursuant to Section 5.5;
(b) second, allocate Before-Tax Contributions pursuant to
Section 5.6; and
(c) third, if the Valuation Date is the last Business Day
of any calendar quarter, allocate Employer Matching Contributions pursuant to
Section 5.7.
5.4 Determination of Value of Trust Fund. As of each Valuation
Date the Trustee shall determine for the period then ended the sum of the net
earnings or losses of the Trust Fund which shall reflect accrued but unpaid
interest, dividends, gains or losses realized from the sale, exchange or
collection of assets, other income received, appreciation or depreciation in
the fair market value of assets, administration expenses, and taxes and other
expenses paid in accordance with prior agreement between the Plan Sponsor and
the Trustee. Gains or losses realized and adjustments for appreciation or
depreciation in fair market value shall be computed with respect to the
difference between such value as of the preceding Valuation Date or date of
purchase, whichever is later, and the value as of the date of disposition or
the current Valuation Date, whichever is earlier. To the extent that any
assets of the Trust have been invested in one or more separate investment
trusts, mutual funds, investment contracts or similar investment media, the net
earnings or losses distributable to such investments shall be determined in
accordance with the procedures of such investment media.
5.5 Allocation of Net Earnings or Losses.
As of each Valuation Date the net earnings or losses of the Trust Fund
for the period then ending shall be allocated to the Accounts of all
Participants (or beneficiaries of deceased Participants) having credits in the
Fund both on such date and at the beginning of such period. Such allocation
shall be in the ratio that (i) the net credits to each such Account of each
such Participant on the first day of such period, less the total amount of any
distributions from such Account to such Participant during such period, bears
to (ii) the total net credits to all such Accounts of all Participants on said
first day of the period, less the total amount of distributions from all such
Accounts to all Participants during such period. Notwithstanding the
foregoing, to the extent the assets
25
<PAGE> 30
of the Trust have been invested in one or more separate investment trusts,
mutual funds, investment contracts or similar investment media, the net
earnings or losses attributable to such investments shall be allocated to the
Accounts of Participants or beneficiaries on the basis of the balances of such
Accounts but in accordance with the procedures of the respective investment
media in which such assets are invested.
5.6 Allocation of Before-Tax Contributions. As of each Valuation
Date which is the last Business Day of any calendar month, the Before-Tax
Contributions made on behalf of each Participant shall be allocated to such
Participant's Before-Tax Account.
5.7 Allocation of Employer Matching Contributions. As of each
Valuation Date which is the last Business Day of a calendar quarter, the
Employer Matching Contribution, if any is in effect, shall be allocated to the
Matching Account of each Participant.
5.8 Provisional Annual Addition. The sum of the amounts allocated
to the Accounts of the Participants pursuant to Sections 5.6 and 5.7 for a Plan
Year shall be known as the "Provisional Annual Addition" and shall be subject
to the limitation on Annual Additions in Section 5.9.
5.9 Limitation on Annual Additions.
(a) For the purpose of complying with the restrictions on
Annual Additions to defined contribution plans imposed by Code Section 415, for
each Eligible Participant and each other Participant who is not employed by
Filtertek de Puerto Rico, Inc. and who has made Before-Tax Contributions during
the Plan Year, there shall be computed a Maximum Annual Addition, which shall
be the lesser of
(i) 25% of his/her Section 415 Compensation for
the Plan Year; or
(ii) the Defined Contribution Dollar Limitation
for the Plan Year.
(b) If the Maximum Annual Addition for a Participant
equals or exceeds the Provisional Annual Addition for that Participant, an
amount equal to the Provisional Annual Addition shall be allocated to the
Participant's respective Accounts.
(c) If the Provisional Annual Addition exceeds the
Maximum Annual Addition for that Participant, the Provisional Annual Addition
shall be reduced until the Provisional Annual Addition as so reduced equals the
Maximum Annual Addition for such Participant, as follows: the Tentative
Employer Contribution allocable to such Participant's respective Accounts shall
be reduced by reducing (A) the Employer Supplemental Contribution, if any, (B)
the Supplemental Before-Tax Contributions, and (C) the Basic Before-Tax
Contributions and Employer Matching Contributions,
26
<PAGE> 31
proportionately, in that order. The Provisional Annual Addition remaining
after such reductions shall be allocated to the Participant's respective
Accounts.
(d) Any forfeiture which cannot be used to reduce the
Employer Matching Contribution under the Plan because of the application of the
above limit (or because the forfeiture exceeds the Employer Matching
Contribution in Section 3.5) shall be carried in the Excess Forfeiture Suspense
Account for such Plan Year. In the next succeeding Plan Year the amounts
included in such Account shall be treated as a forfeiture for such Plan Year
and shall be used to reduce the Employer Matching Contribution in Section 3.4
(and as such will be again subject to the limitations of this Section 5.9 for
such Plan Year). Amounts which are included in the Excess Forfeiture Suspense
Account as of the end of a Plan Year shall be treated as a liability of the
Trust Fund. Upon termination of the Plan, amounts then held in the Excess
Forfeiture Suspense Account which cannot be allocated pursuant to this Section
shall revert to the Employer.
(e) The Excess Tentative Employer Contribution is an
amount equal to the sum of the reductions in the Tentative Employer
Contribution allocable to the Accounts of Participants pursuant to subsection
(c) above.
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<PAGE> 32
ARTICLE 6
Amount of Payments to Participants
6.1 General Rule. Upon the retirement, disability, resignation or
dismissal of a Participant, he, or in the event of his/her death, his/her
beneficiary, shall be entitled to receive from his/her respective Accounts in
the Trust Fund as of his/her Determination Date:
(a) an amount equal to the Participant's Before-Tax
Account, After-Tax Account, Rollover Account, Trustee Transfer Account, Prior
Plan Transfer Account and Life Insurance Account, plus any of the Participant's
Before-Tax Contributions made to the Trust Fund but not allocated to the
Participant's Accounts as of his/her Determination Date; and
(b) the nonforfeitable portion of the Participant's
Matching Account determined as hereafter set forth.
The time and manner of distribution of a Participant's Accounts shall be
determined in accordance with Article 7.
6.2 Normal Retirement. Any Participant may retire on or after
his/her Normal Retirement Date, at which date the forfeitable portion, if any,
of his/her Matching Account shall become nonforfeitable. If the retirement of
a Participant is deferred beyond his/her Normal Retirement Date, he/she shall
continue in full participation in the Plan and Trust Fund.
6.3 Death. As of the date any Participant shall die while in the
employ of the Employer or an Affiliate, the forfeitable portion, if any, of
his/her Matching Account shall become nonforfeitable.
6.4 Disability.
(a) As of the date any Participant shall be determined by
the Administrative Committee to have become totally and permanently disabled
because of physical or mental infirmity while in the employ of the Employer or
an Affiliate and his/her employment shall have terminated, the forfeitable
portion, if any, of his/her Matching Account shall become nonforfeitable.
(b) A Participant shall be deemed totally and permanently
disabled when, on the basis of qualified medical evidence, the Administrative
Committee finds such Participant to be totally and presumably permanently
prevented from engaging in any occupation or employment available with the
Employer or an Affiliate as a result of physical or mental infirmity, injury,
or disease, either occupational or nonoccupational in cause; provided, however,
that disability hereunder shall not include any disability
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<PAGE> 33
incurred or resulting from the Participant having engaged in a criminal
enterprise, or any disability consisting of or resulting from the Participant's
chronic alcoholism, addiction to narcotics or an intentionally self-inflicted
injury.
6.5 Vesting. A Participant's interest in his/her Before-Tax
Account, After-Tax Account, Rollover Account, Trustee-Transfer Account, Prior
Plan Transfer Account and Life Insurance Account shall be nonforfeitable at all
times. Except as otherwise provided in this Article 6, a Participant's
nonforfeitable interest in his/her Matching Account at any point in time shall
be determined under Section 6.6.
6.6 Resignation or Dismissal. If any Participant shall resign or
be dismissed from the service of the Employer and all Affiliates, there shall
become nonforfeitable a portion or all of his/her Matching Account determined
as of his/her Determination Date in accordance with the following schedule,
subject to Section 6.7:
<TABLE>
<CAPTION>
Nonforfeitable
Years of Service Percentage
---------------- --------------
<S> <C>
Less than 3 0%
3 but less than 4 20%
4 but less than 5 40%
5 but less than 6 60%
6 but less than 7 80%
7 or more 100%
</TABLE>
Any part of the Matching Account of such Participant which does not become
nonforfeitable shall be treated as a forfeiture pursuant to Section 6.8.
6.7 Computation of Period of Service. For purposes of determining
the nonforfeitable percentage of the Participant's Matching Account, all Years
of Service shall be taken into account, except that Years of Service before a
One-Year Break in Service shall be disregarded until such Participant has
completed one Year of Service after such One-Year Break in Service.
6.8 Treatment of Forfeitures.
(a) Upon termination of a Participant's employment with
the Employer and all Affiliates, that part of his/her Matching Account which
becomes a forfeiture pursuant to Section 6.6 shall be applied to reduce
Employer Matching Contributions under Section 3.4 at the end of the Plan Year
in which the termination of employment occurred if the Participant is not then
reemployed by the Employer or an Affiliate.
(b) If a Participant is reemployed by the Employer or an
Affiliate without incurring 5 consecutive One-Year Breaks in Service, and
before distribution of the
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<PAGE> 34
nonforfeitable portion of his/her Matching Account, the amount of the
forfeiture shall be restored to his/her Matching Account and Employer Account
(if any) as of the last day of the Plan Year in which he/she is reemployed.
(c) If the Participant is reemployed by the Employer or
an Affiliate without incurring 5 consecutive One-Year Breaks in Service but
after distribution of the nonforfeitable portion of his/her Matching Account,
and if the Participant repays the amount distributed before the earlier of
(i) 5 years from the date of such reemployment;
or
(ii) the end of 5 consecutive One-Year Breaks in
Service following the date of such distribution,
the amount of the Matching Account distributed to him/her and the amount of the
forfeiture shall be restored to his/her Matching Account as of the last day of
the Plan Year in which such repayment is made.
(d) Amounts restored to a Participant's Matching Account
pursuant to (b) or (c) above shall be deducted from the forfeitures which
otherwise would be allocable for the Plan Year in which such reemployment or
repayment occurs or, to the extent such forfeitures are insufficient, shall
require a supplemental contribution from the Employer.
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<PAGE> 35
ARTICLE 7
Distributions
7.1 Commencement and Form of Distributions.
(a) Distribution of a Participant's Accounts in the Trust
Fund following termination of employment with the Employer and all Affiliates
shall commence on or as soon as practicable after the first to occur of:
(i) the date set forth in the Participant's
request for distribution; provided that the Committee has notified the
Participant of the availability of such distribution in a manner that
would satisfy the notice requirements of Section 1.411(a)-11(c) of the
income tax regulations, and such notification is given no less than 30
days and no more than 90 days prior to the distribution date requested
by the Participant; provided, further, that such distribution may
commence less than 30 days after the date the notice required under
Section 1.411(a)-11(c) of the income tax regulations is given,
provided that:
(1) the Committee clearly informs the
Participant that the Participant has a right to a period of at
least 30 days after receiving the notice to consider the
decision of whether or not to elect a distribution, and
(2) the Participant, after receiving the
notice, affirmatively elects a distribution; or
(ii) the 60th day after the close of the later of
the Plan Year in which the Participant attains his/her Normal
Retirement Date or terminates employment with the Employer and all
Affiliates, unless the Participant has requested to defer the
distribution to a later date.
(b) In all events, distribution shall commence no later
than the Required Beginning Date, and subsequent distributions required to be
made each year for compliance with Code Section 401(a)(9) and the regulations
promulgated thereunder shall be made no later than December 31 of such year.
(c) The portion of a Participant's Accounts which equals
the total of his/her Account balances as of November 12, 1992 and which is
distributable to a Participant shall be applied to the purchase of a Qualified
Joint and Survivor Annuity, which provides for a monthly benefit payable for
the life of the Participant and upon the death of the Participant, one-half of
such monthly benefit payable for the remaining life of the Participant's
surviving spouse, unless the Participant has elected to waive the Qualified
Joint and Survivor Annuity form of benefit during the applicable election
period or during such other periods as the Committee, in its discretion, may
permit. This Qualified Joint and Survivor Annuity constitutes the Normal Form
of Benefit. In the case
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<PAGE> 36
of a Participant who is married on his/her Annuity Starting Date, the payment
of his/her retirement benefit shall be subject to the provisions of Section
7.2, relating to the Qualified Joint and Survivor Annuity. In lieu of the
Normal Form of Benefit or a Qualified Joint and Survivor Annuity, a Participant
may, in accordance with such conditions or rules as the Committee shall
prescribe and with the consent of the Participant's spouse, if applicable, as
provided in Section 7.2(b), elect any one of the following optional forms of
distribution of the nonforfeitable balances of the Participant's Accounts under
the Plan, subject to applicable laws and regulations:
(i) by payment in one lump sum; or
(ii) in substantially equal monthly, quarterly,
semi-annual or annual installments which, except for the final
payment, shall not be less than $100; or
(iii) by transfer, at the request of a Participant,
to an employees' trust in which he/she is a participant, which is
described in Code Section 401(a) and which is exempt from tax under
Code Section 501(a); or
(iv) by distribution according to paragraph (d),
below.
(d) This paragraph (d) contains the IRS model amendment
as set forth in Rev. Proc. 93-12, which may be used to amend plans to provide
for the requirement of section 401(a)(31) of the Code that plans permit the
direct rollover of eligible rollover distributions.
(i) This paragraph (d) applies to distributions
made on or after January 1, 1993. Notwithstanding any provision of
the plan to the contrary that would otherwise limit a distributee's
election under this paragraph (d), a distributee may elect, at the
time and in the manner prescribed by the plan administrator, to have
any portion of an eligible rollover distribution paid directly to an
eligible retirement plan specified by the distributee in a direct
rollover.
(ii) Definitions.
(A) Eligible rollover distribution: An
eligible rollover distribution is any distribution of all or any
portion of the balance to the credit of the distributee, except that
an eligible rollover distribution does not include: any distribution
that is one of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life expectancy)
of the distributee or the joint lives (or joint life expectancies) of
the distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent
such distribution is required under section 401(a)(9) of the Code; and
the portion of any distribution that is not includible in gross
32
<PAGE> 37
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
(B) Eligible retirement plan: An
eligible retirement plan is an individual retirement account described
in section 408(a) of the code, an individual retirement annuity
described in section 408(b) of the Code, an annuity plan described in
section 403(a) of the Code, or a qualified trust described in section
401(a) of the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover
distribution to the surviving spouse, an eligible retirement plan is
an individual retirement account or individual retirement annuity.
(C) Distributee: A distributee includes
an employee or former employee. In addition, the employee's or former
employee's surviving spouse and the employee's or former employee's
spouse or former spouse who is the alternate payee under a qualified
domestic relations order, as defined in section 414(p) of the Code,
are distributees with regard to the interest of the spouse or former
spouse.
(D) Direct rollover: A direct rollover
is a payment by the plan to the eligible retirement plan specified by
the distributee.
(e) The value of the Participant's Accounts shall be paid
to the Participant over a period not to exceed his/her life expectancy or the
joint life expectancy of the Participant and his/her Individual Beneficiary.
The minimum amount of any installment distribution and determination of the
life expectancy of a Participant and the joint life expectancy of a Participant
and his/her Individual Beneficiary shall be determined in accordance with the
regulations prescribed under Code Section 401(a)(9); provided that the life
expectancy of a Participant or his/her spouse shall be redetermined annually.
In no event shall the amount distributable in any year be less that the amount
determined in accordance with the minimum distribution incidental benefit
requirements of Treasury Regulation Section 1.401(a)(9)-2.
(f) Notwithstanding anything in this Section 7.1 to the
contrary, if the vested balance of the Participant's Accounts does not exceed
$3,500 at the time a distribution is to be made from the Plan and distribution
pursuant to this Section 7.1 has not otherwise commenced, the Committee shall
direct the Trustee to distribute such amount in a lump sum payment to the
individual so entitled and the payment thereof shall be in full satisfaction of
any liability of the Trust to such individual. If the vested balance of the
Participant's Accounts at the time of any distribution to the individual so
entitled exceeds $3,500, then the vested balance at any subsequent time shall
be deemed to exceed $3,500. Any Participant whose vested percentage of his/her
Matching Account is 0% shall be deemed to have received a lump sum payment upon
termination of employment.
33
<PAGE> 38
(g) Notwithstanding anything in this Section 7.1 to the
contrary, if the amount of any distribution required to commence on a certain
date cannot be ascertained by such date, a payment retroactive to such date may
be made no later than 60 days after the earliest date on which such amount can
be ascertained.
7.2 Qualified Joint and Survivor Annuity.
(a) The nonforfeitable balance of a Participant's
Accounts under the Plan shall be paid in the form of a Qualified Joint and
Survivor Annuity, unless:
(i) the Participant elected not to receive a
Qualified Joint and Survivor Annuity as provided in subsection (b)
below; or
(ii) the Participant was not married throughout
the one-year period ending on his/her Annuity Starting Date. A
Participant who marries within one year before his/her Annuity
Starting Date and is married to such spouse for a one-year period
ending prior to his/her death shall be deemed to have been married
throughout the one-year period ending on his/her Annuity Starting
Date.
(b) A Participant may elect not to receive a Qualified
Joint and Survivor Annuity by electing, within the Election Period described in
subsection (f) below, to receive distribution of the nonforfeitable balance of
his/her Accounts under the Plan in a form other than a Qualified Joint and
Survivor Annuity. Such election may be revoked at any time during the Election
Period and if so revoked the Participant's benefit shall automatically be paid
in the form of a Qualified Joint and Survivor Annuity unless he/she has elected
another form of payment. Elections and revocations may continue to be made
under this Section within the Election Period. To be effective, any election
hereunder and under Sections 7.3 and 7.4 shall be consented to by the
Participant's surviving spouse unless, at the time of filing such election, the
Participant established to the satisfaction of the Committee that the consent
of the spouse could not be obtained because there is no spouse, such spouse
could not be located or by reason of such other circumstances as may be
prescribed by regulations. Any consent (or establishment that the consent
could not be obtained) shall be effective only with respect to such spouse.
Such consent shall be in writing, witnessed by a Plan representative or notary
public, acknowledging the effect of the election and any non-spouse
beneficiary, including any class of beneficiaries or any contingent
beneficiary, designated under the form of benefit elected and shall be
irrevocable with respect to such form and beneficiary designation.
(c) If the spouse of a Participant dies or is divorced
from the Participant before the Participant's Annuity Starting Date, the
Participant's retirement benefit shall not be reduced in accordance with this
Section. If a Participant's spouse dies or is divorced from the Participant on
or after the Participant's Annuity Starting Date, but prior
34
<PAGE> 39
to the death of the Participant, the Qualified Joint and Survivor Annuity shall
continue to be paid in the same reduced amount determined under this Section.
(d) If the Participant dies before his/her Annuity
Starting Date, no annuity shall be payable to his/her spouse pursuant to this
Section and the payment of the nonforfeitable balance of the Participant's
Accounts to his/her spouse shall be determined under Section 7.3. If the
Participant dies after the Annuity Starting Date and while receiving benefits
in the form of a Qualified Joint and Survivor Annuity, the spouse to whom the
Participant was married during the one-year period ending on the Annuity
Starting Date (or was deemed to have been so married) shall, except as may be
otherwise provided in any qualified domestic relations order, be entitled to
receive the survivor annuity benefit whether or not the Participant and such
spouse are married on the date of the Participant's death.
(e) The Committee shall furnish each Participant a
general written explanation of the terms and conditions of the Qualified Joint
and Survivor Annuity, the Participant's right to make and the effect of an
election to waive it, the rights of the Participant's spouse, the Participant's
right to revoke an election to waive the Qualified Joint and Survivor Annuity
and the effect of such a revocation. This general explanation shall be
furnished to a Participant no less than 30 days and not more than 90 days
before the Participant's Annuity Starting Date.
(f) The Election Period is the 90-day period ending on
the Participant's Annuity Starting Date.
7.3 Pre-Retirement Spouse's Survivor Benefit.
(a) The nonforfeitable balance of a Participant's
Accounts under the Plan shall be paid to the surviving spouse of a Participant
who dies before his/her Annuity Starting Date in the form of a Qualified
Pre-Retirement Survivor Annuity unless the Participant has effectively elected
otherwise. Notwithstanding the foregoing, a Participant's spouse shall not be
entitled to a Qualified Pre-Retirement Survivor Annuity unless the Participant
and such spouse were married to each other throughout the one-year period
ending on the date of the Participant's death.
(b) (i) with respect to an Electing Participant,
payment of the Qualified Pre-Retirement Survivor Annuity shall commence as of
the first day of the month coinciding with or next following the latest of:
(A) the date the Participant dies; or
(B) the date the Participant's surviving spouse
elects.
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<PAGE> 40
(ii) with respect to each Participant who is not
an Electing Participant, payment of the Qualified Pre-Retirement
Survivor Annuity shall commence as of the first day of the month
coinciding with or next following the latest of:
(A) the date the Participant dies;
(B) the earliest date the Participant
would have been eligible to receive an early retirement or
deferred vested benefit if he/she had survived; or
(C) the date the Participant's surviving
spouse elects.
(d) Notwithstanding the foregoing, the surviving spouse
of a Participant may elect to receive a distribution of a deceased
Participant's nonforfeitable Account balances under the Plan in one lump sum by
filing an election with the Committee at such time and in such manner as the
Committee shall provide.
(e) Once in effect, coverage under this Section shall
remain in effect until the earliest of:
(i) the date the Participant is divorced from
his/her spouse;
(ii) the date the Participant's spouse dies;
(iii) the Participant's Annuity Starting Date; or
(iv) the date the Participant makes an effective
waiver under paragraph (f) below.
In the event coverage terminates pursuant to subsections (i), (ii) or (iii),
such coverage automatically shall resume on the date the Participant has been
remarried for one year, or the Participant's benefit payments are suspended by
reason of reemployment, as the case may be, unless the Participant otherwise
effectively elects.
(f) No later than one year after his/her separation from
service, the Committee shall furnish each Participant who has a nonforfeitable
right to any portion of his/her Account balances a general written explanation
of the terms and conditions of the Qualified Pre-Retirement Survivor Annuity,
the Participant's right to make and the effect of an election to waive it, the
rights of the Participant's spouse, the Participant's right to revoke an
election to waive the Survivor Annuity and the effect of such a revocation.
36
<PAGE> 41
7.4 Distributions to Beneficiaries.
(a) Except as otherwise provided in this Section 7.4, the
balance of a deceased Participant's Accounts which is distributable to a
beneficiary shall be distributed in one of the forms described in Section
7.1(c), in accordance with an effective designation filed by the Participant
with the Administrative Committee or, if no such designation has been filed, in
one of such forms as the beneficiaries shall request.
(b) In the event that the distribution of the
Participant's Accounts has begun in accordance with Section 7.1, any form of
distribution to a beneficiary under this Section 7.4 shall be designed to
distribute the balance of the deceased Participant's Accounts at least as
rapidly as under the method of distribution in effect at the time of the
Participant's death.
(c) If the distribution of a Participant's Accounts has
not commenced at the time of his/her death, any form of distribution to a
beneficiary shall be designed to distribute the balance of the deceased
Participant's Accounts as follows:
(i) Any portion of the Accounts payable to or for
the benefit of an Individual Beneficiary may be distributed over a
period not to exceed the life expectancy of such Individual
Beneficiary if such payments commence not later than the December 31
coinciding with or next following the first anniversary of the
Participant's death, unless such Individual Beneficiary is the
surviving spouse of the Participant, in which case such payments need
not commence until the later of (1) the December 31 coinciding with or
next following the first anniversary of the Participant's death, or
(2) the December 31 of the calendar year in which the Participant
would have attained age 70-1/2.
(ii) If the Participant's surviving spouse is an
Individual Beneficiary and dies prior to the commencement of benefit
payments to such spouse, subsection (i) above shall be applied as if
the Participant's death had occurred on the date of such spouse's
death.
(iii) Unless distribution is made in accordance
with subsections (i) or (ii) above, the balance of the Participant's
Accounts shall be distributed in full no later than the December 31
coinciding with or next following the 5th anniversary of the
Participant's death.
(d) If a beneficiary to whom payments have commenced dies
prior to receipt of all such payments, the remaining balance of the
Participant's Accounts shall be distributed to any contingent or successor
beneficiary at least as rapidly as under the method of distribution in effect
at the time of the beneficiary's death, or if there is no such contingent or
successor beneficiary, in a lump sum to the deceased beneficiary's estate.
37
<PAGE> 42
(e) The life expectancy of an Individual Beneficiary who
is the surviving spouse of the Participant shall be redetermined annually in
accordance with regulations prescribed under Code Section 401(a)(9).
(f) Notwithstanding the provisions of this Section 7.4,
the Accounts of a deceased Participant shall be distributed to a beneficiary in
such method or form of distribution and at such time as set forth in a written
designation filed with the Administrative Committee by the Participant prior to
January 1, 1984, in accordance with the provisions of the Plan as in effect
prior to that date.
7.5 Beneficiaries.
(a) Unless a Participant has effectively elected
otherwise in accordance with this Section 7.5, the distributable balance of a
deceased Participant's Accounts shall be paid to his/her surviving spouse.
(b) The balance of a deceased Participant's Accounts
shall be distributed to the persons effectively designated by the Participant
as his/her beneficiaries. To be effective, the designation shall be filed with
the Administrative Committee in such written form as the Administrative
Committee requires and may include contingent or successive beneficiaries;
provided that any designation by a Participant who is married at the time of
his/her death (or, if earlier, the date his/her benefit payments commence)
which fails to name his/her surviving spouse as the sole primary beneficiary
shall not be effective unless such surviving spouse has consented to the
designation in writing, witnessed by a Plan representative or notary public,
acknowledging the effect of the designation and the specific non-spouse
beneficiary, including any class of beneficiaries or any contingent
beneficiary. Such consent shall not be required if, at the time of filing such
designation, the Participant established to the satisfaction of the
Administrative Committee that the consent of the Participant's spouse could not
be obtained because there is no spouse, such spouse could not be located or by
reason of such other circumstances as may be prescribed by regulations. Any
consent (or establishment that the consent could not be obtained) shall be
effective only with respect to such spouse. Any Participant may change his/her
beneficiary designation at any time by filing with the Administrative Committee
a new beneficiary designation (with such spousal consent as may be required).
(c) (i) If a Participant dies, and to the knowledge
of the Administrative Committee after reasonable inquiry leaves no
surviving spouse, has not filed an effective beneficiary designation
or has revoked all such designations, or has filed an effective
designation but the beneficiary or beneficiaries predeceased him, the
distributable portion of the Participant's Accounts shall be paid to
the executor or administrator of the Participant's estate.
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<PAGE> 43
(ii) If the beneficiary, having survived the
Participant, shall die prior to the final and complete distribution of
the Participant's Accounts, then the distributable portion of said
Accounts shall be paid:
(A) to the contingent or successive
beneficiary named in the most recent effective beneficiary
designation filed by the Participant in accordance with such
designation; or
(B) if no such beneficiary has been
named, to the executor or administrator of the beneficiary's
estate.
7.6 Installment or Deferred Distributions. If distribution is
made to a Participant or to the beneficiary of a deceased Participant in
installments or is deferred, the undistributed vested balance shall share in
the net earnings or losses (including the net adjustments in the value of the
Trust Fund) as provided in Section 5.5.
7.7 Form of Elections and Applications for Benefits. Any
election, revocation of an election or application for benefits pursuant to the
Plan shall not be effective unless it is (a) made on such form, if any, as the
Administrative Committee may prescribe for such purpose; (b) signed by the
Participant and, if required by Section 7.5, by the Participant's spouse; and
(c) filed with the Administrative Committee.
7.8 Unclaimed Distributions. In the event any distribution cannot
be made because the person entitled thereto cannot be located and the
distribution remains unclaimed for 2 years after the distribution date
established by the Administrative Committee, then such amount shall be treated
as a forfeiture and used to reduce the Employer Matching Contributions under
Section 3.4.
7.9 Loans (effective October 1, 1995).
(a) Upon the submission by the Participant of a written
loan application form as prescribed by the Administrative Committee, the
Committee shall grant a loan to such Participant from his/her Accounts;
provided, however, that if the Committee reasonably believes that the
Participant either does not intend to repay the loan or lacks proper financial
ability to repay the loan, it shall not grant such a loan.
(b) Only one loan shall be outstanding at any time. The
minimum amount of any loan shall be $1,000, and the maximum amount of any loan
shall not exceed 50% of the amount which the Participant would be entitled to
receive from his/her Accounts if he/she had resigned from the service of the
Employer and all Affiliates and his/her Determination Date next preceded the
date of such authorization; provided, however, that the amount of such loan
shall not exceed $50,000 reduced by the greater of (i) the highest outstanding
balance of loans to the Participant from the Trust Fund during the one-year
period ending on the day before the date on which such loan is
39
<PAGE> 44
made or modified, or (ii) the outstanding balance of loans to the Participant
from the Trust Fund on the date on which such loan is made or modified.
(c) Such loans shall be made available on a reasonably
equivalent basis to all Participants and beneficiaries who either (i) are
active employees or (ii) are determined by the Committee to be "parties in
interest" as that term is defined in Section 3(14) of ERISA, so long as the
making of such loans does not discriminate in favor of Highly Compensated
Employees.
(d) Loans shall be made on such terms as the
Administrative Committee may prescribe, provided that any such loan shall be
evidenced by a note, shall bear a rate of interest on the unpaid principal
thereof commensurate with the interest rates charged by persons in the business
of lending money for loans which would be made under similar circumstances, and
shall be secured by the Participant's segregated loan account and such other
security as the Administrative Committee in its discretion deems appropriate.
(e) Loans shall be repaid by the Participant by payroll
deduction or any other method approved by the Committee which requires level
amortization of principal and repayments not less frequently than quarterly.
Such loans shall be repaid over a period not to exceed 5 years (15 years for
the purchase of a participant's principal residence) in accordance with
procedures established by the Administrative Committee from time to time.
(f) Loans shall be an asset of the Participant's Accounts
and shall be treated in the manner of a segregated account. Upon the failure
of a Participant to make loan payments or some other event of default set forth
in the promissory note, upon the Participant's termination of employment, or
upon termination of the Plan pursuant to Section 12.2, such loan shall become
due and payable, and the unpaid balance of such loan, including any unpaid
interest, may in the Administrative Committee's discretion be charged against
the Participant's segregated loan account; provided, that any unpaid balance of
such loan, including any unpaid interest, shall be charged against the
Participant's segregated loan account before any distribution to the
Participant. If after the Participant's segregated loan account has been so
charged, there remains an unpaid balance of any such loan and interest, then
the remaining unpaid balance of such loan shall be charged against any property
pledged as security with respect to such loan.
7.10 Withdrawals From Before-Tax Account Prior to Termination of
Employment.
(a) A Participant who has attained age 59-1/2 may elect
to withdraw from his/her Before-Tax Account any amount not in excess of the
balance of such Account determined as of the Determination Date coinciding with
or immediately preceding the date of such withdrawal.
40
<PAGE> 45
(b) A Participant who has not attained age 59-1/2 may
upon the determination by the Administrative Committee that he/she has incurred
a financial hardship, make a hardship withdrawal from his/her Before-Tax
Account. In any case where the Participant claims financial hardship, he/she
shall submit a written request for such distribution in accordance with
procedures prescribed by the Administrative Committee. The Administrative
Committee shall determine whether the Participant has a "financial hardship" on
the basis of such written request in accordance with this Section 7.10, and
such determination shall be made in a uniform and nondiscriminatory manner.
The Administrative Committee shall only make a determination of "financial
hardship" if the distribution is requested on account of an immediate and heavy
financial need of the Participant and the funds to be distributed are necessary
to satisfy the Participant's need.
(i) The determination of whether a Participant
has an immediate and heavy financial need is to be made by the
Administrative Committee on the basis of all relevant facts and
circumstances. A distribution will be deemed to be on account of an
immediate and heavy financial need if made on account of:
(A) expenses for medical care (as
described in Code Section 213(d)) previously incurred by the
Participant, the Participant's spouse or any dependents of the
Participant (as defined in Code Section 152) or necessary for
these persons to obtain such medical care;
(B) the purchase (excluding mortgage
payments) of a principal residence for the Participant;
(C) tuition and related educational fees
due for the next 12 months of post-secondary education for the
Participant, the Participant's spouse, children or dependents;
(D) the need to prevent the eviction of
the Participant from his/her principal residence or
foreclosure on the mortgage of the Participant's principal
residence; or
(E) any other event or expense deemed an
immediate and heavy financial need by the Department of the
Treasury.
(ii) The determination of whether a distribution
is necessary to satisfy the immediate and heavy financial need of the
Participant shall be made by the Administrative Committee on the basis
of all relevant facts and circumstances. The Administrative Committee
shall determine that a distribution is necessary to satisfy the
financial need if the Participant reasonably demonstrates that all of
the following requirements are satisfied:
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(A) the distribution is not in excess of
the amount of the immediate and heavy financial need of the
Participant;
(B) the Participant has obtained all
distributions (other than hardship distributions) and all
nontaxable loans currently available under the Plan;
(C) the Participant will not make any
Before-Tax Contributions for twelve months after receiving the
hardship distribution; and
(D) the Participant's Before-Tax
Contributions in the Plan Year following the Plan Year of the
hardship distribution do not exceed the limitation in Section
3.3(b) applicable to such following Plan Year, minus the
amount of his/her Before-Tax Contributions for the Plan Year
of the hardship distribution.
(c) Distributions from the Participant's Before-Tax
Account because of hardship pursuant to (b) above shall not exceed the lesser
of:
(i) the amount of the immediate and heavy
financial need; or
(ii) the total balance of the Participant's
Before-Tax Account, Rollover Account and Trustee Transfer Account as
of the Determination Date coinciding with or immediately preceding the
date of such withdrawal.
7.11 Withdrawals From Other Accounts Prior to Termination of
Employment.
(a) A Participant may at any time withdraw from his/her
Rollover Account, Trustee-Transfer Account and/or After-Tax Account any amount
not in excess of the balance of such Accounts determined as of the
Determination Date immediately preceding the date of such withdrawal.
(b) A Participant who has attained age 59 1/2 may elect
to withdraw from his/her Matching Account any amount not in excess of the
nonforfeitable balance of such Account determined as of the Determination Date
immediately preceding the date of such withdrawal.
7.12 Facility of Payment. When, in the Administrative Committee's
opinion, a Participant or beneficiary is under a legal disability or is
incapacitated in any way so as to be unable to manage his/her affairs, the
Administrative Committee may direct the Trustee to make payments:
(a) directly to the Participant or beneficiary;
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(b) to a duly appointed guardian or conservator of the
Participant or beneficiary;
(c) to a custodian for the Participant or beneficiary
under the Uniform Gifts to Minors Act;
(d) to an adult relative of the Participant or
beneficiary; or
(e) directly for the benefit of the Participant or
beneficiary.
Any such payment shall constitute a complete discharge thereof with respect to
the Trustee and the Administrative Committee.
7.13 Claims Procedure.
(a) Any person who believes that he/she is then entitled
to receive a benefit under the Plan, including one greater than that initially
determined by the Administrative Committee, may file a claim in writing with
the Administrative Committee.
(b) The Administrative Committee shall within 90 days of
the receipt of a claim either allow or deny the claim in writing. A denial of
a claim shall be written in a manner calculated to be understood by the
claimant and shall include:
(i) the specific reason or reasons for the
denial;
(ii) specific references to pertinent Plan
provisions on which the denial is based;
(iii) a description of any additional material or
information necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary; and
(iv) an explanation of the Plan's claim review
procedure.
(c) A claimant whose claim is denied (or his/her duly
authorized representative) may, within 60 days after receipt of denial of
his/her claim:
(i) submit a written request for review to the
Administrative Committee;
(ii) review pertinent documents; and
(iii) submit issues and comments in writing.
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(d) The Administrative Committee shall notify the
claimant of its decision on review within 60 days of receipt of a request for
review. The decision on review shall be written in a manner calculated to be
understood by the claimant and shall include specific reasons for the decision
and specific references to the pertinent Plan provisions on which the decision
is based.
(e) The 90-day and 60-day periods described in
subsections (b) and (d), respectively, may be extended at the discretion of the
Administrative Committee for a second 90- or 60-day period, as the case may be,
provided that written notice of the extension is furnished to the claimant
prior to the termination of the initial period, indicating the special
circumstances requiring such extension of time and the date by which a final
decision is expected.
(f) Participants and beneficiaries shall not be entitled
to challenge the Administrative Committee's determinations in judicial or
administrative proceedings without first complying with the procedures in this
Article. The Administrative Committee's decisions made pursuant to this
Section are intended to be final and binding on Participants, beneficiaries and
others.
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ARTICLE 8
Top-Heavy Plan Requirements
8.1 Definitions. For purposes of this Article 8:
(a) A "Key Employee" is any current or former employee
(and the beneficiaries of such employee) who at any time during the
Determination Period was an officer of the Employer or an Affiliate if such
individual's annual compensation exceeds 50% of the Defined Benefit Dollar
Limitation, an owner (or considered an owner under Code Section 318) of one of
the 10 largest interests in the Employer if such individual's compensation
exceeds 100% of the Defined Contribution Dollar Limitation, a Five-Percent
Owner, or a One-Percent Owner of the Employer who has an annual compensation of
more than $150,000. Annual compensation means Section 415 Compensation plus
amounts contributed by the Employer pursuant to a salary reduction agreement
which are excludable from the employee's gross income under Code Section 125,
402(a)(8), 402(h) or 403(b). The "Determination Period" is the Plan Year
containing the Top-Heavy Determination Date and the 4 preceding Plan Years.
The determination of who is a Key Employee will be made in
accordance with Code Section 416(i)(1) and the regulations thereunder.
(b) For any Plan Year beginning after December 31, 1983,
this Plan is "Top-Heavy" if any of the following conditions exists:
(i) The Top-Heavy Ratio for this Plan exceeds 60%
and this Plan is not part of any Required Aggregation Group or
Permissive Aggregation Group of plans;
(ii) This Plan is a part of a Required Aggregation
Group of plans but not part of a Permissive Aggregation Group and the
Top-Heavy Ratio for the group of plans exceeds 60%;
(iii) This Plan is a part of a Required Aggregation
Group and part of a Permissive Aggregation Group of plans and the
Top-Heavy Ratio for the Permissive Aggregation Group exceeds 60%.
(c) The "Top-Heavy Ratio" shall be determined as follows:
(i) If the Employer maintains one or more defined
contribution plans and the Employer has not maintained any defined
benefit plan which during the 5-year period ending on the Top-Heavy
Determination Date(s) has or has had accrued benefits, the Top-Heavy
Ratio for this Plan alone or for the Required or Permissive
Aggregation Group as appropriate is a fraction, the numerator of which
is the sum of the account balances of all Key Employees as of the
Top-Heavy
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Determination Date(s) (including any part of any account balance
distributed in the 5-year period ending on the Top-Heavy Determination
Date(s)), and the denominator of which is the sum of all account
balances (including any part of any account balance distributed in the
5-year period ending on the Top-Heavy Determination Date(s)), both
computed in accordance with Code Section 416 and the regulations
thereunder. Both the numerator and denominator of the Top-Heavy Ratio
are increased to reflect any contribution not actually made as of the
Top-Heavy Determination Date, but which is required to be taken into
account on that date under Code Section 416 and the regulations
thereunder.
(ii) If the Employer maintains one or more defined
contribution plans and the Employer maintains or has maintained one or
more defined benefit plans which during the 5-year period ending on
the Top-Heavy Determination Date(s) has or has had any accrued
benefits, the Top-Heavy Ratio for any Required or Permissive
Aggregation Group as appropriate is a fraction, the numerator of which
is the sum of account balances under the aggregated defined
contribution plan or plans for all Key Employees, determined in
accordance with (i) above, and the Present Value of accrued benefits
under the aggregated defined benefit plan or plans for all Key
Employees as of the Top-Heavy Determination Date(s), and the
denominator of which is the sum of the account balances under the
aggregated defined contribution plan or plans for all Participants,
determined in accordance with (i) above, and the Present Value of
accrued benefits under the aggregated defined benefit plan or plans
for all Participants as of the Top-Heavy Determination Date(s), all
determined in accordance with Code Section 416 and the regulations
thereunder. The accrued benefits under a defined benefit plan in both
the numerator and denominator of the Top-Heavy Ratio are increased for
any distribution of an accrued benefit made in the 5-year period
ending on the Top-Heavy Determination Date.
(iii) For purposes of (i) and (ii) above the value
of account balances and the Present Value of accrued benefits will be
determined as of the most recent valuation date that falls within or
ends with the 12-month period ending on the Top-Heavy Determination
Date, except as provided in Code Section 416 and the regulations
thereunder for the first and second plan years of a defined benefit
plan. The account balances and accrued benefits of a Participant (A)
who is not a Key Employee but who was a Key Employee in a prior year,
or (B) who has not been credited with at least one hour of service
with any employer maintaining the Plan at any time during the 5-year
period ending on the Top-Heavy Determination Date will be disregarded.
The calculation of the Top-Heavy Ratio, and the extent to which
distributions, rollovers, and transfers are taken into account, will
be made in accordance with Code Section 416 and the regulations
thereunder. Deductible employee contributions will not be taken into
account for purposes of computing the Top-Heavy Ratio. When
aggregating plans the value of account balances and accrued benefits
will be calculated with
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reference to the Top-Heavy Determination Date(s) that fall within the
same calendar year. The accrued benefit of a Participant other than a
Key Employee shall be determined under (1) the method, if any, that
uniformly applies for accrual purposes under all defined benefit plans
maintained by the Employer, or (2) if there is no such method, as if
such benefit accrued not more rapidly than the slowest accrual rate
permitted under the fractional rule of Code Section 411(b)(1)(C).
(d) "Permissive Aggregation Group" means the Required
Aggregation Group of plans plus any other plan or plans of the Employer which,
when considered as a group with the Required Aggregation Group, would continue
to satisfy the requirements of Code Sections 401(a)(4) and 410.
(e) "Required Aggregation Group" means (i) each qualified
plan of the Employer in which at least one Key Employee participates or
participated at any time during the Determination Period (regardless of whether
the plan has terminated), and (ii) any other qualified plan of the Employer
which enables a plan described in (i) to meet the requirements of Code Section
401(a)(4) or 410.
(f) "Top-Heavy Determination Date" means, for any Plan
Year subsequent to the first Plan Year, the last day of the preceding Plan Year
or, for the first Plan Year of the Plan, the last day of that year.
(g) "Present Value" shall be based on the interest
assumption 6% and post-retirement mortality assumption specified in any defined
benefit plan maintained by any Employer or Affiliate.
(h) "Employer" means the Employer and all Affiliates
except for purposes of determining ownership under Code Section 416(i)(1).
8.2 Top-Heavy Plan Requirements.
(a) (i) Except as otherwise provided in (ii), (iii)
and (iv) below, the Employer contributions and forfeitures allocated
on behalf of any Participant who is not a Key Employee shall not be
less than the lesser of three percent of such Participant's Considered
Compensation or in the case where the Employer has no defined benefit
plan which designates this Plan to satisfy Code Section 401, the
largest percentage of Employer contributions and forfeitures, as a
percentage of the Key Employee's Considered Compensation, allocated on
behalf of any Key Employee for that year. The minimum allocation is
determined without regard to any Social Security contribution. This
minimum allocation shall be made even though, under other Plan
provisions, the Participant would not otherwise be entitled to receive
an allocation, or would have received a lesser allocation for the year
because of (A) the Participant's failure to complete 1,000 Hours of
Service
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(or any equivalent provided in the Plan), (B) the Participant's
failure to make mandatory employee contributions to the Plan, or (C)
Section 415 Compensation less than a stated amount.
(ii) The provision in (i) above shall not apply to
any Participant who was not employed by the Employer or an Affiliate
on the last day of the Plan Year.
(iii) The provision in (i) above shall not apply to
any Participant to the extent the Participant is covered under any
other plan or plans of the Employer and the Employer's contribution
and forfeitures allocated under such plan or plans are equal to or
exceed the amount required to be allocated under (i) above.
(iv) The provision in (i) above shall not apply to
any Participant who is an employee of Filtertek de Puerto Rico, Inc.
(b) The minimum allocation required (to the extent
required to be nonforfeitable under Code Section 416(b)) may not be forfeited
under Code Section 411(a)(3)(B) or 411(a)(3)(D).
(c) For any Plan Year in which this Plan is Top-Heavy,
the schedule set forth in Section 6.6 shall continue to apply, because it meets
the minimum vesting schedule requirements of Code Section 416.
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ARTICLE 9
Powers and Duties of Plan Administrative Committee
9.1 Appointment of Plan Administrative Committee.
(a) The Board of Directors of the Plan Sponsor (the
"Board of Directors") may name a Plan Administrative Committee (the
"Administrative Committee") to consist of not less than 3 persons to serve as
administrator and named fiduciary of the Plan. Any person, including members
of the Board of Directors, partners, directors, shareholders, officers and
employees of the Employers, shall be eligible to serve on the Administrative
Committee. Every person appointed a member of the Administrative Committee
shall signify his/her acceptance in writing to the Board of Directors. In the
event the Board of Directors does not appoint a Administrative Committee
pursuant to this Section 9.1, the Plan Sponsor shall act as the administrator
and named fiduciary of the Plan and all references to the Administrative
Committee shall mean references to the Plan Sponsor so acting as administrator
and named fiduciary of the Plan.
(b) Members of the Administrative Committee shall serve
at the pleasure of the Board of Directors and may be removed by the Board of
Directors at any time with or without cause. Any member of the Administrative
Committee may resign by delivering his/her written resignation to the Board of
Directors, and such resignation shall become effective at delivery or at any
later date specified therein. Vacancies in the Administrative Committee shall
be filled by the Board of Directors.
(c) Usual and reasonable expenses of the Administrative
Committee may be paid in whole or in part by the Employer and any such expenses
not paid by the Employer shall be paid by the Trustee out of the principal or
income of the Trust Fund. The members of the Administrative Committee shall
not receive any compensation for their services as such.
9.2 Powers and Duties of Administrative Committee. The
Administrative Committee shall have final and binding discretionary authority
to control and manage the operation and administration of the Plan, including
all rights and powers necessary or convenient to the carrying out of its
functions hereunder, whether or not such rights and powers are specifically
enumerated herein. In exercising its responsibilities hereunder, the
Administrative Committee may manage and administer the Plan through the use of
agents who may include employees of the Employer.
Without limiting the generality of the foregoing, and in addition to
the other powers set forth in this Article 9, the Administrative Committee
shall have the following discretionary authorities:
(a) To construe and interpret the Plan, decide all
questions of eligibility and determine the amount, manner and time of payment
of any benefits hereunder.
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(b) To prescribe procedures to be followed by
Participants or beneficiaries filing applications for benefits.
(c) To prepare and distribute, in such manner as the
Administrative Committee determines to be appropriate, information explaining
the Plan.
(d) To request and receive from the Employer,
Participants and others such information as shall be necessary for the proper
administration of the Plan.
(e) To furnish the Employer upon request such annual and
other reports with respect to the administration of the Plan as are reasonable
and appropriate.
(f) To receive, review and maintain on file reports of
the financial condition and of the receipts and disbursements of the Trust Fund
from the Trustee.
9.3 Administrative Committee Procedures.
(a) The Administrative Committee may adopt such bylaws
and regulations as it deems desirable for the conduct of its affairs.
(b) A majority of the members of the Administrative
Committee at the time in office shall constitute a quorum for the transaction
of business. All resolutions or other actions taken by the Administrative
Committee at any meeting shall be by the vote of the majority of the members of
the Administrative Committee present at the meeting. The Administrative
Committee may act without a meeting by written consent of a majority of its
members.
(c) The Administrative Committee may elect one of its
members as chairman and may appoint a secretary, who may or may not be a
Administrative Committee member, and shall advise the Trustee and the Employer
of such actions in writing. The secretary shall keep a record of all actions
of the Administrative Committee and shall forward all necessary communications
to the Employer or the Trustee.
(d) Filing or delivery of any document with or to the
secretary of the Administrative Committee in person or by registered or
certified mail, addressed in care of the Employer, shall be deemed a filing
with or delivery to the Administrative Committee.
9.4 Consultation with Advisors. The Administrative Committee (or
any fiduciary designated by the Administrative Committee pursuant to Section
9.8) may employ or consult with counsel, actuaries, accountants, physicians or
other advisors (who may be counsel, actuaries, accountants, physicians or other
advisors for the Employer).
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9.5 Administrative Committee Members as Participants. Any
Administrative Committee member may also be a Participant, but no
Administrative Committee member shall have power to take part in any
discretionary decision or action affecting his/her own interest as a
Participant under this Plan unless such decision or action is upon a matter
which affects all other Participants similarly situated and confers no special
right, benefit or privilege not simultaneously conferred upon all other such
Participants.
9.6 Records and Reports. The Administrative Committee shall take
all such action as it deems necessary or appropriate to comply with
governmental laws and regulations relating to the maintenance of records,
notifications to Participants, registrations with the Internal Revenue Service,
reports to the U.S. Department of Labor and all other requirements applicable
to the Plan.
9.7 Investment Policy.
(a) The Administrative Committee from time to time shall
determine the Plan's short-term and long-term financial needs, with which the
investment policy of the Trust shall be appropriately coordinated, and such
needs shall be communicated from time to time to the Trustee, Investment
Managers or others having any responsibility for management and control of the
Trust assets.
(b) Subject to (c) below, the Trustee shall have
exclusive authority and discretion to manage and control the assets of the
Trust pursuant to an investment policy coordinated with the needs of the Plan
as determined by the Administrative Committee.
(c) The Administrative Committee may in its discretion
appoint one or more Investment Managers to manage (including the power to
direct the Trustee to acquire and dispose of) any assets of the Plan pursuant
to an investment policy coordinated with the needs of the Plan as determined by
the Administrative Committee, in which event the Trustee shall not be liable
for the acts or omissions of any such Investment Manager or be under an
obligation to invest or otherwise manage any asset of the Plan which is subject
to the management of any such Investment Manager except as directed. Any such
Investment Manager shall acknowledge in writing that he/she is a fiduciary with
respect to the Plan.
(d) The term "Investment Manager" shall mean: (i) a
registered investment adviser under the Investment Advisers Act of 1940; (ii) a
bank as defined in the Investment Advisers Act of 1940; or (iii) an insurance
company qualified under the laws of more than one state to manage, acquire and
dispose of plan assets.
9.8 Designation of Other Fiduciaries. The Administrative
Committee may designate in writing other persons to carry out a specified part
or parts of its responsibilities hereunder (including the power to designate
other persons to carry out a part of such designated responsibility), but not
including the power to appoint
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Investment Managers. Any such designation shall be accepted by the designated
person, who shall acknowledge in writing that he/she is a fiduciary with
respect to the Plan.
9.9 Obligations of Administrative Committee.
(a) The Administrative Committee or its properly
authorized delegate shall make such determinations as are necessary to
accomplish the purposes of the Plan with respect to individual Participants or
classes of such Participants. The Employer shall notify the Administrative
Committee of facts relevant to such determinations, including, without
limitation, length of service, compensation for services, dates of death,
permanent disability, granting or terminating of leaves of absence, ages,
retirement and termination of service for any reason (but indicating such
reason), and termination of participation. The Employer shall also be
responsible for notifying the Administrative Committee of any other facts which
may be necessary for the Administrative Committee to discharge its
responsibilities hereunder.
(b) The Administrative Committee is hereby authorized to
act solely upon the basis of such notifications from the Employer and to rely
upon any document or signature believed by the Administrative Committee to be
genuine and shall be fully protected in so doing. For the purpose of this
Section, a letter or other written instrument signed in the name of the
Employer by any officer thereof shall constitute a notification therefrom;
except that any action by the Plan Sponsor or its Board of Directors with
respect to the appointment or removal of a member of the Administrative
Committee or the amendment of the Plan and Trust or the designation of a group
of employees to which the Plan is applicable shall be evidenced by an
instrument in writing, signed by a duly authorized officer or officers,
certifying that said action has been authorized and directed by a resolution of
the Board of Directors of the Plan Sponsor.
(c) The Administrative Committee shall notify the Trustee
of its actions and determinations affecting the responsibilities of the Trustee
and shall give the Trustee directions as to payments or other distributions
from the Trust Fund to the extent they may be necessary for the Trustee to
fulfill the terms of the Trust Agreement.
(d) The Administrative Committee shall be under no
obligation to enforce payment of contributions hereunder or to determine
whether contributions delivered to the Trustee comply with the provisions
hereof relating to contributions, and is obligated only to administer this Plan
pursuant to the terms hereof.
9.10 Indemnification of Administrative Committee. The Plan Sponsor
shall indemnify members of the Administrative Committee and its authorized
delegates who are employees of the Employers for any liability or expenses,
including attorneys' fees, incurred in the defense of any threatened or pending
action, suit or proceeding by reason of their status as members of the
Administrative Committee or its authorized
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delegates, to the full extent permitted by the law of the Plan Sponsor's state
of incorporation.
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ARTICLE 10
Trustee and Trust Fund
10.1 Trust Fund. A Trust Fund to be known as the Schawk, Inc.
Retirement Trust (herein referred to as the "Trust" or the "Trust Fund") has
been established by the execution of an amendment and continuation of a trust
agreement with one or more Trustees and is maintained for the purposes of this
Plan. The assets of the Trust will be held, invested and disposed of by the
Trustee, in accordance with the terms of the Trust, for the benefit of the
Participants and their beneficiaries.
10.2 Payments to Trust Fund and Expenses. All contributions
hereunder will be paid into and credited to the Trust Fund and all benefits
hereunder and expenses chargeable thereto will be paid from the Trust Fund and
charged thereto.
10.3 Trustee's Responsibilities. The powers, duties and
responsibilities of the Trustee shall be as set forth in the Trust Agreement
and nothing contained in this Plan, either expressly or by implication, shall
impose any additional powers, duties or responsibilities upon the Trustee.
10.4 Reversion to an Employer. An Employer has no beneficial
interest in the Trust Fund and no part of the Trust Fund shall ever revert or
be repaid to an Employer, directly or indirectly, except that an Employer shall
upon written request have a right to recover:
(a) within one year of the date of payment of a
contribution by such Employer, any amount (less any losses attributable
thereto) contributed through a mistake of fact;
(b) within one year of the date on which any deduction
for a contribution by such Employer under Code Section 404 is disallowed, an
amount equal to the amount disallowed (less any losses attributable thereto);
and
(c) at the termination of the Plan, any amounts with
respect to its employees remaining in the Excess Forfeiture Suspense Account.
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ARTICLE 11
Amendment or Termination
11.1 Amendment. The Plan Sponsor reserves the right to amend this
Plan at any time to take effect retroactively or otherwise, in any manner which
it deems desirable including, but not by way of limitation, the right to
increase or diminish contributions to be made by the Employer hereunder, to
change or modify the method of allocation of its contributions, to change any
provision relating to the distribution or payment, or both, of any assets of
the Trust.
11.2 Termination. The Plan Sponsor further reserves the right to
terminate this Plan at any time, and each Employer reserves the right to
terminate the Plan with respect to its own employees at any time.
11.3 Form of Amendment, Discontinuance of Employer Contributions,
and Termination. Any such amendment, discontinuance of Employer contributions
or termination shall be made only by resolution of the Board of Directors of
the Plan Sponsor or by any person so duly authorized by the Board of Directors.
11.4 Limitations on Amendments. The provisions of this Article are
subject to the following restrictions:
(a) Except as provided in Section 10.4, no amendment
shall operate either directly or indirectly to give the Employer any interest
whatsoever in any funds or property held by the Trustee under the terms hereof,
or to permit corpus or income of the Trust to be used for or diverted to
purposes other than the exclusive benefit of the Participants and their
beneficiaries.
(b) Except to the extent necessary to conform to the laws
and regulations or to the extent permitted by any applicable law or regulation,
no amendment shall operate either directly or indirectly to deprive any
Participant of his/her nonforfeitable beneficial interest in his/her Accounts
as of the date of the amendment.
(c) No amendment shall change any vesting schedule unless
each Participant who has completed 3 or more Years of Service is permitted to
elect to have the nonforfeitable percentage of his/her Matching Account and
Employer Account (if any) computed under the Plan without regard to such
amendment. The period for making such election shall commence no later than
the date of the adoption of such amendment and shall expire no earlier than 60
days after the latest of the following dates: (i) the date the Plan amendment
is adopted, (ii) the date the Plan amendment becomes effective, or (iii) the
date the Participant is issued written notice of the Plan amendment by the
Administrative Committee. Notwithstanding the foregoing, no election need be
offered to a Participant whose nonforfeitable percentage of his/her Matching
Account and
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Employer Account (if any) cannot at any time be lower than such percentage
determined without regard to such amendment.
(d) Except as permitted by applicable law, no amendment
shall eliminate or reduce an early retirement benefit or a retirement-type
subsidy or eliminate an optional form of benefit.
11.5 Level of Benefits Upon Merger. This Plan shall not merge or
consolidate with, or transfer assets or liabilities to, any other plan, unless
each Participant shall be entitled to receive a benefit immediately after said
merger, consolidation or transfer (if such other plan were then terminated)
which shall be not less than the benefit he/she would have been entitled to
receive immediately before said merger, consolidation or transfer (if this Plan
were then terminated).
11.6 Vesting Upon Termination or Discontinuance of Employer
Contributions; Liquidation of Trust.
(a) This Plan shall be deemed terminated if and only if
the Plan terminates by operation of law or pursuant to Section 11.2. In the
event of any termination or partial termination within the meaning of the Code,
or in the event the Employer permanently discontinues the making of
contributions to the Plan, the Matching Account and Employer Account (if any)
of each affected Participant who is employed by the Employer on the date of the
occurrence of such event shall be nonforfeitable; provided, however, that in no
event shall any Participant or beneficiary have recourse to other than the
Trust Fund for the satisfaction of benefits hereunder.
(b) In the event the Employer permanently discontinues
the making of contributions to the Plan, the Trustee shall make or commence
distribution to each Participant or his/her beneficiaries of the value of such
Participant's Accounts as provided herein within the time prescribed in Article
7. However, if, after such discontinuance, the Plan Sponsor shall determine it
to be impracticable to continue the Trust any longer, the Plan Sponsor may, in
its discretion, declare a date to be the Determination Date for all
Participants whose Determination Date has not yet occurred. Such date shall
also constitute the final distribution date for each Participant or beneficiary
whose Accounts are being distributed in installments.
(c) The liquidation of the Trust, if any, in connection
with any Plan termination shall be accomplished by the Administrative Committee
acting on behalf of the Plan Sponsor. After directing that sufficient funds be
set aside to provide for the payment of all expenses incurred in the
administration of the Plan and the Trust, to the extent not paid or provided
for by the Employer, the Administrative Committee shall, as promptly as shall
then be reasonable under the circumstances, liquidate the Trust assets and
distribute to each Participant or beneficiary his/her Accounts in the Trust
Fund. Notwithstanding the foregoing, if the Employer or an Affiliate maintains
another defined
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contribution plan, other than an employee stock ownership plan (as defined in
Code Section 4975(e) or 409) or a simplified employee pension plan (as defined
in Code Section 408(k)), the Accounts of such Participant shall be transferred
to such other plan unless the vested balance of such Accounts does not exceed
$3,500 or the Participant consents to distribution of such Accounts. If the
vested balance of a Participant's Accounts at the time of any distribution to
the Participant exceeds $3,500, then the vested balance of a Participant's
Accounts at any subsequent time shall be deemed to exceed $3,500. Upon
completion of such liquidation and distribution, the Trust shall finally and
completely terminate. In the event the Administrative Committee is no longer
in existence, the actions to be taken by the Administrative Committee pursuant
to this Section shall be taken by the Trustee.
57
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ARTICLE 12
Miscellaneous
12.1 No Guarantee of Employment, Etc. Neither the creation of the
Plan nor anything contained in the Plan or trust agreement shall be construed
as a contract of employment between the Employer and the Participant or as
giving any Participant hereunder or other employee of the Employer any right to
remain in the employ of the Employer, any equity or other interest in the
assets, business or affairs of the Employer, or any right to complain about any
action taken or any policy adopted or pursued by the Employer.
12.2 Nonalienation.
(a) Except as may be provided in the Plan with respect to
loans to Participants, no Participant shall have any right to sell, assign,
pledge, hypothecate, anticipate or in any way create a lien upon any part of
the Trust Fund. Except to the extent required by law or provided in the Plan,
no interest in the Trust Fund, or any part thereof, shall be assignable in or
by operation of law, or be subject to liability in any way for the debts or
defaults of Participants, their beneficiaries, spouses or heirs-at-law, whether
to the Employer or to others.
(b) Prior to the time that distributions are to be made
hereunder, the Participants, their spouses, beneficiaries, heirs-at-law or
legal representatives shall have no right to receive cash or other things of
value from the Employer or the Trustee from or as a result of the Plan and
Trust.
12.3 Qualified Domestic Relations Order. Notwithstanding anything
in this Plan to the contrary, the Administrative Committee shall distribute a
Participant's Accounts, or any portion thereof, in accordance with the terms of
any domestic relations order entered on or after January 1, 1985, which the
Administrative Committee determines to be a qualified domestic relations order
described in Code Section 414(p).
12.4 Controlling Law. To the extent not preempted by the laws of
the United States of America, the laws of the State of Illinois shall be
controlling state law in all matters relating to the Plan.
12.5 Severability. If any provision of this Plan shall be held
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining parts of this Plan, but this Plan shall be construed and
enforced as if said illegal or invalid provision had never been included
herein.
12.6 Notification of Addresses. Each Participant and each
beneficiary of a deceased Participant shall file with the Administrative
Committee from time to time in writing his/her post-office address and each
change of post-office address. Any
58
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communication, statement or notice addressed to the last post-office address
filed with the Administrative Committee, or if no such address was filed with
the Administrative Committee, then to the last post-office address of the
Participant or beneficiary as shown on the Employer's records, will be binding
on the Participant and his/her beneficiary for all purposes of this Plan and
neither the Administrative Committee nor the Employer shall be obliged to
search for or ascertain the whereabouts of any Participant or beneficiary.
12.7 Gender and Number. Whenever the context requires or permits,
the gender and number of words shall be interchangeable.
59
<PAGE> 64
ARTICLE 13
Adoption by Affiliates
13.1 Adoption of Plan. Subject to any resolution or terms of any
agreement approved by the Board of Directors of the Plan Sponsor or a committee
thereof to the contrary, any Affiliate may adopt this Plan for the benefit of
its eligible employees if authorized to do so by the Board of Directors of the
Plan Sponsor. Such adoption shall be by resolution of such Affiliate's board
of directors, a certified copy of which shall be filed with the Plan Sponsor,
the Administrative Committee and the Trustee. Upon such adoption, such
Affiliate shall become an "Employer."
13.2 The Plan Sponsor as Agent for Employer. Each Employer which
has adopted this Plan pursuant to Section 13.1 hereby irrevocably gives and
grants to the Plan Sponsor full and exclusive power conferred upon it by the
terms of the Plan and Trust to take or refrain from taking any and all action
which such Employer might otherwise take or refrain from taking with respect to
the Plan, including sole and exclusive power to exercise, enforce or waive any
rights whatsoever which such Employer might otherwise have with respect to the
Trust, and each such Employer, by adopting this Plan, irrevocably appoints the
Plan Sponsor its agent for such purposes. Neither the Trustee nor the
Administrative Committee nor any other person shall have any obligation to
account to any such Employer or to follow the instructions of or otherwise deal
with any such Employer, the intention being that all persons shall deal solely
with the Plan Sponsor as if it were the sole company which had adopted this
Plan. Each such Employer shall contribute such amounts as determined under
Article 3.
13.3 Adoption of Amendments.
(a) Any Employer which adopts this Plan pursuant to
Section 13.1 may amend this Plan with respect to its own employees by
resolution of its board of directors, if authorized to do so by the Board of
Directors of the Plan Sponsor or any person so duly authorized by the Board of
Directors of the Plan Sponsor.
(b) Any Employer shall be deemed conclusively to have
assented to any amendment of this Plan by the Plan Sponsor without the
necessity of any affirmative action on the part of such Employer.
13.4 Termination. Any Employer which adopts this Plan pursuant to
Section 13.1 may terminate this Plan with respect to its own employees by
resolution of its board of directors, if authorized to do so by the Board of
Directors of the Plan Sponsor, or any person so duly authorized by the Board of
Directors of the Plan Sponsor.
13.5 Data to Be Furnished by Employers. Each Employer which adopts
this Plan pursuant to Section 13.1 shall furnish information and maintain such
records with respect to its Participants as called for hereunder, and its
determinations and
60
<PAGE> 65
notifications with respect thereto shall have the same force and effect as
comparable determinations by the Plan Sponsor with respect to its Participants.
13.6 Joint Employees. If a Participant receives Considered
Compensation during a Plan Year from more than one Employer, the total amount
of such Considered Compensation shall be considered for the purposes of the
Plan, and the respective Employers shall share in contributions to the Plan on
account of said Participant based on the Considered Compensation paid to such
Participant by the Employer.
13.7 Expenses. Each Employer shall pay such part of actuarial and
other necessary expenses incurred in the administration of the Plan as the Plan
Sponsor shall determine.
13.8 Withdrawal. An Employer may withdraw from the Plan by giving
60 days' written notice of its intention to the Plan Sponsor and the Trustee,
unless a shorter notice shall be agreed to by the Plan Sponsor.
13.9 Prior Plans. If an Employer adopting the Plan already
maintains a defined contribution plan covering employees who will be covered by
this Plan, it may, with the consent of the Plan Sponsor, provide in its
resolution adopting this Plan for the termination of its own plan or for the
merger, restatement and continuation, of its own plan by this Plan. In either
case, such Employer may, subject to the approval of the Plan Sponsor, provide
in its resolution of adoption of this Plan for the transfer of the assets of
such plan to the Trust for this Plan for the payment of benefits accrued under
such other plan.
61
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APPENDIX A
APPLICABLE TO
PLASTIC MOLDED CONCEPTS, INC.
This Appendix A sets forth provisions applicable to Participants in
the Plan who were employees of Plastic Molded Concepts, Inc. ("PMC") on
December 31, 1995, who became Participants in the Plan on January 1, 1996, and
whose assets and liabilities were transferred from the Plastic Molded Concepts
401(k) Trust to the Trust ("Former PMC Participants"). Except to the extent
expressly modified by this Appendix A, the provisions of the Plan, including
the Appendices thereto, shall apply to the participation of such Former PMC
Participants. The provisions of this Appendix A shall, unless provided
otherwise, be effective as of January 1, 1996.
A.1 A new definition of PMC Plan shall be added to read as follows:
"PMC Plan" means the Plastic Molded Concepts 401(k) Plan as in
effect on December 31, 1995, just prior to its merger into this Plan.
A.2 Section 6.6 shall read as follows:
6.6 Resignation or Dismissal. If any Participant shall
resign or be dismissed from the service of the Employer and all
Affiliates, there shall become nonforfeitable a portion or all of
his/her Matching Account determined as of his/her Determination Date
in accordance with the following schedule, subject to Section 6.7:
<TABLE>
<CAPTION>
Nonforfeitable
Years of Service Percentage
---------------- --------------
<S> <C>
Less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
</TABLE>
Any part of the Matching Account of such Participant which does not
become nonforfeitable shall be treated as a forfeiture pursuant to
Section 6.8.
A.3 A Former PMC Participant may elect to receive the value of his/her PMC
Plan Accounts as of under Section 7.1 of the Plan in the form of a
lump sum, installment payments or in the form of an annuity contract,
whether such
62
<PAGE> 67
Participant terminates employment before, on, or after his/her
Retirement Date. If a Participant elects to receive such an annuity,
the requirements of the following Sections 7.2 and 7.3 apply. If a
Participant does not elect to receive the annuity, Sections 7.2 and
7.3 shall not apply.
A.4 In the event a Former PMC Participant dies prior to commencement of
his/her benefits, and the balance of the Participant's Accounts was
not distributed in accordance with Section 7.3, the beneficiary may
receive the balance of such Participant's Accounts under Section 7.4
of the Plan in the form of a lump sum, installments or an annuity
contract. The annuity may be for the life of the beneficiary or over
a period certain not extending beyond the life expectancy of the
beneficiary, subject to the requirements of Section 7.4(c). If the
beneficiary is the Participant's surviving spouse, or if the
Participant has not designated the form of distribution prior to
his/her death, the designated beneficiary must elect the method of
distribution no later than the date such distributions are required to
begin in accordance with Section 7.4(c).
63
<PAGE> 68
EXHIBIT A
List of Participating Employers:
Filtertek, Inc.
Plastic Molded Concepts, Inc.
Tek Packaging Group, Headquarters
Tek Packaging Group Midwest, Facility
Tek Packaging Group, West Facility
64
<PAGE> 1
EXHIBIT 10.40
EXECUTION COPY
================================================================================
$80,000,000
MULTICURRENCY CREDIT AGREEMENT
DATED AS OF JUNE 30, 1995
AMONG
SCHAWK, INC.,
FILTERTEK USA, INC.,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
AS AGENT,
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Interpretive Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.3 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
1.4 Currency Equivalents Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE II
THE CREDITS . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.2 Loan Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.3 Procedure for Borrowing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.4 Conversion and Continuation Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.5 Utilization of Revolving Commitments in Offshore Currencies. . . . . . . . . . . . . . . . . . . . . 27
2.6 Reduction of Commitments; Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Scheduled Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(b) Voluntary Reductions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.7 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.8 Currency Exchange Fluctuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.9 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.10 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.11 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(a) Arrangement, Agency Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(b) Commitment Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.12 Computation of Fees and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.13 Payments by the Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.14 Payments by the Banks to the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.15 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.16 Amount and Terms of Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(a) Letter of Credit Commitments; Terms of Letters of Credit . . . . . . . . . . . . . . . . . 35
(b) Procedure for Issuance of Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . 36
(c) Draws upon Letters of Credit; Reimbursement Obligations . . . . . . . . . . . . . . . . . . 37
(d) Banks' Participation in Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . 37
(e) Interest and Fees for Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(f) LC Obligations Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(g) Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(h) Stated Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY . . . . . . . . . . . . . . . . . . 42
3.1 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
3.2 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.3 Increased Costs and Reduction of Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C> <C>
3.4 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.5 Inability to Determine Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
3.6 Certificates of Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
3.7 Substitution of Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.8 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE IV
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . 46
4.1 Conditions of Initial Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(a) Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(b) Resolutions; Incumbency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(c) Organization Documents; Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(d) Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(e) Payment of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(f) Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(h) Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.2 Conditions to All Borrowings and Letter of Credit Issuances . . . . . . . . . . . . . . . . . . . . 48
(a) Notice of Borrowing or Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(b) Continuation of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . 48
(c) No Existing Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE V
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 49
5.1 Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.2 Corporate Authorization; No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.3 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.6 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.7 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.8 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.9 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.11 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.13 Regulated Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.14 No Burdensome Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.15 Copyrights, Patents, Trademarks and Licenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.16 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.18 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE VI
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C> <C>
AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 53
6.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.2 Certificates; Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.4 Preservation of Corporate Existence, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
6.5 Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
6.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.7 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.9 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.10 Inspection of Property and Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
6.11 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
6.12 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
6.13 Additional Subsidiary Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE VII
NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 58
7.1 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.2 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.3 Consolidations and Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.4 Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
7.5 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
7.6 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
7.7 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
7.8 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
7.9 Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
7.10 Lease Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
7.11 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
7.12 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
7.13 Change in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
7.14 Accounting Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
7.15 Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
7.16 Limitation on Certain Restrictions on Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 66
7.17 Organization Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
7.18 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
(a) Maintenance of Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . 67
(b) Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
(c) Funded Debt to EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
(e) Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE VIII
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . 69
8.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
(a) NonPayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION> Page
<S> <C> <C>
(b) Representation or Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
(c) Specific Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
(d) Other Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
(e) Cross-Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
(f) Insolvency; Voluntary Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
(g) Involuntary Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
(h) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
(i) Monetary Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
(j) Non-Monetary Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
(k) Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
(l) Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
(m) Unenforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
8.3 Rights Not Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE IX
THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.1 Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.3 Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.4 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
9.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
9.6 Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
9.7 Indemnification of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
9.8 Agent in Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
9.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.10 Withholding Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE X
GUARANTEES OF COMPANY AND EACH BORROWER . . . . . . . . . . . . . . . . . . 78
10.1 Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.2 Unconditional Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.3 Period In Force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.5 Effect of Stay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.6 No Subrogation, Contribution, Reimbursement or Indemnity . . . . . . . . . . . . . . . . . . . . . . 80
ARTICLE XI
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 80
11.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
11.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
11.4 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
11.5 Borrowers Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Page
<S> <C>
11.6 Payments Set Aside . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
11.7 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
11.8 Assignments, Participations, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
11.9 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
11.10 Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
11.11 Automatic Debits of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
11.12 Notification of Addresses, Lending Offices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
11.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
11.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
11.15 No Third Parties Benefited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
11.16 Governing Law and Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
11.17 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
11.18 Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
11.19 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
</TABLE>
v
<PAGE> 7
Page
SCHEDULES
- ---------
Schedule 2.1 Commitments
Schedule 5.5 Litigation
Schedule 5.7 ERISA
Schedule 5.11 Permitted Liabilities
Schedule 5.12 Environmental Matters
Schedule 5.16 Subsidiaries and Minority Interests
Schedule 5.17 Insurance Matters
Schedule 7.1 Permitted Liens
Schedule 7.5 Permitted Indebtedness
Schedule 7.8 Contingent Obligations
Schedule 10.2 Lending Offices; Addresses for Notices
EXHIBITS
- --------
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Legal Opinion of Borrower Counsel
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Promissory Note
Exhibit G Form of Intercompany Note Pledge Agreement
Exhibit H Form of Subsidiary Guarantee Agreement
Exhibit I Form of Intercreditor and Subordination Agreement
Exhibit J Form of Letter of Credit Request
vi
<PAGE> 8
MULTICURRENCY CREDIT AGREEMENT
This MULTICURRENCY CREDIT AGREEMENT is entered into as of June 30,
1995, among Schawk, Inc., a Delaware corporation (the "Company"), Filtertek
USA, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company
("Filtertek"), the several financial institutions from time to time party to
this Agreement (collectively, the "Banks"; individually, a "Bank"), and Bank of
America National Trust and Savings Association, as agent for the Banks. The
Company and Filtertek are referred to individually as a "Borrower" and
collectively as the "Borrowers".
WHEREAS, the Banks have agreed to make available to the Borrowers a
revolving multicurrency credit facility upon the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. The following terms have the following
meanings:
"Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly,
in (a) the acquisition of all or substantially all of the assets of a
Person, or of any business or division of a Person, (b) the
acquisition of in excess of 50% of the capital stock, partnership
interests, membership interests or equity of any Person, or otherwise
causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other combination with another Person (other than
a Person that is a Subsidiary) provided that the Company or the
Subsidiary is the surviving entity.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. A Person shall be deemed to
control another Person if the controlling Person possesses, directly
or indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the
ownership of voting securities, membership interests, by contract, or
otherwise.
"Agent" means BofA in its capacity as agent for the Banks
hereunder, and any successor agent arising under Section 9.9.
<PAGE> 9
"Agent-Related Persons" means BofA and any successor agent
arising under Section 9.9, together with their respective Affiliates,
and the officers, directors, employees, agents and attorneys-in-fact
of such Persons and Affiliates.
"Agent's Payment Office" means (i) in respect of payments in
Dollars, the address for payments set forth on Schedule 11.2 in
relation to the Agent or such other address as the Agent may from time
to time specify in accordance with Section 11.2, and, (ii) in the case
of payments in any Offshore Currency, the address for payments set
forth in Schedule 11.2 in relation to the Agent or such other address
as the Agent may from time to time specify in accordance with Section
11.2.
"Agreed Alternative Currency" has the meaning specified in
subsection 2.5(e).
"Agreement" means this Multicurrency Credit Agreement.
"Applicable Currency" means, as to any particular payment or
Loan, Dollars or the Offshore Currency in which it is denominated or
is payable.
"Applicable Margin" means at any date, the applicable
percentage amount set forth in the following table opposite the
applicable ratio of Funded Debt to EBITDA on a trailing four quarter
basis as shown in the Compliance Certificate then most recently
delivered to the Banks:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Ratio of Funded Debt Applicable Margin
to EBITDA
- -------------------------------------------------------------------------------------------
<S> <C>
3.0 or more .875%
- -------------------------------------------------------------------------------------------
less than 3.0 but .750%
more than or equal to 2.5
- -------------------------------------------------------------------------------------------
less than 2.5 but .625%
more than or equal to 2.0
- -------------------------------------------------------------------------------------------
less than 2.0 but more .500%
than or equal to 1.75
- -------------------------------------------------------------------------------------------
less than 1.75 .400%
- -------------------------------------------------------------------------------------------
</TABLE>
provided, however that for the period from the date hereof to June 30,
1996, the Applicable Margin shall be deemed to be .625%; provided
further that, if the Company shall have failed to deliver to the Banks
by the date required hereunder its Compliance Certificate pursuant to
Section 6.2(b), then until such delivery the Applicable Margin shall
be deemed to be .875%. Each change in the Applicable Margin
2
<PAGE> 10
shall take effect with respect to all outstanding Offshore Rate Loans
on the first day of the month immediately succeeding the month in
which such Compliance Certificate is received by Agent and the Banks.
Notwithstanding the foregoing, no reduction in the Applicable Margin
shall be effected if a Default shall have occurred and be continuing
on the date when such change would otherwise occur.
"Assignee" has the meaning specified in subsection 11.8(a).
"Attorney Costs" means and includes all fees and disbursements
of any law firm or other external counsel, the allocated cost of
internal legal services and all disbursements of internal counsel.
"Bank" has the meaning specified in the introductory clause
hereto.
"Banking Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City, Chicago or San
Francisco are authorized or required by law to close and (i) with
respect to disbursements and payments in Dollars, a day on which
dealings are carried on in the applicable offshore Dollar interbank
market, and (ii) with respect to any disbursements and payments in and
calculations pertaining to any Offshore Currency Loan, a day on which
commercial banks are open for foreign exchange business in London,
England, and on which dealings in the relevant Offshore Currency are
carried on in the applicable offshore foreign exchange interbank
market in which disbursement of or payment in such Offshore Currency
will be made or received hereunder.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of
1978 (11 U.S.C. Section 101, et seq.).
"Base Rate" means, for any day, the higher of:
(a) 0.50% per annum above the latest Federal
Funds Rate; and (b) the rate of interest in effect for such
day as publicly announced from time to time by BofA in San
Francisco, California, as its "reference rate." (The
"reference rate" is a rate set by BofA based upon various
factors including BofA's costs and desired return, general
economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced
at, above, or below such announced rate.)
Any change in the reference rate announced by BofA shall take
effect at the opening of business on the day specified in the public
announcement of such change.
3
<PAGE> 11
"Base Rate Loan" means a Loan that bears interest based on the
Base Rate.
"BofA" means Bank of America National Trust and Savings
Association, a national banking association.
"Borrower" and "Borrowers" have the meaning specified in the
introductory clause hereto.
"Borrowing" means a borrowing hereunder consisting of Loans of
the same Type and in the same Applicable Currency made to a Borrower
on the same day by the Banks under Article II, and, other than in the
case of Base Rate Loans, having the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs
under Section 2.3.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City, Chicago or San
Francisco are authorized or required by law to close and, if the
applicable Business Day relates to any Offshore Rate Loan, means a
Banking Day.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"Capital Expenditures" means, for any period and with respect
to any Person, the aggregate of all expenditures by such Person and
its Subsidiaries for the acquisition or leasing of fixed or capital
assets or additions to equipment (including replacements, capitalized
repairs and improvements during such period) which should be
capitalized under GAAP on a consolidated balance sheet of such Person
and its Subsidiaries, less net proceeds from sales of fixed or capital
assets received by such Person or any of its Subsidiaries during such
period. For the purpose of this definition, the purchase price of
equipment which is purchased simultaneously with the trade-in of
existing equipment owned by such Person or any of its Subsidiaries or
with insurance proceeds shall be included in Capital Expenditures only
to the extent of the gross amount of such purchase price less the
credit granted by the seller of such equipment for such equipment
being traded in at such time, or the amount of such proceeds, as the
case may be.
"Capital Lease" has the meaning specified in the definition of
"Capital Lease Obligations."
4
<PAGE> 12
"Capital Lease Obligations" means all monetary obligations of
the Company or any of its Subsidiaries under any leasing or similar
arrangement which, in accordance with GAAP, is classified as a capital
lease ("Capital Lease").
"Change of Control" means any of the following: (i) the
Schawk Family shall cease to own, free and clear of all liens or other
encumbrances, at least 51% of the outstanding shares of voting stock
of the Company on a fully diluted basis; or (ii) during any period of
twelve consecutive calendar months, individuals who at the beginning
of such period constituted the Company's board of directors (together
with any new directors whose election by the Company's board of
directors or whose nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reasons other than death or
disability to constitute a majority of the directors then in office;
or (iii) the Company shall cease to own, free and clear of all liens
or other encumbrances, 100% of the outstanding shares of capital stock
of Filtertek.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents
(however designated) of such Person's capital stock and any rights
(other than debt securities convertible into or exchangeable for
capital stock), warrants or options exchangeable for or convertible
into such capital stock.
"Closing Date" means the date on which all conditions
precedent set forth in Section 4.1 are satisfied or waived by all
Banks (or, in the case of subsection 4.1(e), waived by the Person
entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"Commitment", as to each Bank, has the meaning specified in
Section 2.1.
"Company" has the meaning specified in the introductory clause
hereto.
"Compliance Certificate" means a certificate substantially in
the form of Exhibit C.
"Computation Date" has the meaning specified in subsection
2.5(a).
5
<PAGE> 13
"Consolidated Fixed Charges" means, for any period, for the
Company and its Subsidiaries, the sum of (without duplication) (i)
Consolidated Interest Expense, (ii) all scheduled payments of
principal on Indebtedness of the Company and its Subsidiaries
(including, without limitation, principal payments in respect of
Capital Leases and in the case of this Agreement, scheduled reductions
in the combined Commitment, but only to the extent that (a) the
average daily borrowed portion of the combined Commitment during such
period exceeds (b) the amount of the combined Commitment on the date
of determination), (iii) taxes paid in cash, (iv) payments under
operating leases, and (v) cash dividends paid by the Company as each
of the foregoing is made during such period of determination in
accordance with GAAP on a consolidated basis.
"Consolidated Interest Expense" means, for any period, the sum
of total interest expense (including that attributable to Capitalized
Leases in accordance with GAAP) of the Company and its Subsidiaries on
a consolidated basis with respect to all outstanding Indebtedness of
the Company and its Subsidiaries, including, without limitation, all
commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, but excluding,
however, any amortization of deferred financing costs, all as
determined on a consolidated basis for the Company and its
consolidated Subsidiaries in accordance with GAAP.
"Consolidated Net Income" and "Consolidated Net Loss" mean,
respectively, with respect to any period, the aggregate of the net
income (loss) of the Person in question for such period, determined in
accordance with GAAP on a consolidated basis, provided that (i) the
net income (loss) of any Person which is not a Subsidiary shall be
included only to the extent of the amount of cash dividends or
distributions paid to the Person in question or to a consolidated
Subsidiary of such Person and (ii) the net income (loss) of any Person
acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded. There shall be
excluded in computing Consolidated Net Income the excess (but not the
deficit), if any, of (i) any gain which must be treated as an
extraordinary item under GAAP or any gain realized upon the sale or
other disposition of any real property or equipment that is not sold
in the ordinary course of business or of any capital stock of the
Person or a Subsidiary of the Person over (ii) any loss which must be
treated as an extraordinary item under GAAP or any loss realized upon
the sale or other disposition of any real property or equipment that
is not sold in the ordinary course of business or of any capital stock
of the Person or a Subsidiary of the Person.
6
<PAGE> 14
"Consolidated Tangible Net Worth" of a Person means, without
duplication, the sum of (i) total stockholders' equity (excluding
treasury stock) less (ii) the net book value of all assets of such
Person and its consolidated Subsidiaries which would be treated as
intangibles under GAAP, including, without limitation, deferred
charges, leasehold conversion costs, franchise rights, non-compete
agreements, research and development costs, goodwill, unamortized debt
discounts, patents, patent applications, trademarks, trade names,
copyrights and licenses.
"Contingent Obligation" means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or
without recourse, (a) with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary
obligations") of another Person (the "primary obligor"), including any
obligation of that Person (i) to purchase, repurchase or otherwise
acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such
primary obligation, or to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial
condition of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv) otherwise to
assure or hold harmless the holder of any such primary obligation
against loss in respect thereof (each, a "Guaranty Obligation"); (b)
with respect to any Surety Instrument issued for the account of that
Person or as to which that Person is otherwise liable for
reimbursement of drawings or payments; (c) to purchase any materials,
supplies or other property from, or to obtain the services of, another
Person if the relevant contract or other related document or
obligation requires that payment for such materials, supplies or other
property, or for such services, shall be made regardless of whether
delivery of such materials, supplies or other property is ever made or
tendered, or such services are ever performed or tendered, or (d) in
respect of any Swap Contract. The amount of any Contingent Obligation
shall, in the case of Guaranty Obligations, be deemed equal to the
stated or determinable amount of the primary obligation in respect of
which such Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated liability in
respect thereof, and in the case of other Contingent Obligations,
shall be equal to the maximum reasonably anticipated liability in
respect thereof.
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed
7
<PAGE> 15
of trust or other instrument, document or agreement to which such
Person is a party or by which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which, under
Section 2.4, a Borrower (a) converts Loans of one Type to another
Type, or (b) continues as Loans of the same Type, but with a new
Interest Period, Loans having Interest Periods expiring on such date.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or
otherwise remedied during such time) constitute an Event of Default.
"Dollar Equivalent" means, at any time, (a) as to any amount
denominated in Dollars, the amount thereof at such time, and (b) as to
any amount denominated in an Offshore Currency, the equivalent amount
in Dollars as determined by the Agent at such time on the basis of the
Spot Rate for the purchase of Dollars with such Offshore Currency on
the most recent Computation Date provided for in subsection 2.5(a).
"Dollars", "dollars" and "$" each mean lawful money of the
United States.
"Domestic Subsidiary": any Subsidiary of the Company that is
not a Foreign Subsidiary.
"EBIT" means, for any period, for the Company and its
Subsidiaries on a consolidated basis, determined in accordance with
GAAP, the sum of (a) Consolidated Net Income for such period plus (b)
all amounts treated as expenses for interest to the extent included in
the determination of such Consolidated Net Income plus (c) all accrued
taxes on or measured by income to the extent included in the
determination of such Consolidated Net Income; provided, however, that
Consolidated Net Income shall be computed for these purposes without
giving effect to extraordinary losses or extraordinary gains.
"EBITDA" means, for any period, for the Company and its
Subsidiaries on a consolidated basis, determined in accordance with
GAAP, the sum of (a) EBIT plus (b) all amounts treated as expenses for
depreciation and the amortization of intangibles of any kind to the
extent included in the determination of Consolidated Net Income.
"Eligible Assignee" means (i) a commercial bank organized
under the laws of the United States, or any state thereof, and having
a combined capital and surplus of at least $200,000,000; (ii) a
commercial bank organized under the laws of any other country which is
a member of the Organization for Economic Cooperation and Development
(the
8
<PAGE> 16
"OECD"), or a political subdivision of any such country, and having a
combined capital and surplus of at least $200,000,000 or its Dollar
Equivalent, provided that such bank is acting through a branch or
agency located in the United States; and (iii) a Person that is
primarily engaged in the business of commercial banking and that is
(A) a Subsidiary of a Bank, (B) a Subsidiary of a Person of which a
Bank is a Subsidiary, or (C) a Person of which a Bank is a Subsidiary.
"Environmental Claims" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential
liability or responsibility for violation of any Environmental Law, or
for release or injury to the environment.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental,
health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Company within the meaning
of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of
the Code for purposes of provisions relating to Section 412 of the
Code).
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by a Borrower or any ERISA Affiliate
from a Pension Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer (as defined in Section
4001(a)(2) of ERISA) or a cessation of operations which is treated as
such a withdrawal under Section 4062(e) of ERISA; (c) a complete or
partial withdrawal by a Borrower or any ERISA Affiliate from a
Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or
4041A of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan or Multiemployer Plan; or
(f) the imposition of any liability under Title IV of ERISA, other
than PBGC premiums due but not delinquent under Section 4007 of ERISA,
upon a Borrower or any ERISA Affiliate.
9
<PAGE> 17
"Eurodollar Reserve Percentage" has the meaning specified in
the definition of "Offshore Rate".
"Event of Default" means any of the events or circumstances
specified in Section 8.1.
"Exchange Act" means the Securities and Exchange Act of 1934,
and regulations promulgated thereunder.
"Existing Credit Agreements" means (i) that certain Credit
Agreement dated as of September 21, 1992 by and among the Company, The
First National Bank of Chicago, as agent and the financial
institutions party thereto, and (ii) that certain Credit Agreement
dated as of December 22, 1993 by and among Filtertek, Filtertek De
Puerto Rico, Inc. and The Northern Trust Company, as Agent, and the
lenders identified therein, in each case, as the same have been
thereafter amended or otherwise modified from time to time.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal
functions.
"Federal Funds Rate" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New
York (including any such successor, "H.15(519)") on the preceding
Business Day opposite the caption "Federal Funds (Effective)"; or, if
for any relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the arithmetic
mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City
time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Agent.
"Fee Letter" has the meaning specified in subsection 2.11(a).
"Filtertek" has the meaning specified in the introductory
clause hereto.
"Foreign Subsidiary" any Subsidiary of the Company that (A)
is incorporated under the laws of a jurisdiction other than any State
of the U.S., the District of Columbia or any territory, commonwealth
or possession of the U.S. and (B) maintains the major portion of its
assets outside the U.S.
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
"Funded Indebtedness" shall at any date mean:
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<PAGE> 18
(a) all outstanding principal under this Agreement
and the Indebtedness outstanding under the Short Term Revolving
Facility; and
(b) all Subordinated Indebtedness of the Company or any
of its Subsidiaries to any member of the Schawk Family to the extent
such Indebtedness is permitted pursuant to the terms hereof;
(c) all other Indebtedness (excluding any Indebtedness
included solely within clause (b) of the definition of Indebtedness)
of the Company or any of its Subsidiaries which by its terms
(i) matures more than one year from the date of
its creation, or
(ii) matures within one year from the date of its
creation but, at the Company's or such Subsidiary's election,
is renewable or extendible (whether or not theretofore renewed
or extended) under, or payable from the proceeds of any other
Indebtedness which may be incurred pursuant to the provisions
of, any revolving credit or similar agreement.
"FX Trading Office" means the Foreign Exchange Trading Center,
Chicago, Illinois, of BofA, or such other of BofA's offices as BofA
may designate from time to time.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date
of determination.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranty Obligation" has the meaning specified in the
definition of "Contingent Obligation."
"Indebtedness" of any Person means, without duplication, (a)
all indebtedness for borrowed money; (b) all obligations issued,
undertaken or assumed as the
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<PAGE> 19
deferred purchase price of property or services (other than trade
payables entered into in the ordinary course of business on ordinary
terms); (c) all non-contingent reimbursement or payment obligations
with respect to Surety Instruments; (d) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations
so evidenced incurred in connection with the acquisition of property,
assets or businesses; (e) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred
as financing, in either case with respect to property acquired by the
Person (even though the rights and remedies of the seller or bank
under such agreement in the event of default are limited to
repossession or sale of such property); (f) all Capital Lease
Obligations; (g) all net obligations with respect to Swap Contracts;
(h) all indebtedness referred to in clauses (a) through (g) above
secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien
upon or in property (including accounts and contracts rights) owned by
such Person, even though such Person has not assumed or become liable
for the payment of such Indebtedness; and (i) all Guaranty Obligations
in respect of indebtedness or obligations of others of the kinds
referred to in clauses (a) through (g) above.
"Indemnified Liabilities" has the meaning specified in Section
11.5.
"Indemnified Person" has the meaning specified in Section
11.5.
"Independent Auditor" has the meaning specified in subsection
6.1(a).
"Insolvency Proceeding" means (a) any case, action or
proceeding before any court or other Governmental Authority relating
to bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding- up or relief of debtors, or (b) any general
assignment for the benefit of creditors, composition, marshalling of
assets for creditors, or other, similar arrangement in respect of its
creditors generally or any substantial portion of its creditors;
undertaken under U.S. Federal, state or foreign law, including the
Bankruptcy Code.
"Intercompany Note Pledge Agreement" means the Note Pledge
Agreement in substantially the form of Exhibit G hereto, dated as of
the date hereof, made by the Borrowers in favor of the beneficiaries
named therein, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms and the terms
hereof.
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<PAGE> 20
"Intercreditor and Subordination Agreement" means the
Intercreditor and Subordination Agreement dated the date hereof, in
substantially the form of Exhibit I, by and among the Borrowers,
Clarence W. Schawk, Marilyn G. Schawk and David A. Schawk, and the
Agent for the benefit of the Banks.
"Interest Payment Date" means, as to any Loan other than a
Base Rate Loan, the last day of each Interest Period applicable to
such Loan and, as to any Base Rate Loan, the last Business Day of each
calendar quarter and each date such Loan is converted into another
Type of Loan; provided, however, that if any Interest Period for an
Offshore Rate Loan exceeds three months, the date that falls three
months after the beginning of such Interest Period and after each
Interest Payment Date thereafter is also an Interest Payment Date.
"Interest Period" means, as to any Offshore Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date one, two,
three or six months thereafter as selected by the applicable Borrower
in its Notice of Borrowing or Notice of Conversion/Continuation, as
selected by the applicable Borrower in its Notice of Borrowing or
Notice of Conversion/Continuation;
provided that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall be
extended to the following Business Day unless, in the case of
an Offshore Rate Loan, the result of such extension would be
to carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period pertaining to an Offshore
Rate Loan that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period;
(iii) no Interest Period for any Revolving Loan
shall extend beyond the Revolving Termination Date; and
(iv) no Interest Period applicable to a Revolving
Loan or portion thereof shall extend beyond any date upon
which is due any scheduled principal payment in
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<PAGE> 21
respect of the Revolving Loans unless the aggregate principal amount
of Revolving Loans represented by Base Rate Loans or Offshore Rate
Loans having Interest Periods that will expire on or before such date,
equals or exceeds the amount of such principal payment.
"Issuing Bank" has the meaning specified in Section 2.16(a).
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Joint Venture" means a single-purpose corporation,
partnership, limited liability company, joint venture or other similar
legal arrangement (whether created by contract or conducted through a
separate legal entity) now or hereafter formed by the Company or any
of its Subsidiaries with another Person in order to conduct a common
venture or enterprise with such Person.
"LC Commission" has the meaning specified in Section
2.16(e)(ii).
"LC Obligations" means, at any time, an amount equal to the
sum of (a) the aggregate Stated Amount of the outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of
Credit which have not then been reimbursed pursuant to Section
2.16(c). The LC Obligation of any Bank at any time shall mean the
amount equal to (x) the aggregate amount of LC Obligations outstanding
at such time times (y) such Bank's Pro Rata Share.
"Lending Office" means, as to any Bank, the office or offices
of such Bank specified as its "Lending Office" or "Domestic Lending
Office" or "Offshore Lending Office", as the case may be, on Schedule
11.2, or such other office or offices as such Bank may from time to
time notify the Borrowers and the Agent.
"Letter of Credit" means any letter of credit issued
hereunder.
"Letter of Credit Cash Collateral Account" has the meaning
specified in Section 8.2.
"Letter of Credit Commitment Sublimit" means $10,000,000.
"Letter of Credit Payment" means, as applicable, (a) all
payments made by the Issuing Bank pursuant to either a draft or demand
for payment under a Letter of Credit or (b)
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<PAGE> 22
all payments made by the Banks to the Issuing Bank in respect thereof.
"Letter of Credit Request" has the meaning specified in
Section 2.16(b).
"Lien" means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional sale
or other title retention agreement, the interest of a lessor under a
capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any
financing statement naming the owner of the asset to which such lien
relates as debtor, under the Uniform Commercial Code or any comparable
law) and any contingent or other agreement to provide any of the
foregoing, but not including the interest of a lessor under an
operating lease.
"Loan" means an extension of credit by a Bank to a Borrower
under Article II, and may be a Base Rate Loan or an Offshore Rate Loan
(each, a "Type" of Loan).
"Loan Documents" means this Agreement, any Notes, the Fee
Letters and all other documents delivered to the Agent or any Bank in
connection herewith.
"Majority Banks" means at any time Banks then holding in
excess of 59% of the then aggregate unpaid principal amount of the
Loans, or, if no such principal amount is then outstanding, Banks then
having in excess of 59% of the Commitments.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.
"Material Adverse Effect" means, with respect to any Person,
(a) a material adverse change in, or a material adverse effect upon,
the operations, business, properties, condition (financial or
otherwise) or prospects of such Person or such Person and its
Subsidiaries taken as a whole; (b) a material impairment of the
ability of the Company or any Subsidiary to perform under any Loan
Document and to avoid any Event of Default; or (c) a material adverse
effect upon the legality, validity, binding effect or enforceability
against the Company or any Subsidiary of any Loan Document.
"Minimum Tranche" means, in respect of Loans comprising part
of the same Borrowing, or to be converted or continued under Section
2.4, (a) in the case of Base Rate Loans, $500,000 or any multiple of
$100,000 in excess
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<PAGE> 23
thereof, and (b) in the case of Offshore Rate Loans, the Dollar
Equivalent amount of $1,000,000 or any multiple of 500,000 units of
the Applicable Currency in excess thereof.
"Multiemployer Plan" means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, to which a Borrower or any
ERISA Affiliate makes, is making, or is obligated to make
contributions or, during the preceding three calendar years, has made,
or been obligated to make, contributions.
"Note" means a promissory note executed by the Borrowers in
favor of a Bank pursuant to subsection 2.2(b), in substantially the
form of Exhibit F.
"Notice of Borrowing" means a notice in substantially the form
of Exhibit A.
"Notice of Conversion/Continuation" means a notice in
substantially the form of Exhibit B.
"Obligations" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document
owing by any Borrower to any Bank, the Agent, or any Indemnified
Person, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now
existing or hereafter arising.
"Offshore Currency" means at any time English pounds sterling,
Canadian dollars, French francs, German Deutsche Marks, Japanese yen
and any Agreed Alternative Currency.
"Offshore Currency Loan" means any Offshore Rate Loan
denominated in an Offshore Currency.
"Offshore Currency Loan Sublimit" means, at any time of
determination, as to all Offshore Currencies in the aggregate, the
Dollar Equivalent amount of 50% of the aggregate Commitments of the
Banks, and, as to any single Offshore Currency, the Dollar Equivalent
amount of 25% of the aggregate Commitments of Banks.
"Offshore Rate" means, for any Interest Period, with respect
to Offshore Rate Loans comprising part of the same Borrowing, the rate
of interest per annum (rounded upward to the next 1/16th of 1%)
determined by the Agent as follows:
Offshore Rate = IBOR
-----------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
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<PAGE> 24
"Eurodollar Reserve Percentage" means for any day for
any Interest Period the maximum reserve percentage (expressed
as a decimal, rounded upward to the next 1/100th of 1%) in
effect on such day (whether or not applicable to any Bank)
under regulations issued from time to time by the FRB for
determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement)
with respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities"); and
"IBOR" means the rate of interest per annum
determined by the Agent as the rate at which deposits in the
Applicable Currency in the approximate amount of BofA's
Offshore Rate Loan for such Interest Period would be offered
by BofA's Grand Cayman Branch, Grand Cayman B.W.I. (or such
other office as may be designated for such purpose by BofA),
to major banks in the offshore currency interbank market at
their request at approximately 11:00 a.m. (New York City time)
two Business Days prior to the commencement of such Interest
Period.
The Offshore Rate shall be adjusted automatically as
to all Offshore Rate Loans then outstanding as of the
effective date of any change in the Eurodollar Reserve
Percentage.
"Offshore Rate Loan" means a Loan that bears interest based on
the Offshore Rate, and may be an Offshore Currency Loan or a Loan
denominated in Dollars.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate
of determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement,
and all applicable resolutions of the board of directors (or any
committee thereof) of such corporation.
"Other Taxes" means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents.
"Overnight Rate" means, for any day, the rate of interest per
annum at which overnight deposits in the Applicable Currency, in an
amount approximately equal to the amount with respect to which such
rate is being determined, would be offered for such day by BofA's
London Branch to major banks in the London or other applicable
offshore interbank market.
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<PAGE> 25
"Participant" has the meaning specified in subsection 11.8(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
"Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which a Borrower sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as
described in Section 4064(a) of ERISA) has made contributions at any
time during the immediately preceding five (5) plan years.
"Permitted Liens" has the meaning specified in Section 7.1.
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which a Borrower sponsors or maintains or to which a
Borrower makes, is making, or is obligated to make contributions and
includes any Pension Plan.
"Pro Rata Share" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth
decimal place) at such time of such Bank's Commitment divided by the
combined Commitments of all Banks.
"Replacement Bank" has the meaning specified in Section 3.7.
"Reportable Event" means, any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, other than any
such event for which the 30-day notice requirement under ERISA has
been waived in regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of
an arbitrator or of a Governmental Authority, in each case applicable
to or binding upon the Person or any of its property or to which the
Person or any of its property is subject.
"Responsible Officer" means the chief executive officer, the
president or the executive vice-president of a Borrower, or any other
officer having substantially the same authority and responsibility;
or, with respect to
18
<PAGE> 26
compliance with financial covenants, the chief financial officer or
the treasurer of a Borrower, or any other officer having substantially
the same authority and responsibility.
"Revolving Loan" has the meaning specified in Section 2.1.
"Revolving Termination Date" means the earlier to occur of:
(a) June 30, 2000; and
(b) the date on which the Commitments terminate in
accordance with the provisions of this Agreement.
"Same Day Funds" means (i) with respect to disbursements and
payments in Dollars, immediately available funds, and (ii) with
respect to disbursements and payments in an Offshore Currency, same
day or other funds as may be determined by the Agent to be customary
in the place of disbursement or payment for the settlement of
international banking transactions in the relevant Offshore Currency.
"Schawk Family" means the persons set forth on Schedule 1.1
hereto, together with any children or grandchildren of such persons
and any grantor trust under which one of such persons shall be the
sole trustee or one of the co-trustees (and such person retains the
sole power to remove any Capital Stock held by such trust from such
trust).
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"Short Term Revolving Loan Facility" means the 364 day
revolving loan facility in an initial total amount of $20,000,000
pursuant to that certain Multicurrency Short Term Credit Agreement
dated the date thereof and among the Borrowers, the Agent and the
Banks, as the same may be amended from time to time and any renewal,
modification or extension thereof.
"Spot Rate" for a currency means the rate quoted by BofA as
the spot rate for the purchase by BofA of such currency with another
currency through its FX Trading Office at approximately 10:30 a.m.
(Chicago time) on the date two Banking Days prior to the date as of
which the foreign exchange computation is made.
"Stated Amount" means the stated or face amount of a Letter of
Credit to the extent available at the time for drawing (subject to
presentment of all requested
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<PAGE> 27
documents), as the same may be increased or decreased from time to
time in accordance with the terms of such Letter of Credit.
"Subordinated Indebtedness" means any Indebtedness of the
Company or Filtertek to Clarence V. Schawk constituting Subordinated
Indebtedness under the terms of the Intercreditor and Subordination
Agreement or the payment of which is otherwise fully and deeply
subordinated to payment of the Obligations to the written satisfaction
of the Agent and the Majority Banks including but not limited to: (i)
having a termination date after the Revolving Termination Date; (ii)
allowing no principal payments prior to the Revolving Termination Date
except to the extent expressly permitted by this Agreement; (iii)
accruing interest at a rate no greater than 2% per annum in excess of
the Base Rate; (iv) allowing no acceleration other than cross
acceleration to the acceleration of the Obligations; and (v) allowing
principal and accrued interest to be paid only to the extent that
after giving effect to the contemplated payment, no Default or Event
of Default exists or will exist.
"Subsidiary" of a Person means any corporation, association,
partnership, limited liability company, joint venture or other
business entity of which more than 50% of the voting stock, membership
interests or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the
Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the
Company.
"Subsidiary Guarantor" means, individually, each of the
Domestic Subsidiaries of the Company signatory to the Subsidiary
Guarantee Agreement and such other Subsidiaries from time to time
party to such Agreement and collectively, all of such Subsidiaries.
"Subsidiary Guarantee Agreement" means the Subsidiary
Guarantee Agreement in substantially the form of Exhibit H hereto,
dated as of the date hereof, made by the Subsidiary Guarantors in
favor of the beneficiaries named therein, as the same may be amended,
supplemented or otherwise modified from time to time in accordance
with its terms and the terms hereof.
"Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
"Swap Contract" means any agreement (including any master
agreement and any agreement, whether or not in
20
<PAGE> 28
writing, relating to any single transaction) that is an interest rate
swap agreement, basis swap, forward rate agreement, commodity swap,
commodity option, equity or equity index swap or option, bond option,
interest rate option, forward foreign exchange agreement, rate cap,
collar or floor agreement, currency swap agreement, cross-currency
rate swap agreement, swaption, currency option or any other, similar
agreement (including any option to enter into any of the foregoing).
"Taxes" means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Bank and the Agent,
such taxes (including income taxes or franchise taxes) as are imposed
on or measured by each Bank's or Agent's net income by the
jurisdiction (or any political subdivision thereof) under the laws of
which such Bank or the Agent, as the case may be, is organized or
maintains a lending office.
"Trade Letter of Credit" means a trade or commercial Letter of
Credit issued by the Issuing Bank pursuant to Section 2.16.
"Type" has the meaning specified in the definition of "Loan."
"Total Capitalization" means the sum of Funded Debt and total
stockholders' equity (excluding treasury stock) of the Company.
"Unfunded Pension Liability" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Plan's assets, determined in accordance with the
assumptions used for funding the Pension Plan pursuant to Section 412
of the Code for the applicable plan year.
"United States" and "U.S." each means the United States of
America.
"Wholly-Owned Subsidiary" means any Subsidiary in which (other
than directors' qualifying shares required by law) 100% of the capital
stock of each class having ordinary voting power, and 100% of the
capital stock of every other class, in each case, at the time as of
which any determination is being made, is owned, beneficially and of
record, by the Company, or by one or more of the other Wholly-Owned
Subsidiaries, or both.
1.2 Other Interpretive Provisions. (a) The meanings of defined
terms are equally applicable to the singular and plural forms of the defined
terms.
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<PAGE> 29
(b) The words "hereof", "herein", "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices
and other writings, however evidenced.
(ii) The term "including" is not limiting and
means "including without limitation."
(iii) In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from
and including"; the words "to" and "until" each mean "to but
excluding", and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i)
references to agreements (including this Agreement) and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and (ii)
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use
several different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are cumulative
and shall each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the
result of negotiations among and have been reviewed by counsel to the Agent,
the Borrowers and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Banks or the Agent merely
because of the Agent's or Banks' involvement in their preparation.
1.3 Accounting Principles. (a) Unless the context otherwise
clearly requires, all accounting terms not expressly defined herein shall be
construed, and all financial computations required under this Agreement shall
be made, in accordance with GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal
quarter" refer to such fiscal periods of the Company.
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<PAGE> 30
1.4 Currency Equivalents Generally. For all purposes of
this Agreement (but not for purposes of the preparation of any financial
statements delivered pursuant hereto), the equivalent in any Offshore Currency
or other currency of an amount in Dollars, and the equivalent in Dollars of an
amount in any Offshore Currency or other currency, shall be determined at the
Spot Rate.
ARTICLE II
THE CREDITS
2.1 Amounts and Terms of Commitments. Each Bank severally agrees,
on the terms and conditions set forth herein, to make loans to the Borrowers
(each such loan, a "Revolving Loan") and to participate in Letters of Credit
from time to time on any Business Day during the period from the Closing Date
to the Revolving Termination Date, in an aggregate principal Dollar Equivalent
amount not to exceed at any time outstanding the amount set forth opposite the
Bank's name in Schedule 2.1(b) under the heading "Commitment" (such amount as
the same may be reduced pursuant to Section 2.6 or as a result of one or more
assignments pursuant to Section 11.8, the Bank's "Commitment"); provided,
however, that, after giving effect to any Borrowing of Revolving Loans or
issuance of a Letter of Credit, the aggregate principal Dollar Equivalent
amount of all outstanding Revolving Loans plus the aggregate amount of
outstanding LC Obligations shall not exceed the combined Commitments; and
provided further that, after giving effect to any Borrowing of Offshore
Currency Loans, the aggregate principal Dollar Equivalent amount of all
outstanding Offshore Currency Loans shall not exceed the Offshore Currency Loan
Sublimit. Within the limits of each Bank's Commitment, and subject to the
other terms and conditions hereof, the Borrowers may borrow under this
subsection 2.1(b), prepay pursuant to Section 2.6 and reborrow pursuant to this
subsection 2.1(b).
2.2 Loan Accounts. (a) The Loans made by each Bank shall be
evidenced by one or more loan accounts or records maintained by such Bank in
the ordinary course of business. The loan accounts or records maintained by
the Agent and each Bank shall be presumptive evidence of the amount of the
Loans made by the Banks to the applicable Borrower and the interest and
payments thereon. Any failure so to record or any error in doing so shall not,
however, limit or otherwise affect the obligation of the Borrowers hereunder to
pay any amount owing with respect to the Loans.
(b) The Loans made by such Bank shall also be evidenced
by one or more Notes as provided herein. Each such Bank shall endorse on the
schedules annexed to its Note(s) the date, amount and maturity of each Loan
made by it and the amount and Applicable Currency of each payment of principal
made by the applicable Borrower with respect thereto. Each such Bank is
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<PAGE> 31
irrevocably authorized by the Borrowers to endorse its Note(s) and each Bank's
record shall be conclusive absent manifest error; provided, however, that the
failure of a Bank to make, or an error in making, a notation thereon with
respect to any Loan shall not limit or otherwise affect the obligations of the
Borrowers hereunder or under any such Note to such Bank.
2.3 Procedure for Borrowing. (a) Each Borrowing shall be made
upon the applicable Borrower's irrevocable written notice in substantially the
form attached hereto as Exhibit 2.3 (or telephonic notice promptly confirmed in
writing) delivered to the Agent in the form of a Notice of Borrowing (which
notice must be received by the Agent prior to 10:30 a.m. (Chicago time) (i)
four Business Days prior to the requested Borrowing Date, in the case of
Offshore Currency Loans; (ii) two Business Days prior to the requested
Borrowing Date, in the case of Offshore Rate Loans denominated in Dollars; and
(iii) on the requested Borrowing Date, in the case of Base Rate Loans),
specifying:
(A) the applicable Borrower;
(B) the amount of the Borrowing, which
shall be in an aggregate amount not less than the Minimum
Tranche;
(C) the requested Borrowing Date, which
shall be a Business Day;
(D) the Type of Loans comprising the
Borrowing;
(E) the duration of the Interest Period
applicable to such Loans included in such notice. If the
Notice of Borrowing fails to specify the duration of the
Interest Period for any Borrowing comprised of Offshore Rate
Loans, such Interest Period shall be three months; and
(F) in the case of a Borrowing comprised
of Offshore Currency Loans, the Applicable Currency.
provided, however, that with respect to the Borrowing to be made on the Closing
Date, the Notice of Borrowing shall be delivered to the Agent not later than
10:30 a.m. (Chicago time) on the Closing Date and such Borrowing will consist
of Base Rate Loans or, Offshore Rate Loan in Dollars if the applicable Borrower
has notified the Agent and the Banks at least three Business Days prior to the
Closing Date and at such time has agreed to pay losses and expenses, in the
same manner as required by Section 3.4 in the event the initial Borrowing does
not occur in accordance with such request.
(b) The Dollar Equivalent amount of any Borrowing in an
Offshore Currency will be determined by the Agent for such Borrowing on the
Computation Date therefor in accordance with
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<PAGE> 32
subsection 2.5(a). Upon receipt of the Notice of Borrowing, the Agent will
promptly notify each Bank thereof and of the amount of such Bank's Pro Rata
Share of the Borrowing. In the case of a Borrowing comprised of Offshore
Currency Loans, the Agent will, upon the determination of the Dollar Equivalent
amount of the Borrowing as specified in the Notice of Borrowing, promptly
notify each Bank of such Dollar Equivalent amount.
(c) Each Bank will make the amount of its Pro Rata Share
of each Borrowing available to the Agent for the account of the Borrower at the
Agent's Payment Office on the Borrowing Date requested by such Borrower in the
Same Day Funds and in the requested currency (i) in the case of a Borrowing
comprised of Loans in Dollars, by 12:00 noon (Chicago time), (ii) in the case
of a Borrowing comprised of Offshore Currency Loans, by such time, on or after
12:00 noon (local time at the place of funding) as the Agent may specify. The
proceeds of all such Loans will then be made available to the applicable
Borrower by the Agent at such office by crediting the account of the applicable
Borrower on the books of BofA with the aggregate of the amounts made available
to the Agent by the Banks and in or by wire transfer in accordance with written
instructions provided to the Agent by the applicable Borrower of like funds as
received by the Agent.
(d) After giving effect to any Borrowing, there may not
be more than eight different Interest Periods in effect.
2.4 Conversion and Continuation Elections. (a) The applicable
Borrower may, upon irrevocable written notice to the Agent in accordance with
subsection 2.4(b):
(i) elect, as of any Business Day, in the case of
Base Rate Loans, or as of the last day of the applicable Interest
Period, in the case of any other Type of Loans denominated in Dollars,
to convert any such Loans (or any part thereof in an amount not less
than the Minimum Tranche) into Loans in Dollars of any other Type; or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any Loans having Interest Periods
expiring on such day (or any part thereof in an amount not less than
the Minimum Tranche);
provided, that if at any time the aggregate amount of Offshore Rate Loans
denominated in Dollars in respect of any Borrowing is reduced, by payment,
prepayment, or conversion of part thereof to be less than $1,000,000, such
Offshore Rate Loans denominated in Dollars shall automatically convert into
Base Rate Loans, and on and after such date the right of the applicable
Borrower to continue such Loans as, and convert such Loans into Offshore Rate
Loans shall terminate.
(b) The applicable Borrower shall deliver a Notice of
Conversion/Continuation to be received by the Agent not later
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<PAGE> 33
than 10:30 a.m. (Chicago time) (i) at least two Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or
continued as Offshore Rate Loans denominated in Dollars; (ii) at least four
Business Days in advance of the continuation date, if the Loans are to be
continued as Offshore Currency Loans; and (iii) on the Conversion/Continuation
Date, if the Loans are to be converted into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation
Date;
(B) the aggregate amount of Loans to be
converted or continued;
(C) the Type of Loans resulting from the
proposed conversion or continuation; and
(D) other than in the case of
conversions into Base Rate Loans, the duration of the
requested Interest Period.
(c) If upon the expiration of any Interest Period
applicable to Offshore Rate Loans in Dollars, the applicable Borrower has
failed to select timely a new Interest Period to be applicable to such Offshore
Rate Loans, as the case may be, or if any Default or Event of Default then
exists, the applicable Borrower shall be deemed to have elected to convert such
Offshore Rate Loans into Base Rate Loans effective as of the expiration date of
such Interest Period. If the applicable Borrower has failed to select a new
Interest Period to be applicable to Offshore Currency Loans prior to the fourth
Business Day in advance of the expiration date of the current Interest Period
applicable thereto as provided in subsection 2.4(b), or if any Default or Event
of Default shall then exist, subject to the provisions of subsection 2.5(d),
the applicable Borrower shall be deemed to have elected to continue such
Offshore Currency Loans on the basis of a one month Interest Period. The Agent
shall give the applicable Borrower prompt written notice of any such conversion
or continuation.
(d) The Agent will promptly notify each Bank of its
receipt of a Notice of Conversion/Continuation, or, if no timely notice is
provided by the applicable Borrower, the Agent will promptly notify each Bank
of the details of any automatic conversion. All conversions and continuations
shall be made ratably according to the respective outstanding principal amounts
of the Loans with respect to which the notice was given held by each Bank.
(e) Unless the Majority Banks otherwise agree, during the
existence of a Default or Event of Default, no Borrower may elect to have a
Loan in Dollars converted into or continued as an Offshore Rate Loan in Dollars
or an Offshore Currency Loan
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<PAGE> 34
continued on the basis of an Interest Period exceeding one month.
(f) After giving effect to any conversion or continuation
of Loans, there may not be more than eight different Interest Periods in
effect.
2.5 Utilization of Revolving Commitments in Offshore Currencies.
(a) The Agent will determine the Dollar Equivalent
amount with respect to any (i) Borrowing comprised of Offshore
Currency Loans as of the requested Borrowing Date, (ii) outstanding Offshore
Currency Loans as of the last Banking Day of each month, and (iii) outstanding
Offshore Currency Loans as of any redenomination date pursuant to this Section
2.5 or Section 3.5 (each such date under clauses (i) through (iii) a
"Computation Date").
(b) In the case of a proposed Borrowing comprised of
Offshore Currency Loans, the Banks shall be under no obligation to make
Offshore Currency Loans in the requested Offshore Currency as part of such
Borrowing if the Agent has received notice from any of the Banks by 3:00 p.m.
(Chicago time) four Business Days prior to the day of such Borrowing that such
Bank cannot provide Loans in the requested Offshore Currency, in which event
the Agent will give notice to the applicable Borrower no later than 10:30 a.m.
(Chicago time) on the third Business Day prior to the date of such Borrowing
that the Borrowing in the requested Offshore Currency is not then available,
and notice thereof also will be given promptly by the Agent to the Banks. If
the Agent shall have so notified the applicable Borrower that any such
Borrowing in a requested Offshore Currency is not then available, the
applicable Borrower may, by notice to the Agent not later than 5:00 p.m.
(Chicago time) three Business Days prior to the requested date of such
Borrowing, withdraw the Notice of Borrowing relating to such requested
Borrowing. If the applicable Borrower does so withdraw such Notice of
Borrowing, the Borrowing requested therein shall not occur and the Agent will
promptly notify each Bank. If the applicable Borrower does not so withdraw
such Notice of Borrowing, the Agent will promptly notify each Bank and such
Notice of Borrowing shall be deemed to be a Notice of Borrowing that requests a
Borrowing comprised of Base Rate Loans in an aggregate amount equal to the
amount of the originally requested Borrowing as expressed in Dollars in the
Notice of Borrowing; and in such notice by the Agent to each Bank the Agent
will state such aggregate amount of such Borrowing in Dollars and such Bank's
Pro Rata Share thereof.
(c) In the case of a proposed continuation of Offshore
Currency Loans for an additional Interest Period pursuant to Section 2.4, the
Banks shall be under no obligation to continue such Offshore Currency Loans if
the Agent has received notice from any of the Banks by 3:00 p.m. (Chicago time)
four Business Days prior to the day of such continuation that such Bank cannot
continue to provide Loans in the relevant
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<PAGE> 35
Offshore Currency, in which event the Agent will give notice to the applicable
Borrower not later than 10:30 a.m. (Chicago time) on the third Business Day
prior to the requested date of such continuation that the continuation of such
Offshore Currency Loans in the relevant Offshore Currency is not then
available, and notice thereof also will be given promptly by the Agent to the
Banks. If the Agent shall have so notified the applicable Borrower that any
such continuation of Offshore Currency Loans is not then available, any Notice
of Continuation/Conversion with respect thereto shall be deemed withdrawn and
such Offshore Currency Loans shall be redenominated into Base Rate Loans in
Dollars with effect from the last day of the Interest Period with respect to
any such Offshore Currency Loans. The Agent will promptly notify the
applicable Borrower and the Banks of any such redenomination and in such notice
by the Agent to each Bank the Agent will state the aggregate Dollar Equivalent
amount of the redenominated Offshore Currency Loans as of the Computation Date
with respect thereto and such Bank's Pro Rata Share thereof.
(d) Notwithstanding anything herein to the contrary,
during the existence of a Default or an Event of Default, upon the request of
the Majority Banks, all or any part of any outstanding Offshore Currency Loans
shall be redenominated and converted into Base Rate Loans in Dollars with
effect from the last day of the Interest Period with respect to any such
Offshore Currency Loans. The Agent will promptly notify the applicable
Borrower of any such redenomination and conversion request.
(e) The Borrowers shall be entitled to request that
Revolving Loans hereunder also be permitted to be made in any other lawful
currency constituting a eurocurrency (other than Dollars), in addition to the
eurocurrencies specified in the definition of "Offshore Currency" herein, that
in the opinion of the Agent and the Majority Banks is at such time freely
traded in the offshore interbank foreign exchange markets and is freely
transferable and freely convertible into Dollars (an "Agreed Alternative
Currency"). A Borrower shall deliver to the Agent any request for designation
of an Agreed Alternate Currency in accordance with Section 11.2, to be received
by the Agent not later than 10:30 a.m. (Chicago time) at least ten Business
Days in advance of the date of any Borrowing hereunder proposed to be made in
such Agreed Alternate Currency. Upon receipt of any such request the Agent
will promptly notify the Banks thereof, and each Bank will use its best efforts
to respond to such request within two Business Days of receipt thereof. Each
Bank may grant or accept such request in its sole discretion. The Agent will
promptly notify the applicable Borrower of the acceptance or rejection of any
such request.
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<PAGE> 36
2.6 Reduction of Commitments; Mandatory Prepayments.
(a) Scheduled Reductions. The combined Commitments shall
be automatically and permanently reduced by the amounts and on the dates set
forth below:
<TABLE>
<CAPTION>
Date Amount of Reduction
---- to combined Commitments
-----------------------
<S> <C>
December 31, 1996 $7,500,000
December 31, 1997 $7,500,000
December 31, 1998 $7,500,000
December 31, 1999 $7,500,000
Revolving Termination Date Balance
</TABLE>
Each reduction of the Commitments shall be applied to each Bank according to
its Pro Rata Share. The Borrowers agree that they will, on or before the date
of any scheduled reduction pursuant to the above table, make a mandatory
prepayment to the Agent in the amount necessary to reduce the sum of (i) the
Dollar Equivalent of the aggregate principal amount of the outstanding
Revolving Loans plus (ii) the LC Obligations to an amount which is less than or
equal to the combined Commitments after giving effect to such scheduled
reduction.
(b) Voluntary Reductions. The Borrowers may, upon not
less than five Business Days' prior notice to the Agent, terminate the
Commitments, or permanently reduce the Commitments by an aggregate minimum
Dollar Equivalent amount of $2,000,000 or any Dollar Equivalent multiple of
$1,000,000 in excess thereof; unless, after giving effect thereto and to any
prepayments of Loans made on the effective date thereof, the sum of the
then-outstanding principal Dollar Equivalent amount of the Loans plus the LC
Obligations would exceed the amount of the combined Commitments then in effect.
Once reduced in accordance with this Section, the Commitments may not be
increased. Any reduction of the Commitments shall be applied to each Bank
according to its Pro Rata Share. All accrued commitment fees to, but not
including the effective date of any reduction or termination of Commitments,
shall be paid on the effective date of such reduction or termination.
2.7 Optional Prepayments. Subject to Section 3.4, any Borrower
may, at any time or from time to time, upon not less than 5 Business Days'
irrevocable notice to the Agent, ratably prepay Loans in whole or in part, in
minimum Dollar Equivalent amounts of $1,000,000 or any multiple of 500,000
units of the Applicable Currency in excess thereof. The applicable Borrower
shall deliver a notice of prepayment in accordance with Section 11.2 to be
received by the Agent not later than 10:30 a.m. (Chicago time) (i) at least
four Business Days in advance of the
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<PAGE> 37
prepayment date if the Loans to be prepaid are Offshore Currency Loan or at
least two Business Days in advance of the prepayment date if the Loans to be
prepaid are Offshore Rate Loans in Dollars, and (iii) on the prepayment date if
the Loans to be prepaid are Base Rate Loans. Such notice of prepayment shall
specify the date and amount of such prepayment, the applicable Borrower and
whether such prepayment is of Base Rate Loans, or Offshore Rate Loans, or any
combination thereof, and the Applicable Currency. Such notice shall not
thereafter be revocable by the applicable Borrower and the Agent will promptly
notify each Bank thereof and of such Bank's Pro Rata Share of such prepayment.
If such notice is given by a Borrower, such Borrower shall make such prepayment
and the payment amount specified in such notice shall be due and payable on the
date specified therein, together with accrued interest to each such date on the
amount prepaid and any amounts required pursuant to Section 3.4.
2.8 Currency Exchange Fluctuations. Subject to Section 3.4, if on
any Computation Date the Agent shall have determined that the aggregate Dollar
Equivalent principal amount of all Loans then outstanding plus the aggregate
amount of outstanding LC Obligations exceeds the combined Commitments of the
Banks by more than $500,000, due to a change in applicable rates of exchange
between Dollars and Offshore Currencies, then the Agent shall give notice to
the Borrowers that a prepayment is required under this Section, and the
Borrowers, jointly and severally agree thereupon to make prepayments of Loans
such that, after giving effect to such prepayment the aggregate Dollar
Equivalent amount of all Loans plus the aggregate amount of outstanding LC
Obligations does not exceed the combined Commitments.
2.9 Repayment. The Borrowers, jointly and severally, agree to
repay to the Banks on the Revolving Termination Date the aggregate principal
amount of Revolving Loans and all other unpaid Obligations then due and
outstanding on such date.
2.10 Interest. (a) Each Loan shall bear interest on the
outstanding principal amount thereof from the applicable Borrowing Date at a
rate per annum equal to the Offshore Rate plus the Applicable Margin or the
Base Rate, as the case may be (and subject to the Borrower's right to convert
to other Types of Loans under Section 2.4).
(b) The applicable Borrower shall pay interest on each
Loan made to it in arrears on each Interest Payment Date. Interest shall also
be paid by the applicable Borrower on the date of any prepayment of Loans under
Section 2.7 or 2.8 for the portion of the Loans so prepaid and upon payment
(including prepayment) in full thereof and, during the existence of any Event
of Default, interest shall be paid by the applicable Borrower on demand of the
Agent at the request or with the consent of the Majority Banks.
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(c) Notwithstanding subsection (a) of this Section, while
any Event of Default exists or after acceleration, the applicable Borrower
shall pay interest (after as well as before entry of judgment thereon to the
extent permitted by law) on the principal amount of all outstanding
Obligations, at a rate per annum which is determined by adding 2% per annum to
the sum of the rate then in effect for such Loans plus the Applicable Margin
and, in the case of Obligations not subject to an Applicable Margin, at a rate
per annum equal to the Base Rate plus 2%; provided, however, that, on and after
the expiration of any Interest Period applicable to any Offshore Rate Loan
outstanding on the date of occurrence of such Event of Default or acceleration,
the principal amount of such Loan shall, during the continuation of such Event
of Default or after acceleration, bear interest at a rate per annum equal to
the Base Rate plus 2%.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Borrowers to any Bank hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by such Bank would be contrary
to the provisions of any law applicable to such Bank limiting the highest rate
of interest that may be lawfully contracted for, charged or received by such
Bank, and in such event the Borrowers shall pay such Bank interest at the
highest rate permitted by applicable law.
2.11 Fees. (a) Arrangement, Agency Fees. The Borrowers shall pay
the fees to the Agent for the Agent's own account, as required by the letter
agreement ("Fee Letter") between the Borrowers and the Agent dated June 23,
1995.
(b) Commitment Fees. Filtertek agrees to pay to the
Agent for the account of each Bank a commitment fee on the average daily unused
portion of such Bank's Commitment, computed on a quarterly basis in arrears on
the last Business Day of each calendar quarter based upon the daily utilization
for that quarter as calculated by the Agent, equal to .20% per annum. Such
commitment fee shall accrue from the Closing Date to the Revolving Termination
Date and shall be due and payable quarterly in arrears on the last Business Day
of each calendar quarter commencing on June 30, 1995 through the Revolving
Termination Date, with the final payment to be made on the Revolving
Termination Date; provided that, in connection with any reduction or
termination of Commitments under Section 2.6 or Section 2.8, the accrued
commitment fee calculated for the period ending on such date shall also be paid
on the date of such reduction or termination, with the following quarterly
payment being calculated on the basis of the period from such reduction or
termination date to such quarterly payment date. The commitment fees provided
in this subsection shall accrue at all times after the above-mentioned
commencement date, including
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<PAGE> 39
at any time during which one or more conditions in Article IV are not met.
2.12 Computation of Fees and Interest. (a) All computations of
interest for Base Rate Loans when the Base Rate is determined by BofA's
"reference rate" shall be made on the basis of a year of 365 or 366 days, as
the case may be, and actual days elapsed. All other computations of fees and
interest shall be made on the basis of a 360-day year and actual days elapsed
(which results in more interest being paid than if computed on the basis of a
365-day year). Interest and fees shall accrue during each period during which
interest or such fees are computed from the first day thereof to the last day
thereof.
(b) For purposes of determining utilization of each
Bank's Commitment in order to calculate the commitment fee due under Section
2.11(b), the amount of any outstanding Offshore Currency Loan on any date shall
be determined based upon the Dollar Equivalent amount as of the most recent
Computation Date with respect to such Offshore Currency Loan.
(c) Each determination of an interest rate or a Dollar
Equivalent amount by the Agent shall be conclusive and binding on the Borrowers
and the Banks in the absence of manifest error. The Agent will, at the request
of a Borrower or any Bank, deliver to such Borrower or the Bank, as the case
may be, a statement showing the quotations used by the Agent in determining any
interest rate or Dollar Equivalent amount.
2.13 Payments by the Borrowers. (a) All payments to be made by the
Borrowers shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Borrowers shall be
made to the Agent for the account of the Banks at the Agent's Payment Office,
and, with respect to principal of, interest on, and any other amounts relating
to, any Offshore Currency Loan, shall be made in the Offshore Currency in which
such Loan is denominated or payable, and, with respect to all other amounts
payable hereunder, shall be made in Dollars. Such payments shall be made in
Same Day Funds, and (i) in the case of Offshore Currency payments, no later
than such time on the dates specified herein as may be determined by the Agent
to be necessary for such payment to be credited on such date in accordance with
normal banking procedures in the place of payment, and (ii) in the case of any
Dollar payments, no later than 12:00 noon (Chicago time) on the date specified
herein. The Agent will promptly distribute to each Bank its Pro Rata Share (or
other applicable share as expressly provided herein) of such principal,
interest, fees or other amounts, in like funds as received. Any payment which
is received by the Agent later than 12:00 noon (Chicago time), or later than
the time specified by the Agent as provided in clause (i) above (in the case of
Offshore Currency payments), shall be deemed to have been received on the
following Business Day and any applicable interest or fee shall continue to
accrue.
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<PAGE> 40
(b) Subject to the provisions set forth in the definition
of "Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and
such extension of time shall in such case be included in the computation of
interest or fees, as the case may be.
(c) Unless the Agent receives notice from the applicable
Borrower prior to the date on which any payment is due to the Banks that the
applicable Borrower will not make such payment in full as and when required,
the Agent may assume that the applicable Borrower has made such payment in full
to the Agent on such date in Same Day Funds and the Agent may (but shall not be
so required), in reliance upon such assumption, distribute to each Bank on such
due date an amount equal to the amount then due such Bank. If and to the
extent the Borrower has not made such payment in full to the Agent, each Bank
shall repay to the Agent on demand such amount distributed to such Bank,
together with interest thereon at the Federal Funds Rate or, in the case of a
payment in an Offshore Currency, the Overnight Rate, for each day from the date
such amount is distributed to such Bank until the date repaid.
(d) All payments on account of or with respect to any
Note and the principal of, and interest on, the Loans, the Letters of Credit
and all other amounts payable under this Agreement by any Borrower to the
Agent, any Issuing Bank or any Bank shall be made in the Applicable Currency,
without set-off or counterclaim and free and clear of and without reduction by
reason of all present and future income, stamp and other taxes and levies,
imposts, duties, deductions, charges, compulsory loans and withholdings
whatsoever imposed, assessed, levied or collected by the U.S., any state or
local government, any foreign government, any territory or possession of the
U.S. or any political subdivision of taxing authority thereof or therein,
together with interest thereon and penalties with respect thereto, if any, on
or in respect of this Agreement, the Loans, any Note, any Letter of Credit, the
registration, notarization or other formalization of any thereof, and any
payments of principal, interest, charges, fees or other amounts made on, under
or in respect thereof, other than any tax on or measured by the overall net
income of a Bank pursuant to the income tax laws of the United States or the
jurisdictions where such Bank's principal or lending offices are located
(hereinafter called "Taxes"), all of which will be paid by such Borrower, for
its own account, prior to the date on which any interest or penalties attach
thereto.
(e) Each Borrower will indemnify the Agent and each Bank
against, and reimburse the Agent and each Bank on demand for, any Taxes and any
loss, liability, claim, or expense including interest, penalties, and legal
fees which the Agent or the Bank may incur at any time arising out of or in
connection with any failure of such Borrower to make any payments of Taxes when
due.
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(f) In the event that any Borrower is required by
applicable law, decree or regulation to deduct or withhold Taxes from any
amounts payable on, under or in respect of this Agreement, under any Note or
Letter of Credit, such Borrower shall pay in United States Dollars such
additional amount as may be required, after the deduction or withholding of
Taxes, to enable the Agent or the Issuing Banks, as the case may be, to receive
from such Borrower an amount equal to the amount stated to be payable under or
with respect to this Agreement, any Note or Letter of Credit.
(g) Each Borrower shall promptly furnish to the Agent
original tax receipts in respect of any withholding of Taxes required under
this Section 3.9 and any other information, documents and receipts that the
Agent may, in its sole discretion from time to time, require to establish to
its satisfaction that full and timely payment has been made of all Taxes
required to be paid under this Section 3.9.
(h) The covenants and agreements of the Borrowers under
this Section 2.13 shall survive the repayment of the Obligations and the Notes.
2.14 Payments by the Banks to the Agent. (a) Unless the Agent
receives notice from a Bank on or prior to the Closing Date or, with respect to
any Borrowing after the Closing Date, at least one Business Day prior to the
date of such Borrowing, that such Bank will not make available as and when
required hereunder to the Agent for the account of the Borrower the amount of
that Bank's Pro Rata Share of the Borrowing, the Agent may assume that each
Bank has made such amount available to the Agent in Same Day Funds on the
Borrowing Date and the Agent may (but shall not be so required), in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent any Bank shall not have made its
full amount available to the Agent in Same Day Funds and the Agent in such
circumstances has made available to the Borrower such amount, that Bank shall
on the Business Day following such Borrowing Date make such amount available to
the Agent, together with interest at the Federal Funds Rate or, in the case of
any Borrowing consisting of Offshore Currency Loans, the Overnight Rate, for
each day during such period. A notice of the Agent submitted to any Bank with
respect to amounts owing under this subsection 2.14(a) shall be conclusive,
absent manifest error. If such amount is so made available, such payment to
the Agent shall constitute such Bank's Loan on the date of Borrowing for all
purposes of this Agreement. If such amount is not made available to the Agent
on the Business Day following the Borrowing Date, the Agent will notify the
Borrowers of such failure to fund and, upon demand by the Agent, the Borrowers,
jointly and severally, agree to pay such amount to the Agent for the Agent's
account, together with interest thereon for each day elapsed since the date of
such Borrowing, at a rate per annum equal to the interest rate applicable at
the time to the Loans comprising such Borrowing.
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(b) The failure of any Bank to make any Loan on any
Borrowing Date shall not relieve any other Bank of any obligation hereunder to
make a Loan on such Borrowing Date, but no Bank shall be responsible for the
failure of any other Bank to make the Loan to be made by such other Bank on any
Borrowing Date.
2.15 Sharing of Payments, Etc. If, other than as expressly
provided elsewhere herein, any Bank shall obtain on account of the Loans made
by it any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) in excess of its Pro Rata Share, such Bank
shall immediately (a) notify the Agent of such fact, and (b) purchase from the
other Banks such participations in the Loans made by them as shall be necessary
to cause such purchasing Bank to share the excess payment pro rata with each of
them; provided, however, that if all or any portion of such excess payment is
thereafter recovered from the purchasing Bank, such purchase shall to that
extent be rescinded and each other Bank shall repay to the purchasing Bank the
purchase price paid therefor, together with an amount equal to such paying
Bank's ratable share (according to the proportion of (i) the amount of such
paying Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Borrowers
agree that any Bank so purchasing a participation from another Bank may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off, but subject to Section 11.9) with respect to such
participation as fully as if such Bank were the direct creditor of the Borrower
in the amount of such participation. The Agent will keep records (which shall
be conclusive and binding in the absence of manifest error) of participations
purchased under this Section and will in each case notify the Banks following
any such purchases or repayments.
2.16 Amount and Terms of Letters of Credit.
(a) Letter of Credit Commitments; Terms of Letters of Credit.
(i) Subject to and upon the terms and conditions herein
set forth, at any time and from time to time on or after the date
hereof and to but not including a date which is thirty (30) days prior
to the Revolving Termination Date, each Bank selected by a Borrower
which is reasonably acceptable to the Agent (and which agrees to
perform the services of a fronting bank) agrees to issue (in such
capacity, an "Issuing Bank") in its own name or through an Affiliate,
one or more Letters of Credit for the account of the applicable
Borrower in an aggregate Stated Amount in Dollars at any one time
that, together with the aggregate Stated Amount of all other Letters
of Credit issued pursuant hereto, does not exceed the Letter of Credit
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Commitment Sublimit; provided, however, that no Issuing Bank
shall issue or extend the expiration of any Letter of Credit if,
immediately after giving effect to such issuance or extension, (A) the
aggregate LC Obligations in respect of Letters of Credit at such time
would exceed the Letter of Credit Commitment Sublimit or (B) the
Commitment of any Bank would be exceeded or (C) the Agent has not
approved such issuance. Each Bank severally, but not jointly, agrees
to participate in each such Letter of Credit issued by an Issuing Bank
ratably according to its Pro Rata Share and to make available to such
Issuing Bank such Bank's Pro Rata Share of any payment made to the
beneficiary of such Letter of Credit to the extent not reimbursed by
the applicable Borrower; provided, however, that no Bank shall be
required to participate in any Letter of Credit to the extent that its
participation therein would exceed such Bank's Commitment then in
effect. No Bank's obligation to participate in any Letter of Credit
or to make available to an Issuing Bank such Bank's Pro Rata Share of
any Letter of Credit Payment made by the Issuing Bank shall be
affected by any other Bank's failure to participate in the same or any
other Letter of Credit or by any other Bank's failure to make
available to the relevant Issuing Bank such other Bank's Pro Rata
Share of any Letter of Credit Payment.
No Standby Letter of Credit or renewal thereof shall be dated
to expire later than the Revolving Termination Date and no Trade
Letter of Credit or renewal thereof shall be stated to expire later
than the day thirty (30) days prior to the Revolving Termination Date.
(b) Procedure for Issuance of Letters of Credit. Whenever a
Borrower desires the issuance of a Letter of Credit hereunder, it shall give
the relevant Issuing Bank (with a copy to the Agent) at least five (5) Business
Days' prior written notice specifying the requested day of issuance thereof
(which day shall be a Business Day), such notice to be given prior to 10:00
a.m. (Chicago time) on the date specified for the giving of such notice. Each
such notice (each, a "Letter of Credit Request") shall be in the form of
Exhibit J hereto and shall specify (A) the name of the Bank which the
applicable Borrower would like to act as the Issuing Bank, (B) the proposed
issuance date and expiration date of the requested Letter of Credit, (C) the
name and address of the beneficiary (which Person shall be reasonably
acceptable to the Issuing Bank), (D) the Stated Amount of such Letter of
Credit, (E) the purpose of such Letter of Credit (which shall be acceptable to
the Issuing Bank), and (F) such other information as the Agent or the Issuing
Bank may reasonably request. The Agent shall notify the Banks as to issuance
of Letters of Credit hereunder. In addition, each Letter of Credit Request
shall contain a description of the terms and conditions to be included in the
proposed Letter of Credit (all of which terms and conditions shall be
acceptable to the Issuing Bank). No Letter of Credit shall contain any
provision for payment thereunder at any time earlier than 2:00
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p.m. (Chicago time) on the first Business Day after the presentation of all
drafts, demands for payment and all other documents, if any, required to be
presented pursuant to such Letter of Credit. Unless otherwise specified, all
Letters of Credit will be governed by the Uniform Customs and Practice for
Documentary Credits of the International Chamber of Commerce as in effect on
the date of issuance of such Letter of Credit. On the Business Day specified
by the applicable Borrower and upon fulfillment or waiver of the applicable
conditions set forth in Article IV, the Issuing Bank will issue the requested
Letter of Credit to the applicable beneficiary.
(c) Draws upon Letters of Credit; Reimbursement Obligations. In
the event of any request for drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Bank shall give telephonic notice to the
applicable Borrower and the Agent (x) confirming receipt of such request and
(y) of the date on or before which the Issuing Bank intends to honor such
drawing, and the applicable Borrower shall reimburse the Agent for the account
of the Issuing Bank on the day on which such drawing is honored in an amount in
Dollars in same day funds equal to the amount of such drawing; provided,
however, that, anything contained in this Agreement to the contrary
notwithstanding, (i) unless the applicable Borrower shall have notified the
Agent and the Issuing Bank prior to 10:00 a.m. (Chicago time) on the Business
Day of such drawing that the applicable Borrower intends to reimburse the Agent
for the account of the Issuing Bank for the amount of such drawing with funds
other than the proceeds of Loans, the applicable Borrower shall be deemed to
have timely given a Notice of Borrowing to the Agent requesting each Bank to
make Loans on the date on which such drawing is honored in an amount equal to
the amount of such drawing and (ii) subject to satisfaction or waiver of the
conditions specified in Section 4.2, each such Bank shall, on the date of such
drawing, make Base Rate Loans in the amount of its Pro Rata Share of such
drawing, the proceeds of which shall be applied directly by the Agent to
reimburse the Issuing Bank for the amount of such drawing; provided, further,
that, if for any reason, proceeds of Base Rate Loans are not received by the
Issuing Bank on such date in an amount equal to the amount of such drawing, the
applicable Borrower shall reimburse the Issuing Bank, on the Business Day
immediately following the date of such drawing, in an amount in Same Day Funds
equal to the excess of the amount of such drawing over the amount of such Base
Rate Loans, if any, which are so received, plus accrued interest on such amount
at the Base Rate.
(d) Banks' Participation in Letters of Credit. In the event that
the Borrowers shall fail to reimburse the Agent for the account of the Issuing
Bank as provided in Section 2.16(c) in an amount equal to the amount of any
drawing honored by the Issuing Bank under a Letter of Credit issued by it in
accordance with the terms hereof, the Agent shall promptly notify each Bank of
the unreimbursed amount of such drawing and of such Bank's respective
participation therein. Each such Bank shall make
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available to the Agent for the account of the Issuing Bank an amount equal to
its Pro Rata Share of such drawing in same day funds, together with interest
thereon at the Federal Funds Rate for the period from the date of funding of
such drawing to the date of payment by such Bank, at the office of the Agent
specified in such notice, not later than 1:00 p.m. (Chicago time) on the
Business Day after the date such Bank is notified by the Agent. In the event
that any such Bank fails to make available to the Agent for the account of the
Issuing Bank the amount of such Bank's participation in such Letter of Credit
as provided in this Section 2.16(d), the Agent shall be entitled to recover
such amount for the benefit of the Issuing Bank on demand from such Bank
together with interest at the Federal Funds Rate for two Business Days and
thereafter at the Base Rate. Nothing in this Section 2.16(d) shall be deemed
to prejudice the right of any Bank to recover from the Issuing Bank any amounts
made available by such Bank to the Issuing Bank pursuant to this Section
2.16(d) in the event that it is determined by a court of competent jurisdiction
that the payment with respect to a Letter of Credit by the Issuing Bank in
respect of which payment was made by such Bank constituted gross negligence or
willful misconduct on the part of the Issuing Bank. The Issuing Bank shall
distribute to the Agent for the account of each Bank which has paid all amounts
payable by it under this Section 2.16(d) with respect to any Letter of Credit
issued by such Issuing Bank such Bank's Pro Rata Share of all payments received
by such Issuing Bank from the applicable Borrower in reimbursement of drawings
honored by such Issuing Bank under such Letter of Credit when such payments are
received and shall promptly notify the Agent of such payment.
(e) Interest and Fees for Letters of Credit.
(i) Issuing Bank Fees. The applicable Borrower agrees to
pay the following amount to the Agent for the account of each Issuing
Bank with respect to Letters of Credit issued for the account of such
Borrower:
(A) with respect to drawings made under any
Letter of Credit, interest, payable on demand, on the amount
paid by such Issuing Bank in respect of each such drawing from
the date of the drawing through the date such amount is
reimbursed by the Borrowers (including any such reimbursement
out of the proceeds of Loans pursuant to Section 2.16(c)) or
the Banks at a rate which is at all times equal to 2% per
annum in excess of the Base Rate; and
(B) with respect to the issuance or amendment of
each Letter of Credit and each drawing made thereunder,
issuance, documentary and processing charges in accordance
with the Issuing Bank's agreement with the Borrower for such
charges in effect at the time of such issuance, amendment,
transfer or drawing, as the case may be; and
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(ii) Participating Bank Fees. The applicable Borrower
shall pay to the Agent, for the ratable account of the Lenders, based
upon the Lenders' respective Pro Rata Shares, a fee (the "LC
Commission") with respect to each (i) Letter of Credit that is a
Standby Letter of Credit, for the period from the Issuance Date
thereof to but including the final expiration date thereof, in an
amount equal to the product of (A) the average daily undrawn amount of
such Letter of Credit times (B) .75% per annum where such Letter of
Credit has a term of 1 year or more or .625% in any other case and
(ii) Letter of Credit that is a Trade Letter of Credit, in an amount
equal to the greater of $150 or .50% of the face amount of such Letter
of Credit. The LC Commission (i) relating to any Standby Letter of
Credit shall be due and payable in arrears on the last Business Day of
each calendar quarter, to the extent any such fees are then due and
unpaid, on the Revolving Termination Date and (ii) relating to any
Trade Letter of Credit shall be due and payable on the Issuance Date.
The Agent shall promptly remit such LC Commission, when paid, to the
other Lenders in accordance with their Pro Rata Share thereof.
Promptly upon receipt by the Agent of any amount described in clause
(i)(A) of this Section 2.16(e), the Agent shall distribute to each Bank that
has reimbursed the Agent for the account of the Issuing Bank in accordance with
Section 2.16(d) its Pro Rata Share of such amount. Amounts payable under
clauses (i)(B) of this Section 2.16(e) shall be payable directly to the Agent
for the account of the Issuing Bank.
(f) LC Obligations Unconditional. Subject to the last paragraph
of Section 2.16(g), the obligation of the Borrowers to reimburse the Agent for
the account of the Issuing Bank for drawings made under any Letter of Credit
issued by such Issuing Bank and the obligations of each Bank under Section
2.16(d) with respect thereto shall be unconditional and irrevocable and shall
be paid strictly in accordance with the terms of this Agreement under all
circumstances, including the following circumstances:
(i) any lack of validity or enforceability of such Letter
of Credit;
(ii) the existence of any claim, setoff, defense or other
right which the Borrowers or any of their Affiliates may have at any
time against a beneficiary or any transferee of such Letter of Credit
(or any Persons for which any such beneficiary or transferee may be
acting), the Issuing Bank, any Bank or any other Person, whether in
connection with this Agreement, the transactions contemplated herein
or any unrelated transaction (including any underlying transaction
between a Borrower or one of its Subsidiaries and the beneficiary of
such Letter of Credit);
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(iii) any draft, demand, certificate or any other document
presented under such Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;
(iv) payment by the Issuing Bank under such Letter of
Credit against presentation of a demand, draft or certificate or other
document which does not comply with the terms of such Letter of
Credit;
(v) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing; or
(vi) the fact that an Event of Default or a Default shall
have occurred and be continuing.
(g) Indemnification. In addition to amounts payable as elsewhere
provided in this Agreement, the Borrowers, jointly and severally hereby agree
to indemnify and hold harmless, the Issuing Bank from and against any and all
actions, suits, proceedings, liabilities, damages, or other claims of any kind
or nature whatsoever which may be made by or asserted against the Issuing Bank
as a result of (i) the issuance of the Letters of Credit, other than as a
result of the gross negligence or willful misconduct of the Issuing Bank or
(ii) the failure of the Issuing Bank to honor a drawing under any Letter of
Credit as a result of any act or omissions, whether rightful or wrongful, of
any present or future de jure or de facto government or Governmental Authority
(all such acts or omissions herein called "Government Acts"). As between the
Borrowers and the Issuing Bank, the Borrowers assume all risks of the acts and
omissions of, or misuse of the Letters of Credit issued by the Issuing Bank by,
the respective beneficiaries of such Letters of Credit. In furtherance and not
in limitation of the foregoing, the Issuing Bank shall not be responsible: (i)
for the form, validity, sufficiency, accuracy, genuineness or legal effect of
any document submitted by any party in connection with the application for and
issuance of or any drawing under such Letters of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any such Letter
of Credit or the rights or benefits thereunder or proceeds thereof, in whole or
in part, which may prove to be invalid or ineffective for any reason; (iii) for
failure of the beneficiary of any such Letter of Credit to comply fully with
conditions required in order to draw upon such Letter of Credit; (iv) for
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not they be
in cipher, (v) for errors in interpretation of technical terms; (vi) for any
loss or delay in the transmission or otherwise of any document required in
order to make a drawing under any such
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Letter of Credit or of the proceeds thereof; (vii) for the misapplication by
the beneficiary of any such Letter of Credit or the proceeds of any drawing
under such Letter of Credit; and (viii) for any consequences arising from
causes beyond the control of the Issuing Bank (including any Government Acts).
None of the above shall affect, impair, or prevent the vesting of any of the
Issuing Bank's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by the Issuing
Bank under or in connection with the Letters of Credit issued by it or the
related certificates, if taken or omitted in good faith, shall not put the
Issuing Bank under any resulting liability to the Borrowers. Notwithstanding
anything to the contrary contained in this Agreement, the Borrowers shall have
no obligation to indemnify the Issuing Bank in respect of any liability
incurred by the Issuing Bank arising solely out of the gross negligence or
willful misconduct of the Issuing Bank. The right of indemnification in the
first paragraph of this Section 2.16(g) shall not prejudice any rights that the
Borrowers may otherwise have against the Issuing Bank with respect to a Letter
of Credit issued hereunder.
(h) Stated Amount. The Stated Amount of each Letter of Credit
shall be such amount as the applicable Borrower and the Issuing Bank have
agreed to. For purposes of calculating the Stated Amount of any Letter of
Credit at any time:
(i) any increase in the Stated Amount of any Letter of
Credit by reason of any amendment to any Letter of Credit shall be
deemed effective under this Agreement as of the date the Issuing Bank
actually issues an amendment purporting to increase the Stated Amount
of such Letter of Credit in accordance with the terms hereof, whether
or not the Issuing Bank receives the consent of the Letter of Credit
beneficiary or beneficiaries to the amendment, provided that any
amendment which increases or renews such Letter of Credit shall be
subject to the requirements of Section 2.16(b) as if it where a new
issuance; and
(ii) any reduction in the Stated Amount of any Letter of
Credit by reason of any amendment to any Letter of Credit shall be
deemed effective under this Agreement as of the later of (x) the date
the Issuing Bank actually issues an amendment purporting to reduce the
Stated Amount of such Letter of Credit, whether or not the amendment
provides that the reduction be given effect as of an earlier date, or
(y) the date the Issuing Bank receives the written consent (including
by telex or facsimile transmission) of the Letter of Credit
beneficiary or beneficiaries to such reduction, which written consent
must be dated on or after the date of the amendment issued by the
Issuing Bank purporting to effect such reduction.
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ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.1 Taxes. (a) Any and all payments by any Borrower to each Bank
or the Agent under this Agreement and any other Loan Document shall be made
free and clear of, and without deduction or withholding for any Taxes. In
addition, the Borrowers shall pay all Other Taxes.
(b) The Borrowers, jointly and severally agree to
indemnify and hold harmless each Bank and the Agent for the full amount of
Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section) paid by the Bank or the
Agent and any liability (including penalties, interest, additions to tax and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date the Bank or the
Agent makes written demand therefor.
(c) If any Borrower shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Bank or the Agent, then:
(i) the sum payable shall be increased as
necessary so that after making all required deductions and
withholdings (including deductions and withholdings applicable to
additional sums payable under this Section) such Bank or the Agent, as
the case may be, receives an amount equal to the sum it would have
received had no such deductions or withholdings been made;
(ii) the applicable Borrower shall make such
deductions and withholdings;
(iii) the applicable Borrower shall pay the full
amount deducted or withheld to the relevant taxing authority or other
authority in accordance with applicable law; and
(iv) the applicable Borrower shall also pay to
each Bank or the Agent for the account of such Bank, at the time
interest is paid, all additional amounts which the respective Bank
specifies in writing in reasonable detail as necessary to preserve the
after-tax yield the Bank would have received if such Taxes or Other
Taxes had not been imposed.
(d) Within 30 days after the date of any payment by a
Borrower of Taxes or Other Taxes, such Borrower shall furnish
the Agent the original or a certified copy of a receipt evidencing
payment thereof, or other evidence of payment satisfactory to the
Agent.
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(e) If a Borrower is required to pay additional amounts
to any Bank or the Agent pursuant to subsection (c) of this Section, then such
Bank shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office so as to
eliminate any such additional payment by such Borrower which may thereafter
accrue, if such change in the judgment of such Bank is not otherwise
disadvantageous to such Bank or take such other non-disadvantageous action, if
any, which, in its sole discretion, it may deem appropriate to eliminate any
such additional payment.
3.2 Illegality. (a) If any Bank determines that the introduction
of any Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Bank or its applicable Lending Office to make
Offshore Rate Loans (including Offshore Rate Loans in any Applicable Currency),
then, on notice thereof by the Bank to the Borrowers through the Agent, any
obligation of that Bank to make Offshore Rate Loans shall be suspended until
the Bank notifies the Agent and the Borrowers that the circumstances giving
rise to such determination no longer exist.
(b) If a Bank determines that it is unlawful to maintain
any Offshore Rate Loan, the Borrowers shall, upon receipt of notice of such
fact and demand from such Bank (with a copy to the Agent), prepay in full such
Offshore Rate Loans of that Bank then outstanding, together with interest
accrued thereon and amounts required under Section 3.4, either on the last day
of the Interest Period thereof, if the Bank may lawfully continue to maintain
such Offshore Rate Loans to such day, or immediately, if the Bank may not
lawfully continue to maintain such Offshore Rate Loan. If any Borrower is
required to so prepay any Offshore Rate Loan, then concurrently with such
prepayment, such Borrower shall borrow from the affected Bank, in the amount of
such repayment, a Base Rate Loan.
(c) If the obligation of any Bank to make or maintain
Offshore Rate Loans has been so terminated or suspended, the Borrowers may
elect, by giving notice to the Bank through the Agent that all Loans which
would otherwise be made by the Bank as Offshore Rate Loans shall be instead
Base Rate Loans.
(d) Before giving any notice to the Agent under this
Section, the affected Bank shall designate a different Lending Office with
respect to its Offshore Rate Loans if such designation will avoid the need for
giving such notice or making such demand and will not, in the judgment of the
Bank, be illegal or otherwise disadvantageous to the Bank.
3.3 Increased Costs and Reduction of Return. (a) If any Bank
determines that, due to either (i) the introduction of or any change (other
than any change by way of imposition of or
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increase in reserve requirements included in the calculation of the Offshore
Rate or in respect of the assessment rate payable by any Bank to the FDIC for
insuring U.S. deposits) in or in the interpretation of any law or regulation or
(ii) the compliance by that Bank with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law),
there shall be any increase in the cost to such Bank of agreeing to make or
making, funding or maintaining any Offshore Rate Loans, then the Borrowers
shall be liable for, and shall from time to time, upon demand (with a copy of
such demand to be sent to the Agent), pay to the Agent for the account of such
Bank, additional amounts as are sufficient to compensate such Bank for such
increased costs.
(b) If any Bank shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration
of any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
compliance by the Bank (or its Lending Office) or any corporation controlling
the Bank with any Capital Adequacy Regulation, affects or would affect the
amount of capital required or expected to be maintained by the Bank or any
corporation controlling the Bank and (taking into consideration such Bank's or
such corporation's policies with respect to capital adequacy and such Bank's
desired return on capital) determines that the amount of such capital is
increased as a consequence of its Commitment[s], loans, credits or obligations
under this Agreement, then, upon demand of such Bank to the Borrowers through
the Agent, the Borrowers shall pay to the Bank, from time to time as specified
by the Bank, additional amounts sufficient to compensate the Bank for such
increase.
3.4 Funding Losses. The Borrowers shall reimburse each Bank and
hold each Bank harmless from any loss or expense which the Bank may sustain or
incur as a consequence of:
(a) the failure of any Borrower to make on a timely basis
any payment of principal of any Offshore Rate Loan;
(b) the failure of any Borrower to borrow, continue or
convert a Loan after such Borrower has given (or is deemed to have given) a
Notice of Borrowing or a Notice of Conversion/ Continuation;
(c) the failure of any Borrower to make any prepayment in
accordance with any notice delivered under Section 2.7;
(d) the prepayment (including pursuant to Section 2.7 or
2.8) or other payment (including after acceleration thereof) of an Offshore
Rate Loan on a day that is not the last day of the relevant Interest Period; or
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(e) the automatic conversion under Section 2.4 of any
Offshore Rate Loan to a Base Rate Loan on a day that is not the last day of the
relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees
payable to terminate the deposits from which such funds were obtained or from
charges relating to any Offshore Currency Loans. For purposes of calculating
amounts payable by a Borrower to the Banks under this Section and under
subsection 3.3(a), each Offshore Rate Loan made by a Bank (and each related
reserve, special deposit or similar requirement) shall be conclusively deemed
to have been funded at the IBOR used in determining the Offshore Rate for such
Offshore Rate Loan by a matching deposit or other borrowing in the interbank
offshore market for a comparable amount and for a comparable period, whether or
not such Offshore Rate Loan is in fact so funded.
3.5 Inability to Determine Rates. If the Agent determines that
for any reason adequate and reasonable means do not exist for determining the
Offshore Rate for any requested Interest Period with respect to a proposed
Offshore Rate Loan, or that the Offshore Rate applicable pursuant to subsection
2.9(a) for any requested Interest Period with respect to a proposed Offshore
Rate Loan does not adequately and fairly reflect the cost to the Banks of
funding such Loan, the Agent will promptly so notify the Borrowers and each
Bank. Thereafter, the obligation of the Banks to make or maintain Offshore
Rate Loans, as the case may be, hereunder shall be suspended until the Agent
upon the instruction of the Majority Banks revokes such notice in writing.
Upon receipt of such notice, any Borrower may revoke any Notice of Borrowing or
Notice of Conversion/ Continuation then submitted by it. If the applicable
Borrower does not revoke such Notice, the Banks shall make, convert or continue
the Loans, as proposed by such Borrower, in the amount specified in the
applicable notice submitted by such Borrower, but such Loans shall be made,
converted or continued as Base Rate Loans instead of Offshore Rate Loans. In
the case of any Offshore Currency Loans, the Borrowing or continuation shall be
in an aggregate amount equal to the Dollar Equivalent amount of the originally
requested Borrowing or continuation in the Offshore Currency, and to that end
any outstanding Offshore Currency Loans which are the subject of any
continuation shall be redenominated and converted into Base Rate Loans in
Dollars with effect from the last day of the Interest Period with respect to
any such Offshore Currency Loans.
3.6 Certificates of Banks. Any Bank claiming reimbursement or
compensation under this Article III shall deliver to the Borrowers (with a copy
to the Agent) a certificate setting forth in reasonable detail the amount
payable to the Bank hereunder and such certificate shall be conclusive and
binding on the Borrowers in the absence of manifest error.
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3.7 Substitution of Banks. Upon the receipt by a Borrower from
any Bank (an "Affected Bank") of a claim for compensation under Section 3.3,
such Borrower may: (i) request the Affected Bank to use its best efforts to
obtain a replacement bank or financial institution satisfactory to the
Borrowers to acquire and assume all or a ratable part of all of such Affected
Bank's Loans and Commitment (a "Replacement Bank"); (ii) request one more of
the other Banks to acquire and assume all or part of such Affected Bank's Loans
and Commitment; or (iii) designate a Replacement Bank. Any such designation of
a Replacement Bank under clause (i) or (iii) shall be subject to the prior
written consent of the Agent (which consent shall not be unreasonably
withheld).
3.8 Survival. The agreements and obligations of the Borrowers in
this Article III shall survive the payment of all other Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions of Initial Loans. The obligation of each Bank to
make its initial Loan or participate in its initial Letter of Credit hereunder
is subject to the condition that the Agent have received on or before the
Closing Date all of the following, in form and substance satisfactory to the
Agent and each Bank, and in sufficient copies for each Bank:
(a) Loan Documents.
(i) this Agreement, executed and delivered by a
duly authorized officer of the Company and of Filtertek;
(ii) for the account of each Bank, a Note
conforming to the requirements hereof and executed by a duly
authorized officer of the Company and of Filtertek;
(iii) the Intercompany Note Pledge Agreement executed
and delivered by a duly authorized officer of the Company and each
Domestic Subsidiary in favor of the Agent for the benefit of the
Banks; and
(iv) the Subsidiary Guarantee Agreement, executed
and delivered by a duly authorized officer of each of the Subsidiary
Guarantors party thereto; and
(v) the Intercreditor and Subordination Agreement
in substantially the form of Exhibit I executed and delivered by
Clarence V. Schawk, and a duly authorized officer of each of the
Borrowers.
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(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of
directors of the Company, Filtertek and each Subsidiary Guarantor
authorizing the transactions contemplated hereby, certified as of the
Closing Date by the Secretary or an Assistant Secretary of the
Company, Filtertek or each Subsidiary Guarantor, as the case may be;
and
(ii) A certificate of the Secretary or Assistant
Secretary of the Company, Filtertek and each Subsidiary Guarantor
certifying the names and true signatures of the officers of the
Company, Filtertek or such Subsidiary authorized to execute, deliver
and perform, as applicable, this Agreement, and all other Loan
Documents to be delivered by it hereunder;
(c) Organization Documents; Good Standing. Each of the
following documents:
(i) the articles or certificate of incorporation
and the bylaws of the Company, Filtertek and each Subsidiary Guarantor
as in effect on the Closing Date, certified by the Secretary or
Assistant Secretary of such person as of the Closing Date; and
(ii) a good standing certificate for the Company,
Filtertek and each Subsidiary Guarantor from the Secretary of State
(or similar, applicable Governmental Authority) of its state of
incorporation and each state where the Company, Filtertek or such
Subsidiary is qualified to do business as a foreign corporation as of
a recent date, together with bring-down certificates by facsimile,
dated the Closing Date;
(d) Legal Opinion. An opinion of Vedder Price Kaufman &
Kammholz, counsel to the Company, Filtertek and the Subsidiary Guarantors and
addressed to the Agent and the Banks, substantially in the form of Exhibit D;
(e) Payment of Fees. Evidence of payment by the
Borrowers of all accrued and unpaid fees, costs and expenses to the extent then
due and payable on the Closing Date, together with Attorney Costs of BofA to
the extent invoiced prior to or on the Closing Date, plus such additional
amounts of Attorney Costs as shall constitute BofA's reasonable estimate of
Attorney Costs incurred or to be incurred by it through the closing proceedings
(provided that such estimate shall not thereafter preclude final settling of
accounts between the Borrowers and BofA); including any such costs, fees and
expenses arising under or referenced in Sections 2.10 and 11.4;
(f) Certificate. A certificate signed by a Responsible
Officer, dated as of the Closing Date, stating that:
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(i) the representations and warranties contained
in Article V are true and correct on and as of such date, as though
made on and as of such date;
(ii) no Default or Event of Default exists or
would result from the initial Borrowing; and
(iii) there has occurred since December 31, 1994,
no event or circumstance that has resulted or could reasonably be
expected to result in a Material Adverse Effect;
(g) Termination of Existing Credit Agreements. On or
prior to the date of the Initial Loan, the total commitments under each of the
Existing Credit Agreements shall have been terminated, all loans thereunder
shall have been repaid in full, together with interest thereon, all letters of
credit, if any, issued thereunder shall have been terminated and all other
amounts owing pursuant to the Existing Credit Agreement shall have been
terminated on terms and conditions satisfactory to Agent and the Banks and be
of no further force or effect.
(h) Other Documents. Such other approvals, opinions,
documents or materials as the Agent or any Bank may request.
4.2 Conditions to All Borrowings and Letter of Credit Issuances.
The obligation of each Bank to make any Loan to be made by it (including its
initial Loan) and of any Issuing Bank to issue, and of each Bank to participate
in, a Letter of Credit is subject to the satisfaction of the following
conditions precedent on the relevant Borrowing Date:
(a) Notice of Borrowing or Issuance. The Agent shall
have received a Notice of Borrowing or in the case of any Letter of Credit
issuance, the Agent and the Issuing Bank shall have received a Letter of Credit
Request;
(b) Continuation of Representations and Warranties. The
representations and warranties in Article V shall be true and correct on and as
of such Borrowing Date with the same effect as if made on and as of such
Borrowing Date (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be true and
correct as of such earlier date); and
(c) No Existing Default. No Default or Event of Default
shall exist or shall result from such Borrowing or issuance of such Letter of
Credit.
Each Notice of Borrowing and Letter of Credit Request submitted by a Borrower
hereunder shall constitute a representation and warranty by the Borrowers
hereunder, as of the date of each such notice and as of each Borrowing Date or
date of issuance, as the case may be, that the conditions in Section 4.2 are
satisfied.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrowers, jointly and severally represent and warrant to the
Agent and each Bank that:
5.1 Corporate Existence and Power. The Company and each of its
Subsidiaries:
(a) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental
licenses, authorizations, consents and approvals to own its assets, carry on
its business and to execute, deliver, and perform its obligations under the
Loan Documents;
(c) is duly qualified as a foreign corporation and is
licensed and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification or license except where the failure to be so
qualified would not have a Material Adverse Effect; and
(d) is in compliance with all Requirements of Law;
except, in each case referred to in clause (c) or clause (d), to the extent
that the failure to do so could not reasonably be expected to have a Material
Adverse Effect.
5.2 Corporate Authorization; No Contravention. The execution,
delivery and performance by the Borrowers of this Agreement and each other Loan
Document to which any Borrower is party, have been duly authorized by all
necessary corporate action, and do not and will not:
(a) contravene the terms of any of the Company's or its
Subsidiaries' Organization Documents;
(b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any document evidencing
any Contractual Obligation to which the Company or any of its Subsidiaries is a
party or any order, injunction, writ or decree of any Governmental Authority to
which the Company or its Subsidiaries or their property is subject; or
(c) violate any Requirement of Law.
5.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or
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enforcement against, the Company or any of its Subsidiaries of the Agreement or
any other Loan Document.
5.4 Binding Effect. This Agreement and each other Loan Document
to which a Borrower is a party constitute the legal, valid and binding
obligations of such Borrower, enforceable against such Borrower in accordance
with their respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability.
5.5 Litigation. Except as specifically disclosed in Schedule 5.5,
there are no actions, suits, proceedings, claims or disputes pending, or to the
best knowledge of any Borrower, threatened or contemplated, at law, in equity,
in arbitration or before any Governmental Authority, against the Company, or
its Subsidiaries or any of their respective properties which:
(a) purport to affect or pertain to this Agreement or any
other Loan Document, or any of the transactions contemplated hereby or thereby;
or
(b) if determined adversely to the Company or its
Subsidiaries, would reasonably be expected to have a Material Adverse Effect.
No injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin
or restrain the execution, delivery or performance of this Agreement or any
other Loan Document, or directing that the transactions provided for herein or
therein not be consummated as herein or therein provided.
5.6 No Default. No Default or Event of Default exists or would
result from the incurring of any Obligations by the Borrowers. As of the
Closing Date, neither the Company nor any Subsidiary is in default under or
with respect to any Contractual Obligation in any respect which, individually
or together with all such defaults, could reasonably be expected to have a
Material Adverse Effect, or that would, if such default had occurred after the
Closing Date, create an Event of Default under subsection 8.1(e).
5.7 ERISA Compliance. Except as specifically disclosed in
Schedule 5.7:
(a) Each Plan is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other federal or state
law. Each Plan which is intended to qualify under Section 401(a) of the Code
has received a favorable determination letter from the IRS and to the best
knowledge of the Borrowers, nothing has occurred which would cause the loss of
such qualification. Each of the Borrowers and each ERISA Affiliate has made
all required contributions to any Plan subject to Section 412 of the Code, and
no application
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for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of
Borrowers, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan which has resulted or could
reasonably be expected to result in a Material Adverse Effect. There has been
no prohibited transaction or violation of the fiduciary responsibility rules
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably
expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability;
(iii) neither the Company, Filtertek nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability under Title IV of ERISA with respect
to any Pension Plan (other than premiums due and not delinquent under Section
4007 of ERISA); (iv) neither the Company, Filtertek nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 or 4243 of ERISA with respect to a
Multiemployer Plan; and (v) neither the Company, Filtertek nor any ERISA
Affiliate has engaged in a transaction that could be subject to Section 4069 or
4212(c) of ERISA.
5.8 Use of Proceeds; Margin Regulations. The proceeds of the
Loans are to be used solely for the purposes set forth in and permitted by
Section 6.12 and Section 7.7. Neither the Company nor any Subsidiary is
generally engaged in the business of purchasing or selling Margin Stock or
extending credit for the purpose of purchasing or carrying Margin Stock.
5.9 Title to Properties. The Company and each Subsidiary have
good record and marketable title in fee simple to, or valid leasehold interests
in, all real property necessary or used in the ordinary conduct of their
respective businesses, except for such defects in title as could not,
individually or in the aggregate, have a Material Adverse Effect. As of the
Closing Date, the property of the Company and its Subsidiaries is subject to no
Liens, other than Permitted Liens.
5.10 Taxes. The Company and its Subsidiaries have filed all
Federal and other material tax returns and reports required to be filed, and
have paid all Federal and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties, income or
assets otherwise due and payable, except those which are being contested in
good faith by appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. There is no proposed tax assessment against
the Company or any Subsidiary that would, if made, have a Material Adverse
Effect.
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5.11 Financial Condition. (a) The audited consolidated financial
statements of the Company and its Subsidiaries dated December 31, 1994 and the
unaudited consolidated financial statements of the Company and its Subsidiaries
dated March 31, 1995, and the related consolidated statements of income or
operations, shareholders' equity and cash flows for the fiscal period ended on
such dates:
(i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein and except, in the case of interim
statements, for normal year-end adjustments;
(ii) fairly present the financial condition of the
Company and its Subsidiaries as of the date thereof and results of
operations for the period covered thereby; and
(iii) except as specifically disclosed in Schedule
5.11, show all material indebtedness and other liabilities, direct or
contingent, of the Company and its consolidated Subsidiaries as of the
date thereof, including liabilities for taxes, material commitments
and Contingent Obligations.
(b) Since March 31, 1995, there has been no Material
Adverse Effect.
5.12 Environmental Matters. Each Borrower conducts in the ordinary
course of business a review of the effect of existing Environmental Laws and
existing Environmental Claims on its business, operations and properties, and
as a result thereof the Borrowers have reasonably concluded that, except as
specifically disclosed in Schedule 5.12, such Environmental Laws and
Environmental Claims could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
5.13 Regulated Entities. None of the Company, any Person
controlling the Company, or any Subsidiary, is an "Investment Company" within
the meaning of the Investment Company Act of 1940. None of the Borrowers is
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act, any state public utilities
code, or any other Federal or state statute or regulation limiting its ability
to incur Indebtedness.
5.14 No Burdensome Restrictions. Neither the Company nor any
Subsidiary is a party to or bound by any Contractual Obligation, or subject to
any restriction in any Organization Document, or any Requirement of Law, which
could reasonably be expected to have a Material Adverse Effect.
5.15 Copyrights, Patents, Trademarks and Licenses, etc. The
Company or its Subsidiaries own or are licensed or otherwise have the right to
use all of the patents, trademarks, service
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marks, trade names, copyrights, contractual franchises, authorizations and
other rights that are reasonably necessary for the operation of their
respective businesses, without conflict with the rights of any other Person.
To the best knowledge of the Borrowers, no slogan or other advertising device,
product, process, method, substance, part or other material now employed, or
now contemplated to be employed, by the Company or any Subsidiary infringes
upon any rights held by any other Person. Except as specifically disclosed in
Schedule 5.5, no claim or litigation regarding any of the foregoing is pending
or threatened, and no patent, invention, device, application, principle or any
statute, law, rule, regulation, standard or code is pending or, to the
knowledge of the Borrowers, proposed, which, in either case, could reasonably
be expected to have a Material Adverse Effect.
5.16 Subsidiaries. As of the Closing Date, the Borrowers have no
Subsidiaries other than those specifically disclosed in part (a) of Schedule
5.16 hereto and has no equity investments in any other corporation or entity
other than those specifically disclosed in part (b) of Schedule 5.16.
5.17 Insurance. Except as specifically disclosed in Schedule 5.17,
the properties of the Company and its Subsidiaries are insured with financially
sound and reputable insurance companies not Affiliates of the Company, in such
amounts, with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning similar
properties in localities where the Company or such Subsidiary operates.
5.18 Full Disclosure. None of the representations or warranties
made by the Company or any Subsidiary in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Company or any Subsidiary in connection with the Loan
Documents , contains any untrue statement of a material fact or omits any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they are made, not
misleading as of the time when made or delivered.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, unless the Majority
Banks waive compliance in writing:
6.1 Financial Statements. The Company shall deliver to the Agent,
in form and detail satisfactory to the Agent and the Majority Banks, with
sufficient copies for each Bank:
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(a) as soon as available, but not later than 90 days
after the end of each fiscal year (commencing with the fiscal year ended
December 31, 1995), a copy of the audited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, and accompanied by the opinion of Ernst & Young,
LLP or another nationally-recognized independent public accounting firm
("Independent Auditor") which report shall state that such consolidated
financial statements present fairly the financial position for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years. Such opinion shall not be qualified or limited in any respect,
including any reason relating to a restricted or limited examination by the
Independent Auditor of any material portion of the Company's or any
Subsidiary's records and shall be delivered to the Agent pursuant to a reliance
agreement between the Agent and Banks and such Independent Auditor in form and
substance satisfactory to the Agent;
(b) as soon as available, but not later than 45 days
after the end of each of the first three fiscal quarters of each fiscal year
(commencing with the fiscal quarter ended June 30, 1995), a copy of the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
the end of such quarter and the related consolidated statements of income,
shareholders' equity and cash flows for the period commencing on the first day
and ending on the last day of such quarter, and certified by a Responsible
Officer as fairly presenting, in accordance with GAAP (subject to ordinary,
good faith year-end audit adjustments), the financial position and the results
of operations of the Company and the Subsidiaries;
(c) as soon as available, but not later than 90 days
after the end of each fiscal year (commencing with the fiscal year ended
December 31, 1995), a copy of an unaudited consolidating balance sheet of the
Company and its Subsidiaries as at the end of such year and the related
consolidating statement of income, shareholders' equity and cash flows for such
year, certified by a Responsible Officer as having been developed and used in
connection with the preparation of the financial statements referred to in
subsection 6.1(a);
(d) as soon as available, but not later than 45 days
after the end of each of the first three fiscal quarters of each fiscal year
(commencing with the fiscal quarter ended June 30, 1995), a copy of the
unaudited consolidating balance sheets of the Company and its Subsidiaries, and
the related consolidating statements of income, shareholders' equity and cash
flows for such quarter, all certified by a Responsible Officer as having been
developed and used in connection with the preparation of the financial
statements referred to in subsection 6.1(b).
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6.2 Certificates; Other Information. The Company shall furnish to
the Agent, with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial
statements referred to in subsection 6.1(a), a certificate of the Independent
Auditor stating that in making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial
statements referred to in subsections 6.1(a) and (b), a Compliance Certificate
executed by a Responsible Officer;
(c) promptly, copies of all financial statements and
reports that the Company sends to its shareholders, and copies of all financial
statements and regular, periodical or special reports (including Forms 10K, 10Q
and 8K) that the Company or any Subsidiary may make to, or file with, the SEC;
(d) as soon as available, but in any event within 60 days
after the beginning of each fiscal year of the Company, a copy of the plan and
forecast (including a projected consolidated and consolidating balance sheet,
income statement and funds flow statement) of the Company for such fiscal year;
and
(e) promptly, such additional information regarding the
business, financial or corporate affairs of the Company or any Subsidiary as
the Agent, at the request of any Bank, may from time to time request.
6.3 Notices. The Borrowers shall promptly notify the Agent and
each Bank:
(a) of the occurrence of any Default or Event of Default,
and of the occurrence or existence of any event or circumstance that
foreseeably will become a Default or Event of Default;
(b) of any matter that has resulted or may result in a
Material Adverse Effect, including (i) breach or non-performance of, or any
default under, a Contractual Obligation of the Company or any Subsidiary; (ii)
any dispute, litigation, investigation, proceeding or suspension between the
Company or any Subsidiary and any Governmental Authority; or (iii) the
commencement of, or any material development in, any litigation or proceeding
affecting the Company or any Subsidiary; including pursuant to any applicable
Environmental Laws;
(c) of the occurrence of any of the following events
affecting the Company, Filtertek or any ERISA Affiliate (but in no event more
than 10 days after such event), and deliver to the Agent and each Bank a copy
of any notice with respect to such event that is filed with a Governmental
Authority and any notice
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delivered by a Governmental Authority to the Company, Filtertek or any ERISA
Affiliate with respect to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension
Liability of any Pension Plan;
(iii) the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the Code by the
Company, Filtertek or any ERISA Affiliate; or
(iv) the adoption of any amendment to a Plan
subject to Section 412 of the Code, if such amendment results in a
material increase in contributions or Unfunded Pension Liability.
(d) of any material change in accounting policies or
financial reporting practices by the Company or any of its consolidated
Subsidiaries.
Each notice under this Section shall be accompanied by a
written statement by a Responsible Officer setting forth details of the
occurrence referred to therein, and stating what action the Company or any
affected Subsidiary proposes to take with respect thereto and at what time.
Each notice under subsection 6.3(a) shall describe with particularity any and
all clauses or provisions of this Agreement or other Loan Document that have
been (or foreseeably will be) breached or violated.
6.4 Preservation of Corporate Existence, Etc. The Borrowers
shall, and shall cause each of their Subsidiaries to:
(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its state or
jurisdiction of incorporation;
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business except
in connection with transactions permitted by Section 7.3 and sales of assets
permitted by Section 7.2;
(c) use reasonable efforts, in the ordinary course of
business, to preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation of which could
reasonably be expected to have a Material Adverse Effect.
6.5 Maintenance of Property. The Borrowers shall maintain, and
shall cause each of their Subsidiaries to
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maintain, and preserve all its equipment and facilities which is used or useful
in its business in good working order and condition, ordinary wear and tear
excepted and make all necessary repairs thereto and renewals and replacements
thereof except where, in either case, the failure to do so could not reasonably
be expected to have a Material Adverse Effect, except as permitted by Section
7.2. The Company and each Subsidiary shall use the standard of care typical in
the industry in the operation and maintenance of its facilities.
6.6 Insurance. The Borrowers shall maintain, and shall cause each
of their Subsidiaries to maintain, with financially sound and reputable
independent insurers, insurance with respect to its properties and business
against loss or damage of the kinds customarily insured against by Persons
engaged in the same or similar business, of such types and in such amounts as
are customarily carried under similar circumstances by such other Persons.
6.7 Payment of Obligations. The Borrowers shall, and shall cause
each of their Subsidiaries to, pay and discharge as the same shall become due
and payable, all their respective obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the same are
being contested in good faith by appropriate proceedings and adequate reserves
in accordance with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law
become a Lien upon its property; provided, however, that the Company or any
Subsidiary shall have the right to contest such claims in good faith and by
appropriate proceedings; and
(c) all indebtedness, as and when due and payable, but
subject to any subordination provisions contained in any instrument or
agreement evidencing such Indebtedness.
6.8 Compliance with Laws. The Borrowers shall comply, and shall
cause each of their Subsidiaries to comply, in all material respects with all
Requirements of Law of any Governmental Authority having jurisdiction over it
or its business (including the Federal Fair Labor Standards Act), except such
as may be contested in good faith or as to which a bona fide dispute may exist.
6.9 Compliance with ERISA. The Borrowers shall, and shall cause
each of their ERISA Affiliates to: (a) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
federal or state law; (b) cause each Plan which is qualified under Section
401(a) of the Code to maintain such qualification; and (c) make all required
contributions to any Plan subject to Section 412 of the Code.
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6.10 Inspection of Property and Books and Records. The Borrowers
shall maintain and shall cause each of their Subsidiaries to maintain proper
books of record and account, in which full, true and correct entries in
conformity with GAAP consistently applied shall be made of all financial
transactions and matters involving the assets and business of the Company and
such Subsidiary. The Borrowers shall permit, and shall cause each of their
Subsidiaries to permit, representatives and independent contractors of the
Agent or any Bank to visit and inspect any of their respective properties, to
examine their respective corporate, financial and operating records, and make
copies thereof or abstracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective directors, officers, and
independent public accountants, all at the expense of the Borrowers and at such
reasonable times during normal business hours and as often as may be reasonably
desired, upon reasonable advance notice to the applicable Borrower; provided,
however, when an Event of Default exists the Agent or any Bank may do any of
the foregoing at the expense of the Borrowers at any time during normal
business hours and without advance notice.
6.11 Environmental Laws. The Borrowers shall, and shall cause each
of their Subsidiaries to, conduct its operations and keep and maintain its
property in compliance with all Environmental Laws.
6.12 Use of Proceeds. The Borrowers shall use the proceeds of the
Loans for working capital and other general corporate purposes not in
contravention of any Requirement of Law or of any Loan Document.
6.13 Additional Subsidiary Guarantors. In the event any Person
shall hereafter become a Domestic Subsidiary, the Borrowers shall promptly
notify the Agent and the Banks and the Borrowers shall, upon the request of
Agent or Majority Banks, cause such Domestic Subsidiary to become a party to
the Subsidiary Guarantee Agreement.
ARTICLE VII
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, unless the Majority
Banks waive compliance in writing:
7.1 Limitation on Liens. The Borrowers shall not, and shall not
suffer or permit any of their Subsidiaries to, directly or indirectly, make,
create, incur, assume or suffer to exist any Lien upon or with respect to any
part of its property, whether now owned or hereafter acquired, other than the
following ("Permitted Liens"):
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(a) any Lien existing on property of the Company or any
Subsidiary on the Closing Date and set forth in Schedule 7.1 securing
Indebtedness outstanding on such date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other
governmental charges which are not delinquent or remain payable without
penalty, or to the extent that non-payment thereof is permitted by Section 6.7,
provided that no notice of lien has been filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary
course of business which are not delinquent or remain payable without penalty
or which are being contested in good faith and by appropriate proceedings,
which proceedings have the effect of preventing the forfeiture or sale of the
property subject thereto;
(e) Liens (other than any Lien imposed by ERISA)
consisting of pledges or deposits required in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
social security legislation;
(f) Liens on the property of the Company or its
Subsidiary securing (i) the non-delinquent performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, (ii) contingent
obligations on surety and appeal bonds, and (iii) other non-delinquent
obligations of a like nature; in each case, incurred in the ordinary course of
business, provided all such Liens in the aggregate would not (even if enforced)
cause a Material Adverse Effect;
(g) Liens consisting of judgment or judicial attachment
liens, provided that the enforcement of such Liens is effectively stayed and
all such liens in the aggregate at any time outstanding for the Company and its
Subsidiaries do not exceed $500,000;
(h) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the businesses of the Company and its
Subsidiaries;
(i) Liens on assets of corporations which become
Subsidiaries after the date of this Agreement, provided, however, that(i) such
Liens existed at the time the respective corporations became Subsidiaries and
were not created in anticipation thereof and (ii) the principal amount of the
Indebtedness secured by such Liens shall not at any time exceed, together with
Indebtedness permitted under Subsection 7.5(d), $7,500,000.
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<PAGE> 67
(j) purchase money security interests on equipment or
real property acquired or held by the Company or its Subsidiaries in the
ordinary course of business, securing Indebtedness incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such property;
provided that (i) any such Lien attaches to such property concurrently with or
within 20 days after the acquisition thereof, (ii) such Lien attaches solely to
the property so acquired in such transaction, (iii) the principal amount of the
debt secured thereby does not exceed 100% of the cost of such property, and
(iv) the principal amount of the Indebtedness secured by any and all such
purchase money security interests shall not at any time exceed, together with
Indebtedness permitted under subsection 7.5(d), $7,500,000;
(k) Liens securing obligations in respect of Capital
Leases on assets subject to such leases, provided that such Capital Leases are
otherwise permitted hereunder; and
(l) Liens arising solely by virtue of any statutory or
common law provision relating to banker's liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; provided that (i) such deposit account is not
a dedicated cash collateral account and is not subject to restrictions against
access by the Company or any Subsidiary in excess of those set forth by
regulations promulgated by the FRB, and (ii) such deposit account is not
intended by the Company or any Subsidiary to provide collateral to the
depository institution.
7.2 Disposition of Assets. The Borrowers shall not, and shall not
suffer or permit any of their Subsidiaries to, directly or indirectly, sell,
assign, lease, convey, transfer or otherwise dispose of (whether in one or a
series of transactions) any property (including accounts and notes receivable,
with or without recourse) or enter into any agreement to do any of the
foregoing, except:
(a) dispositions of inventory, or used, worn-out or
surplus equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such
equipment is exchanged for credit against the purchase price of similar
replacement equipment, or the proceeds of such sale are reasonably promptly
applied to the purchase price of such replacement equipment; and
(c) Sale-leaseback transactions not prohibited by Section
7.15; and
(d) dispositions of assets other than accounts receivable
not otherwise permitted hereunder which are made for fair market value;
provided, that (i) at the time of any disposition, no Event of Default shall
exist or shall result from such
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disposition, (ii) the aggregate sales price from such disposition shall be paid
in cash, and (iii) the aggregate value of all assets so sold by the Company and
its Subsidiaries, together, shall not exceed in any fiscal year more than
$7,500,000 as of the date of disposition.
7.3 Consolidations and Mergers. The Company shall not, and shall
not suffer or permit any Subsidiary to, merge, consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person, except:
(a) any Subsidiary may merge with the Company, provided
that the Company shall be the continuing or surviving corporation, or with any
one or more Subsidiaries, provided that if any transaction shall be between a
Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be
the continuing or surviving corporation and if the transaction shall be between
a Subsidiary and a Subsidiary Guarantor, the Subsidiary Guarantor shall be the
continuing or surviving corporation; and
(b) any Subsidiary may sell all or substantially all of
its assets (upon voluntary liquidation or otherwise), to the Company or another
Wholly-Owned Subsidiary that is a Subsidiary Guarantor.
(c) The Company or any Subsidiary may consummate a merger
in connection with an Acquisition permitted by Section 7.4(j) provided that the
Company or such Subsidiary is the surviving person in such merger.
7.4 Loans and Investments. No Borrower shall purchase or acquire,
or suffer or permit any of their Subsidiaries to purchase or acquire, or make
any commitment therefor, any capital stock, equity interest, or any obligations
or other securities of, or any interest in, any Person, or make or commit to
make any Acquisitions, or make or commit to make any advance, loan, extension
of credit or capital contribution to or any other investment in, any Person
including any Affiliate of the Company, except for:
(a) short-term obligations of, or fully guaranteed by,
the United States of America;
(b) commercial paper rated A-1 or better by Standard and
Poor's Corporation ("S&P") or P-1 or better by Moody's Investors Service, Inc.
("Moody's");
(c) demand deposit accounts maintained in the ordinary
course of business;
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<PAGE> 69
(d) certificates of deposit issued by and time deposits
with commercial banks (whether domestic or foreign) having capital and surplus
in excess of $100,000,000;
(e) common stock of companies publicly traded on a
national exchange; provided, that the aggregate cost of such common stock does
not at any time exceed $1,000,000;
(f) existing investments in Subsidiaries and other
investments in existence on the date hereof and described in Schedule 5.16
hereto and additional investments by a Foreign Subsidiary in another Foreign
Subsidiary;
(g) adjustable rate preferred stock and preferred stock
of companies listed on the S&P 500 and having a long-term debt rating of A or
better by S&P or A2 or better by Moody's, and loan participations, so long as
the underlying obligor has a short-term debt rating of A-2 or better by S&P or
P-2 or better by Moody's; provided, that the aggregate cost of such investments
does not at any time exceed $2,000,000;
(h) extensions of credit in the nature of accounts
receivable or notes receivable arising from the sale or lease of goods or
services in the ordinary course of business;
(i) extensions of credit by a Borrower to any of its
Wholly-Owned Subsidiaries or by any of its Wholly-Owned Subsidiaries to another
of its Wholly-Owned Subsidiaries provided that in the event of any extension of
credit to a Wholly-Owned Subsidiary which is not a Borrower or a Subsidiary
Guarantor, such extension of credit shall be evidenced by promissory notes
payable to such Borrower or such Subsidiary, as the case may be, in form and
substance as set forth on Exhibit A to the Intercompany Note Pledge Agreement,
which promissory notes shall be delivered and pledged to Agent pursuant to the
Intercompany Note Pledge Agreement;
(j) investments incurred in order to consummate
Acquisitions otherwise permitted herein, provided that (i) immediately
following such Acquisition the Company will have the ability to borrow not less
than five percent (5%) of the aggregate Revolving Commitment of the Banks
hereunder and under the Short Term Revolving Loan Facility, (ii) such
Acquisitions are undertaken in accordance with all applicable Requirements of
Law; (iii) the prior, effective written consent or approval to such Acquisition
of the board of directors or equivalent governing body of the acquiree is
obtained; and (iv) on a pro forma basis after giving effect to such Acquisition
(including any Indebtedness to be incurred in connection therewith), no Default
or Event of Default will exist; and
(k) extensions of credit to employees of the Company or
its Subsidiaries in the ordinary course of business consistent with past
practice and in an aggregate amount at any one time outstanding not to exceed
$1,000,000, provided that the
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<PAGE> 70
Company or its Subsidiaries may not extend credit to Clarence W. Schawk or
David A. Schawk.
7.5 Limitation on Indebtedness. The Borrowers shall not, and
shall not suffer or permit any of their Subsidiaries to, create, incur, assume,
suffer to exist, or otherwise become or remain directly or indirectly liable
with respect to, any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement or
the Short Term Revolving Loan Facility;
(b) Indebtedness consisting of Contingent Obligations
permitted pursuant to Section 7.8;
(c) Indebtedness existing on the Closing Date and set
forth in Schedule 7.5;
(d) Indebtedness secured by Liens permitted by subsection
7.1(i) and (j) or other unsecured Indebtedness incurred to finance an
Acquisition if such Acquisition is permitted pursuant to Section 7.4 in an
aggregate amount (for all such secured and unsecured Indebtedness) outstanding
not to exceed $7,500,000 at any time;
(e) Indebtedness incurred in connection with leases
permitted pursuant to Section 7.10;
(f) Subordinated Indebtedness to a member of the Schawk
Family meeting the requirements set forth in the definition thereof in Section
1.1 hereof;
(g) Indebtedness permitted by Section 7.4(i);
(h) Unsecured Indebtedness in an aggregate principal
amount at any one time outstanding not to exceed $5,000,000 provided that such
Indebtedness is repaid not later than five Business Days after the date of its
incurrence and provided further that the principal amount of such Indebtedness
together with the principal amount of Loans and the face amount of Letters of
Credit hereunder and under the Short Term Revolving Loan Facility does not, at
any time, exceed $100,000,000; and
(i) Indebtedness to a member of the Schawk Family (other
than Clarence W. Schawk, Marilyn G. Schawk, or David A. Schawk) not in excess
of $1,200,000 incurred solely with respect to federal, state and local income
tax obligations of such member of the Schawk Family arising with respect to
income of Schawk, Inc. allocable to such member of the Schawk Family.
7.6 Transactions with Affiliates. The Borrowers shall not, and
shall not suffer or permit any of their Subsidiaries to, enter into any
transaction with any Affiliate of the Company (other than a Borrower or a
Subsidiary Guarantor), except upon fair and reasonable terms no less favorable
to the Company or
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such Subsidiary than would obtain in a comparable arm's-length transaction with
a Person not an Affiliate of the Company or such Subsidiary.
7.7 Use of Proceeds. The Borrowers shall not, and shall not
suffer or permit any of their Subsidiaries to, use any portion of the Loan
proceeds, directly or indirectly, (i) to purchase or carry Margin Stock, (ii)
to repay or otherwise refinance indebtedness of the Borrowers or others
incurred to purchase or carry Margin Stock, (iii) to extend credit for the
purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any
security in any transaction that is subject to Section 13 or 14 of the Exchange
Act.
7.8 Contingent Obligations. The Borrowers shall not, and shall
not suffer or permit any of their Subsidiaries to, create, incur, assume or
suffer to exist any Contingent Obligations except:
(a) endorsements for collection or deposit in the
ordinary course of business;
(b) Swap Contracts entered into in the ordinary course of
business as bona fide hedging transactions;
(c) Contingent Obligations of the Company and its
Subsidiaries existing as of the Closing Date and listed in Schedule 7.8;
(d) Contingent Obligations of the Company or any
Subsidiary arising from the guaranty by the Company or any Subsidiary of an
obligation or liability of any Wholly-Owned Subsidiary of the Company, if the
underlying obligation or liability is permitted by the terms hereof;
(e) Contingent Obligations consisting of Letters of
Credit under this Agreement; and
(f) Contingent Obligations which, in the aggregate, do
not exceed at any point in time, $1,000,000.
7.9 Joint Ventures. The Borrowers shall not, and shall not suffer
or permit any of their Subsidiaries to enter into any Joint Venture, other than
in the ordinary course of business.
7.10 Lease Obligations. The Borrowers shall not, and shall not
suffer or permit any of their Subsidiaries to, create or suffer to exist any
obligations for the payment of rent for any property under lease or agreement
to lease, except for:
(a) operating leases entered into by the Company or any
Subsidiary in the ordinary course of business provided that the aggregate
annual rental payments for all such operating leases shall not exceed in any
fiscal year $3,600,000;
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<PAGE> 72
(b) leases entered into by the Company or any Subsidiary
after the Closing Date pursuant to sale- leaseback transactions permitted under
Section 7.15;
(c) Capital Leases other than those permitted under
clause (b) of this Section, entered into by the Company or any Subsidiary to
finance the acquisition of equipment; provided that the aggregate annual rental
payments for all such Capital Leases shall not exceed in any fiscal year
$3,600,000.
7.11 Restricted Payments. The Borrowers shall not, and shall not
suffer or permit any of their Subsidiaries to, declare or make any dividend
payment or other distribution of assets, properties, cash, rights, obligations
or securities on account of any shares of any class of its capital stock, or
purchase, redeem or otherwise acquire for value any shares of its capital stock
or any warrants, rights or options to acquire such shares, now or hereafter
outstanding or repay, repurchase or otherwise acquire any Subordinated
Indebtedness owed to any Person in the Schawk Family; except that:
(a) the Company or any Wholly-Owed Subsidiary may declare
and make dividend payments or other distributions payable solely in its common
stock;
(b) the Company or any Wholly-Owed Subsidiary may
purchase, redeem or otherwise acquire shares of its common stock or warrants or
options to acquire any such shares with the proceeds received from the
substantially concurrent issue of new shares of its common stock;
(c) Filtertek may declare or pay cash dividends to the
Company; and the Company may declare or pay cash dividends to its stockholders
in an amount not in excess of $0.26 per common share (as the same may be
adjusted to take into account stock splits) per fiscal year through June 30,
1996 and thereafter the Company may declare or pay cash dividends to its
stockholders and purchase, redeem or otherwise acquire shares of its capital
stock or warrants, rights or options to acquire any such shares for cash solely
out of 50% of Consolidated Net Income of the Company accrued during the period
(treated as an accounting period) beginning July 1, 1996 to the end of the most
recent fiscal quarter ending at least 45 days prior to the date of such
payment, provided, that, immediately after giving effect to such proposed
action, no Default or Event of Default would exist;
(d) the Company may declare or pay cash dividends on
preferred stock to the extent required by the terms of such preferred stock in
an amount not to exceed $2,000,000 in any fiscal year;
(e) the Company or any Wholly-Owed Subsidiary may
purchase, redeem or otherwise acquire shares of its common stock or warrants or
options to acquire such shares if after giving
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effect to any such purchase, redemption or acquisition there is no Default or
Event of Default and if the aggregate amount of all such purchases, redemptions
or acquisitions by the Company and its Subsidiaries within any one fiscal year
does not exceed $2,500,000; and
(f) the Company or any Wholly-Owed Subsidiary may repay,
repurchase or otherwise acquire Subordinated Indebtedness owed as of the date
hereof to any person in the Schawk Family in an aggregate amount not to exceed
$4,500,000, provided that no Default or Event of Default exists before such
payment or would exist immediately thereafter.
7.12 ERISA. The Borrowers shall not, and shall not suffer or
permit any of their ERISA Affiliates to: (a) engage in a prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably expected to result in liability
of any Borrower in an aggregate amount in excess of $500,000; or (b) engage in
a transaction that could be subject to Section 4069 or 4212(c) of ERISA.
7.13 Change in Business. The Borrowers shall not, and shall not
suffer or permit any of their Subsidiaries to, engage in any material line of
business substantially different from those lines of business carried on by the
Company and its Subsidiaries on the date hereof.
7.14 Accounting Changes. The Borrowers shall not, and shall not
suffer or permit any of their Subsidiaries to, make any significant change in
accounting treatment or reporting practices, except as required by GAAP, or
change the fiscal year of the Company or of any Subsidiary.
7.15 Sale and Leaseback. The Borrowers will not, nor will they
permit any of their Subsidiaries to, sell or transfer any of its property in
order to concurrently or subsequently lease as lessee such or similar property
(a "Sale/Leaseback Transaction"), except for Sale/Leaseback Transactions to the
extent that the fair market value of all such Sale/Leaseback Transactions does
not, in the aggregate, exceed $5,000,000.
7.16 Limitation on Certain Restrictions on Subsidiaries. The
Borrowers will not, nor will they permit any of their Subsidiaries to create or
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any of their Subsidiaries or (i)
pay dividends or make any other distributions on its Capital Stock or pay and
Indebtedness or other obligation owed to the Company or any of its other
Subsidiaries, (ii) make any loans or advances to the Company or any of its
other Subsidiaries, or (iii) transfer any of its property or assets to the
Company or any of its other Subsidiaries, except:
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(a) any encumbrance or restriction pursuant hereto or to
an agreement in effect at or entered into on the Closing Date and reflected on
Schedule 7.16 hereto;
(b) any encumbrance or restriction with respect to a
Subsidiary of the Company pursuant to an agreement relating to any Indebtedness
issued by such Subsidiary on or prior to the date on which such Subsidiary
became a Subsidiary of the Company or was acquired by the Company (other than
Indebtedness issued as consideration in, or to provide all or any portion of
the funds utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary became a Subsidiary or was
acquired by the Company) and outstanding on such date;
(c) any such encumbrance or restriction consisting of
customary non-assignment provisions in leases governing leasehold interests to
the extent such provisions restrict the transfer of the lease; and
(d) in the case of clause (iii) above, Permitted Liens or
other restrictions contained in security agreements securing Indebtedness
permitted hereby to the extent such restrictions restrict the transfer of the
property subject to such security agreements.
7.17 Organization Documents. The Borrowers shall not, nor will
they permit any of their Subsidiaries to amend, modify or waive, or permit any
amendment, modification or waiver as to its Organization Documents if such
amendment, modification or waiver could reasonably be expected to adversely
affect the interests of Agent or the Banks.
7.18 Financial Covenants
(a) Maintenance of Consolidated Tangible Net Worth. The
Borrowers shall not permit Consolidated Tangible Net Worth of the Company at
any time to be less than the sum of (i) $15,000,000 plus (ii) as of the end of
each fiscal quarter, the amount equal to 40% of the aggregate Consolidated Net
Income of the Company since December 31, 1994; provided, however, that in the
event that the Company has a Consolidated Net Loss for any fiscal quarter,
Consolidated Net Income for purposes only of this Section 7.15(a) shall be
deemed to be zero for such fiscal quarter.
(b) Leverage Ratio. The Borrowers shall not permit the
ratio of (a) Funded Debt to (b) Total Capitalization of the Company at any time
to exceed the percentage set forth below for the applicable period:
<TABLE>
<CAPTION>
==================================================================================================================
PERIOD MAXIMUM RATIO
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
Closing - 12/30/96 58%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 75
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
12/31/96 - 12/30/97 55%
- ------------------------------------------------------------------------------------------------------------------
12/31/97 - maturity 50%
==================================================================================================================
</TABLE>
(c) Funded Debt to EBITDA. The Borrowers shall not
permit the ratio of Funded Debt as of the last day of any fiscal quarter to
EBITDA of the Company for the period of four consecutive fiscal quarters ending
on the last day of such fiscal quarter to exceed 3.5 to 1.0.
(d) Interest Coverage Ratio. For each period of one
fiscal quarter ending on the last day of each fiscal quarter ending within the
periods set forth below the Borrowers shall not permit the ratio of (i) the
amount equal to EBIT for such period to (ii) Consolidated Interest Expense for
such period to be less than the ratio set forth below:
<TABLE>
<CAPTION>
==================================================================================================================
PERIOD MINIMUM RATIO
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
4/1/95 - 6/30/96 2.25 to 1.0
- ------------------------------------------------------------------------------------------------------------------
7/1/96 - 9/30/97 2.50 to 1.0
==================================================================================================================
</TABLE>
and beginning 12/31/97 and thereafter, the Company shall not permit the ratio
of (i) an amount equal to EBIT for the period of four consecutive fiscal
quarters ending on the last day of any fiscal quarter to (ii) Consolidated
Interest Expense for such period to be less than 3.0 to 1.0.
(e) Fixed Charge Coverage Ratio. For each period of one
fiscal quarter ending on the last day of each fiscal quarter ending within the
periods set forth below, the Borrowers shall not permit the ratio of (i) EBIT
of the Company for such period plus payments under operating leases for such
period to (ii) Consolidated Fixed Charges of the Company for such period to be
less than the ratio set forth below:
<TABLE>
<CAPTION>
==================================================================================================================
PERIOD MAXIMUM RATIO
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
4/1/95 - 6/30/96 0.8 to 1.0
- ------------------------------------------------------------------------------------------------------------------
7/1/96 - 9/30/97 0.9 to 1.0
==================================================================================================================
</TABLE>
and the Borrowers shall not permit the ratio of (i) EBIT for the period of four
consecutive fiscal quarters ending on the last day of each fiscal quarter
ending within the periods set forth below to (ii) Consolidated Fixed Charges of
the Company for such period to exceed the ratio set forth below for the
applicable period:
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<TABLE>
<CAPTION>
==================================================================================================================
FOUR QUARTER PERIOD ENDING
ON THE LAST DAY OF EACH
FISCAL QUARTER ENDING WITHIN MAXIMUM RATIO
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
7/1/97 - 6/30/98 1.0 to 1.0
- ------------------------------------------------------------------------------------------------------------------
7/1/98 - 6/30/99 1.10 to 1.0
- ------------------------------------------------------------------------------------------------------------------
7/1/99 - maturity 1.20 to 1.0
==================================================================================================================
</TABLE>
ARTICLE VIII
EVENTS OF DEFAULT
8.1 Event of Default. Any of the following shall constitute an
"Event of Default":
(a) Non-Payment. Any Borrower fails to pay, (i) when and
as required to be paid herein, any amount of principal of any Loan, or (ii)
within 3 Business Days after the same becomes due, any interest, fee or any
other amount payable hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or
warranty by a Borrower or any Subsidiary made or deemed made herein, in any
other Loan Document, or which is contained in any certificate, document or
financial or other statement by a Borrower, any Subsidiary, or any Responsible
Officer, furnished at any time under this Agreement, or in or under any other
Loan Document, is incorrect in any material respect on or as of the date made
or deemed made; or
(c) Specific Defaults. Any Borrower fails to perform or
observe any term, covenant or agreement contained in any of Section 6.1, 6.2,
6.3 or 6.9 or in Article VII; or
(d) Other Defaults. Any Borrower fails to perform or
observe any other term or covenant contained in this Agreement or any other
Loan Document, and such default shall continue unremedied for a period of 30
days after the date upon which written notice thereof is given to the Borrowers
by the Agent or any Bank; or
(e) Cross-Default. Any Borrower or any Subsidiary (i)
fails to make any payment in respect of any Indebtedness or Contingent
Obligation having an aggregate principal amount (including undrawn committed or
available amounts and including amounts owing to all creditors under any
combined or syndicated credit arrangement) of more than $500,000 when due
(whether by scheduled maturity, required prepayment, acceleration, demand, or
otherwise) and such failure continues after the applicable grace or notice
period, if any, specified in the relevant
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document on the date of such failure; or (ii) fails to perform or observe any
other condition or covenant, or any other event shall occur or condition exist,
under any agreement or instrument relating to any such Indebtedness or
Contingent Obligation, and such failure continues after the applicable grace or
notice period, if any, specified in the relevant document on the date of such
failure if the effect of such failure, event or condition is to cause, or to
permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause such Indebtedness
to be declared to be due and payable prior to its stated maturity, or such
Contingent Obligation to become payable or cash collateral in respect thereof
to be demanded; or
(f) Insolvency; Voluntary Proceedings. The Company or
any Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject
to applicable grace periods, if any, whether at stated maturity or otherwise;
(ii) voluntarily ceases to conduct its business in the ordinary course (other
than a Subsidiary not a Borrower with assets of less than $100,000); (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary
Insolvency Proceeding is commenced or filed against the Company or any
Subsidiary, or any writ, judgment, warrant of attachment, execution or similar
process, is issued or levied against a substantial part of the Company's or any
Subsidiary's properties, and any such proceeding or petition shall not be
dismissed, or such writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded within 60 days after
commencement, filing or levy; (ii) the Company or any Subsidiary admits the
material allegations of a petition against it in any Insolvency Proceeding, or
an order for relief (or similar order under non-U.S. law) is ordered in any
Insolvency Proceeding; or (iii) the Company or any Subsidiary acquiesces in the
appointment of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefor), or other similar Person for itself
or a substantial portion of its property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect
to a Pension Plan or Multiemployer Plan which has resulted or could reasonably
be expected to result in liability of a Borrower under Title IV of ERISA to the
Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess
of $500,000; (ii) the aggregate amount of Unfunded Pension Liability among all
Pension Plans at any time exceeds $500,000; or (iii) any Borrower or any ERISA
Affiliate shall fail to pay when due, after the expiration of any applicable
grace period, any installment payment with respect to its withdrawal liability
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under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount
in excess of $500,000; or
(i) Monetary Judgments. One or more non-interlocutory
judgments, non-interlocutory orders, decrees or arbitration awards is entered
against the Company or any Subsidiary involving in the aggregate a liability
(to the extent not covered by independent third-party insurance as to which the
insurer does not dispute coverage) as to any single or related series of
transactions, incidents or conditions, of $500,000 or more, and the same shall
remain unsatisfied, unvacated and unstayed pending appeal for a period of the
lesser of 30 days or the applicable statutory appeal period after the entry
thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment,
order or decree is entered against the Company or any Subsidiary which does or
would reasonably be expected to have a Material Adverse Effect, and there shall
be any period of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; or
(k) Change of Control. There occurs any Change of
Control; or
(l) Environmental Matters. The Company or any of its
Subsidiaries shall be the subject of any proceeding or investigation pertaining
to the release by the Company or any of its Subsidiaries, or any other Person
of any toxic or hazardous waste or substance into the environment, or any
violation of any Environmental Laws, which, in either case, could reasonably be
expected to have a Material Adverse Effect; or
(m) Unenforceability. This Agreement or the Subsidiary
Guarantee Agreement shall cease for any reason to be in full force and effect
(other than by reason of the satisfaction of all the Company's or any of its
Subsidiaries' obligations thereunder) or the Company or any of its Subsidiaries
or any other Person (other than the Banks or the Agent) shall disavow its
obligations under any provision hereof or thereof, or shall deny that it has
any or further obligations under any provision thereof, or shall contest the
validity or enforceability of any provision thereof.
8.2 Remedies. If any Event of Default occurs, the Agent shall, at
the request of, or may, with the consent of, the Majority Banks,
(a) declare the commitment of each Bank to make Loans to
be terminated, whereupon such commitments shall be terminated;
(b) declare the unpaid principal amount of all
outstanding Loans, all interest accrued and unpaid thereon, and
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all other amounts owing or payable hereunder or under any other Loan Document
to be immediately due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by the
Borrowers; and
(c) exercise on behalf of itself and the Banks all rights
and remedies available to it and the Banks under the Loan Documents or
applicable law;
provided, however, that upon the occurrence of any event specified in
subsection (f) or (g) of Section 8.1 (in the case of clause (i) of subsection
(g) upon the expiration of the 60-day period mentioned therein), the obligation
of each Bank to make Loans shall automatically terminate and the unpaid
principal amount of all outstanding Loans and all interest and other amounts as
aforesaid shall automatically become due and payable without further act of the
Agent or any Bank.
In addition to the foregoing, following the occurrence and during the
continuance of an Event of Default, so long as any Letter of Credit has not
been fully drawn and has not been cancelled or expired by its terms, upon
demand by the Agent, the Borrowers shall deposit in an account (the "Letter of
Credit Cash Collateral Account") maintained with BofA in the name of the Agent,
for the ratable benefit of the Banks and the Agent, cash in an amount equal to
the aggregate undrawn face amount of all outstanding Letters of Credit and all
fees and other amounts due or which may become due with respect thereto. The
Borrowers shall have no control over funds in the Letter of Credit Cash
Collateral Account, which funds shall be invested by the Agent from time to
time in certificates of deposit of BofA having a maturity not exceeding thirty
days or in other short term funds as the Agent may in its sole judgment
determine. Such funds shall be promptly applied by the Agent to reimburse the
Issuing Bank for drafts drawn from time to time under such Letters of Credit,
and if there are insufficient funds available to reimburse the Issuing Bank for
all such drafts, then such funds shall be applied ratably in accordance with
the Stated Amounts of the related Letters of Credit. Such funds, if any,
remaining in the Letter of Credit Cash Collateral Account following the payment
of all Obligations in full or the earlier termination of all Events of Default
shall, unless the Agent is otherwise directed by a court of competent
jurisdiction, be promptly paid over to the Borrowers.
8.3 Rights Not Exclusive. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other rights, powers, privileges or remedies provided by law or in equity,
or under any other instrument, document or agreement now existing or hereafter
arising.
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ARTICLE IX
THE AGENT
9.1 Appointment and Authorization. Each Bank hereby irrevocably
(subject to Section 9.9) appoints, designates and authorizes the Agent to take
such action on its behalf under the provisions of this Agreement and each other
Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such 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, nor shall the Agent
have or be deemed to have any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent.
9.2 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
9.3 Liability of Agent. None of the Agent-Related Persons shall
(i) be liable to any other Bank for any action taken or omitted to be taken by
any of them under or in connection with this Agreement or any other Loan
Document or the transactions contemplated hereby (except for its own gross
negligence or willful misconduct), or (ii) be responsible in any manner to any
of the Banks for any recital, statement, representation or warranty made by the
Company or any Subsidiary or Affiliate of the Company, or any officer thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for
in, or received by the Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of any Borrower or any other party to any Loan Document to
perform its obligations hereunder or thereunder. No Agent-Related Person shall
be under any obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of any Borrower or any of the Company's other Subsidiaries or
Affiliates.
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9.4 Reliance by Agent. (a) The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, statement or other document or conversation believed by it
to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to the Borrowers), independent accountants and other experts selected
by the Agent. The Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless it shall
first receive such advice or concurrence of the Majority Banks as it deems
appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Banks against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
The Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement or any other Loan Document in accordance with
a request or consent of the Majority Banks and such request and any action
taken or failure to act pursuant thereto shall be binding upon all of the
Banks.
(b) For purposes of determining compliance with the
conditions specified in Section 4.1, each Bank that has executed this Agreement
shall be deemed to have consented to, approved or accepted or to be satisfied
with, each document or other matter either sent by the Agent to such Bank for
consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Bank.
9.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Agent for the account of the Banks, unless the Agent
shall have received written notice from a Bank or a Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". The Agent will notify the Banks of its
receipt of any such notice. The Agent shall take such action with respect to
such Default or Event of Default as may be requested by the Majority Banks in
accordance with Article VIII; provided, however, that unless and until the
Agent has received any such request, the Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable or in the best interest
of the Banks.
9.6 Credit Decision. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that
no act by the Agent hereinafter taken, including any review of the affairs of
the Company and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Bank. Each Bank
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represents to the Agent that it has, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company and its Subsidiaries, and all applicable bank
regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to the Borrowers
hereunder. Each Bank also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the Borrowers.
Except for notices, reports and other documents expressly herein required to be
furnished to the Banks by the Agent, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Borrowers which may come into the
possession of any of the Agent-Related Persons.
9.7 Indemnification of Agent. Whether or not the transactions
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent owed but not reimbursed by or on behalf of
the Borrowers and without limiting the obligation of the Borrowers to do so),
pro rata, from and against any and all Indemnified Liabilities; provided,
however, that no Bank shall be liable for the payment to the Agent-Related
Persons of any portion of such Indemnified Liabilities resulting solely from
such Person's gross negligence or willful misconduct. Without limitation of
the foregoing, each Bank shall reimburse the Agent upon demand for its ratable
share of any costs or out-of-pocket expenses (including Attorney Costs)
incurred by the Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that the
Agent is required to be but is not reimbursed for such expenses by or on behalf
of the Borrowers. The undertaking in this Section shall survive the payment of
all Obligations hereunder and the resignation or replacement of the Agent.
9.8 Agent in Individual Capacity. BofA and its Affiliates may
make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with the Company and
its
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Subsidiaries and Affiliates as though BofA were not the Agent hereunder
and without notice to or consent of the Banks. The Banks acknowledge that,
pursuant to such activities, BofA or its Affiliates may receive information
regarding the Company or its Affiliates (including information that may be
subject to confidentiality obligations in favor of the Company or such
Subsidiary) and acknowledge that the Agent shall be under no obligation to
provide such information to them. With respect to its Loans, BofA shall have
the same rights and powers under this Agreement as any other Bank and may
exercise the same as though it were not the Agent, and the terms "Bank" and
"Banks" include BofA in its individual capacity.
9.9 Successor Agent. The Agent may, and at the request of the
Borrowers and the Majority Banks shall, resign as Agent upon 30 days' notice to
the Banks. If the Agent resigns under this Agreement, the Majority Banks shall
appoint from among the Banks a successor agent for the Banks which successor
agent shall be approved by the Borrowers. If no successor agent is appointed
prior to the effective date of the resignation of the Agent, the Agent may
appoint, after consulting with the Banks and the Borrowers, a successor agent
from among the Banks. Upon the acceptance of its appointment as successor
agent hereunder, such successor agent shall succeed to all the rights, powers
and duties of the retiring Agent and the term "Agent" shall mean such successor
agent and the retiring Agent's appointment, powers and duties as Agent shall be
terminated. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article IX and Sections 11.4 and 11.5 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 no successor agent has accepted appointment as Agent
by the date which is 30 days following a retiring Agent's notice of
resignation, the retiring Agent's resignation shall nevertheless thereupon
become effective and the Banks shall perform all of the duties of the Agent
hereunder until such time, if any, as the Majority Banks appoint a successor
agent as provided for above.
9.10 Withholding Tax. (a) If any Bank is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Bank claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Bank agrees with and in favor of the Agent, to deliver
to the Agent:
(i) if such Bank claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty,
properly completed IRS Forms 1001 and W-8 before the payment of any
interest in the first calendar year and before the payment of any
interest in each third succeeding calendar year during which interest
may be paid under this Agreement;
(ii) if such Bank claims that interest paid under
this Agreement is exempt from United States withholding tax
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because it is effectively connected with a United States trade or
business of such Bank, two properly completed and executed copies of
IRS Form 4224 before the payment of any interest is due in the first
taxable year of such Bank and in each succeeding taxable year of such
Bank during which interest may be paid under this Agreement, and IRS
Form W-9; and
(iii) such other form or forms as may be required
under the Code or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Bank claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Bank sells, assigns, grants a participation in, or otherwise transfers all
or part of the Obligations of the Borrowers to such Bank, such Bank agrees to
notify the Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of the Borrowers to such Bank. To the extent
of such percentage amount, the Agent will treat such Bank's IRS Form 1001 as no
longer valid.
(c) If any Bank claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of the
Borrowers to such Bank, such Bank agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(d) If any Bank is entitled to a reduction in the
applicable withholding tax, the Agent may withhold from any interest payment to
such Bank an amount equivalent to the applicable withholding tax after taking
into account such reduction. If the forms or other documentation required by
subsection (a) of this Section are not delivered to the Agent, then the Agent
may withhold from any interest payment to such Bank not providing such forms or
other documentation an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any Bank
(because the appropriate form was not delivered, was not properly executed, or
because such Bank failed to notify the Agent of a change in circumstances which
rendered the exemption from, or reduction of, withholding tax ineffective, or
for any other reason) such Bank shall indemnify the Agent fully for all amounts
paid, directly or indirectly, by the Agent as tax or otherwise, including
penalties and interest,
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and including any taxes imposed by any jurisdiction on the amounts payable to
the Agent under this Section, together with all costs and expenses (including
Attorney Costs). The obligation of the Banks under this subsection shall
survive the payment of all Obligations and the resignation or replacement of
the Agent.
ARTICLE X
GUARANTEES OF COMPANY AND EACH BORROWER
10.1 Guarantee. The Company and each Borrower, jointly and
severally, hereby unconditionally guarantees the due and punctual payment of
all Obligations of the Borrowers, including without limitation the due and
punctual payment of the principal of and interest on the Loans made to each
Borrower pursuant to this Agreement and the due and punctual payment of all
other amounts payable by each other Borrower under this Agreement or the other
Loan Documents. Upon failure by any Borrower to pay punctually any such
amount, upon demand by Agent, the Company or any other Borrower, as the case
may be, shall forthwith pay the amount not so paid at the place and in the
manner and with the effect specified in this Agreement. Notwithstanding
anything to the contrary contained in this Section 10.1 and elsewhere in the
Agreement to the extent this Agreement provides for joint and several
liability, the obligations and liabilities of each Borrower with respect to the
Loan and related Obligations of the other Borrower hereunder shall not at any
time exceed the "Limit of Liability" (as hereafter defined) of such Borrower.
The term "Limit of Liability", with respect to any Borrower, shall have the
meaning assigned to such term in the Subsidiary Guaranty Agreement provided
that, for purposes of this Section 10.1 all references to "Guarantor" therein
and in any other related terms shall be replaced with reference to such
Borrower.
10.2 Unconditional Obligations. The obligations of the Company and
each Borrower hereunder shall be unconditional and absolute and, without
limiting the generality of the foregoing, shall not be released, discharged or
otherwise affected by:
(i) any extension, renewal, settlement, compromise,
waiver or release in respect of any Obligation of any Borrower or any
collateral therefor under this Agreement or the other Loan Document;
(ii) any modification or amendment of or supplement to
this Agreement or the other Loan Documents;
(iii) any change in the corporate existence, structure or
ownership of any Borrower, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting any other
Borrower or its collateral or its assets;
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(iv) the existence of any claim, set-off or other rights
which a Borrower may have at any time against the Company or any other
Borrower, the Agent or any other Person, whether in connection
herewith or any unrelated transactions, provided that nothing herein
shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
(v) any validity or unenforceability relating to or
against the Company or any Borrower for any reason of any provision or
all of this Agreement or the other Loan Documents, or any provision of
applicable law or regulation purporting to prohibit the payment by the
Company or any Borrower of the principal of or interest on any loan or
any other amount payable by it under this Agreement or the other Loan
Documents; or
(vi) any other act or omission to act or delay of any kind
by the Company or any Borrower, the Agent or any other Person or any
other circumstance whatsoever which might, but for the provisions of
this paragraph, constitute a legal or equitable discharge of the
Company's or such Borrower's obligations under this Agreement or the
other Loan Documents.
10.3 Period In Force. The Company's and each Borrower's
Obligations under this Article 10 shall remain in full force and effect until
all Obligations shall have been paid in full and this Agreement and the other
Loan Documents shall have terminated in accordance with their terms. If at any
time any payment of the principal of or interest on any loan made to a Borrower
or any other amount payable the Company or by any Borrower under this Agreement
or the other Loan Documents is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy or reorganization of the Company or
such Borrower or otherwise, each of the Company's and such Borrower's
Obligations under this Section 10 with respect to such payment shall be revived
and continued in full force and effect.
10.4 Waiver. THE COMPANY AND EACH BORROWER WAIVES ACCEPTANCE
HEREOF, PRESENTMENT, DEMAND, PROTEST AND ANY NOTICE NOT PROVIDED FOR HEREIN, AS
WELL AS ANY REQUIREMENT THAT AT ANY TIME ANY ACTION BE TAKEN BY ANY PERSON
AGAINST ANY OTHER BORROWER OR ANY OTHER PERSON.
10.5 Effect of Stay. In the event that the demand for payment of
any amount payable by the Company or any Borrower under this Agreement or the
other Loan Documents is stayed upon the insolvency, bankruptcy or
reorganization of the Company or a Borrower, all such amounts otherwise subject
to acceleration under the terms of this Agreement or the other Loan Documents
shall nonetheless be payable by the Company or the other Borrowers hereunder
forthwith upon demand by Agent.
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10.6 No Subrogation, Contribution, Reimbursement or Indemnity.
Notwithstanding anything to the contrary in this Section 10 and this Agreement,
the Company and the Borrowers hereby irrevocably waive all rights which may
have arisen in connection with the guarantees made pursuant to this Section 10
to be subrogated to any of the rights (whether contractual, under the United
States Bankruptcy Code, as amended, including Section 509 thereof, under common
law or otherwise) of the Agent or any of the Lenders against the Company or the
Borrowers or against any collateral security or guaranty or right of offset
held by the Agent for the payment of the Obligations until such time as all
Obligations have been fully and indefinitely paid in full. The Company and the
Borrowers hereby further irrevocably waive all contractual, common law,
statutory or other rights of reimbursement, contribution, exoneration or
indemnity (or any similar right) from or against the Company or the Borrowers
which may have arisen in connection with the guarantees made pursuant to this
Section 10 until such time as all Obligations have been fully and indefeasibly
paid in full. So long as any Obligations remain, if any amount shall be paid
by or on behalf of the Company or any Borrower to any of them on account of any
of the rights waived in this paragraph, such amount shall be held by such
Person in trust, segregated from other funds of such Person, and shall,
forthwith upon receipt, be turned over to the Agent (duly indorsed by such
Person to the Agent, if required), to be applied against the Obligations,
whether matured or unmatured, in such order as the Agent may determine. The
provisions of this paragraph shall survive the term of this Agreement and the
payment in full of the Obligations.
ARTICLE XI
MISCELLANEOUS
11.1 Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by the Borrowers therefrom, shall be effective unless
the same shall be in writing and signed by the Majority Banks (or by the Agent
at the written request of the Majority Banks) and the Borrowers and
acknowledged by the Agent, and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no such waiver, amendment, or consent shall,
unless in writing and signed by all the Banks and the Borrowers and
acknowledged by the Agent, do any of the following:
(a) increase or extend the Commitment of any Bank (or
reinstate any Commitment terminated pursuant to Section 8.2);
(b) postpone or delay any date fixed by this Agreement or
any other Loan Document for any payment of principal, interest, fees or other
amounts due to the Banks (or any of them) hereunder or under any other Loan
Document;
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(c) reduce the principal of, or the rate of interest
specified herein on any Loan, or (subject to clause (ii) below) any fees or
other amounts payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the Banks
or any of them to take any action hereunder;
(e) extend the Termination Date or permit any Letter of
Credit to have an expiration date beyond the Revolving Termination Date;
(f) release any guarantor or release all or substantially
all of any collateral, if any, securing the Obligations; or
(g) amend this Section, or Section 2.14, or any provision
herein providing for consent or other action by all Banks;
and, provided further, that (i) no amendment, waiver or consent shall, unless
in writing and signed by the Agent in addition to the Majority Banks or all the
Banks, as the case may be, affect the rights or duties of the Agent under this
Agreement or any other Loan Document, and (ii) the Fee Letters may be amended,
or rights or privileges thereunder waived, in a writing executed by the parties
thereto.
11.2 Notices. (a) All notices, requests and other communications
shall be in writing (including, unless the context expressly otherwise
provides, by facsimile transmission, provided that any matter transmitted by
the Borrowers by facsimile (i) shall be immediately confirmed by a telephone
call to the recipient at the number specified on Schedule 11.2, and (ii) shall
be followed promptly by delivery of a hard copy original thereof) and mailed,
faxed or delivered, to the address or facsimile number specified for notices on
Schedule 11.2; or, as directed to the Borrowers or the Agent, to such other
address as shall be designated by such party in a written notice to the other
parties, and as directed to any other party, at such other address as shall be
designated by such party in a written notice to the Borrowers and the Agent.
(b) All such notices, requests and communications shall,
when transmitted by overnight delivery, or faxed, be effective when delivered
for overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II or IX shall not be effective until actually
received by the Agent.
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(c) Any agreement of the Agent and the Banks herein to
receive certain notices by telephone or facsimile is solely for the convenience
and at the request of the Borrowers. The Agent and the Banks shall be entitled
to rely on the authority of any Person purporting to be a Person authorized by
a Borrowers to give such notice and the Agent and the Banks shall not have any
liability to the or other Person on account of any action taken or not taken
by the Agent or the Banks in reliance upon such telephonic or facsimile notice.
The obligation of the Borrowers to repay the Loans shall not be affected in any
way or to any extent by any failure by the Agent and the Banks to receive
written confirmation of any telephonic or facsimile notice or the receipt by
the Agent and the Banks of a confirmation which is at variance with the terms
understood by the Agent and the Banks to be contained in the telephonic or
facsimile notice.
(d) Any Notice given by the Agent or any Bank and
addressed to a Borrower shall be deemed to constitute notice hereunder of such
event, circumstance, requirement or other matter for all Borrowers hereunder.
11.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.
11.4 Costs and Expenses. The Borrowers shall:
(a) whether or not the transactions contemplated hereby
are consummated, pay or reimburse BofA (including in its capacity as Agent)
within ten Business Days after demand (subject to subsection 4.1(f)) for all
costs and expenses incurred by BofA (including in its capacity as Agent) in
connection with the development, preparation, delivery, administration and
execution of, and any amendment, supplement, waiver or modification to (in each
case, whether or not consummated), this Agreement, any Loan Document and any
other documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby, including
reasonable Attorney Costs incurred by BofA (including in its capacity as Agent)
with respect thereto; and
(b) pay or reimburse the Agent and each Bank within five
Business Days after demand (subject to subsection 4.1(f)) for all costs and
expenses (including Attorney Costs) incurred by them in connection with the
enforcement, attempted enforcement, or preservation of any rights or remedies
under this Agreement or any other Loan Document during the existence of an
Event of Default or after acceleration of the Loans (including in connection
with any "workout" or restructuring
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regarding the Loans, and including in any Insolvency Proceeding or appellate
proceeding); and
(c) the provisions of Section 11.4(a) notwithstanding,
the Borrower's obligations to reimburse Agent for attorneys' fees and expenses
incurred in connection with the preparation of this Agreement shall not exceed
$40,000.
11.5 Borrowers Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Borrowers shall indemnify and hold the
Agent-Related Persons, and each Bank and each of its respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination, resignation or replacement of the
Agent or replacement of any Bank) be imposed on, incurred by or asserted
against any such Person in any way relating to or arising out of this Agreement
or any document contemplated by or referred to herein, or the transactions
contemplated hereby, or any action taken or omitted by any such Person under or
in connection with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including any Insolvency Proceeding or
appellate proceeding) related to or arising out of this Agreement or the Loans
or the use of the proceeds thereof, or related to any Offshore Currency
transactions entered into in connection herewith, whether or not any
Indemnified Person is a party thereto (all the foregoing, collectively, the
"Indemnified Liabilities"); provided, that the Borrowers shall have no
obligation hereunder to any Indemnified Person with respect to Indemnified
Liabilities resulting solely from the gross negligence or willful misconduct of
such Indemnified Person. The agreements in this Section shall survive payment
of all other Obligations.
11.6 Payments Set Aside. To the extent that a Borrower makes a
payment to the Agent or the Banks, or the Agent or the Banks exercise their
right of set-off, and such payment or the proceeds of such set-off or any part
thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement
entered into by the Agent or such Bank in its discretion) to be repaid to a
trustee, receiver or any other party, in connection with any Insolvency
Proceeding or otherwise, then (a) to the extent of such recovery the obligation
or part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or such
set-off had not occurred, and (b) each Bank severally agrees to pay to the
Agent upon demand its pro rata share of any amount so recovered from or repaid
by the Agent.
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11.7 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that no Borrower may assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of the Agent and each Bank.
11.8 Assignments, Participations, etc. (a) Any Bank may, with the
written consent of the Borrowers at all times other than during the existence
of an Event of Default and the Agent, which consents shall not be unreasonably
withheld, at any time assign and delegate to one or more Eligible Assignees
(provided that no written consent of the Borrowers or the Agent shall be
required in connection with any assignment and delegation by a Bank to an
Eligible Assignee that is an Affiliate of such Bank) (each an "Assignee") all,
or any ratable part of all, of the Loans, its Pro Rata Share of all LC
Obligations, the Commitments and the other rights and obligations of such Bank
hereunder, in a minimum amount of $5,000,000; provided, however, that the
Borrowers and the Agent may continue to deal solely and directly with such Bank
in connection with the interest so assigned to an Assignee until (i) written
notice of such assignment, together with payment instructions, addresses and
related information with respect to the Assignee, shall have been given to the
Borrowers and the Agent by such Bank and the Assignee; (ii) such Bank and its
Assignee shall have delivered to the Borrowers and the Agent an Assignment and
Acceptance in the form of Exhibit E ("Assignment and Acceptance") together with
subject to such assignment and (iii) the assignor Bank or Assignee has paid to
the Agent a processing fee in the amount of $2,500.
(b) From and after the date that the Agent notifies the
assignor Bank that it has received (and provided its consent with respect to)
an executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Bank under the Loan Documents, and (ii) the assignor Bank shall, to the extent
that rights and obligations hereunder and under the other Loan Documents have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under the Loan Documents.
(c) Within five Business Days after its receipt of notice
by the Agent that it has received an executed Assignment and Acceptance and
payment of the processing fee, (and provided that it consents to such
assignment in accordance with subsection 11.8(a)), the Borrowers shall execute
and deliver to the Agent, if requested by Assignee or assignor Bank new Notes
evidencing such Assignee's assigned Loans and Commitment and, if the assignor
Bank has retained a portion of its Loans and its Commitment, replacement Notes
in the principal amount of the Revolving Loans retained by the assignor Bank
(such Notes to be
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<PAGE> 92
in exchange for, but not in payment of, the Notes held by such Bank).
Immediately upon each Assignee's making its processing fee payment under the
Assignment and Acceptance, this Agreement shall be deemed to be amended to the
extent, but only to the extent, necessary to reflect the addition of the
Assignee and the resulting adjustment of the Commitments arising therefrom. The
Commitment allocated to each Assignee shall reduce such Commitments of the
assigning Bank pro tanto.
(d) Any Bank may at any time sell to one or more
commercial banks or other Persons not Affiliates of the Company (a
"Participant") participating interests in any Loans, the Commitment of that
Bank and the other interests of that Bank (the "originating Bank") hereunder
and under the other Loan Documents; provided, however, that (i) the originating
Bank's obligations under this Agreement shall remain unchanged, (ii) the
originating Bank shall remain solely responsible for the performance of such
obligations, (iii) the Borrowers and the Agent shall continue to deal solely
and directly with the originating Bank in connection with the originating
Bank's rights and obligations under this Agreement and the other Loan
Documents, and (iv) no Bank shall transfer or grant any participating interest
under which the Participant has rights to approve any amendment to, or any
consent or waiver with respect to, this Agreement or any other Loan Document,
except to the extent such amendment, consent or waiver would require unanimous
consent of the Banks as described in the first proviso to Section 11.1. In the
case of any such participation, the Participant shall be entitled to the
benefit of Sections 3.1, 3.3 and 11.5 as though it were also a Bank hereunder,
and if amounts outstanding under this Agreement are due and unpaid, or shall
have been declared or shall have become due and payable upon the occurrence of
an Event of Default, each Participant shall be deemed to have the right of
set-off in respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Bank under this Agreement.
(e) Notwithstanding any other provision in this
Agreement, any Bank may at any time create a security interest in, or pledge,
all or any portion of its rights under and interest in this Agreement and the
Note held by it in favor of any Federal Reserve Bank in accordance with
Regulation A of the FRB or U.S. Treasury Regulation 31 CFR Section 203.14, and
such Federal Reserve Bank may enforce such pledge or security interest in any
manner permitted under applicable law.
11.9 Confidentiality. Each Bank agrees to take and to cause its
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by the Company or any Subsidiary and provided to it by the Company or
any Subsidiary, or by the Agent on such Company's or Subsidiary's behalf, under
this Agreement or any other Loan Document, and neither it nor any of its
Affiliates shall use any
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<PAGE> 93
such information other than in connection with or in enforcement of this
Agreement and the other Loan Documents or in connection with other business now
or hereafter existing or contemplated with the Company or any Subsidiary;
except to the extent such information (i) was or becomes generally available to
the public other than as a result of disclosure by the Bank, or (ii) was or
becomes available on a non-confidential basis from a source other than the
Company or any Subsidiary, provided that such source is not bound by a
confidentiality agreement with the Company or any Subsidiary known to the Bank;
provided, however, that any Bank may disclose such information (A) at the
request or pursuant to any requirement of any Governmental Authority to which
the Bank is subject or in connection with an examination of such Bank by any
such authority; (B) pursuant to subpoena or other court process; (C) when
required to do so in accordance with the provisions of any applicable
Requirement of Law; (D) to the extent reasonably required in connection with
any litigation or proceeding to which the Agent, any Bank or their respective
Affiliates may be party; (E) to the extent reasonably required in connection
with the exercise of any remedy hereunder or under any other Loan Document; (F)
to such Bank's independent auditors and other professional advisors; (G) to any
Participant or Assignee, actual or potential, provided that such Person agrees
in writing to keep such information confidential to the same extent required of
the Banks hereunder; (H) as to any Bank or its Affiliate, as expressly
permitted under the terms of any other document or agreement regarding
confidentiality to which the Company or any Subsidiary is party or is deemed
party with such Bank or such Affiliate; and (I) to its Affiliates.
11.10 Set-off. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists or the Loans have been
accelerated, each Bank is authorized at any time and from time to time, without
prior notice to any Borrower, any such notice being waived by the Borrowers to
the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by,
and other indebtedness at any time owing by, such Bank to or for the credit or
the account of the Borrower against any and all Obligations owing to such Bank,
now or hereafter existing, irrespective of whether or not the Agent or such
Bank shall have made demand under this Agreement or any Loan Document and
although such Obligations may be contingent or unmatured. Each Bank agrees
promptly to notify the applicable Borrower and the Agent after any such set-off
and application made by such Bank; provided, however, that the failure to give
such notice shall not affect the validity of such set-off and application.
11.11 Automatic Debits of Fees. With respect to any commitment fee,
arrangement fee, or other fee, or any other cost or expense (including Attorney
Costs) due and payable to the Agent, BofA or the Arranger under the Loan
Documents, the Borrower hereby irrevocably authorizes BofA to debit any deposit
account of such Borrower with BofA in an amount such that the
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<PAGE> 94
aggregate amount debited from all such deposit accounts does not exceed such
fee or other cost or expense. If there are insufficient funds in such deposit
accounts to cover the amount of the fee or other cost or expense then due, such
debits will be reversed (in whole or in part, in BofA's sole discretion) and
such amount not debited shall be deemed to be unpaid. No such debit under this
Section shall be deemed a set-off. BofA will provide the applicable Borrower
with prompt written notice of any such debit.
11.12 Notification of Addresses, Lending Offices, Etc. Each Bank
shall notify the Agent in writing of any changes in the address to which
notices to the Bank should be directed, of addresses of any Lending Office, of
payment instructions in respect of all payments to be made to it hereunder and
of such other administrative information as the Agent shall reasonably request.
11.13 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
11.14 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
11.15 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Borrowers, the Banks, the
Agent and the Agent-Related Persons, and their permitted successors and
assigns, and no other Person shall be a direct or indirect legal beneficiary
of, or have any direct or indirect cause of action or claim in connection with,
this Agreement or any of the other Loan Documents.
11.16 Governing Law and Jurisdiction. (a) THIS AGREEMENT AND THE
NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF ILLINOIS; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL
RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF ILLINOIS OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWERS, THE AGENT
AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE BORROWERS, THE AGENT
AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
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JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE
BORROWERS, THE AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
ILLINOIS LAW.
11.17 Waiver of Jury Trial. THE BORROWERS, THE BANKS AND THE AGENT
EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR
ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
THE BORROWERS, THE BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE
OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
11.18 Judgment. If, for the purposes of obtaining judgment in any
court, it is necessary to convert a sum due hereunder or any other Loan
Document in one currency into another currency, the rate of exchange used shall
be that at which in accordance with normal banking procedures the Agent could
purchase the first currency with such other currency on the Business Day
preceding that on which final judgment is given. The obligation of the
Borrowers in respect of any such sum due from it to the Agent hereunder or
under the other Loan Documents shall, notwithstanding any judgment in a
currency (the "Judgment Currency") other than that in which such sum is
denominated in accordance with the applicable provisions of this Agreement (the
"Agreement Currency"), be discharged only to the extent that on the Business
Day following receipt by the Agent of any sum adjudged to be so due in the
Judgment Currency, the Agent may in accordance with normal banking procedures
purchase the Agreement Currency with the Judgment Currency. If the amount of
the Agreement Currency so purchased is less than the sum originally due to the
Agent in the Agreement Currency, the Borrowers agree, as a separate obligation
and notwithstanding any such judgment, to indemnify the Agent or the Person to
whom such obligation was owing against such loss. If the amount of the
Agreement currency so purchased is greater than the sum originally due to the
Agent in such currency, the Agent agrees to return the amount of any excess to
the applicable Borrowers (or to any other Person who may be entitled thereto
under applicable law).
11.19 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and
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<PAGE> 96
understanding among the Borrowers, the Banks and the Agent, and supersedes all
prior or contemporaneous agreements and understandings of such Persons, verbal
or written, relating to the subject matter hereof and thereof.
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<PAGE> 97
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in Chicago, Illinois by their proper and duly
authorized officers as of the day and year first above written.
SCHAWK, INC.
By:_______________________________
Title:____________________________
By:_______________________________
Title:____________________________
FILTERTEK USA, INC.
By:_______________________________
Title:____________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By:_______________________________
Title:____________________________
BANK OF AMERICA ILLINOIS,
as a Bank
By:_______________________________
Title:____________________________
THE NORTHERN TRUST COMPANY,
as a Bank
By:_______________________________
Title:____________________________
<PAGE> 98
NBD BANK, as a Bank
By:_______________________________
Title:____________________________
THE FIRST NATIONAL
BANK OF CHICAGO, as a Bank
By:_______________________________
Title:____________________________
<PAGE> 99
SCHEDULE 2.1
------------
COMMITMENTS
-----------
AND PRO RATA SHARES
-------------------
<TABLE>
<CAPTION>
Pro Rata
Bank Commitment Share
- ---- ---------- ------------
<S> <C> <C>
Bank of America Illinois $32,000,000 40.00000000%
The First National Bank
of Chicago $16,000,000 20.00000000%
NBD Bank $16,000,000 20.00000000%
The Northern Trust Company $16,000,000 20.00000000%
----------- ------------
TOTAL $80,000,000 100.00000000%
</TABLE>
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SCHEDULE 11.2
LENDING OFFICES; ADDRESSES FOR NOTICES
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
Address for Notices:
Bank of America National Trust
and Savings Association
Agency Management Services - Illinois #69596
231 South LaSalle Street
Chicago, Illinois 60697
Attention: Senior Agency Officer
Telephone: 312-828-7933
Facsimile: 312-977-9102
Address for Payments:
CURRENCY ACCOUNT
-------- -------
US Dollars Bank of America, San Francisco
Account No. 12333-14599
Ref: Schawk, Inc.
Pounds Sterling Bank of America, London
Account No. 95415024
Ref: Schawk, Inc.
Deutsche Marks Bank of America, Frankfurt
Account No. 95596011
Ref: Schawk, Inc.
Japanese Yen Bank of America, Tokyo
Account No. 95596016
Ref: Schawk, Inc.
French Francs Bank of America, Paris
Account No. 95596010
Ref: Schawk, Inc.
Canadian Dollars Bank of America, Toronto
Account No. 65067-226
Ref: Schawk, Inc.
ECU Bank of America, Brussels
Account No. 95596024
Ref: Schawk, Inc.
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BANK OF AMERICA ILLINOIS,
as a Bank
Address for Notices:
[Address]
THE NORTHERN TRUST COMPANY,
as a Bank
Address for Notices:
[Address]
NBD BANK,
as a Bank
Address for Notices:
[Address]
THE FIRST NATIONAL BANK OF CHICAGO,
as a Bank
Address for Notices:
[Address]
94
<PAGE> 1
EXHIBIT 10.41
EXECUTION COPY
================================================================================
$20,000,000
MULTICURRENCY SHORT TERM CREDIT AGREEMENT
Dated as of June 30, 1995
among
SCHAWK, INC.,
FILTERTEK USA, INC.,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Agent,
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION> Page
<S> <C> <C> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Interpretive Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.3 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.4 Currency Equivalents Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE II
THE CREDITS . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.1 Amounts and Terms of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.2 Loan Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.3 Procedure for Borrowing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.4 Conversion and Continuation Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.5 Utilization of Revolving Commitments in Offshore Currencies. . . . . . . . . . . . . . . . . . . . . 26
2.6 Voluntary Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.7 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.8 Currency Exchange Fluctuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.9 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.10 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.11 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Arrangement, Agency Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(b) Commitment Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.12 Computation of Fees and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.13 Payments by the Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.14 Payments by the Banks to the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.15 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY . . . . . . . . . . . . . . . . . . 33
3.1 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.2 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.3 Increased Costs and Reduction of Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.4 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.5 Inability to Determine Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.6 Certificates of Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.7 Substitution of Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.8 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE IV
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . 38
4.1 Conditions of Initial Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(a) Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(b) Resolutions; Incumbency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
(c) Organization Documents; Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(d) Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(e) Payment of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(f) Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(h) Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.2 Conditions to All Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(a) Notice of Borrowing or Issuance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(b) Continuation of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . 40
(c) No Existing Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE V
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 40
5.1 Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.2 Corporate Authorization; No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.3 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.6 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.7 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.8 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.9 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.11 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.13 Regulated Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.14 No Burdensome Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.15 Copyrights, Patents, Trademarks and Licenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.16 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.18 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VI
AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 45
6.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.2 Certificates; Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.4 Preservation of Corporate Existence, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.5 Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.7 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.9 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.10 Inspection of Property and Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.11 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
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<TABLE>
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6.12 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.13 Additional Subsidiary Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VII
NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . 50
7.1 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.2 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.3 Consolidations and Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.4 Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.5 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.6 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.7 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.8 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.9 Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.10 Lease Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.11 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.12 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.13 Change in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.14 Accounting Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.15 Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.16 Limitation on Certain Restrictions on Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.17 Organization Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
7.18 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
(a) Maintenance of Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . 58
(b) Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(c) Funded Debt to EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
(e) Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
ARTICLE VIII
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . 60
8.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
(a) Non-Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
(b) Representation or Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
(c) Specific Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
(d) Other Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
(e) Cross-Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
(f) Insolvency; Voluntary Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
(g) Involuntary Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
(h) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
(i) Monetary Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(j) Non-Monetary Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(k) Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(l) Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
(m) Unenforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
</TABLE>
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<TABLE>
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8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.3 Rights Not Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE IX
THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.1 Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.3 Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.4 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.6 Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.7 Indemnification of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.8 Agent in Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
9.10 Withholding Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE X
GUARANTEES OF COMPANY AND EACH BORROWER . . . . . . . . . . . . . . . . . . 68
10.1 Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.2 Unconditional Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.3 Period In Force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
10.5 Effect of Stay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.6 No Subrogation, Contribution, Reimbursement or Indemnity . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE XI
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 70
11.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
11.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
11.4 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
11.5 Borrowers Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.6 Payments Set Aside . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
11.7 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
11.8 Assignments, Participations, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
11.9 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
11.10 Set-off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
11.11 Automatic Debits of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
11.12 Notification of Addresses, Lending Offices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.15 No Third Parties Benefited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.16 Governing Law and Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.17 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
</TABLE>
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<TABLE>
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11.18 Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
11.19 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
</TABLE>
v
<PAGE> 7
SCHEDULES
<TABLE>
<S> <C>
Schedule 2.1 Commitments
Schedule 5.5 Litigation
Schedule 5.7 ERISA
Schedule 5.11 Permitted Liabilities
Schedule 5.12 Environmental Matters
Schedule 5.16 Subsidiaries and Minority Interests
Schedule 5.17 Insurance Matters
Schedule 7.1 Permitted Liens
Schedule 7.5 Permitted Indebtedness
Schedule 7.8 Contingent Obligations
Schedule 10.2 Lending Offices; Addresses for Notices
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Legal Opinion of Borrower Counsel
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Promissory Note
Exhibit G Form of Intercompany Note Pledge Agreement
Exhibit H Form of Subsidiary Guarantee Agreement
Exhibit I Form of Intercreditor and Subordination Agreement
</TABLE>
vi
<PAGE> 8
MULTICURRENCY SHORT TERM CREDIT AGREEMENT
This MULTICURRENCY SHORT TERM CREDIT AGREEMENT is entered into as of
June 30, 1995, among Schawk, Inc., a Delaware corporation (the "Company"),
Filtertek USA, Inc., a Delaware corporation and a wholly-owned subsidiary of
the Company ("Filtertek"), the several financial institutions from time to time
party to this Agreement (collectively, the "Banks"; individually, a "Bank"),
and Bank of America National Trust and Savings Association, as agent for the
Banks. The Company and Filtertek are referred to individually as a "Borrower"
and collectively as the "Borrowers".
WHEREAS, the Banks have agreed to make available to the Borrowers a
revolving multicurrency credit facility upon the terms and conditions set forth
in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. The following terms have the
following meanings:
"Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly,
in (a) the acquisition of all or substantially all of the assets of a
Person, or of any business or division of a Person, (b) the
acquisition of in excess of 50% of the capital stock, partnership
interests, membership interests or equity of any Person, or otherwise
causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other combination with another Person (other than
a Person that is a Subsidiary) provided that the Company or the
Subsidiary is the surviving entity.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. A Person shall be deemed to
control another Person if the controlling Person possesses, directly
or indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the
ownership of voting securities, membership interests, by contract, or
otherwise.
"Agent" means BofA in its capacity as agent for the Banks
hereunder, and any successor agent arising under Section 9.9.
<PAGE> 9
"Agent-Related Persons" means BofA and any successor agent
arising under Section 9.9, together with their respective Affiliates,
and the officers, directors, employees, agents and attorneys-in-fact
of such Persons and Affiliates.
"Agent's Payment Office" means (i) in respect of payments in
Dollars, the address for payments set forth on Schedule 11.2 in
relation to the Agent or such other address as the Agent may from time
to time specify in accordance with Section 11.2, and, (ii) in the case
of payments in any Offshore Currency, the address for payments set
forth in Schedule 11.2 in relation to the Agent or such other address
as the Agent may from time to time specify in accordance with Section
11.2.
"Agreed Alternative Currency" has the meaning specified in
subsection 2.5(e).
"Agreement" means this Multicurrency Credit Agreement.
"Applicable Currency" means, as to any particular payment or
Loan, Dollars or the Offshore Currency in which it is denominated or
is payable.
"Applicable Margin" means at any date, the applicable
percentage amount set forth in the following table opposite the
applicable ratio of Funded Debt to EBITDA on a trailing four quarter
basis as shown in the Compliance Certificate then most recently
delivered to the Banks:
<TABLE>
<CAPTION>
============================================================================
Ratio of Funded Debt Applicable Margin
to EBITDA
----------------------------------------------------------------------------
<S> <C>
3.0 or more .875%
----------------------------------------------------------------------------
less than 3.0 but .750%
more than or equal to 2.5
----------------------------------------------------------------------------
less than 2.5 but .625%
more than or equal to 2.0
----------------------------------------------------------------------------
less than 2.0 but more .500%
than or equal to 1.75
----------------------------------------------------------------------------
less than 1.75 .400%
============================================================================
</TABLE>
provided, however that for the period from the date hereof to June 30,
1996, the Applicable Margin shall be deemed to be .625%; provided
further that, if the Company shall have failed to deliver to the Banks
by the date required hereunder its Compliance Certificate pursuant to
Section 6.2(b), then until such delivery the Applicable Margin shall
be deemed to be .875%. Each change in the Applicable Margin
2
<PAGE> 10
shall take effect with respect to all outstanding Offshore Rate Loans
on the first day of the month immediately succeeding the month in
which such Compliance Certificate is received by Agent and the Banks.
Notwithstanding the foregoing, no reduction in the Applicable Margin
shall be effected if a Default shall have occurred and be continuing
on the date when such change would otherwise occur.
"Assignee" has the meaning specified in subsection 11.8(a).
"Attorney Costs" means and includes all fees and disbursements
of any law firm or other external counsel, the allocated cost of
internal legal services and all disbursements of internal counsel.
"Bank" has the meaning specified in the introductory
clause hereto.
"Banking Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City, Chicago or San
Francisco are authorized or required by law to close and (i) with
respect to disbursements and payments in Dollars, a day on which
dealings are carried on in the applicable offshore Dollar interbank
market, and (ii) with respect to any disbursements and payments in and
calculations pertaining to any Offshore Currency Loan, a day on which
commercial banks are open for foreign exchange business in London,
England, and on which dealings in the relevant Offshore Currency are
carried on in the applicable offshore foreign exchange interbank
market in which disbursement of or payment in such Offshore Currency
will be made or received hereunder.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of
1978 (11 U.S.C. Section 101, et seq.).
"Base Rate" means, for any day, the higher of:
(a) 0.50% per annum above the latest Federal
Funds Rate; and (b) the rate of interest in effect for such
day as publicly announced from time to time by BofA in San
Francisco, California, as its "reference rate." (The
"reference rate" is a rate set by BofA based upon various
factors including BofA's costs and desired return, general
economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced
at, above, or below such announced rate.)
Any change in the reference rate announced by BofA shall take
effect at the opening of business on the day specified in the public
announcement of such change.
3
<PAGE> 11
"Base Rate Loan" means a Loan that bears interest based on the
Base Rate.
"BofA" means Bank of America National Trust and Savings
Association, a national banking association.
"Borrower" and "Borrowers" have the meaning specified in the
introductory clause hereto.
"Borrowing" means a borrowing hereunder consisting of Loans of
the same Type and in the same Applicable Currency made to a Borrower
on the same day by the Banks under Article II, and, other than in the
case of Base Rate Loans, having the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs
under Section 2.3.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City, Chicago or San
Francisco are authorized or required by law to close and, if the
applicable Business Day relates to any Offshore Rate Loan, means a
Banking Day.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"Capital Expenditures" means, for any period and with respect
to any Person, the aggregate of all expenditures by such Person and
its Subsidiaries for the acquisition or leasing of fixed or capital
assets or additions to equipment (including replacements, capitalized
repairs and improvements during such period) which should be
capitalized under GAAP on a consolidated balance sheet of such Person
and its Subsidiaries, less net proceeds from sales of fixed or capital
assets received by such Person or any of its Subsidiaries during such
period. For the purpose of this definition, the purchase price of
equipment which is purchased simultaneously with the trade-in of
existing equipment owned by such Person or any of its Subsidiaries or
with insurance proceeds shall be included in Capital Expenditures only
to the extent of the gross amount of such purchase price less the
credit granted by the seller of such equipment for such equipment
being traded in at such time, or the amount of such proceeds, as the
case may be.
"Capital Lease" has the meaning specified in the definition of
"Capital Lease Obligations."
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<PAGE> 12
"Capital Lease Obligations" means all monetary obligations of
the Company or any of its Subsidiaries under any leasing or similar
arrangement which, in accordance with GAAP, is classified as a capital
lease ("Capital Lease").
"Change of Control" means any of the following: (i) the
Schawk Family shall cease to own, free and clear of all liens or other
encumbrances, at least 51% of the outstanding shares of voting stock
of the Company on a fully diluted basis; or (ii) during any period of
twelve consecutive calendar months, individuals who at the beginning
of such period constituted the Company's board of directors (together
with any new directors whose election by the Company's board of
directors or whose nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of such period or whose election or nomination for election
was previously so approved) cease for any reasons other than death or
disability to constitute a majority of the directors then in office;
or (iii) the Company shall cease to own, free and clear of all liens
or other encumbrances, 100% of the outstanding shares of capital stock
of Filtertek.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents
(however designated) of such Person's capital stock and any rights
(other than debt securities convertible into or exchangeable for
capital stock), warrants or options exchangeable for or convertible
into such capital stock.
"Closing Date" means the date on which all conditions
precedent set forth in Section 4.1 are satisfied or waived by all
Banks (or, in the case of subsection 4.1(e), waived by the Person
entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
"Commitment", as to each Bank, has the meaning specified in
Section 2.1.
"Company" has the meaning specified in the introductory clause
hereto.
"Compliance Certificate" means a certificate substantially in
the form of Exhibit C.
"Computation Date" has the meaning specified in subsection
2.5(a).
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<PAGE> 13
"Consolidated Fixed Charges" means, for any period, for the
Company and its Subsidiaries, the sum of (without duplication) (i)
Consolidated Interest Expense, (ii) all scheduled payments of
principal on Indebtedness of the Company and its Subsidiaries
(including, without limitation, principal payments in respect of
Capital Leases and in the case of this Agreement, scheduled reductions
in the combined Commitment, but only to the extent that (a) the
average daily borrowed portion of the combined Commitment during such
period exceeds (b) the amount of the combined Commitment on the date
of determination), (iii) taxes paid in cash, (iv) payments under
operating leases, and (v) cash dividends paid by the Company as each
of the foregoing is made during such period of determination in
accordance with GAAP on a consolidated basis.
"Consolidated Interest Expense" means, for any period, the sum
of total interest expense (including that attributable to Capitalized
Leases in accordance with GAAP) of the Company and its Subsidiaries on
a consolidated basis with respect to all outstanding Indebtedness of
the Company and its Subsidiaries, including, without limitation, all
commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, but excluding,
however, any amortization of deferred financing costs, all as
determined on a consolidated basis for the Company and its
consolidated Subsidiaries in accordance with GAAP.
"Consolidated Net Income" and "Consolidated Net Loss" mean,
respectively, with respect to any period, the aggregate of the net
income (loss) of the Person in question for such period, determined in
accordance with GAAP on a consolidated basis, provided that (i) the
net income (loss) of any Person which is not a Subsidiary shall be
included only to the extent of the amount of cash dividends or
distributions paid to the Person in question or to a consolidated
Subsidiary of such Person and (ii) the net income (loss) of any Person
acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded. There shall be
excluded in computing Consolidated Net Income the excess (but not the
deficit), if any, of (i) any gain which must be treated as an
extraordinary item under GAAP or any gain realized upon the sale or
other disposition of any real property or equipment that is not sold
in the ordinary course of business or of any capital stock of the
Person or a Subsidiary of the Person over (ii) any loss which must be
treated as an extraordinary item under GAAP or any loss realized upon
the sale or other disposition of any real property or equipment that
is not sold in the ordinary course of business or of any capital stock
of the Person or a Subsidiary of the Person.
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<PAGE> 14
"Consolidated Tangible Net Worth" of a Person means, without
duplication, the sum of (i) total stockholders' equity (excluding
treasury stock) less (ii) the net book value of all assets of such
Person and its consolidated Subsidiaries which would be treated as
intangibles under GAAP, including, without limitation, deferred
charges, leasehold conversion costs, franchise rights, non-compete
agreements, research and development costs, goodwill, unamortized debt
discounts, patents, patent applications, trademarks, trade names,
copyrights and licenses.
"Contingent Obligation" means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or
without recourse, (a) with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary
obligations") of another Person (the "primary obligor"), including any
obligation of that Person (i) to purchase, repurchase or otherwise
acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such
primary obligation, or to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial
condition of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv) otherwise to
assure or hold harmless the holder of any such primary obligation
against loss in respect thereof (each, a "Guaranty Obligation"); (b)
with respect to any Surety Instrument issued for the account of that
Person or as to which that Person is otherwise liable for
reimbursement of drawings or payments; (c) to purchase any materials,
supplies or other property from, or to obtain the services of, another
Person if the relevant contract or other related document or
obligation requires that payment for such materials, supplies or other
property, or for such services, shall be made regardless of whether
delivery of such materials, supplies or other property is ever made or
tendered, or such services are ever performed or tendered, or (d) in
respect of any Swap Contract. The amount of any Contingent Obligation
shall, in the case of Guaranty Obligations, be deemed equal to the
stated or determinable amount of the primary obligation in respect of
which such Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated liability in
respect thereof, and in the case of other Contingent Obligations,
shall be equal to the maximum reasonably anticipated liability in
respect thereof.
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed
7
<PAGE> 15
of trust or other instrument, document or agreement to which such
Person is a party or by which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which, under
Section 2.4, a Borrower (a) converts Loans of one Type to another
Type, or (b) continues as Loans of the same Type, but with a new
Interest Period, Loans having Interest Periods expiring on such date.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or
otherwise remedied during such time) constitute an Event of Default.
"Dollar Equivalent" means, at any time, (a) as to any amount
denominated in Dollars, the amount thereof at such time, and (b) as to
any amount denominated in an Offshore Currency, the equivalent amount
in Dollars as determined by the Agent at such time on the basis of the
Spot Rate for the purchase of Dollars with such Offshore Currency on
the most recent Computation Date provided for in subsection 2.5(a).
"Dollars", "dollars" and "$" each mean lawful money of the
United States.
"Domestic Subsidiary": any Subsidiary of the Company that is
not a Foreign Subsidiary.
"EBIT" means, for any period, for the Company and its
Subsidiaries on a consolidated basis, determined in accordance with
GAAP, the sum of (a) Consolidated Net Income for such period plus (b)
all amounts treated as expenses for interest to the extent included in
the determination of such Consolidated Net Income plus (c) all accrued
taxes on or measured by income to the extent included in the
determination of such Consolidated Net Income; provided, however, that
Consolidated Net Income shall be computed for these purposes without
giving effect to extraordinary losses or extraordinary gains.
"EBITDA" means, for any period, for the Company and its
Subsidiaries on a consolidated basis, determined in accordance with
GAAP, the sum of (a) EBIT plus (b) all amounts treated as expenses for
depreciation and the amortization of intangibles of any kind to the
extent included in the determination of Consolidated Net Income.
"Eligible Assignee" means (i) a commercial bank organized
under the laws of the United States, or any state thereof, and having
a combined capital and surplus of at least $200,000,000; (ii) a
commercial bank organized under the laws of any other country which is
a member of the Organization for Economic Cooperation and Development
(the
8
<PAGE> 16
"OECD"), or a political subdivision of any such country, and having a
combined capital and surplus of at least $200,000,000 or its Dollar
Equivalent, provided that such bank is acting through a branch or
agency located in the United States; and (iii) a Person that is
primarily engaged in the business of commercial banking and that is
(A) a Subsidiary of a Bank, (B) a Subsidiary of a Person of which a
Bank is a Subsidiary, or (C) a Person of which a Bank is a Subsidiary.
"Environmental Claims" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential
liability or responsibility for violation of any Environmental Law, or
for release or injury to the environment.
"Environmental Laws" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental,
health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Company within the meaning
of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of
the Code for purposes of provisions relating to Section 412 of the
Code).
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by a Borrower or any ERISA Affiliate
from a Pension Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer (as defined in Section
4001(a)(2) of ERISA) or a cessation of operations which is treated as
such a withdrawal under Section 4062(e) of ERISA; (c) a complete or
partial withdrawal by a Borrower or any ERISA Affiliate from a
Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or
4041A of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan or Multiemployer Plan; or
(f) the imposition of any liability under Title IV of ERISA, other
than PBGC premiums due but not delinquent under Section 4007 of ERISA,
upon a Borrower or any ERISA Affiliate.
9
<PAGE> 17
"Eurodollar Reserve Percentage" has the meaning specified in
the definition of "Offshore Rate".
"Event of Default" means any of the events or circumstances
specified in Section 8.1.
"Exchange Act" means the Securities and Exchange Act of 1934,
and regulations promulgated thereunder.
"Existing Credit Agreements" means (i) that certain Credit
Agreement dated as of September 21, 1992 by and among the Company, The
First National Bank of Chicago, as agent and the financial
institutions party thereto, and (ii) that certain Credit Agreement
dated as of December 22, 1993 by and among Filtertek, Filtertek De
Puerto Rico, Inc. and The Northern Trust Company, as Agent, and the
lenders identified therein, in each case, as the same have been
thereafter amended or otherwise modified from time to time.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal
functions.
"Federal Funds Rate" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New
York (including any such successor, "H.15(519)") on the preceding
Business Day opposite the caption "Federal Funds (Effective)"; or, if
for any relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the arithmetic
mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City
time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Agent.
"Fee Letter" has the meaning specified in subsection 2.11(a).
"Filtertek" has the meaning specified in the introductory
clause hereto.
"Foreign Subsidiary" any Subsidiary of the Company that (A)
is incorporated under the laws of a jurisdiction other than any State
of the U.S., the District of Columbia or any territory, commonwealth
or possession of the U.S. and (B) maintains the major portion of its
assets outside the U.S.
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
"Funded Indebtedness" shall at any date mean:
10
<PAGE> 18
(a) all outstanding principal under this Agreement and the
Indebtedness outstanding under the Short Term Revolving
Facility; and
(b) all Subordinated Indebtedness of the Company or
any of its Subsidiaries to any member of the Schawk
Family to the extent such Indebtedness is permitted
pursuant to the terms hereof;
(c) all other Indebtedness (excluding any Indebtedness
included solely within clause (b) of the definition of
Indebtedness) of the Company or any of its Subsidiaries
which by its terms
(i) matures more than one year from the
date of its creation, or
(ii) matures within one year from the date of its
creation but, at the Company's or such
Subsidiary's election, is renewable or extendible
(whether or not theretofore renewed or extended)
under, or payable from the proceeds of any other
Indebtedness which may be incurred pursuant to
the provisions of, any revolving credit or
similar agreement.
"FX Trading Office" means the Foreign Exchange Trading Center,
Chicago, Illinois, of BofA, or such other of BofA's offices as BofA
may designate from time to time.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date
of determination.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranty Obligation" has the meaning specified in the
definition of "Contingent Obligation."
"Indebtedness" of any Person means, without duplication, (a)
all indebtedness for borrowed money; (b) all obligations issued,
undertaken or assumed as the
11
<PAGE> 19
deferred purchase price of property or services (other than trade
payables entered into in the ordinary course of business on ordinary
terms); (c) all non-contingent reimbursement or payment obligations
with respect to Surety Instruments; (d) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations
so evidenced incurred in connection with the acquisition of property,
assets or businesses; (e) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred
as financing, in either case with respect to property acquired by the
Person (even though the rights and remedies of the seller or bank
under such agreement in the event of default are limited to
repossession or sale of such property); (f) all Capital Lease
Obligations; (g) all net obligations with respect to Swap Contracts;
(h) all indebtedness referred to in clauses (a) through (g) above
secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien
upon or in property (including accounts and contracts rights) owned by
such Person, even though such Person has not assumed or become liable
for the payment of such Indebtedness; and (i) all Guaranty Obligations
in respect of indebtedness or obligations of others of the kinds
referred to in clauses (a) through (g) above.
"Indemnified Liabilities" has the meaning specified in Section
11.5.
"Indemnified Person" has the meaning specified in Section 11.5.
"Independent Auditor" has the meaning specified in subsection
6.1(a).
"Insolvency Proceeding" means (a) any case, action or
proceeding before any court or other Governmental Authority relating
to bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding-up or relief of debtors, or (b) any general
assignment for the benefit of creditors, composition, marshalling of
assets for creditors, or other, similar arrangement in respect of its
creditors generally or any substantial portion of its creditors;
undertaken under U.S. Federal, state or foreign law, including the
Bankruptcy Code.
"Intercompany Note Pledge Agreement" means the Note Pledge
Agreement in substantially the form of Exhibit G hereto, dated as of
the date hereof, made by the Borrowers in favor of the beneficiaries
named therein, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms and the terms
hereof.
12
<PAGE> 20
"Intercreditor and Subordination Agreement" means the
Intercreditor and Subordination Agreement dated the date hereof, in
substantially the form of Exhibit I, by and among the Borrowers,
Clarence W. Schawk, Marily G. Schawk, David A. Schawk, and the Agent
for the benefit of the Banks.
"Interest Payment Date" means, as to any Loan other than a
Base Rate Loan, the last day of each Interest Period applicable to
such Loan and, as to any Base Rate Loan, the last Business Day of each
calendar quarter and each date such Loan is converted into another
Type of Loan; provided, however, that if any Interest Period for an
Offshore Rate Loan exceeds three months, the date that falls three
months after the beginning of such Interest Period and after each
Interest Payment Date thereafter is also an Interest Payment Date.
"Interest Period" means, as to any Offshore Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date one, two,
three or six months thereafter as selected by the applicable Borrower
in its Notice of Borrowing or Notice of Conversion/Continuation, as
selected by the applicable Borrower in its Notice of Borrowing or
Notice of Conversion/Continuation;
provided that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall be
extended to the following Business Day unless, in the case of
an Offshore Rate Loan, the result of such extension would be
to carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period pertaining to an Offshore
Rate Loan that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period;
(iii) no Interest Period for any Revolving Loan
shall extend beyond the Revolving Termination Date; and
(iv) no Interest Period applicable to a Revolving
Loan or portion thereof shall extend beyond any date upon
which is due any scheduled principal payment in
13
<PAGE> 21
respect of the Revolving Loans unless the aggregate
principal amount of Revolving Loans represented by Base Rate
Loans or Offshore Rate Loans having Interest Periods that will
expire on or before such date, equals or exceeds the amount of
such principal payment.
"Issuing Bank" has the meaning specified in Section 2.16(a).
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Joint Venture" means a single-purpose corporation,
partnership, limited liability company, joint venture or other similar
legal arrangement (whether created by contract or conducted through a
separate legal entity) now or hereafter formed by the Company or any
of its Subsidiaries with another Person in order to conduct a common
venture or enterprise with such Person.
"Lending Office" means, as to any Bank, the office or offices
of such Bank specified as its "Lending Office" or "Domestic Lending
Office" or "Offshore Lending Office", as the case may be, on Schedule
11.2, or such other office or offices as such Bank may from time to
time notify the Borrowers and the Agent.
"Lien" means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional sale
or other title retention agreement, the interest of a lessor under a
capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any
financing statement naming the owner of the asset to which such lien
relates as debtor, under the Uniform Commercial Code or any comparable
law) and any contingent or other agreement to provide any of the
foregoing, but not including the interest of a lessor under an
operating lease.
"Loan" means an extension of credit by a Bank to a Borrower
under Article II, and may be a Base Rate Loan or an Offshore Rate Loan
(each, a "Type" of Loan).
"Loan Documents" means this Agreement, any Notes, the Fee
Letters and all other documents delivered to the Agent or any Bank in
connection herewith.
"Long Term Revolving Loan Facility" means the revolving loan
facility in an initial total amount of
14
<PAGE> 22
$80,000,000 pursuant to that certain Multicurrency Credit Agreement
dated the date hereof by and among the Borrowers, the Agent and the
Banks, as the same may be amended from time to time, and any renewal,
modification or extension thereof.
"Majority Banks" means at any time Banks then holding in
excess of 59% of the then aggregate unpaid principal amount of the
Loans, or, if no such principal amount is then outstanding, Banks then
having in excess of 59% of the Commitments.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.
"Material Adverse Effect" means, with respect to any Person,
(a) a material adverse change in, or a material adverse effect upon,
the operations, business, properties, condition (financial or
otherwise) or prospects of such Person or such Person and its
Subsidiaries taken as a whole; (b) a material impairment of the
ability of the Company or any Subsidiary to perform under any Loan
Document and to avoid any Event of Default; or (c) a material adverse
effect upon the legality, validity, binding effect or enforceability
against the Company or any Subsidiary of any Loan Document.
"Minimum Tranche" means, in respect of Loans comprising part
of the same Borrowing, or to be converted or continued under Section
2.4, (a) in the case of Base Rate Loans, $500,000 or any multiple of
$100,000 in excess thereof, and (b) in the case of Offshore Rate
Loans, the Dollar Equivalent amount of $1,000,000 or any multiple of
500,000 units of the Applicable Currency in excess thereof.
"Multiemployer Plan" means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, to which a Borrower or any
ERISA Affiliate makes, is making, or is obligated to make
contributions or, during the preceding three calendar years, has made,
or been obligated to make, contributions.
"Note" means a promissory note executed by the Borrowers in
favor of a Bank pursuant to subsection 2.2(b), in substantially the
form of Exhibit F.
"Notice of Borrowing" means a notice in substantially the form
of Exhibit A.
"Notice of Conversion/Continuation" means a notice in
substantially the form of Exhibit B.
"Obligations" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document
owing by any Borrower to any Bank, the Agent, or any Indemnified
Person, whether direct or indirect (including
15
<PAGE> 23
those acquired by assignment), absolute or contingent, due or
to become due, now existing or hereafter arising.
"Offshore Currency" means at any time English pounds sterling,
Canadian dollars, French francs, German Deutsche Marks, Japanese yen
and any Agreed Alternative Currency.
"Offshore Currency Loan" means any Offshore Rate Loan
denominated in an Offshore Currency.
"Offshore Currency Loan Sublimit" means, at any time of
determination, as to all Offshore Currencies in the aggregate, the
Dollar Equivalent amount of 50% of the aggregate Commitments of the
Banks, and, as to any single Offshore Currency, the Dollar Equivalent
amount of 25% of the aggregate Commitments of Banks.
"Offshore Rate" means, for any Interest Period, with respect
to Offshore Rate Loans comprising part of the same Borrowing, the rate
of interest per annum (rounded upward to the next 1/16th of 1%)
determined by the Agent as follows:
Offshore Rate = IBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for
any Interest Period the maximum reserve percentage (expressed
as a decimal, rounded upward to the next 1/100th of 1%) in
effect on such day (whether or not applicable to any Bank)
under regulations issued from time to time by the FRB for
determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement)
with respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities"); and
"IBOR" means the rate of interest per annum determined
by the Agent as the rate at which deposits in the Applicable
Currency in the approximate amount of BofA's Offshore Rate
Loan for such Interest Period would be offered by BofA's Grand
Cayman Branch, Grand Cayman B.W.I. (or such other office as
may be designated for such purpose by BofA), to major banks in
the offshore currency interbank market at their request at
approximately 11:00 a.m. (New York City time) two Business
Days prior to the commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as to
all Offshore Rate Loans then outstanding as of the effective
date of any change in the Eurodollar Reserve Percentage.
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<PAGE> 24
"Offshore Rate Loan" means a Loan that bears interest based on
the Offshore Rate, and may be an Offshore Currency Loan or a Loan
denominated in Dollars.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate
of determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement,
and all applicable resolutions of the board of directors (or any
committee thereof) of such corporation.
"Other Taxes" means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents.
"Overnight Rate" means, for any day, the rate of interest per
annum at which overnight deposits in the Applicable Currency, in an
amount approximately equal to the amount with respect to which such
rate is being determined, would be offered for such day by BofA's
London Branch to major banks in the London or other applicable
offshore interbank market.
"Participant" has the meaning specified in subsection 11.8(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
"Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which a Borrower sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as
described in Section 4064(a) of ERISA) has made contributions at any
time during the immediately preceding five (5) plan years.
"Permitted Liens" has the meaning specified in Section 7.1.
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which a Borrower sponsors or maintains or to which a
Borrower makes, is making, or is obligated to make contributions and
includes any Pension Plan.
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"Pro Rata Share" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth
decimal place) at such time of such Bank's Commitment divided by the
combined Commitments of all Banks.
"Replacement Bank" has the meaning specified in Section 3.7.
"Reportable Event" means, any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder, other than any
such event for which the 30-day notice requirement under ERISA has
been waived in regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of
an arbitrator or of a Governmental Authority, in each case applicable
to or binding upon the Person or any of its property or to which the
Person or any of its property is subject.
"Responsible Officer" means the chief executive officer, the
president or the executive vice-president of a Borrower, or any other
officer having substantially the same authority and responsibility;
or, with respect to compliance with financial covenants, the chief
financial officer or the treasurer of a Borrower, or any other officer
having substantially the same authority and responsibility.
"Revolving Loan" has the meaning specified in Section 2.1.
"Revolving Termination Date" means the earlier to occur of:
(a) June 27, 1996; and
(b) the date on which the Commitments terminate in
accordance with the provisions of this Agreement.
"Same Day Funds" means (i) with respect to disbursements and
payments in Dollars, immediately available funds, and (ii) with
respect to disbursements and payments in an Offshore Currency, same
day or other funds as may be determined by the Agent to be customary
in the place of disbursement or payment for the settlement of
international banking transactions in the relevant Offshore Currency.
"Schawk Family" means the persons set forth on Schedule 1.1
hereto, together with any children or grandchildren of such persons
and any grantor trust under which one of such persons shall be the
sole trustee or one of the co-trustees (and such person retains the
sole power to remove any Capital Stock held by such trust from such
trust).
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"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"Spot Rate" for a currency means the rate quoted by BofA as the
spot rate for the purchase by BofA of such currency with another
currency through its FX Trading Office at approximately 10:30 a.m.
(Chicago time) on the date two Banking Days prior to the date as of
which the foreign exchange computation is made.
"Subordinated Indebtedness" means any Indebtedness of the
Company or Filtertek to Clarence V. Schawk constituting Subordinated
Indebtedness under the terms of the Intercreditor and Subordination
Agreement or the payment of which is otherwise fully and deeply
subordinated to payment of the Obligations to the written satisfaction
of the Agent and the Majority Banks including but not limited to: (i)
having a termination date after the Revolving Termination Date; (ii)
allowing no principal payments prior to the Revolving Termination Date
except to the extent expressly permitted by this Agreement; (iii)
accruing interest at a rate no greater than 2% per annum in excess of
the Base Rate; (iv) allowing no acceleration other than cross
acceleration to the acceleration of the Obligations; and (v) allowing
principal and accrued interest to be paid only to the extent that
after giving effect to the contemplated payment, no Default or Event
of Default exists or will exist.
"Subsidiary" of a Person means any corporation, association,
partnership, limited liability company, joint venture or other
business entity of which more than 50% of the voting stock, membership
interests or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the
Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the
Company.
"Subsidiary Guarantor" means, individually, each of the
Domestic Subsidiaries of the Company signatory to the Subsidiary
Guarantee Agreement and such other Subsidiaries from time to time
party to such Agreement and collectively, all of such Subsidiaries.
"Subsidiary Guarantee Agreement" means the Subsidiary
Guarantee Agreement in substantially the form of Exhibit H hereto,
dated as of the date hereof, made by the Subsidiary Guarantors in
favor of the beneficiaries named therein, as the same may be amended,
supplemented or otherwise modified from time to time in accordance
with its terms and the terms hereof.
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"Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
"Swap Contract" means any agreement (including any master
agreement and any agreement, whether or not in writing, relating to
any single transaction) that is an interest rate swap agreement, basis
swap, forward rate agreement, commodity swap, commodity option, equity
or equity index swap or option, bond option, interest rate option,
forward foreign exchange agreement, rate cap, collar or floor
agreement, currency swap agreement, cross-currency rate swap
agreement, swaption, currency option or any other, similar agreement
(including any option to enter into any of the foregoing).
"Taxes" means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Bank and the Agent,
such taxes (including income taxes or franchise taxes) as are imposed
on or measured by each Bank's or Agent's net income by the
jurisdiction (or any political subdivision thereof) under the laws of
which such Bank or the Agent, as the case may be, is organized or
maintains a lending office.
"Type" has the meaning specified in the definition of "Loan."
"Total Capitalization" means the sum of Funded Debt and total
stockholders' equity (excluding treasury stock) of the Company.
"Unfunded Pension Liability" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Plan's assets, determined in accordance with the
assumptions used for funding the Pension Plan pursuant to Section 412
of the Code for the applicable plan year.
"United States" and "U.S." each means the United States of
America.
"Wholly-Owned Subsidiary" means any Subsidiary in which (other
than directors' qualifying shares required by law) 100% of the capital
stock of each class having ordinary voting power, and 100% of the
capital stock of every other class, in each case, at the time as of
which any determination is being made, is owned, beneficially and of
record, by the Company, or by one or more of the other Wholly-Owned
Subsidiaries, or both.
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1.2 Other Interpretive Provisions. (a) The meanings of defined
terms are equally applicable to the singular and plural forms of the defined
terms.
(b) The words "hereof", "herein", "hereunder" and similar words
refer to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(iii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and
including"; the words "to" and "until" each mean "to but excluding",
and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document, and (ii) references to any
statute or regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing, supplementing or
interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the
result of negotiations among and have been reviewed by counsel to the Agent,
the Borrowers and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Banks or the Agent merely
because of the Agent's or Banks' involvement in their preparation.
1.3 Accounting Principles. (a) Unless the context otherwise
clearly requires, all accounting terms not expressly defined herein shall be
construed, and all financial computations required under this Agreement shall
be made, in accordance with GAAP, consistently applied.
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(b) References herein to "fiscal year" and "fiscal quarter" refer
to such fiscal periods of the Company.
1.4 Currency Equivalents Generally. For all purposes of this
Agreement (but not for purposes of the preparation of any financial statements
delivered pursuant hereto), the equivalent in any Offshore Currency or other
currency of an amount in Dollars, and the equivalent in Dollars of an amount in
any Offshore Currency or other currency, shall be determined at the Spot Rate.
ARTICLE II
THE CREDITS
2.1 Amounts and Terms of Commitments. Each Bank severally agrees,
on the terms and conditions set forth herein, to make loans to the Borrowers
(each such loan, a "Revolving Loan") from time to time on any Business Day
during the period from the Closing Date to the Revolving Termination Date, in
an aggregate principal Dollar Equivalent amount not to exceed at any time
outstanding the amount set forth opposite the Bank's name in Schedule 2.1(b)
under the heading "Commitment" (such amount as the same may be reduced pursuant
to Section 2.6 or as a result of one or more assignments pursuant to Section
11.8, the Bank's "Commitment"); provided, however, that, after giving effect to
any Borrowing of Revolving Loans, the aggregate principal Dollar Equivalent
amount of all outstanding Revolving Loans shall not exceed the combined
Commitments; and provided further that, after giving effect to any Borrowing of
Offshore Currency Loans, the aggregate principal Dollar Equivalent amount of
all outstanding Offshore Currency Loans shall not exceed the Offshore Currency
Loan Sublimit. Within the limits of each Bank's Commitment, and subject to the
other terms and conditions hereof, the Borrowers may borrow under this
subsection 2.1(b), prepay pursuant to Section 2.6 and reborrow pursuant to this
subsection 2.1(b).
2.2 Loan Accounts. (a) The Loans made by each Bank shall be
evidenced by one or more loan accounts or records maintained by such Bank in
the ordinary course of business. The loan accounts or records maintained by
the Agent and each Bank shall be presumptive evidence of the amount of the
Loans made by the Banks to the applicable Borrower and the interest and
payments thereon. Any failure so to record or any error in doing so shall not,
however, limit or otherwise affect the obligation of the Borrowers hereunder to
pay any amount owing with respect to the Loans.
(b) The Loans made by such Bank shall also be evidenced by one or more
Notes as provided herein. Each such Bank shall endorse on the schedules
annexed to its Note(s) the date, amount and maturity of each Loan made by it
and the amount and Applicable Currency of each payment of principal made by the
applicable Borrower with respect thereto. Each such Bank is irrevocably
authorized by the Borrowers to endorse its Note(s) and each Bank's record shall
be conclusive absent manifest error; provided,
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however, that the failure of a Bank to make, or an error in making, a notation
thereon with respect to any Loan shall not limit or otherwise
affect the obligations of the Borrowers hereunder or under any such
Note to such Bank.
2.3 Procedure for Borrowing. (a) Each Borrowing shall be made upon
the applicable Borrower's irrevocable written notice in substantially the form
attached hereto as Exhibit 2.3 (or telephonic notice promptly confirmed in
writing) delivered to the Agent in the form of a Notice of Borrowing (which
notice must be received by the Agent prior to 10:30 a.m. (Chicago time) (i) four
Business Days prior to the requested Borrowing Date, in the case of Offshore
Currency Loans; (ii) two Business Days prior to the requested Borrowing Date, in
the case of Offshore Rate Loans denominated in Dollars; and (iii) on the
requested Borrowing Date, in the case of Base Rate Loans), specifying:
(A) the applicable Borrower;
(B) the amount of the Borrowing, which shall be in
an aggregate amount not less than the Minimum Tranche;
(C) the requested Borrowing Date, which shall be a Business
Day;
(D) the Type of Loans comprising the Borrowing;
(E) the duration of the Interest Period applicable to such
Loans included in such notice. If the Notice of Borrowing
fails to specify the duration of the Interest Period for any
Borrowing comprised of Offshore Rate Loans, such Interest
Period shall be three months; and
(F) in the case of a Borrowing comprised
of Offshore Currency Loans, the Applicable Currency.
provided, however, that with respect to the Borrowing to be made on the Closing
Date, the Notice of Borrowing shall be delivered to the Agent not later than
10:30 a.m. (Chicago time) on the Closing Date and such Borrowing will consist
of Base Rate Loans or, Offshore Rate Loan in Dollars if the applicable Borrower
has notified the Agent and the Banks at least three Business Days prior to the
Closing Date and at such time has agreed to pay losses and expenses, in the
same manner as required by Section 3.4 in the event the initial Borrowing does
not occur in accordance with such request.
(b) The Dollar Equivalent amount of any Borrowing in an Offshore
Currency will be determined by the Agent for such Borrowing on the Computation
Date therefor in accordance with subsection 2.5(a). Upon receipt of the Notice
of Borrowing, the Agent will promptly notify each Bank thereof and of the
amount of
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such Bank's Pro Rata Share of the Borrowing. In the case of a Borrowing
comprised of Offshore Currency Loans, the Agent will, upon the determination of
the Dollar Equivalent amount of the Borrowing as specified in the Notice of
Borrowing, promptly notify each Bank of such Dollar Equivalent amount.
(c) Each Bank will make the amount of its Pro Rata Share
of each Borrowing available to the Agent for the account of the Borrower at the
Agent's Payment Office on the Borrowing Date requested by such Borrower in the
Same Day Funds and in the requested currency (i) in the case of a Borrowing
comprised of Loans in Dollars, by 12:00 noon (Chicago time), (ii) in the case
of a Borrowing comprised of Offshore Currency Loans, by such time, on or after
12:00 noon (local time at the place of funding) as the Agent may specify. The
proceeds of all such Loans will then be made available to the applicable
Borrower by the Agent at such office by crediting the account of the applicable
Borrower on the books of BofA with the aggregate of the amounts made available
to the Agent by the Banks and in or by wire transfer in accordance with written
instructions provided to the Agent by the applicable Borrower of like funds as
received by the Agent.
(d) After giving effect to any Borrowing, there may not
be more than eight different Interest Periods in effect.
2.4 Conversion and Continuation Elections. (a) The applicable
Borrower may, upon irrevocable written notice to the Agent in accordance with
subsection 2.4(b):
(i) elect, as of any Business Day, in the case of
Base Rate Loans, or as of the last day of the applicable Interest
Period, in the case of any other Type of Loans denominated in Dollars,
to convert any such Loans (or any part thereof in an amount not less
than the Minimum Tranche) into Loans in Dollars of any other Type; or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any Loans having Interest Periods
expiring on such day (or any part thereof in an amount not less than
the Minimum Tranche);
provided, that if at any time the aggregate amount of Offshore Rate Loans
denominated in Dollars in respect of any Borrowing is reduced, by payment,
prepayment, or conversion of part thereof to be less than $1,000,000, such
Offshore Rate Loans denominated in Dollars shall automatically convert into
Base Rate Loans, and on and after such date the right of the applicable
Borrower to continue such Loans as, and convert such Loans into Offshore Rate
Loans shall terminate.
(b) The applicable Borrower shall deliver a Notice of
Conversion/Continuation to be received by the Agent not later than 10:30 a.m.
(Chicago time) (i) at least two Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or
continued as Offshore Rate Loans denominated
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in Dollars; (ii) at least four Business Days in advance of the continuation
date, if the Loans are to be continued as Offshore Currency Loans; and (iii) on
the Conversion/Continuation Date, if the Loans are to be converted into Base
Rate Loans, specifying:
(A) the proposed Conversion/Continuation
Date;
(B) the aggregate amount of Loans to be
converted or continued;
(C) the Type of Loans resulting from the
proposed conversion or continuation; and
(D) other than in the case of
conversions into Base Rate Loans, the duration of the
requested Interest Period.
(c) If upon the expiration of any Interest Period
applicable to Offshore Rate Loans in Dollars, the applicable Borrower has
failed to select timely a new Interest Period to be applicable to such Offshore
Rate Loans, as the case may be, or if any Default or Event of Default then
exists, the applicable Borrower shall be deemed to have elected to convert such
Offshore Rate Loans into Base Rate Loans effective as of the expiration date of
such Interest Period. If the applicable Borrower has failed to select a new
Interest Period to be applicable to Offshore Currency Loans prior to the fourth
Business Day in advance of the expiration date of the current Interest Period
applicable thereto as provided in subsection 2.4(b), or if any Default or Event
of Default shall then exist, subject to the provisions of subsection 2.5(d),
the applicable Borrower shall be deemed to have elected to continue such
Offshore Currency Loans on the basis of a one month Interest Period. The Agent
shall give the applicable Borrower prompt written notice of any such conversion
or continuation.
(d) The Agent will promptly notify each Bank of its
receipt of a Notice of Conversion/Continuation, or, if no timely notice is
provided by the applicable Borrower, the Agent will promptly notify each Bank
of the details of any automatic conversion. All conversions and continuations
shall be made ratably according to the respective outstanding principal amounts
of the Loans with respect to which the notice was given held by each Bank.
(e) Unless the Majority Banks otherwise agree, during the
existence of a Default or Event of Default, no Borrower may elect to have a
Loan in Dollars converted into or continued as an Offshore Rate Loan in Dollars
or an Offshore Currency Loan continued on the basis of an Interest Period
exceeding one month.
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(f) After giving effect to any conversion or continuation
of Loans, there may not be more than eight different Interest Periods in
effect.
2.5 Utilization of Revolving Commitments in Offshore Currencies.
(a) The Agent will determine the Dollar Equivalent amount with respect to any
(i) Borrowing comprised of Offshore Currency Loans as of the requested
Borrowing Date, (ii) outstanding Offshore Currency Loans as of the last Banking
Day of each month, and (iii) outstanding Offshore Currency Loans as of any
redenomination date pursuant to this Section 2.5 or Section 3.5 (each such date
under clauses (i) through (iii) a "Computation Date").
(b) In the case of a proposed Borrowing comprised of
Offshore Currency Loans, the Banks shall be under no obligation to make
Offshore Currency Loans in the requested Offshore Currency as part of such
Borrowing if the Agent has received notice from any of the Banks by 3:00 p.m.
(Chicago time) four Business Days prior to the day of such Borrowing that such
Bank cannot provide Loans in the requested Offshore Currency, in which event
the Agent will give notice to the applicable Borrower no later than 10:30 a.m.
(Chicago time) on the third Business Day prior to the date of such Borrowing
that the Borrowing in the requested Offshore Currency is not then available,
and notice thereof also will be given promptly by the Agent to the Banks. If
the Agent shall have so notified the applicable Borrower that any such
Borrowing in a requested Offshore Currency is not then available, the
applicable Borrower may, by notice to the Agent not later than 5:00 p.m.
(Chicago time) three Business Days prior to the requested date of such
Borrowing, withdraw the Notice of Borrowing relating to such requested
Borrowing. If the applicable Borrower does so withdraw such Notice of
Borrowing, the Borrowing requested therein shall not occur and the Agent will
promptly notify each Bank. If the applicable Borrower does not so withdraw
such Notice of Borrowing, the Agent will promptly notify each Bank and such
Notice of Borrowing shall be deemed to be a Notice of Borrowing that requests a
Borrowing comprised of Base Rate Loans in an aggregate amount equal to the
amount of the originally requested Borrowing as expressed in Dollars in the
Notice of Borrowing; and in such notice by the Agent to each Bank the Agent
will state such aggregate amount of such Borrowing in Dollars and such Bank's
Pro Rata Share thereof.
(c) In the case of a proposed continuation of Offshore
Currency Loans for an additional Interest Period pursuant to Section 2.4, the
Banks shall be under no obligation to continue such Offshore Currency Loans if
the Agent has received notice from any of the Banks by 3:00 p.m. (Chicago time)
four Business Days prior to the day of such continuation that such Bank cannot
continue to provide Loans in the relevant Offshore Currency, in which event the
Agent will give notice to the applicable Borrower not later than 10:30 a.m.
(Chicago time) on the third Business Day prior to the requested date of such
continuation that the continuation of such Offshore Currency Loans in the
relevant
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Offshore Currency is not then available, and notice thereof also will be given
promptly by the Agent to the Banks. If the Agent shall have so notified the
applicable Borrower that any such continuation of Offshore Currency Loans is
not then available, any Notice of Continuation/Conversion with respect thereto
shall be deemed withdrawn and such Offshore Currency Loans shall be
redenominated into Base Rate Loans in Dollars with effect from the last day of
the Interest Period with respect to any such Offshore Currency Loans. The
Agent will promptly notify the applicable Borrower and the Banks of any such
redenomination and in such notice by the Agent to each Bank the Agent will
state the aggregate Dollar Equivalent amount of the redenominated Offshore
Currency Loans as of the Computation Date with respect thereto and such Bank's
Pro Rata Share thereof.
(d) Notwithstanding anything herein to the contrary,
during the existence of a Default or an Event of Default, upon the request of
the Majority Banks, all or any part of any outstanding Offshore Currency Loans
shall be redenominated and converted into Base Rate Loans in Dollars with
effect from the last day of the Interest Period with respect to any such
Offshore Currency Loans. The Agent will promptly notify the applicable
Borrower of any such redenomination and conversion request.
(e) The Borrowers shall be entitled to request that
Revolving Loans hereunder also be permitted to be made in any other lawful
currency constituting a eurocurrency (other than Dollars), in addition to the
eurocurrencies specified in the definition of "Offshore Currency" herein, that
in the opinion of the Agent and the Majority Banks is at such time freely
traded in the offshore interbank foreign exchange markets and is freely
transferable and freely convertible into Dollars (an "Agreed Alternative
Currency"). A Borrower shall deliver to the Agent any request for designation
of an Agreed Alternate Currency in accordance with Section 11.2, to be received
by the Agent not later than 10:30 a.m. (Chicago time) at least ten Business
Days in advance of the date of any Borrowing hereunder proposed to be made in
such Agreed Alternate Currency. Upon receipt of any such request the Agent
will promptly notify the Banks thereof, and each Bank will use its best efforts
to respond to such request within two Business Days of receipt thereof. Each
Bank may grant or accept such request in its sole discretion. The Agent will
promptly notify the applicable Borrower of the acceptance or rejection of any
such request.
2.6 Voluntary Reduction of Commitments. The Borrowers may, upon
not less than five Business Days' prior notice to the Agent, terminate the
Commitments, or permanently reduce the Commitments by an aggregate minimum
Dollar Equivalent amount of $2,000,000 or any Dollar Equivalent multiple of
$1,000,000 in excess thereof; unless, after giving effect thereto and to any
prepayments of Loans made on the effective date thereof, the sum of the
then-outstanding principal Dollar Equivalent amount of the Loans would exceed
the amount of the combined Commitments then in effect. Once reduced in
accordance with this Section, the Commitments may
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not be increased. Any reduction of the Commitments shall be applied to each
Bank according to its Pro Rata Share. All accrued commitment fees to, but not
including the effective date of any reduction or termination of Commitments,
shall be paid on the effective date of such reduction or termination.
2.7 Optional Prepayments. Subject to Section 3.4, any Borrower
may, at any time or from time to time, upon not less than 5 Business Days'
irrevocable notice to the Agent, ratably prepay Loans in whole or in part, in
minimum Dollar Equivalent amounts of $1,000,000 or any multiple of 500,000
units of the Applicable Currency in excess thereof. The applicable Borrower
shall deliver a notice of prepayment in accordance with Section 11.2 to be
received by the Agent not later than 10:30 a.m. (Chicago time) (i) at least
four Business Days in advance of the prepayment date if the Loans to be prepaid
are Offshore Currency Loan or at least two Business Days in advance of the
prepayment date if the Loans to be prepaid are Offshore Rate Loans in Dollars,
and (iii) on the prepayment date if the Loans to be prepaid are Base Rate
Loans. Such notice of prepayment shall specify the date and amount of such
prepayment, the applicable Borrower and whether such prepayment is of Base Rate
Loans, or Offshore Rate Loans, or any combination thereof, and the Applicable
Currency. Such notice shall not thereafter be revocable by the applicable
Borrower and the Agent will promptly notify each Bank thereof and of such
Bank's Pro Rata Share of such prepayment. If such notice is given by a
Borrower, such Borrower shall make such prepayment and the payment amount
specified in such notice shall be due and payable on the date specified
therein, together with accrued interest to each such date on the amount prepaid
and any amounts required pursuant to Section 3.4.
2.8 Currency Exchange Fluctuations. Subject to Section 3.4, if on
any Computation Date the Agent shall have determined that the aggregate Dollar
Equivalent principal amount of all Loans then outstanding exceeds the combined
Commitments of the Banks by more than $125,000, due to a change in applicable
rates of exchange between Dollars and Offshore Currencies, then the Agent shall
give notice to the Borrowers that a prepayment is required under this Section,
and the Borrowers, jointly and severally agree thereupon to make prepayments of
Loans such that, after giving effect to such prepayment the aggregate Dollar
Equivalent amount of all Loans does not exceed the combined Commitments.
2.9 Repayment. The Borrowers, jointly and severally, agree to
repay to the Banks on the Revolving Termination Date the aggregate principal
amount of Revolving Loans and all other unpaid Obligations then due and
outstanding on such date.
2.10 Interest. (a) Each Loan shall bear interest on the
outstanding principal amount thereof from the applicable Borrowing Date at a
rate per annum equal to the Offshore Rate plus the Applicable Margin or the
Base Rate, as the case may be (and subject to the Borrower's right to convert
to other Types of Loans under Section 2.4).
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(b) The applicable Borrower shall pay interest on each
Loan made to it in arrears on each Interest Payment Date. Interest shall also
be paid by the applicable Borrower on the date of any prepayment of Loans under
Section 2.7 or 2.8 for the portion of the Loans so prepaid and upon payment
(including prepayment) in full thereof and, during the existence of any Event
of Default, interest shall be paid by the applicable Borrower on demand of the
Agent at the request or with the consent of the Majority Banks.
(c) Notwithstanding subsection (a) of this Section, while
any Event of Default exists or after acceleration, the applicable Borrower
shall pay interest (after as well as before entry of judgment thereon to the
extent permitted by law) on the principal amount of all outstanding
Obligations, at a rate per annum which is determined by adding 2% per annum to
the sum of the rate then in effect for such Loans plus the Applicable Margin
and, in the case of Obligations not subject to an Applicable Margin, at a rate
per annum equal to the Base Rate plus 2%; provided, however, that, on and after
the expiration of any Interest Period applicable to any Offshore Rate Loan
outstanding on the date of occurrence of such Event of Default or acceleration,
the principal amount of such Loan shall, during the continuation of such Event
of Default or after acceleration, bear interest at a rate per annum equal to
the Base Rate plus 2%.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Borrowers to any Bank hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by such Bank would be contrary
to the provisions of any law applicable to such Bank limiting the highest rate
of interest that may be lawfully contracted for, charged or received by such
Bank, and in such event the Borrowers shall pay such Bank interest at the
highest rate permitted by applicable law.
2.11 Fees. (a) Arrangement, Agency Fees. The Borrowers shall pay
the fees to the Agent for the Agent's own account, as required by the letter
agreement ("Fee Letter") between the Borrowers and the Agent dated June 23,
1995.
(b) Commitment Fees. Filtertek agrees to pay to the
Agent for the account of each Bank a commitment fee on the average daily unused
portion of such Bank's Commitment, computed on a quarterly basis in arrears on
the last Business Day of each calendar quarter based upon the daily utilization
for that quarter as calculated by the Agent, equal to .15% per annum. Such
commitment fee shall accrue from the Closing Date to the Revolving Termination
Date and shall be due and payable quarterly in arrears on the last Business Day
of each calendar quarter commencing on June 30, 1995 through the Revolving
Termination Date, with the final payment to be made on the Revolving
Termination Date; provided that, in connection with any reduction or
termination of
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Commitments under Section 2.6 or Section 2.8, the accrued commitment fee
calculated for the period ending on such date shall also be paid on the date of
such reduction or termination, with the following quarterly payment being
calculated on the basis of the period from such reduction or termination date
to such quarterly payment date. The commitment fees provided in this
subsection shall accrue at all times after the above-mentioned commencement
date, including at any time during which one or more conditions in Article IV
are not met.
2.12 Computation of Fees and Interest. (a) All computations of
interest for Base Rate Loans when the Base Rate is determined by BofA's
"reference rate" shall be made on the basis of a year of 365 or 366 days, as
the case may be, and actual days elapsed. All other computations of fees and
interest shall be made on the basis of a 360-day year and actual days elapsed
(which results in more interest being paid than if computed on the basis of a
365-day year). Interest and fees shall accrue during each period during which
interest or such fees are computed from the first day thereof to the last day
thereof.
(b) For purposes of determining utilization of each
Bank's Commitment in order to calculate the commitment fee due under Section
2.11(b), the amount of any outstanding Offshore Currency Loan on any date shall
be determined based upon the Dollar Equivalent amount as of the most recent
Computation Date with respect to such Offshore Currency Loan.
(c) Each determination of an interest rate or a Dollar
Equivalent amount by the Agent shall be conclusive and binding on the Borrowers
and the Banks in the absence of manifest error. The Agent will, at the request
of a Borrower or any Bank, deliver to such Borrower or the Bank, as the case
may be, a statement showing the quotations used by the Agent in determining any
interest rate or Dollar Equivalent amount.
2.13 Payments by the Borrowers. (a) All payments to be made by the
Borrowers shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Borrowers shall be
made to the Agent for the account of the Banks at the Agent's Payment Office,
and, with respect to principal of, interest on, and any other amounts relating
to, any Offshore Currency Loan, shall be made in the Offshore Currency in which
such Loan is denominated or payable, and, with respect to all other amounts
payable hereunder, shall be made in Dollars. Such payments shall be made in
Same Day Funds, and (i) in the case of Offshore Currency payments, no later
than such time on the dates specified herein as may be determined by the Agent
to be necessary for such payment to be credited on such date in accordance with
normal banking procedures in the place of payment, and (ii) in the case of any
Dollar payments, no later than 12:00 noon (Chicago time) on the date specified
herein. The Agent will promptly distribute to each Bank its Pro Rata Share (or
other applicable share as expressly provided herein) of such principal,
interest, fees or other amounts, in like funds as
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received. Any payment which is received by the Agent later than 12:00 noon
(Chicago time), or later than the time specified by the Agent as provided in
clause (i) above (in the case of Offshore Currency payments), shall be deemed
to have been received on the following Business Day and any applicable interest
or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition
of "Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and
such extension of time shall in such case be included in the computation of
interest or fees, as the case may be.
(c) Unless the Agent receives notice from the applicable
Borrower prior to the date on which any payment is due to the Banks that the
applicable Borrower will not make such payment in full as and when required,
the Agent may assume that the applicable Borrower has made such payment in full
to the Agent on such date in Same Day Funds and the Agent may (but shall not be
so required), in reliance upon such assumption, distribute to each Bank on such
due date an amount equal to the amount then due such Bank. If and to the
extent the Borrower has not made such payment in full to the Agent, each Bank
shall repay to the Agent on demand such amount distributed to such Bank,
together with interest thereon at the Federal Funds Rate or, in the case of a
payment in an Offshore Currency, the Overnight Rate, for each day from the date
such amount is distributed to such Bank until the date repaid.
(d) All payments on account of or with respect to any
Note and the principal of, and interest on, the Loans and all other amounts
payable under this Agreement by any Borrower to the Agent, any Issuing Bank or
any Bank shall be made in the Applicable Currency, without set-off or
counterclaim and free and clear of and without reduction by reason of all
present and future income, stamp and other taxes and levies, imposts, duties,
deductions, charges, compulsory loans and withholdings whatsoever imposed,
assessed, levied or collected by the U.S., any state or local government, any
foreign government, any territory or possession of the U.S. or any political
subdivision of taxing authority thereof or therein, together with interest
thereon and penalties with respect thereto, if any, on or in respect of this
Agreement, the Loans, any Note, the registration, notarization or other
formalization of any thereof, and any payments of principal, interest, charges,
fees or other amounts made on, under or in respect thereof, other than any tax
on or measured by the overall net income of a Bank pursuant to the income tax
laws of the United States or the jurisdictions where such Bank's principal or
lending offices are located (hereinafter called "Taxes"), all of which will be
paid by such Borrower, for its own account, prior to the date on which any
interest or penalties attach thereto.
(e) Each Borrower will indemnify the Agent and each Bank
against, and reimburse the Agent and each Bank on demand for,
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any Taxes and any loss, liability, claim, or expense including interest,
penalties, and legal fees which the Agent or the Bank may incur at any time
arising out of or in connection with any failure of such Borrower to make any
payments of Taxes when due.
(f) In the event that any Borrower is required by
applicable law, decree or regulation to deduct or withhold Taxes from any
amounts payable on, under or in respect of this Agreement or under any Note,
such Borrower shall pay in United States Dollars such additional amount as may
be required, after the deduction or withholding of Taxes, to enable the Agent
or the Issuing Banks, as the case may be, to receive from such Borrower an
amount equal to the amount stated to be payable under or with respect to this
Agreement or any Note.
(g) Each Borrower shall promptly furnish to the Agent
original tax receipts in respect of any withholding of Taxes required under
this Section 3.9 and any other information, documents and receipts that the
Agent may, in its sole discretion from time to time, require to establish to
its satisfaction that full and timely payment has been made of all Taxes
required to be paid under this Section 3.9.
(h) The covenants and agreements of the Borrowers under
this Section 2.13 shall survive the repayment of the Obligations and the Notes.
2.14 Payments by the Banks to the Agent. (a) Unless the Agent
receives notice from a Bank on or prior to the Closing Date or, with respect to
any Borrowing after the Closing Date, at least one Business Day prior to the
date of such Borrowing, that such Bank will not make available as and when
required hereunder to the Agent for the account of the Borrower the amount of
that Bank's Pro Rata Share of the Borrowing, the Agent may assume that each
Bank has made such amount available to the Agent in Same Day Funds on the
Borrowing Date and the Agent may (but shall not be so required), in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent any Bank shall not have made its
full amount available to the Agent in Same Day Funds and the Agent in such
circumstances has made available to the Borrower such amount, that Bank shall
on the Business Day following such Borrowing Date make such amount available to
the Agent, together with interest at the Federal Funds Rate or, in the case of
any Borrowing consisting of Offshore Currency Loans, the Overnight Rate, for
each day during such period. A notice of the Agent submitted to any Bank with
respect to amounts owing under this subsection 2.14(a) shall be conclusive,
absent manifest error. If such amount is so made available, such payment to
the Agent shall constitute such Bank's Loan on the date of Borrowing for all
purposes of this Agreement. If such amount is not made available to the Agent
on the Business Day following the Borrowing Date, the Agent will notify the
Borrowers of such failure to fund and, upon demand by the Agent, the Borrowers,
jointly and severally, agree to pay such amount to the Agent for the Agent's
account, together with interest thereon
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for each day elapsed since the date of such Borrowing, at a rate per annum
equal to the interest rate applicable at the time to the Loans comprising such
Borrowing.
(b) The failure of any Bank to make any Loan on any
Borrowing Date shall not relieve any other Bank of any obligation hereunder to
make a Loan on such Borrowing Date, but no Bank shall be responsible for the
failure of any other Bank to make the Loan to be made by such other Bank on any
Borrowing Date.
2.15 Sharing of Payments, Etc. If, other than as expressly
provided elsewhere herein, any Bank shall obtain on account of the Loans made
by it any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) in excess of its Pro Rata Share, such Bank
shall immediately (a) notify the Agent of such fact, and (b) purchase from the
other Banks such participations in the Loans made by them as shall be necessary
to cause such purchasing Bank to share the excess payment pro rata with each of
them; provided, however, that if all or any portion of such excess payment is
thereafter recovered from the purchasing Bank, such purchase shall to that
extent be rescinded and each other Bank shall repay to the purchasing Bank the
purchase price paid therefor, together with an amount equal to such paying
Bank's ratable share (according to the proportion of (i) the amount of such
paying Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Borrowers
agree that any Bank so purchasing a participation from another Bank may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off, but subject to Section 11.9) with respect to such
participation as fully as if such Bank were the direct creditor of the Borrower
in the amount of such participation. The Agent will keep records (which shall
be conclusive and binding in the absence of manifest error) of participations
purchased under this Section and will in each case notify the Banks following
any such purchases or repayments.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.1 Taxes. (a) Any and all payments by any Borrower to each Bank
or the Agent under this Agreement and any other Loan Document shall be made
free and clear of, and without deduction or withholding for any Taxes. In
addition, the Borrowers shall pay all Other Taxes.
(b) The Borrowers, jointly and severally agree to
indemnify and hold harmless each Bank and the Agent for the full amount of
Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section) paid by the Bank or the
Agent and any liability (including penalties, interest, additions to tax and
expenses) arising
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therefrom or with respect thereto, whether or not such Taxes or Other Taxes
were correctly or legally asserted. Payment under this indemnification shall
be made within 30 days after the date the Bank or the Agent makes written
demand therefor.
(c) If any Borrower shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Bank or the Agent, then:
(i) the sum payable shall be increased as
necessary so that after making all required deductions and
withholdings (including deductions and withholdings applicable to
additional sums payable under this Section) such Bank or the Agent, as
the case may be, receives an amount equal to the sum it would have
received had no such deductions or withholdings been made;
(ii) the applicable Borrower shall make such
deductions and withholdings;
(iii) the applicable Borrower shall pay the full
amount deducted or withheld to the relevant taxing authority or other
authority in accordance with applicable law; and
(iv) the applicable Borrower shall also pay to
each Bank or the Agent for the account of such Bank, at the time
interest is paid, all additional amounts which the respective Bank
specifies in writing in reasonable detail as necessary to preserve the
after-tax yield the Bank would have received if such Taxes or Other
Taxes had not been imposed.
(d) Within 30 days after the date of any payment by a
Borrower of Taxes or Other Taxes, such Borrower shall furnish the Agent the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to the Agent.
(e) If a Borrower is required to pay additional amounts
to any Bank or the Agent pursuant to subsection (c) of this Section, then such
Bank shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office so as to
eliminate any such additional payment by such Borrower which may thereafter
accrue, if such change in the judgment of such Bank is not otherwise
disadvantageous to such Bank or take such other non-disadvantageous action, if
any, which, in its sole discretion, it may deem appropriate to eliminate any
such additional payment.
3.2 Illegality. (a) If any Bank determines that the introduction
of any Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Bank or its applicable Lending Office to make
Offshore Rate Loans (including Offshore Rate Loans in any
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Applicable Currency), then, on notice thereof by the Bank to the
Borrowers through the Agent, any obligation of that Bank to make Offshore
Rate Loans shall be suspended until the Bank notifies the Agent and the
Borrowers that the circumstances giving rise to such determination no longer
exist.
(b) If a Bank determines that it is unlawful to maintain
any Offshore Rate Loan, the Borrowers shall, upon receipt of notice of such
fact and demand from such Bank (with a copy to the Agent), prepay in full such
Offshore Rate Loans of that Bank then outstanding, together with interest
accrued thereon and amounts required under Section 3.4, either on the last day
of the Interest Period thereof, if the Bank may lawfully continue to maintain
such Offshore Rate Loans to such day, or immediately, if the Bank may not
lawfully continue to maintain such Offshore Rate Loan. If any Borrower is
required to so prepay any Offshore Rate Loan, then concurrently with such
prepayment, such Borrower shall borrow from the affected Bank, in the amount of
such repayment, a Base Rate Loan.
(c) If the obligation of any Bank to make or maintain
Offshore Rate Loans has been so terminated or suspended, the Borrowers may
elect, by giving notice to the Bank through the Agent that all Loans which
would otherwise be made by the Bank as Offshore Rate Loans shall be instead
Base Rate Loans.
(d) Before giving any notice to the Agent under this
Section, the affected Bank shall designate a different Lending Office with
respect to its Offshore Rate Loans if such designation will avoid the need for
giving such notice or making such demand and will not, in the judgment of the
Bank, be illegal or otherwise disadvantageous to the Bank.
3.3 Increased Costs and Reduction of Return. (a) If any Bank
determines that, due to either (i) the introduction of or any change (other
than any change by way of imposition of or increase in reserve requirements
included in the calculation of the Offshore Rate or in respect of the
assessment rate payable by any Bank to the FDIC for insuring U.S. deposits) in
or in the interpretation of any law or regulation or (ii) the compliance by
that Bank with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
any increase in the cost to such Bank of agreeing to make or making, funding or
maintaining any Offshore Rate Loans, then the Borrowers shall be liable for,
and shall from time to time, upon demand (with a copy of such demand to be sent
to the Agent), pay to the Agent for the account of such Bank, additional
amounts as are sufficient to compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration
of any Capital Adequacy Regulation by any central bank or other Governmental
Authority
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charged with the interpretation or administration thereof, or (iv) compliance
by the Bank (or its Lending Office) or any corporation controlling the Bank
with any Capital Adequacy Regulation, affects or would affect the amount of
capital required or expected to be maintained by the Bank or any corporation
controlling the Bank and (taking into consideration such Bank's or such
corporation's policies with respect to capital adequacy and such Bank's desired
return on capital) determines that the amount of such capital is increased as a
consequence of its Commitment[s], loans, credits or obligations under this
Agreement, then, upon demand of such Bank to the Borrowers through the Agent,
the Borrowers shall pay to the Bank, from time to time as specified by the
Bank, additional amounts sufficient to compensate the Bank for such increase.
3.4 Funding Losses. The Borrowers shall reimburse each Bank and
hold each Bank harmless from any loss or expense which the Bank may sustain or
incur as a consequence of:
(a) the failure of any Borrower to make on a timely basis
any payment of principal of any Offshore Rate Loan;
(b) the failure of any Borrower to borrow, continue or
convert a Loan after such Borrower has given (or is deemed to have given) a
Notice of Borrowing or a Notice of Conversion/ Continuation;
(c) the failure of any Borrower to make any prepayment in
accordance with any notice delivered under Section 2.7;
(d) the prepayment (including pursuant to Section 2.7 or
2.8) or other payment (including after acceleration thereof) of an Offshore
Rate Loan on a day that is not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.4 of any
Offshore Rate Loan to a Base Rate Loan on a day that is not the last day of the
relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees
payable to terminate the deposits from which such funds were obtained or from
charges relating to any Offshore Currency Loans. For purposes of calculating
amounts payable by a Borrower to the Banks under this Section and under
subsection 3.3(a), each Offshore Rate Loan made by a Bank (and each related
reserve, special deposit or similar requirement) shall be conclusively deemed
to have been funded at the IBOR used in determining the Offshore Rate for such
Offshore Rate Loan by a matching deposit or other borrowing in the interbank
offshore market for a comparable amount and for a comparable period, whether or
not such Offshore Rate Loan is in fact so funded.
3.5 Inability to Determine Rates. If the Agent determines that
for any reason adequate and reasonable means do not exist for determining the
Offshore Rate for any requested Interest Period
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with respect to a proposed Offshore Rate Loan, or that the Offshore Rate
applicable pursuant to subsection 2.9(a) for any requested Interest Period with
respect to a proposed Offshore Rate Loan does not adequately and fairly reflect
the cost to the Banks of funding such Loan, the Agent will promptly so notify
the Borrowers and each Bank. Thereafter, the obligation of the Banks to make
or maintain Offshore Rate Loans, as the case may be, hereunder shall be
suspended until the Agent upon the instruction of the Majority Banks revokes
such notice in writing. Upon receipt of such notice, any Borrower may revoke
any Notice of Borrowing or Notice of Conversion/ Continuation then submitted by
it. If the applicable Borrower does not revoke such Notice, the Banks shall
make, convert or continue the Loans, as proposed by such Borrower, in the
amount specified in the applicable notice submitted by such Borrower, but such
Loans shall be made, converted or continued as Base Rate Loans instead of
Offshore Rate Loans. In the case of any Offshore Currency Loans, the Borrowing
or continuation shall be in an aggregate amount equal to the Dollar Equivalent
amount of the originally requested Borrowing or continuation in the Offshore
Currency, and to that end any outstanding Offshore Currency Loans which are the
subject of any continuation shall be redenominated and converted into Base Rate
Loans in Dollars with effect from the last day of the Interest Period with
respect to any such Offshore Currency Loans.
3.6 Certificates of Banks. Any Bank claiming reimbursement or
compensation under this Article III shall deliver to the Borrowers (with a copy
to the Agent) a certificate setting forth in reasonable detail the amount
payable to the Bank hereunder and such certificate shall be conclusive and
binding on the Borrowers in the absence of manifest error.
3.7 Substitution of Banks. Upon the receipt by a Borrower from
any Bank (an "Affected Bank") of a claim for compensation under Section 3.3,
such Borrower may: (i) request the Affected Bank to use its best efforts to
obtain a replacement bank or financial institution satisfactory to the
Borrowers to acquire and assume all or a ratable part of all of such Affected
Bank's Loans and Commitment (a "Replacement Bank"); (ii) request one more of
the other Banks to acquire and assume all or part of such Affected Bank's Loans
and Commitment; or (iii) designate a Replacement Bank. Any such designation of
a Replacement Bank under clause (i) or (iii) shall be subject to the prior
written consent of the Agent (which consent shall not be unreasonably
withheld).
3.8 Survival. The agreements and obligations of the Borrowers in
this Article III shall survive the payment of all other Obligations.
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ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions of Initial Loans. The obligation of each Bank to
make its initial Loan hereunder is subject to the condition that the Agent have
received on or before the Closing Date all of the following, in form and
substance satisfactory to the Agent and each Bank, and in sufficient copies for
each Bank:
(a) Loan Documents.
(i) this Agreement, executed and delivered by a
duly authorized officer of the Company and of Filtertek;
(ii) for the account of each Bank, a Note
conforming to the requirements hereof and executed by a duly
authorized officer of the Company and of Filtertek;
(iii) the Intercompany Note Pledge Agreement executed
and delivered by a duly authorized officer of the Company and each
Domestic Subsidiary in favor of the Agent for the benefit of the
Banks; and
(iv) the Subsidiary Guarantee Agreement, executed
and delivered by a duly authorized officer of each of the Subsidiary
Guarantors party thereto; and
(v) the Intercreditor and Subordination Agreement
in substantially the form of Exhibit I executed and delivered by
Clarence V. Schawk, and a duly authorized officer of each of the
Borrowers.
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of
directors of the Company, Filtertek and each Subsidiary Guarantor
authorizing the transactions contemplated hereby, certified as of the
Closing Date by the Secretary or an Assistant Secretary of the
Company, Filtertek or each Subsidiary Guarantor, as the case may be;
and
(ii) A certificate of the Secretary or Assistant
Secretary of the Company, Filtertek and each Subsidiary Guarantor
certifying the names and true signatures of the officers of the
Company, Filtertek or such Subsidiary authorized to execute, deliver
and perform, as applicable, this Agreement, and all other Loan
Documents to be delivered by it hereunder;
(c) Organization Documents; Good Standing. Each of the
following documents:
(i) the articles or certificate of incorporation
and the bylaws of the Company, Filtertek and each Subsidiary
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Guarantor as in effect on the Closing Date, certified by the Secretary
or Assistant Secretary of such person as of the Closing Date; and
(ii) a good standing certificate for the Company,
Filtertek and each Subsidiary Guarantor from the Secretary of State
(or similar, applicable Governmental Authority) of its state of
incorporation and each state where the Company, Filtertek or such
Subsidiary is qualified to do business as a foreign corporation as of
a recent date, together with bring-down certificates by facsimile,
dated the Closing Date;
(d) Legal Opinion. An opinion of Vedder Price Kaufman &
Kammholz, counsel to the Company, Filtertek and the Subsidiary Guarantors and
addressed to the Agent and the Banks, substantially in the form of Exhibit D;
(e) Payment of Fees. Evidence of payment by the
Borrowers of all accrued and unpaid fees, costs and expenses to the extent then
due and payable on the Closing Date, together with Attorney Costs of BofA to
the extent invoiced prior to or on the Closing Date, plus such additional
amounts of Attorney Costs as shall constitute BofA's reasonable estimate of
Attorney Costs incurred or to be incurred by it through the closing proceedings
(provided that such estimate shall not thereafter preclude final settling of
accounts between the Borrowers and BofA); including any such costs, fees and
expenses arising under or referenced in Sections 2.10 and 11.4;
(f) Certificate. A certificate signed by a Responsible
Officer, dated as of the Closing Date, stating that:
(i) the representations and warranties contained
in Article V are true and correct on and as of such date, as though
made on and as of such date;
(ii) no Default or Event of Default exists or
would result from the initial Borrowing; and
(iii) there has occurred since December 31, 1994,
no event or circumstance that has resulted or could reasonably be
expected to result in a Material Adverse Effect;
(g) Termination of Existing Credit Agreements. On or
prior to the date of the Initial Loan, the total commitments under each of the
Existing Credit Agreements shall have been terminated, all loans thereunder
shall have been repaid in full, together with interest thereon, all letters of
credit, if any, issued thereunder shall have been terminated and all other
amounts owing pursuant to the Existing Credit Agreement shall have been
terminated on terms and conditions satisfactory to Agent and the Banks and be
of no further force or effect.
(h) Other Documents. Such other approvals, opinions,
documents or materials as the Agent or any Bank may request.
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4.2 Conditions to All Borrowings. The obligation of each Bank to
make any Loan to be made by it (including its initial Loan) is subject to the
satisfaction of the following conditions precedent on the relevant Borrowing
Date:
(a) Notice of Borrowing or Issuance. The Agent shall
have received a Notice of Borrowing;
(b) Continuation of Representations and Warranties. The
representations and warranties in Article V shall be true and correct on and as
of such Borrowing Date with the same effect as if made on and as of such
Borrowing Date (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be true and
correct as of such earlier date); and
(c) No Existing Default. No Default or Event of Default
shall exist or shall result from such Borrowing.
Each Notice of Borrowing submitted by a Borrower hereunder shall constitute a
representation and warranty by the Borrowers hereunder, as of the date of each
such notice and as of each Borrowing Date or date of issuance, as the case may
be, that the conditions in Section 4.2 are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrowers, jointly and severally represent and warrant to the
Agent and each Bank that:
5.1 Corporate Existence and Power. The Company and each of its
Subsidiaries:
(a) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental
licenses, authorizations, consents and approvals to own its assets, carry on
its business and to execute, deliver, and perform its obligations under the
Loan Documents;
(c) is duly qualified as a foreign corporation and is
licensed and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification or license except where the failure to be so
qualified would not have a Material Adverse Effect; and
(d) is in compliance with all Requirements of Law;
except, in each case referred to in clause (c) or clause (d), to
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the extent that the failure to do so could not reasonably be expected to have a
Material Adverse Effect.
5.2 Corporate Authorization; No Contravention. The execution,
delivery and performance by the Borrowers of this Agreement and each other Loan
Document to which any Borrower is party, have been duly authorized by all
necessary corporate action, and do not and will not:
(a) contravene the terms of any of the Company's or its
Subsidiaries' Organization Documents;
(b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any document evidencing
any Contractual Obligation to which the Company or any of its Subsidiaries is a
party or any order, injunction, writ or decree of any Governmental Authority to
which the Company or its Subsidiaries or their property is subject; or
(c) violate any Requirement of Law.
5.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company or
any of its Subsidiaries of the Agreement or any other Loan Document.
5.4 Binding Effect. This Agreement and each other Loan Document
to which a Borrower is a party constitute the legal, valid and binding
obligations of such Borrower, enforceable against such Borrower in accordance
with their respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability.
5.5 Litigation. Except as specifically disclosed in Schedule 5.5,
there are no actions, suits, proceedings, claims or disputes pending, or to the
best knowledge of any Borrower, threatened or contemplated, at law, in equity,
in arbitration or before any Governmental Authority, against the Company, or
its Subsidiaries or any of their respective properties which:
(a) purport to affect or pertain to this Agreement or any
other Loan Document, or any of the transactions contemplated hereby or thereby;
or
(b) if determined adversely to the Company or its
Subsidiaries, would reasonably be expected to have a Material Adverse Effect.
No injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin
or restrain the execution, delivery or performance of this Agreement or any
other Loan Document, or directing that the transactions provided for
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herein or therein not be consummated as herein or therein provided.
5.6 No Default. No Default or Event of Default exists or would
result from the incurring of any Obligations by the Borrowers. As of the
Closing Date, neither the Company nor any Subsidiary is in default under or
with respect to any Contractual Obligation in any respect which, individually
or together with all such defaults, could reasonably be expected to have a
Material Adverse Effect, or that would, if such default had occurred after the
Closing Date, create an Event of Default under subsection 8.1(e).
5.7 ERISA Compliance. Except as specifically disclosed in
Schedule 5.7:
(a) Each Plan is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other federal or state
law. Each Plan which is intended to qualify under Section 401(a) of the Code
has received a favorable determination letter from the IRS and to the best
knowledge of the Borrowers, nothing has occurred which would cause the loss of
such qualification. Each of the Borrowers and each ERISA Affiliate has made
all required contributions to any Plan subject to Section 412 of the Code, and
no application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of
Borrowers, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan which has resulted or could
reasonably be expected to result in a Material Adverse Effect. There has been
no prohibited transaction or violation of the fiduciary responsibility rules
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably
expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability;
(iii) neither the Company, Filtertek nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability under Title IV of ERISA with respect
to any Pension Plan (other than premiums due and not delinquent under Section
4007 of ERISA); (iv) neither the Company, Filtertek nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability (and no event has
occurred which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 or 4243 of ERISA with respect to a
Multiemployer Plan; and (v) neither the Company, Filtertek nor any ERISA
Affiliate has engaged in a transaction that could be subject to Section 4069 or
4212(c) of ERISA.
5.8 Use of Proceeds; Margin Regulations. The proceeds of the
Loans are to be used solely for the purposes set forth in and permitted by
Section 6.12 and Section 7.7. Neither the Company
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nor any Subsidiary is generally engaged in the business of purchasing or
selling Margin Stock or extending credit for the purpose of purchasing or
carrying Margin Stock.
5.9 Title to Properties. The Company and each Subsidiary have
good record and marketable title in fee simple to, or valid leasehold interests
in, all real property necessary or used in the ordinary conduct of their
respective businesses, except for such defects in title as could not,
individually or in the aggregate, have a Material Adverse Effect. As of the
Closing Date, the property of the Company and its Subsidiaries is subject to no
Liens, other than Permitted Liens.
5.10 Taxes. The Company and its Subsidiaries have filed all
Federal and other material tax returns and reports required to be filed, and
have paid all Federal and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties, income or
assets otherwise due and payable, except those which are being contested in
good faith by appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. There is no proposed tax assessment against
the Company or any Subsidiary that would, if made, have a Material Adverse
Effect.
5.11 Financial Condition. (a) The audited consolidated financial
statements of the Company and its Subsidiaries dated December 31, 1994 and the
unaudited consolidated financial statements of the Company and its Subsidiaries
dated March 31, 1995, and the related consolidated statements of income or
operations, shareholders' equity and cash flows for the fiscal period ended on
such dates:
(i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein and except, in the case of interim
statements, for normal year-end adjustments;
(ii) fairly present the financial condition of the
Company and its Subsidiaries as of the date thereof and results of
operations for the period covered thereby; and
(iii) except as specifically disclosed in Schedule
5.11, show all material indebtedness and other liabilities, direct or
contingent, of the Company and its consolidated Subsidiaries as of the
date thereof, including liabilities for taxes, material commitments
and Contingent Obligations.
(b) Since March 31, 1995, there has been no Material Adverse Effect.
5.12 Environmental Matters. Each Borrower conducts in the ordinary
course of business a review of the effect of existing Environmental Laws and
existing Environmental Claims on its business, operations and properties, and
as a result thereof the
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Borrowers have reasonably concluded that, except as specifically disclosed in
Schedule 5.12, such Environmental Laws and Environmental Claims could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
5.13 Regulated Entities. None of the Company, any Person
controlling the Company, or any Subsidiary, is an "Investment Company" within
the meaning of the Investment Company Act of 1940. None of the Borrowers is
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act, any state public utilities
code, or any other Federal or state statute or regulation limiting its ability
to incur Indebtedness.
5.14 No Burdensome Restrictions. Neither the Company nor any
Subsidiary is a party to or bound by any Contractual Obligation,or subject to
any restriction in any Organization Document, or any Requirement of Law, which
could reasonably be expected to have a Material Adverse Effect.
5.15 Copyrights, Patents, Trademarks and Licenses, etc. The
Company or its Subsidiaries own or are licensed or otherwise have the right to
use all of the patents, trademarks, service marks, trade names, copyrights,
contractual franchises, authorizations and other rights that are reasonably
necessary for the operation of their respective businesses, without conflict
with the rights of any other Person. To the best knowledge of the Borrowers,
no slogan or other advertising device, product, process, method, substance,
part or other material now employed, or now contemplated to be employed, by the
Company or any Subsidiary infringes upon any rights held by any other Person.
Except as specifically disclosed in Schedule 5.5, no claim or litigation
regarding any of the foregoing is pending or threatened, and no patent,
invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or, to the knowledge of the Borrowers,
proposed, which, in either case, could reasonably be expected to have a
Material Adverse Effect.
5.16 Subsidiaries. As of the Closing Date, the Borrowers have no
Subsidiaries other than those specifically disclosed in part (a) of Schedule
5.16 hereto and has no equity investments in any other corporation or entity
other than those specifically disclosed in part (b) of Schedule 5.16.
5.17 Insurance. Except as specifically disclosed in Schedule 5.17,
the properties of the Company and its Subsidiaries are insured with financially
sound and reputable insurance companies not Affiliates of the Company, in such
amounts, with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning similar
properties in localities where the Company or such Subsidiary operates.
5.18 Full Disclosure. None of the representations or warranties
made by the Company or any Subsidiary in the Loan
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Documents as of the date such representations and warranties are made or deemed
made, and none of the statements contained in any exhibit, report, statement or
certificate furnished by or on behalf of the Company or any Subsidiary in
connection with the Loan Documents, contains any untrue statement of a
material fact or omits any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made or
delivered.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, unless the Majority
Banks waive compliance in writing:
6.1 Financial Statements. The Company shall deliver to the Agent,
in form and detail satisfactory to the Agent and the Majority Banks, with
sufficient copies for each Bank:
(a) as soon as available, but not later than 90 days
after the end of each fiscal year (commencing with the fiscal year ended
December 31, 1995), a copy of the audited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, and accompanied by the opinion of Ernst & Young,
LLP or another nationally-recognized independent public accounting firm
("Independent Auditor") which report shall state that such consolidated
financial statements present fairly the financial position for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years. Such opinion shall not be qualified or limited in any respect,
including any reason relating to a restricted or limited examination by the
Independent Auditor of any material portion of the Company's or any
Subsidiary's records and shall be delivered to the Agent pursuant to a reliance
agreement between the Agent and Banks and such Independent Auditor in form and
substance satisfactory to the Agent;
(b) as soon as available, but not later than 45 days
after the end of each of the first three fiscal quarters of each fiscal year
(commencing with the fiscal quarter ended June 30, 1995), a copy of the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
the end of such quarter and the related consolidated statements of income,
shareholders' equity and cash flows for the period commencing on the first day
and ending on the last day of such quarter, and certified by a Responsible
Officer as fairly presenting, in accordance with GAAP (subject to ordinary,
good faith year-end audit adjustments), the
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financial position and the results of operations of the Company and the
Subsidiaries;
(c) as soon as available, but not later than 90 days
after the end of each fiscal year (commencing with the fiscal year ended
December 31, 1995), a copy of an unaudited consolidating balance sheet of the
Company and its Subsidiaries as at the end of such year and the related
consolidating statement of income, shareholders' equity and cash flows for such
year, certified by a Responsible Officer as having been developed and used in
connection with the preparation of the financial statements referred to in
subsection 6.1(a);
(d) as soon as available, but not later than 45 days
after the end of each of the first three fiscal quarters of each fiscal year
(commencing with the fiscal quarter ended June 30, 1995), a copy of the
unaudited consolidating balance sheets of the Company and its Subsidiaries, and
the related consolidating statements of income, shareholders' equity and cash
flows for such quarter, all certified by a Responsible Officer as having been
developed and used in connection with the preparation of the financial
statements referred to in subsection 6.1(b).
6.2 Certificates; Other Information. The Company shall furnish to
the Agent, with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial
statements referred to in subsection 6.1(a), a certificate of the Independent
Auditor stating that in making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial
statements referred to in subsections 6.1(a) and (b), a Compliance Certificate
executed by a Responsible Officer;
(c) promptly, copies of all financial statements and
reports that the Company sends to its shareholders, and copies of all financial
statements and regular, periodical or special reports (including Forms 10K, 10Q
and 8K) that the Company or any Subsidiary may make to, or file with, the SEC;
(d) as soon as available, but in any event within 60 days
after the beginning of each fiscal year of the Company, a copy of the plan and
forecast (including a projected consolidated and consolidating balance sheet,
income statement and funds flow statement) of the Company for such fiscal year;
and
(e) promptly, such additional information regarding the
business, financial or corporate affairs of the Company or any Subsidiary as
the Agent, at the request of any Bank, may from time to time request.
6.3 Notices. The Borrowers shall promptly notify the Agent and
each Bank:
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(a) of the occurrence of any Default or Event of Default,
and of the occurrence or existence of any event or circumstance that
foreseeably will become a Default or Event of Default;
(b) of any matter that has resulted or may result in a
Material Adverse Effect, including (i) breach or non-performance of, or any
default under, a Contractual Obligation of the Company or any Subsidiary; (ii)
any dispute, litigation, investigation, proceeding or suspension between the
Company or any Subsidiary and any Governmental Authority; or (iii) the
commencement of, or any material development in, any litigation or proceeding
affecting the Company or any Subsidiary; including pursuant to any applicable
Environmental Laws;
(c) of the occurrence of any of the following events
affecting the Company, Filtertek or any ERISA Affiliate (but in no event more
than 10 days after such event), and deliver to the Agent and each Bank a copy
of any notice with respect to such event that is filed with a Governmental
Authority and any notice delivered by a Governmental Authority to the Company,
Filtertek or any ERISA Affiliate with respect to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension
Liability of any Pension Plan;
(iii) the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the Code by the
Company, Filtertek or any ERISA Affiliate; or
(iv) the adoption of any amendment to a Plan
subject to Section 412 of the Code, if such amendment results in a
material increase in contributions or Unfunded Pension Liability.
(d) of any material change in accounting policies or
financial reporting practices by the Company or any of its consolidated
Subsidiaries.
Each notice under this Section shall be accompanied by a
written statement by a Responsible Officer setting forth details of the
occurrence referred to therein, and stating what action the Company or any
affected Subsidiary proposes to take with respect thereto and at what time.
Each notice under subsection 6.3(a) shall describe with particularity any and
all clauses or provisions of this Agreement or other Loan Document that have
been (or foreseeably will be) breached or violated.
6.4 Preservation of Corporate Existence, Etc. The Borrowers
shall, and shall cause each of their Subsidiaries to:
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(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its state or
jurisdiction of incorporation;
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business except
in connection with transactions permitted by Section 7.3 and sales of assets
permitted by Section 7.2;
(c) use reasonable efforts, in the ordinary course of
business, to preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation of which could
reasonably be expected to have a Material Adverse Effect.
6.5 Maintenance of Property. The Borrowers shall maintain, and
shall cause each of their Subsidiaries to maintain, and preserve all its
equipment and facilities which is used or useful in its business in good
working order and condition, ordinary wear and tear excepted and make all
necessary repairs thereto and renewals and replacements thereof except where,
in either case, the failure to do so could not reasonably be expected to have a
Material Adverse Effect, except as permitted by Section 7.2. The Company and
each Subsidiary shall use the standard of care typical in the industry in the
operation and maintenance of its facilities.
6.6 Insurance. The Borrowers shall maintain, and shall cause each
of their Subsidiaries to maintain, with financially sound and reputable
independent insurers, insurance with respect to its properties and business
against loss or damage of the kinds customarily insured against by Persons
engaged in the same or similar business, of such types and in such amounts as
are customarily carried under similar circumstances by such other Persons.
6.7 Payment of Obligations. The Borrowers shall, and shall cause
each of their Subsidiaries to, pay and discharge as the same shall become due
and payable, all their respective obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the same are
being contested in good faith by appropriate proceedings and adequate reserves
in accordance with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law
become a Lien upon its property; provided, however, that the Company or any
Subsidiary shall have the right to contest such claims in good faith and by
appropriate proceedings; and
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(c) all indebtedness, as and when due and payable, but
subject to any subordination provisions contained in any instrument or
agreement evidencing such Indebtedness.
6.8 Compliance with Laws. The Borrowers shall comply, and shall
cause each of their Subsidiaries to comply, in all material respects with all
Requirements of Law of any Governmental Authority having jurisdiction over it
or its business (including the Federal Fair Labor Standards Act), except such
as may be contested in good faith or as to which a bona fide dispute may exist.
6.9 Compliance with ERISA. The Borrowers shall, and shall cause
each of their ERISA Affiliates to: (a) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
federal or state law; (b) cause each Plan which is qualified under Section
401(a) of the Code to maintain such qualification; and (c) make all required
contributions to any Plan subject to Section 412 of the Code.
6.10 Inspection of Property and Books and Records. The Borrowers
shall maintain and shall cause each of their Subsidiaries to maintain proper
books of record and account, in which full, true and correct entries in
conformity with GAAP consistently applied shall be made of all financial
transactions and matters involving the assets and business of the Company and
such Subsidiary. The Borrowers shall permit, and shall cause each of their
Subsidiaries to permit, representatives and independent contractors of the
Agent or any Bank to visit and inspect any of their respective properties, to
examine their respective corporate, financial and operating records, and make
copies thereof or abstracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective directors, officers, and
independent public accountants, all at the expense of the Borrowers and at such
reasonable times during normal business hours and as often as may be reasonably
desired, upon reasonable advance notice to the applicable Borrower; provided,
however, when an Event of Default exists the Agent or any Bank may do any of
the foregoing at the expense of the Borrowers at any time during normal
business hours and without advance notice.
6.11 Environmental Laws. The Borrowers shall, and shall cause each
of their Subsidiaries to, conduct its operations and keep and maintain its
property in compliance with all Environmental Laws.
6.12 Use of Proceeds. The Borrowers shall use the proceeds of the
Loans for working capital and other general corporate purposes not in
contravention of any Requirement of Law or of any Loan Document.
6.13 Additional Subsidiary Guarantors. In the event any Person
shall hereafter become a Domestic Subsidiary, the Borrowers shall promptly
notify the Agent and the Banks and the Borrowers shall, upon the request of
Agent or Majority Banks, cause such
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Domestic Subsidiary to become a party to the Subsidiary Guarantee Agreement.
ARTICLE VII
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, unless the Majority
Banks waive compliance in writing:
7.1 Limitation on Liens. The Borrowers shall not, and shall not
suffer or permit any of their Subsidiaries to, directly or indirectly, make,
create, incur, assume or suffer to exist any Lien upon or with respect to any
part of its property, whether now owned or hereafter acquired, other than the
following ("Permitted Liens"):
(a) any Lien existing on property of the Company or any
Subsidiary on the Closing Date and set forth in Schedule 7.1 securing
Indebtedness outstanding on such date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other
governmental charges which are not delinquent or remain payable without
penalty, or to the extent that non-payment thereof is permitted by Section 6.7,
provided that no notice of lien has been filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary
course of business which are not delinquent or remain payable without penalty
or which are being contested in good faith and by appropriate proceedings,
which proceedings have the effect of preventing the forfeiture or sale of the
property subject thereto;
(e) Liens (other than any Lien imposed by ERISA)
consisting of pledges or deposits required in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
social security legislation;
(f) Liens on the property of the Company or its
Subsidiary securing (i) the non-delinquent performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, (ii) contingent
obligations on surety and appeal bonds, and (iii) other non-delinquent
obligations of a like nature; in each case, incurred in the ordinary course of
business, provided all such Liens in the aggregate would not (even if enforced)
cause a Material Adverse Effect;
(g) Liens consisting of judgment or judicial attachment
liens, provided that the enforcement of such Liens is effectively
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stayed and all such liens in the aggregate at any time outstanding for the
Company and its Subsidiaries do not exceed $500,000;
(h) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the businesses of the Company and its
Subsidiaries;
(i) Liens on assets of corporations which become
Subsidiaries after the date of this Agreement, provided, however, that(i) such
Liens existed at the time the respective corporations became Subsidiaries and
were not created in anticipation thereof and (ii) the principal amount of the
Indebtedness secured by such Liens shall not at any time exceed, together with
Indebtedness permitted under Subsection 7.5(d), $7,500,000.
(j) purchase money security interests on equipment or
real property acquired or held by the Company or its Subsidiaries in the
ordinary course of business, securing Indebtedness incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such property;
provided that (i) any such Lien attaches to such property concurrently with or
within 20 days after the acquisition thereof, (ii) such Lien attaches solely to
the property so acquired in such transaction, (iii) the principal amount of the
debt secured thereby does not exceed 100% of the cost of such property, and
(iv) the principal amount of the Indebtedness secured by any and all such
purchase money security interests shall not at any time exceed, together with
Indebtedness permitted under subsection 7.5(d), $7,500,000;
(k) Liens securing obligations in respect of Capital
Leases on assets subject to such leases, provided that such Capital Leases are
otherwise permitted hereunder; and
(l) Liens arising solely by virtue of any statutory or
common law provision relating to banker's liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; provided that (i) such deposit account is not
a dedicated cash collateral account and is not subject to restrictions against
access by the Company or any Subsidiary in excess of those set forth by
regulations promulgated by the FRB, and (ii) such deposit account is not
intended by the Company or any Subsidiary to provide collateral to the
depository institution.
7.2 Disposition of Assets. The Borrowers shall not, and shall not
suffer or permit any of their Subsidiaries to, directly or indirectly, sell,
assign, lease, convey, transfer or otherwise dispose of (whether in one or a
series of transactions) any property (including accounts and notes receivable,
with or without recourse) or enter into any agreement to do any of the
foregoing, except:
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(a) dispositions of inventory, or used, worn-out or
surplus equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such
equipment is exchanged for credit against the purchase price of similar
replacement equipment, or the proceeds of such sale are reasonably promptly
applied to the purchase price of such replacement equipment; and
(c) Sale-leaseback transactions not prohibited by Section
7.15; and
(d) dispositions of assets other than accounts receivable
not otherwise permitted hereunder which are made for fair market value;
provided, that (i) at the time of any disposition, no Event of Default shall
exist or shall result from such disposition, (ii) the aggregate sales price
from such disposition shall be paid in cash, and (iii) the aggregate value of
all assets so sold by the Company and its Subsidiaries, together, shall not
exceed in any fiscal year more than $7,500,000 as of the date of disposition.
7.3 Consolidations and Mergers. The Company shall not, and shall
not suffer or permit any Subsidiary to, merge, consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person, except:
(a) any Subsidiary may merge with the Company, provided
that the Company shall be the continuing or surviving corporation, or with any
one or more Subsidiaries, provided that if any transaction shall be between a
Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be
the continuing or surviving corporation and if the transaction shall be between
a Subsidiary and a Subsidiary Guarantor, the Subsidiary Guarantor shall be the
continuing or surviving corporation; and
(b) any Subsidiary may sell all or substantially all of
its assets (upon voluntary liquidation or otherwise), to the Company or another
Wholly-Owned Subsidiary that is a Subsidiary Guarantor.
(c) The Company or any Subsidiary may consummate a merger
in connection with an Acquisition permitted by Section 7.4(j) provided that the
Company or such Subsidiary is the surviving person in such merger.
7.4 Loans and Investments. No Borrower shall purchase or acquire,
or suffer or permit any of their Subsidiaries to purchase or acquire, or make
any commitment therefor, any capital stock, equity interest, or any obligations
or other securities of, or any interest in, any Person, or make or commit to
make any Acquisitions, or make or commit to make any advance, loan, extension
of credit or capital contribution to or any other
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investment in, any Person including any Affiliate of the Company, except for:
(a) short-term obligations of, or fully guaranteed by,
the United States of America;
(b) commercial paper rated A-1 or better by Standard and
Poor's Corporation ("S&P") or P-1 or better by Moody's Investors Service, Inc.
("Moody's");
(c) demand deposit accounts maintained in the ordinary
course of business;
(d) certificates of deposit issued by and time deposits
with commercial banks (whether domestic or foreign) having capital and surplus
in excess of $100,000,000;
(e) common stock of companies publicly traded on a
national exchange; provided, that the aggregate cost of such common stock does
not at any time exceed $1,000,000;
(f) existing investments in Subsidiaries and other
investments in existence on the date hereof and described in Schedule 5.16
hereto and additional investments by a Foreign Subsidiary in another Foreign
Subsidiary;
(g) adjustable rate preferred stock and preferred stock
of companies listed on the S&P 500 and having a long-term debt rating of A or
better by S&P or A2 or better by Moody's, and loan participations, so long as
the underlying obligor has a short-term debt rating of A-2 or better by S&P or
P-2 or better by Moody's; provided, that the aggregate cost of such investments
does not at any time exceed $2,000,000;
(h) extensions of credit in the nature of accounts
receivable or notes receivable arising from the sale or lease of goods or
services in the ordinary course of business;
(i) extensions of credit by a Borrower to any of its
Wholly-Owned Subsidiaries or by any of its Wholly-Owned Subsidiaries to another
of its Wholly-Owned Subsidiaries provided that in the event of any extension of
credit to a Wholly-Owned Subsidiary which is not a Borrower or a Subsidiary
Guarantor, such extension of credit shall be evidenced by promissory notes
payable to such Borrower or such Subsidiary, as the case may be, in form and
substance as set forth on Exhibit A to the Intercompany Note Pledge Agreement,
which promissory notes shall be delivered and pledged to Agent pursuant to the
Intercompany Note Pledge Agreement;
(j) investments incurred in order to consummate
Acquisitions otherwise permitted herein, provided that (i) immediately
following such Acquisition the Company will have the ability to borrow not less
than five percent (5%) of the aggregate Revolving Commitment of the Banks
hereunder and under
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the Short Term Revolving Loan Facility, (ii) such Acquisitions are undertaken
in accordance with all applicable Requirements of Law; (iii) the prior,
effective written consent or approval to such Acquisition of the board of
directors or equivalent governing body of the acquiree is obtained; and (iv) on
a pro forma basis after giving effect to such Acquisition (including any
Indebtedness to be incurred in connection therewith), no Default or Event of
Default will exist; and
(k) extensions of credit to employees of the Company or
its Subsidiaries in the ordinary course of business consistent with past
practice and in an aggregate amount at any one time outstanding not to exceed
$1,000,000, provided that the Company or its Subsidiaries may not extend credit
to Clarence W. Schawk or David A. Schawk.
7.5 Limitation on Indebtedness. The Borrowers shall not, and
shall not suffer or permit any of their Subsidiaries to, create, incur, assume,
suffer to exist, or otherwise become or remain directly or indirectly liable
with respect to, any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement or
the Long Term Revolving Loan Facility;
(b) Indebtedness consisting of Contingent Obligations
permitted pursuant to Section 7.8;
(c) Indebtedness existing on the Closing Date and set
forth in Schedule 7.5;
(d) Indebtedness secured by Liens permitted by subsection
7.1(i) and (j) or other unsecured Indebtedness incurred to finance an
Acquisition if such Acquisition is permitted pursuant to Section 7.4 in an
aggregate amount (for all such secured and unsecured Indebtedness) outstanding
not to exceed $7,500,000 at any time;
(e) Indebtedness incurred in connection with leases
permitted pursuant to Section 7.10;
(f) Subordinated Indebtedness to a member of the Schawk
Family meeting the requirements set forth in the definition thereof in Section
1.1 hereof;
(g) Indebtedness permitted by Section 7.4(i);
(h) Unsecured Indebtedness in an aggregate principal
amount at any one time outstanding not to exceed $5,000,000 provided that such
Indebtedness is repaid not later than five Business Days after the date of its
incurrence and provided further that the principal amount of such Indebtedness
together with the principal amount of Loans and the face amount of letters of
credit hereunder and under the Long Term Revolving Loan Facility does not, at
any time, exceed $100,000,000; and
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(i) Indebtedness to a member of the Schawk Family (other
than Clarence W. Schawk, Marilyn G. Schawk, or David A. Schawk) not in excess
of $1,200,000 incurred solely with respect to federal and state income tax
obligations of such member of the Schawk Family arising with respect to income
of Schawk, Inc. allocable to such member of the Schawk Family.
7.6 Transactions with Affiliates. The Borrowers shall not, and
shall not suffer or permit any of their Subsidiaries to, enter into any
transaction with any Affiliate of the Company (other than a Borrower or a
Subsidiary Guarantor), except upon fair and reasonable terms no less favorable
to the Company or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate of the Company or such
Subsidiary.
7.7 Use of Proceeds. The Borrowers shall not, and shall not
suffer or permit any of their Subsidiaries to, use any portion of the Loan
proceeds, directly or indirectly, (i) to purchase or carry Margin Stock, (ii)
to repay or otherwise refinance indebtedness of the Borrowers or others
incurred to purchase or carry Margin Stock, (iii) to extend credit for the
purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any
security in any transaction that is subject to Section 13 or 14 of the Exchange
Act.
7.8 Contingent Obligations. The Borrowers shall not, and shall
not suffer or permit any of their Subsidiaries to, create, incur, assume or
suffer to exist any Contingent Obligations except:
(a) endorsements for collection or deposit in the
ordinary course of business;
(b) Swap Contracts entered into in the ordinary course of
business as bona fide hedging transactions;
(c) Contingent Obligations of the Company and its
Subsidiaries existing as of the Closing Date and listed in Schedule 7.8;
(d) Contingent Obligations of the Company or any
Subsidiary arising from the guaranty by the Company or any Subsidiary of an
obligation or liability of any Wholly-Owned Subsidiary of the Company, if the
underlying obligation or liability is permitted by the terms hereof;
(e) Contingent Obligations consisting of Letters of
Credit under the Long Term Revolving Loan Facility; and
(f) Contingent Obligations which, in the aggregate, do
not exceed at any point in time, $1,000,000.
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7.9 Joint Ventures. The Borrowers shall not, and shall not suffer
or permit any of their Subsidiaries to enter into any Joint Venture, other than
in the ordinary course of business.
7.10 Lease Obligations. The Borrowers shall not, and shall not
suffer or permit any of their Subsidiaries to, create or suffer to exist any
obligations for the payment of rent for any property under lease or agreement
to lease, except for:
(a) operating leases entered into by the Company or any
Subsidiary in the ordinary course of business provided that the aggregate
annual rental payments for all such operating leases shall not exceed in any
fiscal year $3,600,000;
(b) leases entered into by the Company or any Subsidiary
after the Closing Date pursuant to sale- leaseback transactions permitted under
Section 7.15;
(c) Capital Leases other than those permitted under
clause (b) of this Section, entered into by the Company or any Subsidiary to
finance the acquisition of equipment; provided that the aggregate annual rental
payments for all such Capital Leases shall not exceed in any fiscal year
$3,600,000.
7.11 Restricted Payments. The Borrowers shall not, and shall not
suffer or permit any of their Subsidiaries to, declare or make any dividend
payment or other distribution of assets, properties, cash, rights, obligations
or securities on account of any shares of any class of its capital stock, or
purchase, redeem or otherwise acquire for value any shares of its capital stock
or any warrants, rights or options to acquire such shares, now or hereafter
outstanding or repay, repurchase or otherwise acquire any Subordinated
Indebtedness owed to any Person in the Schawk Family; except that:
(a) the Company or any Wholly-Owed Subsidiary may declare
and make dividend payments or other distributions payable solely in its common
stock;
(b) the Company or any Wholly-Owed Subsidiary may
purchase, redeem or otherwise acquire shares of its common stock or warrants or
options to acquire any such shares with the proceeds received from the
substantially concurrent issue of new shares of its common stock;
(c) Filtertek may declare or pay cash dividends to the
Company; and the Company may declare or pay cash dividends to its stockholders
in an amount not in excess of $0.26 per common share (as the same may be
adjusted to take into account stock splits) per fiscal year through June 30,
1996 and thereafter the Company may declare or pay cash dividends to its
stockholders and purchase, redeem or otherwise acquire shares of its capital
stock or warrants, rights or options to acquire any such shares for cash solely
out of 50% of Consolidated Net Income of the Company accrued during the period
(treated as an accounting period)
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beginning July 1, 1996 to the end of the most recent fiscal quarter ending at
least 45 days prior to the date of such payment, provided, that, immediately
after giving effect to such proposed action, no Default or Event of Default
would exist;
(d) the Company may declare or pay cash dividends on
preferred stock to the extent required by the terms of such preferred stock in
an amount not to exceed $2,000,000 in any fiscal year;
(e) the Company or any Wholly-Owed Subsidiary may
purchase, redeem or otherwise acquire shares of its common stock or warrants or
options to acquire such shares if after giving effect to any such purchase,
redemption or acquisition there is no Default or Event of Default and if the
aggregate amount of all such purchases, redemptions or acquisitions by the
Company and its Subsidiaries within any one fiscal year does not exceed
$2,500,000; and
(f) the Company or any Wholly-Owed Subsidiary may repay,
repurchase or otherwise acquire Subordinated Indebtedness owed as of the date
hereof to any person in the Schawk Family in an aggregate amount not to exceed
$4,500,000, provided that no Default or Event of Default exists before such
payment or would exist immediately thereafter.
7.12 ERISA. The Borrowers shall not, and shall not suffer or
permit any of their ERISA Affiliates to: (a) engage in a prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably expected to result in liability
of any Borrower in an aggregate amount in excess of $500,000; or (b) engage in
a transaction that could be subject to Section 4069 or 4212(c) of ERISA.
7.13 Change in Business. The Borrowers shall not, and shall not
suffer or permit any of their Subsidiaries to, engage in any material line of
business substantially different from those lines of business carried on by the
Company and its Subsidiaries on the date hereof.
7.14 Accounting Changes. The Borrowers shall not, and shall not
suffer or permit any of their Subsidiaries to, make any significant change in
accounting treatment or reporting practices, except as required by GAAP, or
change the fiscal year of the Company or of any Subsidiary.
7.15 Sale and Leaseback. The Borrowers will not, nor will they
permit any of their Subsidiaries to, sell or transfer any of its property in
order to concurrently or subsequently lease as lessee such or similar property
(a "Sale/Leaseback Transaction"), except for Sale/Leaseback Transactions to the
extent that the fair market value of all such Sale/Leaseback Transactions does
not, in the aggregate, exceed $5,000,000.
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<PAGE> 65
7.16 Limitation on Certain Restrictions on Subsidiaries. The
Borrowers will not, nor will they permit any of their Subsidiaries to create or
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any of their Subsidiaries or (i)
pay dividends or make any other distributions on its Capital Stock or pay and
Indebtedness or other obligation owed to the Company or any of its other
Subsidiaries, (ii) make any loans or advances to the Company or any of its
other Subsidiaries, or (iii) transfer any of its property or assets to the
Company or any of its other Subsidiaries, except:
(a) any encumbrance or restriction pursuant hereto or to
an agreement in effect at or entered into on the Closing Date and reflected on
Schedule 7.16 hereto;
(b) any encumbrance or restriction with respect to a
Subsidiary of the Company pursuant to an agreement relating to any Indebtedness
issued by such Subsidiary on or prior to the date on which such Subsidiary
became a Subsidiary of the Company or was acquired by the Company (other than
Indebtedness issued as consideration in, or to provide all or any portion of
the funds utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary became a Subsidiary or was
acquired by the Company) and outstanding on such date;
(c) any such encumbrance or restriction consisting of
customary non-assignment provisions in leases governing leasehold interests to
the extent such provisions restrict the transfer of the lease; and
(d) in the case of clause (iii) above, Permitted Liens or
other restrictions contained in security agreements securing Indebtedness
permitted hereby to the extent such restrictions restrict the transfer of the
property subject to such security agreements.
7.17 Organization Documents. The Borrowers shall not, nor will
they permit any of their Subsidiaries to amend, modify or waive, or permit any
amendment, modification or waiver as to its Organization Documents if such
amendment, modification or waiver could reasonably be expected to adversely
affect the interests of Agent or the Banks.
7.18 Financial Covenants
(a) Maintenance of Consolidated Tangible Net Worth. The
Borrowers shall not permit Consolidated Tangible Net Worth of the Company at
any time to be less than the sum of (i) $15,000,000 plus (ii) as of the end of
each fiscal quarter, the amount equal to 40% of the aggregate Consolidated Net
Income of the Company since December 31, 1994; provided, however, that in the
event that the Company has a Consolidated Net Loss for any fiscal quarter,
Consolidated Net Income for purposes only of this Section 7.15(a) shall be
deemed to be zero for such fiscal quarter.
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(b) Leverage Ratio. The Borrowers shall not permit the
ratio of (a) Funded Debt to (b) Total Capitalization of the Company at any time
to exceed the percentage set forth below for the applicable period:
<TABLE>
<CAPTION>
PERIOD MAXIMUM RATIO
------ -------------
<S> <C>
Closing - 12/30/96 58%
12/31/96 - 12/30/97 55%
12/31/97 - maturity 50%
</TABLE>
(c) Funded Debt to EBITDA. The Borrowers shall not
permit the ratio of Funded Debt as of the last day of any fiscal quarter to
EBITDA of the Company for the period of four consecutive fiscal quarters ending
on the last day of such fiscal quarter to exceed 3.5 to 1.0.
(d) Interest Coverage Ratio. For each period of one
fiscal quarter ending on the last day of each fiscal quarter ending within the
periods set forth below the Borrowers shall not permit the ratio of (i) the
amount equal to EBIT for such period to (ii) Consolidated Interest Expense for
such period to be less than the ratio set forth below:
<TABLE>
<CAPTION>
PERIOD MINIMUM RATIO
------ -------------
<S> <C>
4/1/95 - 6/30/96 2.25 to 1.0
7/1/96 - 9/30/97 2.50 to 1.0
</TABLE>
and beginning 12/31/97 and thereafter, the Company shall not permit the ratio
of (i) an amount equal to EBIT for the period of four consecutive fiscal
quarters ending on the last day of any fiscal quarter to (ii) Consolidated
Interest Expense for such period to be less than 3.0 to 1.0.
(e) Fixed Charge Coverage Ratio. For each period of one
fiscal quarter ending on the last day of each fiscal quarter ending within the
periods set forth below, the Borrowers shall not permit the ratio of (i) EBIT
of the Company for such period plus payments under operating leases for such
period to (ii) Consolidated Fixed Charges of the Company for such period to be
less than the ratio set forth below:
<TABLE>
<CAPTION>
PERIOD MAXIMUM RATIO
------ -------------
<S> <C>
4/1/95 - 6/30/96 0.8 to 1.0
7/1/96 - 9/30/97 0.9 to 1.0
</TABLE>
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<PAGE> 67
and the Borrowers shall not permit the ratio of (i) EBIT for the period of four
consecutive fiscal quarters ending on the last day of each fiscal quarter
ending within the periods set forth below to (ii) Consolidated Fixed Charges of
the Company for such period to exceed the ratio set forth below for the
applicable period:
<TABLE>
<CAPTION>
FOUR QUARTER PERIOD ENDING
ON THE LAST DAY OF EACH
FISCAL QUARTER ENDING WITHIN MAXIMUM RATIO
<S> <C>
7/1/97 - 6/30/98 1.0 to 1.0
7/1/98 - 6/30/99 1.10 to 1.0
7/1/99 - maturity 1.20 to 1.0
</TABLE>
ARTICLE VIII
EVENTS OF DEFAULT
8.1 Event of Default. Any of the following shall constitute an
"Event of Default":
(a) Non-Payment. Any Borrower fails to pay, (i) when and
as required to be paid herein, any amount of principal of any Loan, or (ii)
within 3 Business Days after the same becomes due, any interest, fee or any
other amount payable hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or
warranty by a Borrower or any Subsidiary made or deemed made herein, in any
other Loan Document, or which is contained in any certificate, document or
financial or other statement by a Borrower, any Subsidiary, or any Responsible
Officer, furnished at any time under this Agreement, or in or under any other
Loan Document, is incorrect in any material respect on or as of the date made
or deemed made; or
(c) Specific Defaults. Any Borrower fails to perform or
observe any term, covenant or agreement contained in any of Section 6.1, 6.2,
6.3 or 6.9 or in Article VII; or
(d) Other Defaults. Any Borrower fails to perform or
observe any other term or covenant contained in this Agreement or any other
Loan Document, and such default shall continue unremedied for a period of 30
days after the date upon which written notice thereof is given to the Borrowers
by the Agent or any Bank; or
(e) Cross-Default. Any Borrower or any Subsidiary (i)
fails to make any payment in respect of any Indebtedness or Contingent
Obligation having an aggregate principal amount
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(including undrawn committed or available amounts and including amounts owing
to all creditors under any combined or syndicated credit arrangement) of more
than $500,000 when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) and such failure continues after the
applicable grace or notice period, if any, specified in the relevant document
on the date of such failure; or (ii) fails to perform or observe any other
condition or covenant, or any other event shall occur or condition exist, under
any agreement or instrument relating to any such Indebtedness or Contingent
Obligation, and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such failure
if the effect of such failure, event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness to be declared to be
due and payable prior to its stated maturity, or such Contingent Obligation to
become payable or cash collateral in respect thereof to be demanded; or
(f) Insolvency; Voluntary Proceedings. The Company or
any Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject
to applicable grace periods, if any, whether at stated maturity or otherwise;
(ii) voluntarily ceases to conduct its business in the ordinary course (other
than a Subsidiary not a Borrower with assets of less than $100,000); (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary
Insolvency Proceeding is commenced or filed against the Company or any
Subsidiary, or any writ, judgment, warrant of attachment, execution or similar
process, is issued or levied against a substantial part of the Company's or any
Subsidiary's properties, and any such proceeding or petition shall not be
dismissed, or such writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded within 60 days after
commencement, filing or levy; (ii) the Company or any Subsidiary admits the
material allegations of a petition against it in any Insolvency Proceeding, or
an order for relief (or similar order under non-U.S. law) is ordered in any
Insolvency Proceeding; or (iii) the Company or any Subsidiary acquiesces in the
appointment of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefor), or other similar Person for itself
or a substantial portion of its property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect
to a Pension Plan or Multiemployer Plan which has resulted or could reasonably
be expected to result in liability of a Borrower under Title IV of ERISA to the
Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess
of $500,000; (ii) the
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<PAGE> 69
aggregate amount of Unfunded Pension Liability among all Pension Plans at any
time exceeds $500,000; or (iii) any Borrower or any ERISA Affiliate shall fail
to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$500,000; or
(i) Monetary Judgments. One or more non-interlocutory
judgments, non-interlocutory orders, decrees or arbitration awards is entered
against the Company or any Subsidiary involving in the aggregate a liability
(to the extent not covered by independent third-party insurance as to which the
insurer does not dispute coverage) as to any single or related series of
transactions, incidents or conditions, of $500,000 or more, and the same shall
remain unsatisfied, unvacated and unstayed pending appeal for a period of the
lesser of 30 days or the applicable statutory appeal period after the entry
thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment,
order or decree is entered against the Company or any Subsidiary which does or
would reasonably be expected to have a Material Adverse Effect, and there shall
be any period of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; or
(k) Change of Control. There occurs any Change of
Control; or
(l) Environmental Matters. The Company or any of its
Subsidiaries shall be the subject of any proceeding or investigation pertaining
to the release by the Company or any of its Subsidiaries, or any other Person
of any toxic or hazardous waste or substance into the environment, or any
violation of any Environmental Laws, which, in either case, could reasonably be
expected to have a Material Adverse Effect; or
(m) Unenforceability. This Agreement or the Subsidiary
Guarantee Agreement shall cease for any reason to be in full force and effect
(other than by reason of the satisfaction of all the Company's or any of its
Subsidiaries' obligations thereunder) or the Company or any of its Subsidiaries
or any other Person (other than the Banks or the Agent) shall disavow its
obligations under any provision hereof or thereof, or shall deny that it has
any or further obligations under any provision thereof, or shall contest the
validity or enforceability of any provision thereof.
8.2 Remedies. If any Event of Default occurs, the Agent shall, at
the request of, or may, with the consent of, the Majority Banks,
(a) declare the commitment of each Bank to make Loans to
be terminated, whereupon such commitments shall be terminated;
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<PAGE> 70
(b) declare the unpaid principal amount of all
outstanding Loans, all interest accrued and unpaid thereon, and all other
amounts owing or payable hereunder or under any other Loan Document to be
immediately due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Borrowers;
and
(c) exercise on behalf of itself and the Banks all rights
and remedies available to it and the Banks under the Loan Documents or
applicable law;
provided, however, that upon the occurrence of any event specified in
subsection (f) or (g) of Section 8.1 (in the case of clause (i) of subsection
(g) upon the expiration of the 60-day period mentioned therein), the obligation
of each Bank to make Loans shall automatically terminate and the unpaid
principal amount of all outstanding Loans and all interest and other amounts as
aforesaid shall automatically become due and payable without further act of the
Agent or any Bank.
8.3 Rights Not Exclusive. The rights provided for in
this Agreement and the other Loan Documents are cumulative and are not
exclusive of any other rights, powers, privileges or remedies provided by law
or in equity, or under any other instrument, document or agreement now existing
or hereafter arising.
ARTICLE IX
THE AGENT
9.1 Appointment and Authorization. Each Bank hereby irrevocably
(subject to Section 9.9) appoints, designates and authorizes the Agent to take
such action on its behalf under the provisions of this Agreement and each other
Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such 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, nor shall the Agent
have or be deemed to have any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent.
9.2 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
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9.3 Liability of Agent. None of the Agent-Related Persons shall
(i) be liable to any other Bank for any action taken or omitted to be taken by
any of them under or in connection with this Agreement or any other Loan
Document or the transactions contemplated hereby (except for its own gross
negligence or willful misconduct), or (ii) be responsible in any manner to any
of the Banks for any recital, statement, representation or warranty made by the
Company or any Subsidiary or Affiliate of the Company, or any officer thereof,
contained in this Agreement or in any other Loan Document, or in any
certificate, report, statement or other document referred to or provided for
in, or received by the Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of any Borrower or any other party to any Loan Document to
perform its obligations hereunder or thereunder. No Agent-Related Person shall
be under any obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of any Borrower or any of the Company's other Subsidiaries or
Affiliates.
9.4 Reliance by Agent. (a) The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, statement or other document or conversation believed by it
to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to the Borrowers), independent accountants and other experts selected
by the Agent. The Agent shall be fully justified in failing or refusing to take
any action under this Agreement or any other Loan Document unless it shall
first receive such advice or concurrence of the Majority Banks as it deems
appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Banks against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
The Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement or any other Loan Document in accordance with
a request or consent of the Majority Banks and such request and any action
taken or failure to act pursuant thereto shall be binding upon all of the
Banks.
(b) For purposes of determining compliance with the
conditions specified in Section 4.1, each Bank that has executed this Agreement
shall be deemed to have consented to, approved or accepted or to be satisfied
with, each document or other matter either sent by the Agent to such Bank for
consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Bank.
9.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event
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<PAGE> 72
of Default, except with respect to defaults in the payment of principal,
interest and fees required to be paid to the Agent for the account of the
Banks, unless the Agent shall have received written notice from a Bank or a
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". The Agent will
notify the Banks of its receipt of any such notice. The Agent shall take such
action with respect to such Default or Event of Default as may be requested by
the Majority Banks in accordance with Article VIII; provided, however, that
unless and until the Agent has received any such request, the Agent may (but
shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable or in the best interest of the Banks.
9.6 Credit Decision. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that
no act by the Agent hereinafter taken, including any review of the affairs of
the Company and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Bank. Each Bank
represents to the Agent that it has, independently and without reliance upon
any Agent- Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company and its Subsidiaries, and all applicable bank
regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to the Borrowers
hereunder. Each Bank also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the Borrowers.
Except for notices, reports and other documents expressly herein required to be
furnished to the Banks by the Agent, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Borrowers which may come into the
possession of any of the Agent-Related Persons.
9.7 Indemnification of Agent. Whether or not the transactions
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent owed but not reimbursed by or on behalf of
the Borrowers and without limiting the obligation of the Borrowers to do so),
pro rata, from and against any and all Indemnified Liabilities; provided,
however, that no Bank shall be liable for the payment to the Agent-Related
Persons of any portion of such Indemnified Liabilities resulting solely from
such Person's gross negligence
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or willful misconduct. Without limitation of the foregoing, each Bank shall
reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any
document contemplated by or referred to herein, to the extent that the Agent is
required to be but is not reimbursed for such expenses by or on behalf of the
Borrowers. The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of the Agent.
9.8 Agent in Individual Capacity. BofA and its Affiliates may
make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with the Company and
its Subsidiaries and Affiliates as though BofA were not the Agent hereunder and
without notice to or consent of the Banks. The Banks acknowledge that,
pursuant to such activities, BofA or its Affiliates may receive information
regarding the Company or its Affiliates (including information that may be
subject to confidentiality obligations in favor of the Company or such
Subsidiary) and acknowledge that the Agent shall be under no obligation to
provide such information to them. With respect to its Loans, BofA shall have
the same rights and powers under this Agreement as any other Bank and may
exercise the same as though it were not the Agent, and the terms "Bank" and
"Banks" include BofA in its individual capacity.
9.9 Successor Agent. The Agent may, and at the request of the
Borrowers and the Majority Banks shall, resign as Agent upon 30 days' notice to
the Banks. If the Agent resigns under this Agreement, the Majority Banks shall
appoint from among the Banks a successor agent for the Banks which successor
agent shall be approved by the Borrowers. If no successor agent is appointed
prior to the effective date of the resignation of the Agent, the Agent may
appoint, after consulting with the Banks and the Borrowers, a successor agent
from among the Banks. Upon the acceptance of its appointment as successor
agent hereunder, such successor agent shall succeed to all the rights, powers
and duties of the retiring Agent and the term "Agent" shall mean such successor
agent and the retiring Agent's appointment, powers and duties as Agent shall be
terminated. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article IX and Sections 11.4 and 11.5 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 no successor agent has accepted appointment as Agent
by the date which is 30 days following a retiring Agent's notice of
resignation, the retiring Agent's resignation shall nevertheless thereupon
become effective and the Banks shall perform all of the duties of the Agent
hereunder until
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such time, if any, as the Majority Banks appoint a successor agent as provided
for above.
9.10 Withholding Tax. (a) If any Bank is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Bank claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Bank agrees with and in favor of the Agent, to deliver
to the Agent:
(i) if such Bank claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty,
properly completed IRS Forms 1001 and W-8 before the payment of any
interest in the first calendar year and before the payment of any
interest in each third succeeding calendar year during which interest
may be paid under this Agreement;
(ii) if such Bank claims that interest paid under
this Agreement is exempt from United States withholding tax because it
is effectively connected with a United States trade or business of
such Bank, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable year of
such Bank and in each succeeding taxable year of such Bank during
which interest may be paid under this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required
under the Code or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Bank claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Bank sells, assigns, grants a participation in, or otherwise transfers all
or part of the Obligations of the Borrowers to such Bank, such Bank agrees to
notify the Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of the Borrowers to such Bank. To the extent
of such percentage amount, the Agent will treat such Bank's IRS Form 1001 as no
longer valid.
(c) If any Bank claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of the
Borrowers to such Bank, such Bank agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(d) If any Bank is entitled to a reduction in the
applicable withholding tax, the Agent may withhold from any
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interest payment to such Bank an amount equivalent to the applicable
withholding tax after taking into account such reduction. If the forms or
other documentation required by subsection (a) of this Section are not
delivered to the Agent, then the Agent may withhold from any interest payment
to such Bank not providing such forms or other documentation an amount
equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any Bank
(because the appropriate form was not delivered, was not properly executed, or
because such Bank failed to notify the Agent of a change in circumstances which
rendered the exemption from, or reduction of, withholding tax ineffective, or
for any other reason) such Bank shall indemnify the Agent fully for all amounts
paid, directly or indirectly, by the Agent as tax or otherwise, including
penalties and interest, and including any taxes imposed by any jurisdiction on
the amounts payable to the Agent under this Section, together with all costs
and expenses (including Attorney Costs). The obligation of the Banks under
this subsection shall survive the payment of all Obligations and the
resignation or replacement of the Agent.
ARTICLE X
GUARANTEES OF COMPANY AND EACH BORROWER
10.1 Guarantee. The Company and each Borrower, jointly and
severally, hereby unconditionally guarantees the due and punctual payment of
all Obligations of the Borrowers, including without limitation the due and
punctual payment of the principal of and interest on the Loans made to each
Borrower pursuant to this Agreement and the due and punctual payment of all
other amounts payable by each other Borrower under this Agreement or the other
Loan Documents. Upon failure by any Borrower to pay punctually any such
amount, upon demand by Agent, the Company or any other Borrower, as the case
may be, shall forthwith pay the amount not so paid at the place and in the
manner and with the effect specified in this Agreement. Notwithstanding
anything to the contrary contained in this Section 10.1 and elsewhere in the
Agreement to the extent this Agreement provides for joint and several
liability, the obligations and liabilities of each Borrower with respect to the
Loan and related Obligations of the other Borrower hereunder shall not at any
time exceed the "Limit of Liability" (as hereafter defined) of such Borrower.
The term "Limit of Liability", with respect to any Borrower, shall have the
meaning assigned to such term in the Subsidiary Guaranty Agreement provided
that, for purposes of this Section 10.1 all references to "Guarantor" therein
and in any other related terms shall be replaced with reference to such
Borrower.
10.2 Unconditional Obligations. The obligations of the Company and
each Borrower hereunder shall be unconditional and
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absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise,
waiver or release in respect of any Obligation of any Borrower or any
collateral therefor under this Agreement or the other Loan Document;
(ii) any modification or amendment of or supplement to
this Agreement or the other Loan Documents;
(iii) any change in the corporate existence, structure or
ownership of any Borrower, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting any other
Borrower or its collateral or its assets;
(iv) the existence of any claim, set-off or other rights which
a Borrower may have at any time against the Company or any other
Borrower, the Agent or any other Person, whether in connection
herewith or any unrelated transactions, provided that nothing herein
shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
(v) any validity or unenforceability relating to or
against the Company or any Borrower for any reason of any provision or
all of this Agreement or the other Loan Documents, or any provision of
applicable law or regulation purporting to prohibit the payment by the
Company or any Borrower of the principal of or interest on any loan or
any other amount payable by it under this Agreement or the other Loan
Documents; or
(vi) any other act or omission to act or delay of any kind
by the Company or any Borrower, the Agent or any other Person or any
other circumstance whatsoever which might, but for the provisions of
this paragraph, constitute a legal or equitable discharge of the
Company's or such Borrower's obligations under this Agreement or the
other Loan Documents.
10.3 Period In Force. The Company's and each Borrower's Obligations
under this Article 10 shall remain in full force and effect until all
Obligations shall have been paid in full and this Agreement and the other
Loan Documents shall have terminated in accordance with their terms. If at
any time any payment of the principal of or interest on any loan made to a
Borrower or any other amount payable the Company or by any Borrower under
this Agreement or the other Loan Documents is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of the Company or such Borrower or otherwise, each of the
Company's and such Borrower's Obligations under this Section 10 with
respect to such payment shall be revived and continued in full force and
effect.
10.4 Waiver. THE COMPANY AND EACH BORROWER WAIVES ACCEPTANCE
HEREOF, PRESENTMENT, DEMAND, PROTEST AND ANY NOTICE NOT PROVIDED
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FOR HEREIN, AS WELL AS ANY REQUIREMENT THAT AT ANY TIME ANY ACTION BE TAKEN BY
ANY PERSON AGAINST ANY OTHER BORROWER OR ANY OTHER PERSON.
10.5 Effect of Stay. In the event that the demand for payment of
any amount payable by the Company or any Borrower under this Agreement or the
other Loan Documents is stayed upon the insolvency, bankruptcy or
reorganization of the Company or a Borrower, all such amounts otherwise subject
to acceleration under the terms of this Agreement or the other Loan Documents
shall nonetheless be payable by the Company or the other Borrowers hereunder
forthwith upon demand by Agent.
10.6 No Subrogation, Contribution, Reimbursement or Indemnity.
Notwithstanding anything to the contrary in this Section 10 and this Agreement,
the Company and the Borrowers hereby irrevocably waive all rights which may
have arisen in connection with the guarantees made pursuant to this Section 10
to be subrogated to any of the rights (whether contractual, under the United
States Bankruptcy Code, as amended, including Section 509 thereof, under common
law or otherwise) of the Agent or any of the Lenders against the Company or the
Borrowers or against any collateral security or guaranty or right of offset
held by the Agent for the payment of the Obligations until such time as all
Obligations have been fully and indefinitely paid in full. The Company and the
Borrowers hereby further irrevocably waive all contractual, common law,
statutory or other rights of reimbursement, contribution, exoneration or
indemnity (or any similar right) from or against the Company or the Borrowers
which may have arisen in connection with the guarantees made pursuant to this
Section 10 until such time as all Obligations have been fully and indefeasibly
paid in full. So long as any Obligations remain, if any amount shall be paid
by or on behalf of the Company or any Borrower to any of them on account of any
of the rights waived in this paragraph, such amount shall be held by such
Person in trust, segregated from other funds of such Person, and shall,
forthwith upon receipt, be turned over to the Agent (duly indorsed by such
Person to the Agent, if required), to be applied against the Obligations,
whether matured or unmatured, in such order as the Agent may determine. The
provisions of this paragraph shall survive the term of this Agreement and the
payment in full of the Obligations.
ARTICLE XI
MISCELLANEOUS
11.1 Amendments and Waivers. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by the Borrowers therefrom, shall be effective unless
the same shall be in writing and signed by the Majority Banks (or by the Agent
at the written request of the Majority Banks) and the Borrowers and
acknowledged by the Agent, and then any such waiver or consent shall be
effective only
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in the specific instance and for the specific purpose for which given;
provided, however, that no such waiver, amendment, or consent shall, unless in
writing and signed by all the Banks and the Borrowers and acknowledged by the
Agent, do any of the following:
(a) increase or extend the Commitment of any Bank (or
reinstate any Commitment terminated pursuant to Section 8.2);
(b) postpone or delay any date fixed by this Agreement or
any other Loan Document for any payment of principal, interest, fees or other
amounts due to the Banks (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest
specified herein on any Loan, or (subject to clause (ii) below) any fees or
other amounts payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the Banks
or any of them to take any action hereunder;
(e) extend the Revolving Termination Date;
(f) release any guarantor or release all or substantially
all of any collateral, if any, securing the Obligations; or
(g) amend this Section, or Section 2.14, or any provision
herein providing for consent or other action by all Banks;
and, provided further, that (i) no amendment, waiver or consent shall, unless
in writing and signed by the Agent in addition to the Majority Banks or all the
Banks, as the case may be, affect the rights or duties of the Agent under this
Agreement or any other Loan Document, and (ii) the Fee Letters may be amended,
or rights or privileges thereunder waived, in a writing executed by the parties
thereto.
11.2 Notices. (a) All notices, requests and other communications
shall be in writing (including, unless the context expressly otherwise
provides, by facsimile transmission, provided that any matter transmitted by
the Borrowers by facsimile (i) shall be immediately confirmed by a telephone
call to the recipient at the number specified on Schedule 11.2, and (ii) shall
be followed promptly by delivery of a hard copy original thereof) and mailed,
faxed or delivered, to the address or facsimile number specified for notices on
Schedule 11.2; or, as directed to the Borrowers or the Agent, to such other
address as shall be designated by such party in a written notice to the other
parties, and as directed to any other party, at such other address as shall be
designated by such party in a written notice to the Borrowers and the Agent.
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(b) All such notices, requests and communications shall,
when transmitted by overnight delivery, or faxed, be effective when delivered
for overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II or IX shall not be effective until actually
received by the Agent.
(c) Any agreement of the Agent and the Banks herein to
receive certain notices by telephone or facsimile is solely for the convenience
and at the request of the Borrowers. The Agent and the Banks shall be entitled
to rely on the authority of any Person purporting to be a Person authorized by
a Borrowers to give such notice and the Agent and the Banks shall not have any
liability to the or other Person on account of any action taken or not taken
by the Agent or the Banks in reliance upon such telephonic or facsimile notice.
The obligation of the Borrowers to repay the Loans shall not be affected in any
way or to any extent by any failure by the Agent and the Banks to receive
written confirmation of any telephonic or facsimile notice or the receipt by
the Agent and the Banks of a confirmation which is at variance with the terms
understood by the Agent and the Banks to be contained in the telephonic or
facsimile notice.
(d) Any Notice given by the Agent or any Bank and
addressed to a Borrower shall be deemed to constitute notice hereunder of such
event, circumstance, requirement or other matter for all Borrowers hereunder.
11.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.
11.4 Costs and Expenses. The Borrowers shall:
(a) whether or not the transactions contemplated hereby
are consummated, pay or reimburse BofA (including in its capacity as Agent)
within ten Business Days after demand (subject to subsection 4.1(f)) for all
costs and expenses incurred by BofA (including in its capacity as Agent) in
connection with the development, preparation, delivery, administration and
execution of, and any amendment, supplement, waiver or modification to (in each
case, whether or not consummated), this Agreement, any Loan Document and any
other documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby, including
reasonable Attorney Costs incurred by BofA (including in its capacity as Agent)
with respect thereto; and
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EXHIBIT 10.42
================================================================================
FILTERTEK USA, INC.
$10,000,000 6.58% SERIES A SENIOR NOTES
DUE AUGUST 18, 2000
$30,000,000 6.98% SERIES B SENIOR NOTES
DUE AUGUST 18, 2005
--------------
NOTE AGREEMENT
--------------
DATED AS OF AUGUST 18, 1995
================================================================================
<PAGE> 2
TABLE OF CONTENTS
(Not Part of Agreement)
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
1. AUTHORIZATION OF ISSUE OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. PURCHASE AND SALE OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. CONDITIONS OF CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3A. OPINION OF PURCHASERS' SPECIAL COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . 2
3B. OPINION OF TRANSACTION PARTIES' COUNSEL . . . . . . . . . . . . . . . . . . . . . . . 2
3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT . . . . . . . . . . . . . . . . . . . . . . 2
3D. PURCHASE PERMITTED BY APPLICABLE LAWS. . . . . . . . . . . . . . . . . . . . . . . . . 3
3E. PRIVATE PLACEMENT NUMBERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3F. FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3G. DELIVERY OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3H. SALE OF NOTES TO OTHER PURCHASERS . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3I. BANK AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3J. PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. PREPAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4A(1). REQUIRED PREPAYMENTS OF SERIES A NOTES . . . . . . . . . . . . . . . . . . . . . . . . 3
4A(2). REQUIRED PREPAYMENTS OF SERIES B NOTES . . . . . . . . . . . . . . . . . . . . . . . . 4
4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT . . . . . . . . . . . . . . . . . . 4
4C. NOTICE OF OPTIONAL PREPAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4D. PARTIAL PAYMENTS PRO RATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4E. RETIREMENT OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5A. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5B. INFORMATION REQUIRED BY RULE 144A . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5C. INSPECTION OF PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5D. COVENANT TO SECURE NOTE EQUALLY . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5E. CHANGE IN CONTROL PUT OPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5F. CONDUCT OF BUSINESS; MAINTENANCE OF EXISTENCE; COMPLIANCE WITH LAWS . . . . . . . . . 8
5G. MAINTENANCE OF PROPERTY; INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5H. NOTICE OF SUITS, ADVERSE CHANGE IN BUSINESS, ETC. . . . . . . . . . . . . . . . . . . 9
6. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6A. FINANCIAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6B. RESTRICTED PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6C. LIEN, DEBT AND OTHER RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6D. ISSUANCE OF STOCK BY SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6E. ADDITIONAL GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7A. ACCELERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7B. RESCISSION OF ACCELERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
7C. NOTICE OF ACCELERATION OR RESCISSION . . . . . . . . . . . . . . . . . . . . . . . . . 20
7D. OTHER REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8. REPRESENTATIONS, COVENANTS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8A. ORGANIZATION; POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8B. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8C. ACTIONS PENDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8D. OUTSTANDING INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8E. TITLE TO PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8F. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . 22
8H. OFFERING OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8I. REGULATION G, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8J. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8K. GOVERNMENTAL CONSENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8L. ENVIRONMENTAL COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8M. DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9. REPRESENTATIONS OF EACH PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9A. NATURE OF PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9B. SOURCE OF FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10A. YIELD-MAINTENANCE TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10B. OTHER TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS . . . . . . . . . . . . . . . . . . . 35
12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12A. NOTE PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
12B. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12C. CONSENT TO AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
12D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES . . . . . . . . . . . . 43
12E. PERSONS DEEMED OWNERS; PARTICIPATIONS . . . . . . . . . . . . . . . . . . . . . . . . 43
12F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT . . . . . . . . . . . . . 44
12G. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12H. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12I. PAYMENTS DUE ON NON-BUSINESS DAYS . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12J. SATISFACTION REQUIREMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12K. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12L. INDEPENDENCE OF COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12M. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12N. DESCRIPTIVE HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12O. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12P. SEVERALTY OF OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12Q. DISCLOSURE TO OTHER PERSONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
12R. INDEPENDENT CREDIT INVESTIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
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<PAGE> 4
PURCHASER SCHEDULE
EXHIBIT A-1 -- FORM OF SERIES A NOTE
EXHIBIT A-2 -- FORM OF SERIES B NOTE
EXHIBIT B -- FORM OF OPINION OF COMPANY'S COUNSEL
SCHEDULE 6(C)(1) -- LIST OF EXISTING LIENS
SCHEDULE 6(C)(3) -- LIST OF EXISTING PRIORITY DEBT
SCHEDULE 8G -- LIST OF AGREEMENTS RESTRICTING DEBT
SCHEDULE 10B(1) -- MEMBERS OF SCHAWK FAMILY
<PAGE> 5
FILTERTEK USA, INC.
1695 RIVER ROAD
DES PLAINES, ILLINOIS 60018
As of August 18, 1995
To Each of the Purchasers Named in the
Purchaser Schedule Attached Hereto
Ladies and Gentlemen:
The undersigned, Filtertek USA, Inc. (herein called "FILTERTEK"),
Schawk, Inc. (herein called the "COMPANY"), Plastic Molded Concepts, Inc.
(herein called "PMC") and Tek Packaging Group, Inc. (herein called
"PACKAGING"), hereby agree with the purchasers named in the Purchaser Schedule
attached hereto (herein called the "PURCHASERS") as follows:
1. AUTHORIZATION OF ISSUE OF NOTES. Filtertek will authorize the
issue of the following:
(i) its senior promissory notes in the aggregate principal amount of
$10,000,000 (herein called the "SERIES A NOTES"), to be dated the date of issue
thereof, to mature August 18, 2000, to bear interest on the unpaid balance
thereof from the date thereof until the principal thereof shall have become due
and payable at the rate of 6.58% per annum and on overdue payments at the rate
specified therein, and to be substantially in the form of Exhibit A-1 attached
hereto. The term "SERIES A NOTES" as used herein shall include each Series A
Note delivered pursuant to any provision of this Agreement and each Series A
Note delivered in substitution or exchange for any other Series A Note pursuant
to any such provision; and
(ii) its senior promissory notes in the aggregate principal amount of
$30,000,000 (herein called the "SERIES B NOTES"), to be dated the date of issue
thereof, to mature August 18, 2005, to bear interest on the unpaid balance
thereof from the date thereof until the principal thereof shall have become due
and payable at the rate of 6.98% per annum and on overdue payments at the rate
specified therein, and to be substantially in the form of Exhibit A-2 attached
hereto. The term "SERIES B NOTES" as used herein shall include each Series B
Note delivered pursuant to any provision of this Agreement and each Series B
Note delivered in substitution or exchange for any other Series B Note pursuant
to any such provision.
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<PAGE> 6
The term "NOTE" or "NOTES" as used herein shall include each Series A Note and
Series B Note delivered pursuant to any provision of this Agreement and each
Series A Note and Series B Note delivered in substitution or exchange for any
such Note pursuant to any such provision.
2. PURCHASE AND SALE OF NOTES. Filtertek hereby agrees to sell
to each Purchaser and, subject to the terms and conditions herein set forth,
each Purchaser agrees to purchase from Filtertek the aggregate principal amount
of Notes set forth opposite such Purchaser's name in the Purchaser Schedule
attached hereto at 100% of such aggregate principal amount. Filtertek will
deliver to each Purchaser, at the offices of Schiff Hardin & Waite at 7200
Sears Tower, Chicago, Illinois 60606, one or more Notes registered in such
Purchaser's name, evidencing the aggregate principal amount of Notes to be
purchased by such Purchaser and in the denomination or denominations specified
with respect to such Purchaser in the Purchaser Schedule against payment of the
purchase price thereof by transfer of immediately available funds for credit to
Filtertek's account #73 10447 at Bank of America Illinois, Chicago, Illinois,
ABA #071000039, on the date of closing, which shall be August 18, 1995 or any
other date on or before August 31, 1995 upon which Filtertek and the Purchasers
may mutually agree (herein called the "CLOSING" or the "DATE OF CLOSING").
3. CONDITIONS OF CLOSING. Each Purchaser's obligation to
purchase and pay for the Notes to be purchased by such Purchaser hereunder is
subject to the satisfaction, on or before the date of closing, of the following
conditions:
3A. OPINION OF PURCHASERS' SPECIAL COUNSEL. Such Purchaser shall
have received from Schiff Hardin & Waite, who are acting as special counsel for
the Purchasers in connection with this transaction, a favorable opinion
satisfactory to such Purchaser as to such matters incident to the matters
herein contemplated as it may reasonably request.
3B. OPINION OF TRANSACTION PARTIES' COUNSEL. Such Purchaser shall
have received from Vedder Price Kaufman & Kammholz, special counsel for the
Transaction Parties, a favorable opinion satisfactory to such Purchaser and
substantially in the form of Exhibit B attached hereto, and the Transaction
Parties, by their execution of this Agreement, authorize and request such
counsel to render such opinion to the Purchasers.
3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The representations
and warranties contained in paragraph 8 shall be true on and as of the date of
closing, except to the extent of changes caused by the transactions herein
contemplated; there shall exist on the date of closing no Event of Default or
Default; and the Company shall have delivered to such Purchaser an Officer's
Certificate, dated the date of closing, to both such effects.
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<PAGE> 7
3D. PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and
payment for the Notes to be purchased by such Purchaser on the date of closing
on the terms and conditions herein provided (including the use of the proceeds
of such Notes by Filtertek) shall not violate any applicable law or
governmental regulation (including, without limitation, section 5 of the
Securities Act or Regulation G, T or X of the Board of Governors of the Federal
Reserve System) and shall not subject such Purchaser to any tax, penalty,
liability or other onerous condition under or pursuant to any applicable law or
governmental regulation, and such Purchaser shall have received such
certificates or other evidence as it may request to establish compliance with
this condition.
3E. PRIVATE PLACEMENT NUMBERS. Private placement numbers shall have
been obtained from Standard & Poor's CUSIP Service Bureau with respect to the
Notes.
3F. FEES AND EXPENSES. Filtertek shall have paid such fees and
expenses of the Purchasers' special counsel (up to a maximum amount of $35,000)
as the Purchasers shall have required to have been paid on or before the date
of closing.
3G. DELIVERY OF NOTES. Filtertek shall have delivered to such
Purchaser on the date of closing the Notes to be delivered to such Purchaser
pursuant to paragraph 2, all duly completed and executed by Filtertek.
3H. SALE OF NOTES TO OTHER PURCHASERS. Filtertek shall have sold
to the other Purchasers the Notes to be purchased by them at the closing and
shall have received payment in full therefor.
3I. BANK AGREEMENT. All Liens created under any Loan Document (as
defined in the Bank Agreement) shall have been terminated to the satisfaction
of such Purchaser.
3J. PROCEEDINGS. All corporate and other proceedings taken or to be
taken in connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in substance and form to such Purchaser,
and such Purchaser shall have received all such counterpart originals or
certified or other copies of such documents as it may reasonably request.
4. PREPAYMENTS. The Notes shall be subject to prepayment with
respect to the required prepayments specified in paragraphs 4A(1) and 4A(2) and
the optional prepayments permitted by paragraph 4B.
4A(1). REQUIRED PREPAYMENTS OF SERIES A NOTES. Until the Series A
Notes shall be paid in full, Filtertek shall apply to the prepayment of the
Series A Notes, without premium, the sum of $5,000,000 on August 18 in each of
the years 1999 and 2000, inclusive, and such principal amounts of the Series A
Notes,
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<PAGE> 8
together with interest thereon to the prepayment dates, shall become due on
such prepayment dates.
4A(2). REQUIRED PREPAYMENTS OF SERIES B NOTES. Until the Series B
Notes shall be paid in full, Filtertek shall apply to the prepayment of the
Series B Notes, without premium, the sum of $6,000,000 on August 18 in each of
the years 2001 to 2004, inclusive, and such principal amounts of the Series B
Notes, together with interest thereon to the prepayment dates, shall become due
on such prepayment dates. The remaining unpaid principal amount of the Series
B Notes, together with interest accrued thereon, shall become due on the
maturity date of the Series B Notes.
4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT. On and
after August 18, 1996, the Notes shall be subject to prepayment, in whole at
any time or from time to time in part (in multiples of $100,000 with a minimum
of $1,000,000), at the option of Filtertek, at 100% of the principal amount so
prepaid plus interest thereon to the prepayment date and the Yield-Maintenance
Amount, if any, with respect to each Note. Any partial prepayment of the Notes
pursuant to this paragraph 4B allocated to the Series A Notes pursuant to
paragraph 4D hereof shall be applied in satisfaction of the required payments
of principal thereof under paragraph 4A(1) hereof in inverse order of their
scheduled due dates, and any partial payment of Notes pursuant to this
paragraph 4B allocated to the Series B Notes pursuant to paragraph 4D hereof
shall be applied in satisfaction of the required payments of principal thereof
under paragraph 4A(2) hereof in the inverse order of their scheduled due dates.
4C. NOTICE OF OPTIONAL PREPAYMENT. Filtertek shall give the
holder of each Note irrevocable written notice of any prepayment pursuant to
paragraph 4B not less than 10 Business Days prior to the prepayment date,
specifying such prepayment date and the principal amount of the Notes, and of
the Notes held by such holder, to be prepaid on such date and stating that such
prepayment is to be made pursuant to paragraph 4B. Notice of prepayment having
been given as aforesaid, the principal amount of the Notes specified in such
notice, together with interest thereon to the prepayment date and together with
the Yield-Maintenance Amount, if any, with respect thereto, shall become due
and payable on such prepayment date. Filtertek shall, on or before the day on
which it gives written notice of any prepayment pursuant to paragraph 4B, give
telephonic notice of the principal amount of the Notes to be prepaid and the
prepayment date to each Significant Holder which shall have designated a
recipient of such notices in the Purchaser Schedule attached hereto or by
notice in writing to Filtertek or the Company.
4D. PARTIAL PAYMENTS PRO RATA. Upon any partial prepayment of the
Notes of any Series pursuant to paragraph 4A(1) or 4A(2),
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<PAGE> 9
the principal amount so prepaid shall be allocated to all Notes of such Series
at the time outstanding (including, for the purpose of this sentence only, all
Notes of such Series prepaid or otherwise retired or purchased or otherwise
acquired by Filtertek or any of its Subsidiaries or Affiliates (including,
without limitation, Notes of such Series purchased by Filtertek pursuant to
paragraph 5E) other than by prepayment pursuant to paragraph 4A(1), 4A(2) or
4B) in proportion to the respective outstanding principal amounts thereof.
Upon any partial prepayment of the Notes pursuant to paragraph 4B, the
principal amount so prepaid shall be allocated to all Notes at the time
outstanding in proportion to the respective outstanding principal amounts
thereof.
4E. RETIREMENT OF NOTES. The Transaction Parties shall not, and
shall not permit any of their Subsidiaries or Affiliates to, prepay or otherwise
retire in whole or in part prior to their stated final maturity (other than by
prepayment pursuant to paragraph 4A(1), 4A(2) or 4B, upon exercise of the put
option pursuant to paragraph 5E, or upon acceleration of such final maturity
pursuant to paragraph 7A), or purchase or otherwise acquire, directly or
indirectly, Notes held by any holder.
5. AFFIRMATIVE COVENANTS.
5A. FINANCIAL STATEMENTS. The Company and Filtertek jointly and
severally covenant to deliver to each Significant Holder in duplicate:
(i) as soon as practicable and in any event within 45
days after the end of each quarterly period (other than the last
quarterly period) in each fiscal year, consolidated statements of
income, stockholders' equity and cash flows of the Company and its
Subsidiaries for the period from the beginning of the current fiscal
year to the end of such quarterly period, and a consolidated balance
sheet of the Company and its Subsidiaries as at the end of such
quarterly period, setting forth in each case in comparative form
figures for the corresponding period in the preceding fiscal year, all
in reasonable detail and satisfactory in form to the Required
Holder(s) and certified by an authorized financial officer of the
Company, subject to changes resulting from year-end adjustments;
(ii) as soon as practicable and in any event within 90
days after the end of each fiscal year, consolidating and consolidated
statements of income and cash flows and a consolidated statement of
stockholders' equity of the Company and its Subsidiaries for such
year, and a consolidating and consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year, setting forth
in each case in comparative form corresponding consolidated figures
from the preceding annual audit, all in reasonable detail and
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<PAGE> 10
satisfactory in form to the Required Holder(s) and, as to the
consolidated statements, reported on by independent public accountants
of recognized national standing selected by the Company whose report
shall be without limitation as to the scope of the audit and
satisfactory in substance to the Required Holder(s) and, as to the
consolidating statements, certified by an authorized financial officer
of the Company;
(iii) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it
shall send to its public stockholders and copies of all registration
statements (without exhibits) and all reports which it files with the
Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange
Commission);
(iv) promptly upon receipt thereof, a copy of each other
report submitted to the Company or any Subsidiary by independent
accountants in connection with any annual, interim or special audit
made by them of the books of the Company or any Subsidiary; and
(v) with reasonable promptness, such other financial data
as such Significant Holder may reasonably request.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company and Filtertek will deliver to each Significant Holder
an Officer's Certificate demonstrating (with computations in reasonable detail)
compliance by the Company and its Subsidiaries with the provisions of
paragraphs 6A(1), 6A(2), 6B, 6C(2), 6C(3), 6C(4)(ix) and 6C(7) and stating that
there exists no Event of Default or Default, or, if any Event of Default or
Default exists, specifying the nature and period of existence thereof and what
action the Company and Filtertek proposes to take with respect thereto.
Together with each delivery of financial statements required by clause (ii)
above, the Company and Filtertek will deliver to each Significant Holder a
certificate of such accountants stating that, in making the audit necessary for
their report on such financial statements, they have obtained no knowledge of
any Event of Default or Default, or, if they have obtained knowledge of any
Event of Default or Default, specifying the nature and period of existence
thereof. Such accountants, however, shall not be liable to anyone by reason of
their failure to obtain knowledge of any Event of Default or Default which
would not be disclosed in the course of an audit conducted in accordance with
generally accepted auditing standards. The Company and Filtertek also covenant
that immediately after any Responsible Officer obtains knowledge of an Event of
Default or Default, they will deliver to each Significant Holder an Officer's
Certificate specifying the nature and period of existence thereof and what
action the Company and Filtertek propose to take with respect thereto.
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<PAGE> 11
5B. INFORMATION REQUIRED BY RULE 144A. Each of the Company and
Filtertek jointly and severally covenant that it will, upon the request of the
holder of any Note, provide such holder, and any qualified institutional buyer
designated by such holder, such financial and other information as such holder
may reasonably determine to be necessary in order to permit compliance with the
information requirements of Rule 144A under the Securities Act in connection
with the resale of Notes, except at such times as Filtertek is subject to the
reporting requirements of section 13 or 15(d) of the Exchange Act. For the
purpose of this paragraph 5B, the term "qualified institutional buyer" shall
have the meaning specified in Rule 144A under the Securities Act.
5C. INSPECTION OF PROPERTY. The Company and Filtertek jointly and
severally covenant that they will permit any Person designated by any
Significant Holder in writing, at such Significant Holder's expense, to visit
and inspect any of the properties of Filtertek, the Company and its
Subsidiaries, to examine the corporate books and financial records of
Filtertek, the Company and its Subsidiaries and make copies thereof or extracts
therefrom and to discuss the affairs, finances and accounts of any of such
corporations with the principal officers of Filtertek, the Company and its
independent public accountants, all at such reasonable times and as often as
such Significant Holder may reasonably request.
5D. COVENANT TO SECURE NOTE EQUALLY. The Company and Filtertek
jointly and severally covenant that, if they or any Subsidiary shall create or
assume any Lien upon any of their property or assets, whether now owned or
hereafter acquired, other than Liens permitted by the provisions of paragraph
6C(1) (unless prior written consent to the creation or assumption thereof shall
have been obtained pursuant to paragraph 12C), they will make or cause to be
made effective provision whereby the Notes will be secured by such Lien equally
and ratably with any and all other Indebtedness thereby secured so long as any
such other Indebtedness shall be so secured.
5E. CHANGE IN CONTROL PUT OPTION. The Company and Filtertek
covenant that within three Business Days after any Responsible Officer shall
obtain knowledge of the occurrence of a Change in Control Event, the Company
and Filtertek shall provide each holder of Notes written notice thereof,
describing in reasonable detail the facts and circumstances constituting such
Change in Control Event. Following the occurrence of any Change in Control
Event, if at any time prior to 15 Business Days after receipt of notice
thereof, the holder of any Notes requests in writing that Filtertek purchase
the Notes held by such holder, Filtertek shall, on the 25th Business Day after
such receipt of such notice, purchase (and each such holder thereof shall sell)
such Notes at a purchase price equal to the aggregate outstanding principal
amount thereof, together with interest thereon to the date of purchase and the
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<PAGE> 12
Yield-Maintenance Amount, if any, with respect thereto. Each Purchaser of
Series B Notes hereby irrevocably relinquishes for itself, but not for any
subsequent holder of Series B Notes, the right to sell its Series B Notes
pursuant to this paragraph 5E unless either (i) on or after the earlier of the
date upon which (a) the Change of Control Event is first publicly announced or
(b) the Change of Control Event occurs, and within one year after such date,
the aggregate amount of all Funded Debt of the Company and its Subsidiaries on
a consolidated basis is greater than or equal to 55% of Consolidated
Capitalization, or (ii) any holder of Series A Notes makes a request to have
any Series A Notes purchased by Filtertek pursuant to this paragraph 5E, in
which event such Purchaser may request that Filtertek purchase the Series B
Notes held by such holder pursuant to this paragraph 5E at any time prior to 5
Business Days after receipt by such Purchaser of notice of the occurrence of an
event described in clause (i) or (ii). The Company and Filtertek agree to
notify in writing the holders of the Series B Notes promptly, but in any event
within 2 Business Days, following the occurrence of an event described in
clause (i) or (ii). No holder of any such Note shall be required to make any
representation or warranty in connection with such sale, other than with
respect to its ownership of its Note.
5F. CONDUCT OF BUSINESS; MAINTENANCE OF EXISTENCE; COMPLIANCE WITH
LAWS. The Company and Filtertek jointly and severally covenant to, and to
cause each Subsidiary to, (i) continue to engage primarily in the material
lines of business which Filtertek, the Company and its Subsidiaries operate,
respectively, as of the date of closing, (ii) preserve, renew and keep in full
force and effect the corporate existence, and all material rights, privileges,
franchises, permits and licenses of Filtertek, the Company and its
Subsidiaries, respectively, provided, however, that this clause (ii) shall not
prohibit a merger otherwise permitted pursuant to the terms hereof, and (iii)
comply in all material respects with all applicable laws, ordinances, rules,
regulations and other requirements of governmental authorities (including,
without limitation, all federal, state, local and regional statutes, laws,
ordinances and judicial or administrative orders, judgments, rulings and
regulations relating to protection of the environment and ERISA).
5G. MAINTENANCE OF PROPERTY; INSURANCE.
(i) The Company and Filtertek jointly and severally
covenant to, and to cause each Subsidiary to, maintain its property in good
working order and condition and make all necessary repairs, renewals,
replacements, additions, betterments and improvements thereto so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this paragraph shall
prevent Filtertek,
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<PAGE> 13
the Company or any Subsidiary from discontinuing or disposing of any of its
property to the extent otherwise permitted by paragraph 6C(7) hereof.
(ii) The Company and Filtertek jointly and severally
covenant to insure and keep insured, and to cause each Subsidiary to insure and
keep insured, with financially sound and reputable insurers, so much of their
respective property and in such amounts as is usually and customarily insured
by companies engaged in similar businesses with respect to property of a
similar character.
5H. NOTICE OF SUITS, ADVERSE CHANGE IN BUSINESS, ETC. The Company
and Filtertek jointly and severally covenant to, and to cause each Subsidiary
to, as soon as possible, and in any event within five (5) Business Days after
any officer of such Person learns of the following, give written notice to each
Significant Holder: (i) of any material proceeding(s) (including, without
limitation, litigation, investigations, arbitration or governmental
proceedings) being instituted or threatened to be instituted by or against such
Person in any federal, state, local or foreign court or before any commission
or other regulatory body (federal, state, local or foreign), (ii) that such
Person's operations are not in full compliance with all requirements of
applicable federal, state, local or foreign law, ordinance, rule, regulation or
other governmental requirement, except for notices as to matters which, either
individually or in the aggregate, could not reasonably be expected to have a
material adverse effect on the property or assets, business, condition
(financial or otherwise) or the operations of the Company and its Subsidiaries,
taken as a whole, (iii) that, without limiting the foregoing clause (ii), such
Person is subject to a material federal, state, local or foreign investigation
evaluating whether any remedial action is needed to respond to the release of
any hazardous or toxic waste, substance or constituent, or other substance into
the environment and (iv) of any material adverse change in such Person's
property or assets, business, condition (financial or otherwise), operations or
prospects.
6. NEGATIVE COVENANTS.
6A. FINANCIAL COVENANTS. The Company and Filtertek jointly and
severally covenant not to permit:
6A(1). CURRENT RATIO. As of the last day of any fiscal quarter, the
ratio of (a) the sum of Consolidated Current Assets as of the last day of such
quarter plus Consolidated Current Assets as of the last day of each of the
three fiscal quarters immediately preceding such fiscal quarter to (b) the sum
of the Consolidated Current Liabilities as of the last day of such quarter plus
the Consolidated Current Liabilities as of the last day of each of the three
fiscal quarters immediately preceding such fiscal quarter to be less than 1.0
to 1.0; or
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<PAGE> 14
6A(2). NET WORTH. Consolidated Net Worth at any time to be less than
the sum of (i) $60,000,000, plus (ii) if positive, 25% of Cumulative Adjusted
Net Earnings;
6B. RESTRICTED PAYMENTS. The Company and Filtertek jointly and
severally covenant that they will not, and will not permit any Subsidiary to,
make, pay or declare, or commit to make, pay or declare, any Restricted Payment
if after giving effect to such Restricted Payment the aggregate amount of all
Restricted Payments made after December 31, 1994 would exceed the sum of (i)
$10,000,000, plus (ii) 75% (or minus 100% in the case of a deficit) of
Cumulative Adjusted Net Earnings. Notwithstanding the foregoing, no Restricted
Payment shall be made if (a) a Default or Event of Default exists or would
exist after giving effect to such Restricted Payment or (b) after giving effect
to such Restricted Payment, the Company could not incur at least $1 of
additional Funded Debt pursuant to paragraph 6C(2);
6C. LIEN, DEBT AND OTHER RESTRICTIONS. The Company and Filtertek
jointly and severally covenant that they will not, and will not permit any
Subsidiary to:
6C(1). LIENS. Create, assume or suffer to exist any Lien upon any of
its properties or assets, whether now owned or hereafter acquired (whether or
not provision is made for the equal and ratable securing of the Notes in
accordance with the provisions of paragraph 5D), except:
(i) any Lien existing on property of the Company,
Filtertek, or any Subsidiary on the date of closing and set forth in
Schedule 6C(1) securing Indebtedness outstanding on such date;
(ii) Liens for taxes, fees, assessments or other
governmental charges which are not delinquent or remain payable
without penalty, interest or other charge, provided that no notice of
lien has been filed or recorded under the Code;
(iii) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the
ordinary course of business which are not delinquent or which are
being contested in good faith and by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of
the property subject thereto;
(iv) Liens (other than any Lien imposed by ERISA)
consisting of pledges or deposits required in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other social security legislation;
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<PAGE> 15
(v) Liens on the property of the Company, Filtertek, or
any Subsidiary securing (a) the non-delinquent performance of bids and
trade contracts and leases (provided such Liens are with respect to
deposits made to secure performance of such contracts or leases), and
statutory obligations, (b) contingent obligations on surety and appeal
bonds, and (c) other non-delinquent obligations of a like nature; in
each case, incurred in the ordinary course of business and not in
connection with the borrowing of money or the obtaining of credit or
advances, provided all such Liens in the aggregate would not (even if
enforced) cause a material adverse effect on the property or assets,
business, condition (financial or otherwise) or operations of the
Company, Filtertek or any Subsidiary;
(vi) Liens consisting of judgment or judicial attachment
liens, provided that the enforcement of such Liens is effectively
stayed and all such Liens in the aggregate at any time outstanding for
the Company, Filtertek, and its Subsidiaries do not exceed $500,000;
(vii) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business
which, in the aggregate, are not substantial in amount, and which do
not in any case materially detract from the value of the property
subject thereto or interfere with the ordinary conduct of the
businesses of the Company, Filtertek and any Subsidiaries;
(viii) any Lien on assets of corporations which become
Subsidiaries after the date of this Agreement, provided, however, that
(a) such Lien existed at the time the respective corporations became
Subsidiaries and was not created in anticipation thereof, (b) the
principal amount of the Indebtedness secured by such Lien shall not at
any time exceed, together with Indebtedness secured by Liens permitted
under paragraph 6C(1)(ix), $7,500,000, and (c) the Indebtedness
secured by such Lien is permitted by paragraphs 6C(2) and 6C(3);
(ix) purchase money security interests on equipment or
real property acquired or held by the Company, Filtertek or any
Subsidiary in the ordinary course of business, securing Indebtedness
incurred or assumed for the purpose of financing all or any part of
the cost of acquiring such property; provided that (a) any such Lien
attaches to such property concurrently with or within 20 days after
the acquisition thereof, (b) such Lien attaches solely to the property
so acquired in such transaction, (c) the principal amount of the
Indebtedness secured thereby does not exceed 100% of the cost of such
property, (d) the aggregate Indebtedness secured by such purchase
money security interests shall not at any time
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<PAGE> 16
exceed, together with Indebtedness secured by Liens permitted under
subsection 6C(1)(viii), $7,500,000 and (e) the Indebtedness secured by
such Lien is permitted by paragraphs 6C(2) and 6C(3);
(x) Liens securing Capitalized Lease Obligations on
assets subject to leases thereunder, provided that such Capitalized
Lease Obligations are otherwise permitted by paragraph 6C(2) and
6C(3); and
(xi) Liens arising solely by virtue of any statutory or
common law provision relating to banker's liens, rights of set-off or
similar rights and remedies as to deposit accounts or other funds
maintained with a creditor depository institution, provided that (a)
such deposit account is not a dedicated cash collateral account and is
not subject to restrictions against access by the Company or any
Subsidiary in excess of those set forth by regulations promulgated by
the Board of Governors of the Federal Reserve System, and (b) such
deposit account is not intended by the Company or any Subsidiary to
provide collateral to the depository institution;
6C(2). FUNDED DEBT. Create, incur or assume any Funded Debt, unless
immediately after giving effect to the incurrence, issuance or assumption of
such Funded Debt (i) the aggregate amount of all Funded Debt of the Company and
its Subsidiaries on a consolidated basis is less than or equal to 60% of
Consolidated Capitalization, (ii) the ratio of (A) Consolidated Earnings
Available for Fixed Charges for the four consecutive fiscal quarters ending
with the fiscal quarter most recently ended on or prior to the date of
creation, incurrence or assumption of such Funded Debt to (B) Fixed Charges for
such four consecutive fiscal quarters, is greater than or equal to 2.0 to 1.0,
and (iii) if such Funded Debt is Priority Debt, such creation, incurrence or
assumption is permitted by paragraph 6C(3). For the purposes of this paragraph
6C(2), any Person becoming a Subsidiary after the date of this Agreement shall
be deemed to have incurred all of its then outstanding Funded Debt at the time
it becomes a Subsidiary of the Company;
6C(3). PRIORITY DEBT. Create, incur, assume or suffer to exist any
Priority Debt other than:
(i) Priority Debt consisting of Capitalized Lease
Obligations existing on the date hereof, which Capitalized Lease
Obligations are described on Schedule 6C(3) hereto, provided that no
such Capitalized Lease Obligation shall be extended, renewed or
increased; and
(ii) other Priority Debt, provided that (a) the aggregate
amount of all such other Priority Debt outstanding at any time
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<PAGE> 17
does not exceed 15% of Consolidated Net Worth at such time, and (b)
the creation, incurrence or assumption of such other Priority Debt is
permitted by paragraph 6C(2);
6C(4). LOANS, ADVANCES AND INVESTMENTS. Make or permit to remain
outstanding any loan or advance to, or own, purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any Person (all of the foregoing being herein called
"INVESTMENTS"), except that the Company or any Subsidiary may:
(i) make or permit to remain outstanding loans or
advances to any Subsidiary, provided, however, that the aggregate
outstanding amount of all advances and loans made by the Company or
Filtertek to all Subsidiaries that are liable under a Guarantee with
respect to all or any portion of Indebtedness under the Bank Agreement
shall not at any time exceed $750,000;
(ii) own, purchase or acquire obligations of, or fully
guaranteed by, the United States of America provided such obligations
mature within one year from the date of acquisition thereof;
(iii) own, purchase or acquire commercial paper rated A-1 or
better by Standard and Poor's Corporation or P-1 or better by Moody's
Investors Service, Inc.;
(iv) maintain demand deposit accounts in the ordinary
course of business;
(v) own, purchase or acquire certificates of deposit
issued by and time deposits with commercial banks (whether domestic or
foreign) having capital and surplus in excess of $100,000,000;
(vi) own, purchase or acquire common stock of companies
publicly traded on a national exchange; provided, that the aggregate
cost of such common stock does not at any time exceed $1,000,000;
(vii) own, purchase or acquire adjustable rate preferred
stock and preferred stock of companies listed on the S&P 500 and
having a long-term debt rating of A or better by Standard & Poor's
Corporation or A2 or better by Moody's Investors Services, Inc., and
loan participations, so long as the underlying obligor has a
short-term debt rating of A-2 or better by Standard & Poor's
Corporation or P-2 or better by Moody's Investors Service, Inc.;
provided, that the aggregate cost of such investments does not at any
time exceed $2,000,000;
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<PAGE> 18
(viii) make extensions of credit in the nature of accounts
receivable or notes receivable arising from the sale or lease of goods
or services in the ordinary course of business;
(ix) make Investments in Persons transacting business related
to or involving the primary business lines of the Company, provided
that the aggregate amount of all Investments made under this clause
(ix) does not exceed at any time 10% of Consolidated Net Worth at such
time;
(x) own, purchase or acquire stock, obligations or
securities of a Subsidiary or a Person which immediately after such
purchase or acquisition will be a Subsidiary;
(xi) make extensions of credit to employees of the
Company, Filtertek or any Subsidiary in the ordinary course of
business consistent with past practice and in an aggregate amount at
any one time outstanding not to exceed $1,000,000, provided, that the
Company, Filtertek and any Subsidiary may not extend credit to
Clarence W. Schawk or David A. Schawk; and
(xii) Restricted Investments permitted by paragraph 6B;
6C(5). SALE OF STOCK AND DEBT OF SUBSIDIARIES. Sell or otherwise
dispose of, or part with control of, any shares of stock or Indebtedness of any
Subsidiary (other than Filtertek), except to the Company or a Wholly-Owned
Subsidiary, and except that all shares of stock and Indebtedness of any
Subsidiary at the time owned by or owed to the Company and all Subsidiaries may
be sold as an entirety for a cash consideration which represents the fair value
(as determined in good faith by the Board of Directors of the Company) at the
time of sale of the shares of stock and Indebtedness so sold; provided that (a)
such sale or other disposition is treated as a Transfer of the assets of such
Subsidiary subject to paragraph 6C(7)(iii) and is permitted by paragraph
6C(7)(iii) and (b) at the time of such sale, such Subsidiary shall not own,
directly or indirectly, any shares of stock or Indebtedness of any other
Subsidiary (unless all of the shares of stock and Indebtedness of such other
Subsidiary owned, directly or indirectly, by the Company and all Subsidiaries
are simultaneously being sold as permitted by this paragraph 6C(5));
6C(6). MERGER AND CONSOLIDATION. Merge or consolidate with or into
any other Person, except that:
(i) any Subsidiary of the Company (other than Filtertek)
may merge or consolidate with or into the Company, provided that the
Company is the continuing or surviving corporation,
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(ii) any Subsidiary of the Company (other than Filtertek)
may merge or consolidate with or into a Wholly-Owned Subsidiary of the
Company, provided that such Wholly-Owned Subsidiary is the continuing
or surviving corporation, and
(iii) the Company or Filtertek may merge with any other
solvent corporation, provided that (a) the surviving corporation is a
corporation organized and existing under the laws of the United States
of America or a state thereof, with substantially all of its assets
located and a majority of its business conducted within the United
States, (b) if the Company or Filtertek is not the surviving
corporation, such corporation expressly assumes, by an agreement
satisfactory in substance and form to the Required Holders (which
agreement may require in connection with such assumption the delivery
of such opinions of counsel as the Required Holders may reasonably
request), the obligations of the Company under this Agreement and
under the Notes, and (c) no Default or Event of Default exists or
would exist immediately after giving effect to such merger;
provided, however, that no merger or consolidation under this paragraph 6C(6)
shall be permitted unless immediately after giving effect thereto the Company
shall be able to incur at least $1 of additional Funded Debt pursuant to
paragraph 6C(2);
6C(7). TRANSFER OF ASSETS. Transfer any of its assets except that:
(i) the Company or any Subsidiary may Transfer assets in
the ordinary course of business,
(ii) any Subsidiary other than Filtertek may Transfer
assets to the Company or a Wholly-Owned Subsidiary if after giving
effect thereto the Company shall be able to incur at least $1 of
additional Funded Debt pursuant to paragraph 6C(2), and
(iii) the Company or any Subsidiary may otherwise Transfer
assets, provided that after giving effect thereto (a) the aggregate
Value of all Annual Transferred Assets, plus the aggregate Value of
the assets then proposed to be Transferred, does not exceed 15% of the
consolidated total assets of the Company and its Subsidiaries as of
the end of the fiscal quarter most recently ended on or prior to the
date of such Transfer, (b) all Annual Transferred Assets, together
with the assets then proposed to be Transferred, have not contributed,
in the aggregate, more than 10% of Consolidated Net Earnings during
either of the two fiscal years most recently ended on or prior to the
date of such Transfer, and (c) the Company shall be able to incur at
least $1 of additional Funded Debt pursuant to paragraph 6C(2);
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<PAGE> 20
6C(8). SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse, or
discount or otherwise sell for less than the face value thereof, any of its
notes or accounts receivable; or
6C(9). RELATED PARTY TRANSACTIONS. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise deal with, in the ordinary course of business or otherwise, any
Related Party; provided that the foregoing shall not apply to any transaction
entered into (A) in the ordinary course of and pursuant to the reasonable
requirements of the Company's or a Subsidiary's business and (B) upon fair and
reasonable terms no less favorable to the Company or such Subsidiary than would
be obtained in a comparably arm's length transaction with a Person other than a
Related Party.
6D. ISSUANCE OF STOCK BY SUBSIDIARIES. The Company and Filtertek
jointly and severally covenant that they will not permit any Subsidiary (either
directly or indirectly by the issuance of rights or options for, or securities
convertible into, such shares) to, and Filtertek covenants that it will not,
issue, sell or otherwise dispose of any shares of any class of its stock (other
than directors' qualifying shares) except to the Company or a Wholly-Owned
Subsidiary.
6E. ADDITIONAL GUARANTEES. The Company and Filtertek jointly and
severally covenant not to permit any Subsidiary to become liable under a
Guarantee with respect to any of the obligations of the Company, Filtertek or
any Subsidiary or Affiliate of the Company under the Bank Agreement or any
other agreement, document or instrument now or hereafter executed or delivered
in connection therewith unless concurrently therewith such Subsidiary
guarantees the Obligations by becoming a party to this Agreement as a
"Guarantor" hereunder pursuant to written agreements in form and substance
satisfactory to the Required Holder(s).
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur and
be continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(i) Filtertek defaults in the payment of any principal of
or Yield-Maintenance Amount payable with respect to any Note when the
same shall become due, either by the terms thereof or otherwise as
herein provided; or
(ii) Filtertek defaults in the payment of any interest on
any Note for more than five Business Days after the date due; or
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(iii) Filtertek, the Company or any Subsidiary defaults
(whether as primary obligor or as guarantor or other surety) in any
payment of principal of or interest on any other obligation for
borrowed money (or any Capitalized Lease Obligation, any obligation
under a conditional sale or other title retention agreement, any
obligation issued or assumed as full or partial payment for property
whether or not secured by a purchase money mortgage or any obligation
under notes payable or drafts accepted representing extensions of
credit) beyond any period of grace provided with respect thereto, or
Filtertek, the Company or any Subsidiary fails to perform or observe
any other agreement, term or condition contained in any agreement
under which any such obligation is created (or if any other event
thereunder or under any such agreement shall occur and be continuing)
and the effect of such failure or other event is to cause, or to
permit the holder or holders of such obligation (or a trustee on
behalf of such holder or holders) to cause, such obligation to become
due (or to be repurchased by Filtertek, the Company or any Subsidiary)
prior to any stated maturity, provided that the aggregate amount of
all obligations as to which such a payment default shall occur and be
continuing or such a failure or other event causing or permitting
acceleration (or resale to Filtertek, the Company or any Subsidiary)
shall occur and be continuing exceeds $500,000; or
(iv) any representation or warranty made by Filtertek, the
Company or any other Transaction Party herein or by Filtertek, the
Company or any of its Subsidiaries or any of such Person's officers in
any writing furnished in connection with or pursuant to this Agreement
shall be false in any material respect on the date as of which made;
or
(v) Filtertek or the Company fails to perform or
observe any agreement contained in paragraph 5E or 6 (other than
paragraph 6C(1) with respect to Liens not securing Indebtedness); or
(vi) any Transaction Party fails to perform or observe
any other agreement, term or condition contained herein or in any
other agreement delivered in connection herewith and such failure
shall not be remedied within 30 days after any Responsible Officer
obtains actual knowledge thereof; or
(vii) Filtertek, the Company or any Subsidiary makes an
assignment for the benefit of creditors or is generally not paying its
debts as such debts become due; or
(viii) any decree or order for relief in respect of Filtertek,
the Company or any Subsidiary is entered under any bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment of
debt, dissolution or liquidation
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<PAGE> 22
or similar law, whether now or hereafter in effect (herein called the
"Bankruptcy Law"), of any jurisdiction; or
(ix) Filtertek, the Company or any Subsidiary petitions
or applies to any tribunal for, or consents to, the appointment of, or
taking possession by, a trustee, receiver, custodian, liquidator or
similar official of Filtertek, the Company or any Subsidiary, or of
any substantial part of the assets of Filtertek, the Company or any
Subsidiary, or commences a voluntary case under the Bankruptcy Law of
the United States or any proceedings (other than proceedings for the
voluntary liquidation and dissolution of a Subsidiary other than
Filtertek) relating to Filtertek, the Company or any Subsidiary under
the Bankruptcy Law of any other jurisdiction; or
(x) any such petition or application is filed, or any
such proceedings are commenced, against Filtertek, the Company or any
Subsidiary and Filtertek, the Company or such Subsidiary by any act
indicates its approval thereof, consent thereto or acquiescence
therein, or an order, judgment or decree is entered appointing any
such trustee, receiver, custodian, liquidator or similar official, or
approving the petition in any such proceedings, and such order,
judgment or decree remains unstayed and in effect for more than 30
days; or
(xi) any order, judgment or decree is entered in any
proceedings against Filtertek or the Company decreeing the dissolution
of Filtertek or the Company and such order, judgment or decree remains
unstayed and in effect for more than 60 days; or
(xii) any order, judgment or decree is entered in any
proceedings against Filtertek, the Company or any Subsidiary decreeing
a split-up of Filtertek, the Company or such Subsidiary which requires
the divestiture of assets representing a substantial part, or the
divestiture of the stock of a Subsidiary whose assets represent a
substantial part, of the consolidated assets of the Company and its
Subsidiaries (determined in accordance with generally accepted
accounting principles) or which requires the divestiture of assets, or
stock of a Subsidiary, which shall have contributed a substantial part
of the consolidated net income of the Company and its Subsidiaries
(determined in accordance with generally accepted accounting
principles) for any of the three fiscal years then most recently
ended, and such order, judgment or decree remains unstayed and in
effect for more than 60 days; or
(xiii) a final judgment in an amount in excess of $1,000,000
(other than an amount the payment of which is
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<PAGE> 23
covered by insurance from an independent third party insurance company
that has agreed in writing that it is obligated to pay such amount) is
rendered against Filtertek, the Company or any Subsidiary and, within
30 days after entry thereof, such judgment is not discharged or
execution thereof stayed pending appeal, or within 30 days after the
expiration of any such stay, such judgment is not discharged; or
(xiv) if (a) any Plan shall fail to satisfy the minimum
funding standards of ERISA or the Code for any plan year or part
thereof or a waiver of such standards or extension of any amortization
period is sought or granted under section 412 of the Code, (b) a
notice of intent to terminate any Plan shall have been or is
reasonably expected to be filed with the PBGC or the PBGC shall have
instituted proceedings under ERISA section 4042 to terminate or
appoint a trustee to administer any Plan or the PBGC shall have
notified Filtertek, the Company or any ERISA Affiliate that a Plan may
become a subject of any such proceedings, (c) the aggregate "amount of
unfunded benefit liabilities" (within the meaning of section
4001(a)(18) of ERISA) under all Plans, determined in accordance with
Title IV of ERISA, shall exceed $500,000, (d) Filtertek, the Company
or any ERISA Affiliate shall have incurred or is reasonably expected
to incur any liability pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to employee
benefit plans, (e) Filtertek, the Company or any ERISA Affiliate
withdraws from any Multiemployer Plan, or (f) Filtertek, the Company
or any Subsidiary establishes or amends any employee welfare benefit
plan that provides post-employment welfare benefits in a manner that
would increase the liability of Filtertek, the Company or any
Subsidiary thereunder; and any such event or events described in
clauses (i) through (vi) above, either individually or together with
any such event or events, could reasonably be expected to have a
material adverse effect on the business, condition (financial or
otherwise) or operations of the Company and its Subsidiaries taken as
a whole.
then (a) if such event is an Event of Default specified in clause (i) or (ii)
of this paragraph 7A, the holder of any Note (other than Filtertek, the Company
or any of its Subsidiaries or Affiliates) may at its option, by notice in
writing to Filtertek, declare such Note to be, and such Note shall thereupon be
and become, immediately due and payable at par together with interest accrued
thereon, without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by Filtertek, (b) if such event is an Event of
Default specified in clause (viii), (ix) or (x) of this paragraph 7A with
respect to Filtertek or the Company, all of the Notes at the time outstanding
shall automatically become immediately due and payable together with interest
accrued thereon and the Yield-Maintenance Amount, if any, with respect thereto,
without presentment, demand, protest or
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<PAGE> 24
notice of any kind, all of which are hereby waived by Filtertek, and (c) if
such event is any Event of Default, the Required Holder(s) may at its or their
option, by notice in writing to Filtertek, declare all of the Notes to be, and
all of the Notes shall thereupon be and become, immediately due and payable
together with interest accrued thereon and together with the Yield-Maintenance
Amount, if any, with respect to each Note, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by Filtertek.
7B. RESCISSION OF ACCELERATION. At any time after any or all of
the Notes shall have been declared immediately due and payable pursuant to
paragraph 7A, the Required Holder(s) may, by notice in writing to Filtertek,
rescind and annul such declaration and its consequences if (i) Filtertek shall
have paid all overdue interest on the Notes, the principal of and
Yield-Maintenance Amount, if any, payable with respect to any Notes which have
become due otherwise than by reason of such declaration, and interest on such
overdue interest and overdue principal and Yield-Maintenance Amount at the rate
specified in the Notes, (ii) Filtertek shall not have paid any amounts which
have become due solely by reason of such declaration, (iii) all Events of
Default and Defaults, other than non-payment of amounts which have become due
solely by reason of such declaration, shall have been cured or waived pursuant
to paragraph 12C, and (iv) no judgment or decree shall have been entered for
the payment of any amounts due pursuant to the Notes or this Agreement. No
such rescission or annulment shall extend to or affect any subsequent Event of
Default or Default or impair any right arising therefrom.
7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall
be declared immediately due and payable pursuant to paragraph 7A or any such
declaration shall be rescinded and annulled pursuant to paragraph 7B, Filtertek
shall forthwith give written notice thereof to the holder of each Note at the
time outstanding.
7D. OTHER REMEDIES. If any Event of Default or Default shall
occur and be continuing, the holder of any Note may proceed to protect and
enforce its rights under this Agreement and such Note by exercising such
remedies as are available to such holder in respect thereof under applicable
law, either by suit in equity or by action at law, or both, whether for
specific performance of any covenant or other agreement contained in this
Agreement or in aid of the exercise of any power granted in this Agreement. No
remedy conferred in this Agreement upon the holder of any Note is intended to
be exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy conferred herein or
now or hereafter existing at law or in equity or by statute or otherwise.
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8. REPRESENTATIONS, COVENANTS AND WARRANTIES. Each of Filtertek
and the Company jointly and severally represents, covenants and warrants as
follows:
8A. ORGANIZATION; POWER AND AUTHORITY.
8A(1). ORGANIZATION. Each of Filtertek and the Company is a
corporation duly organized and existing in good standing under the laws of the
State of Delaware and each other Subsidiary is duly organized and existing in
good standing under the laws of the jurisdiction in which it is incorporated.
8A(2). POWER AND AUTHORITY. Filtertek, the Company and each
Subsidiary have all requisite power to conduct its respective business as
currently conducted and as currently proposed to be conducted. Each
Transaction Party has all requisite power to execute, deliver and perform its
obligations under this Agreement and Filtertek has all requisite power to
execute, deliver and perform its obligations under the Notes. The execution,
delivery and performance of this Agreement and the Notes has been duly
authorized by all requisite action, this Agreement has been duly executed and
delivered by authorized officers of each Transaction Party, the Notes have been
duly executed by authorized officers of Filtertek and this Agreement is, and
the Notes when delivered on the date of closing will be, the valid obligation
of each Transaction Party a party thereto, legally binding upon and enforceable
against each such Transaction Party in accordance with its respective terms,
except as such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and (ii) general principals of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
8B. FINANCIAL STATEMENTS. The Company has furnished each
Purchaser with the following financial statements, identified by a principal
financial officer of the Company: (i) a consolidated balance sheet of the
Company and its Subsidiaries as at December 31 in each of the years 1990 to
1994, inclusive, and consolidated statements of income, stockholders' equity
and cash flows of the Company and its Subsidiaries for each such year, all
reported on by Arthur Anderson & Co.; and (ii) a consolidated balance sheet of
the Company and its Subsidiaries as at June 30 in each of the years 1994 and
1995 and consolidated statements of income, stockholders' equity and cash flows
for the six-month period ended on each such date, prepared by the Company.
Such financial statements (including any related schedules and/or notes) are
true and correct in all material respects (subject, as to interim statements,
to changes resulting from audits and year-end adjustments), have been prepared
in accordance with generally accepted accounting principles consistently
followed throughout the periods involved and show all liabilities, direct and
contingent, of the Company and its Subsidiaries required to be shown in
accordance with such
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<PAGE> 26
principles. The balance sheets fairly present the condition of the Company and
its Subsidiaries as at the dates thereof, and the statements of income,
stockholders' equity and cash flows fairly present the results of the
operations of the Company and its Subsidiaries and their cash flows for the
periods indicated. There has been no material adverse change in the business,
condition (financial or otherwise) or operations of the Company and its
Subsidiaries taken as a whole since December 31, 1994.
8C. ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the knowledge of Filtertek or the Company, threatened
against Filtertek, the Company or any Subsidiary, or any properties or rights
of Filtertek, the Company or any Subsidiary, by or before any court, arbitrator
or administrative or governmental body which might result in any material
adverse change in the business, condition (financial or otherwise) or
operations of the Company and its Subsidiaries taken as a whole.
8D. OUTSTANDING INDEBTEDNESS. Neither Filtertek, the Company nor
any Subsidiary has outstanding any Funded Debt except as permitted by paragraph
6C(2) nor any Priority Debt except as permitted by paragraph 6C(3). There
exists no default under the provisions of any instrument evidencing any
Indebtedness or of any agreement relating thereto.
8E. TITLE TO PROPERTIES. Each of Filtertek and the Company has
and each Subsidiary has good and indefeasible title to its respective real
properties (other than properties which it leases) and good title to all of its
other respective properties and assets, including the properties and assets
reflected in the balance sheet as at December 31, 1994 referred to in paragraph
8B (other than properties and assets disposed of in the ordinary course of
business), subject to no Lien of any kind except Liens permitted by paragraph
6C(1). All leases necessary in any material respect for the conduct of the
respective businesses of Filtertek, the Company and any Subsidiary are valid
and subsisting and are in full force and effect.
8F. TAXES. Each of Filtertek and the Company has and each
Subsidiary has filed all federal, state and other income tax returns which, to
the knowledge of the officers of the Company, are required to be filed, and
each has paid all taxes as shown on such returns and on all assessments
received by it to the extent that such taxes have become due, except such taxes
as are being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with generally accepted
accounting principles.
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither Filtertek,
the Company nor any Subsidiary is a party to any contract or agreement or
subject to any charter or other corporate
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restriction which materially and adversely affects its business, property or
assets, or financial condition. Neither the execution nor delivery of this
Agreement or the Notes, nor the offering, issuance and sale of the Notes, nor
fulfillment of nor compliance with the terms and provisions hereof and of the
Notes will conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in any violation of, or
result in the creation of any Lien upon any of the properties or assets of
Filtertek, the Company or any Subsidiary pursuant to, the charter or by-laws of
Filtertek, the Company or any Subsidiary, any award of any arbitrator or any
agreement (including any agreement with stockholders), instrument, order,
judgment, decree, statute, law, rule or regulation to which Filtertek, the
Company or any Subsidiary is subject. Neither Filtertek, the Company nor any
Subsidiary is a party to, or otherwise subject to any provision contained in,
any instrument evidencing Indebtedness of Filtertek, the Company or such
Subsidiary, any agreement relating thereto or any other contract or agreement
(including its charter) which limits the amount of, or otherwise imposes
restrictions on the incurring of, Indebtedness of Filtertek of the type to be
evidenced by the Notes except as set forth in the agreements listed in Schedule
8G attached hereto.
8H. OFFERING OF NOTES. Neither Filtertek, the Company nor any
agent acting on their behalf have, directly or indirectly, offered the Notes or
any similar security of Filtertek or the Company for sale to, or solicited any
offers to buy the Notes or any similar security of Filtertek or the Company
from, or otherwise approached or negotiated with respect thereto with, any
Person other than institutional investors, and neither Filtertek, the Company
nor any financial agent or any agent acting on their behalf have taken or will
take any action which would subject the issuance or sale of the Notes to the
provisions of section 5 of the Securities Act or to the provisions of any
securities or Blue Sky law of any applicable jurisdiction.
8I. REGULATION G, ETC. Neither Filtertek, the Company nor any
Subsidiary owns or has any present intention of acquiring any "margin stock" as
defined in Regulation G (12 CFR Part 207) of the Board of Governors of the
Federal Reserve System (herein called "margin stock"). The proceeds of sale of
the Notes will be used to repay existing Indebtedness and for general corporate
purposes. None of such proceeds will be used, directly or indirectly, for the
purpose, whether immediate, incidental or ultimate, of purchasing or carrying
any margin stock or for the purpose of maintaining, reducing or retiring any
Indebtedness which was originally incurred to purchase or carry any stock that
is currently a margin stock or for any other purpose which might constitute
this transaction a "purpose credit" within the meaning of such Regulation G.
Neither Filtertek, the Company nor any agent acting on its behalf has taken or
will take any action which might cause this Agreement or the Notes to violate
Regulation G, Regulation T or any other regulation
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of the Board of Governors of the Federal Reserve System or to violate the
Exchange Act, in each case as in effect now or as the same may hereafter be in
effect.
8J. ERISA. No accumulated funding deficiency (as defined in
section 302 of ERISA and section 412 of the Code), whether or not waived,
exists with respect to any Plan (other than a Multiemployer Plan). No
liability to the Pension Benefit Guaranty Corporation has been or is expected
by Filtertek, the Company or any ERISA Affiliate to be incurred with respect to
any Plan (other than a Multiemployer Plan) by Filtertek, the Company, any
Subsidiary or any ERISA Affiliate which is or would be materially adverse to
the business, condition (financial or otherwise) or operations of the Company
and its Subsidiaries taken as a whole. Neither the Company, any Subsidiary nor
any ERISA Affiliate has incurred or presently expects to incur any withdrawal
liability under Title IV of ERISA with respect to any Multiemployer Plan which
is or would be materially adverse to the business, condition (financial or
otherwise) or operations of the Company and its Subsidiaries taken as a whole.
The execution and delivery of this Agreement and the issuance and sale of the
Notes will be exempt from, or will not involve any transaction which is subject
to, the prohibitions of section 406 of ERISA and will not involve any
transaction in connection with which a penalty could be imposed under section
502(i) of ERISA or a tax could be imposed pursuant to section 4975 of the Code.
The representation by Filtertek and the Company in the next preceding sentence
is made in reliance upon and subject to the accuracy of each Purchaser's
representation in paragraph 9B.
8K. GOVERNMENTAL CONSENT. Neither the nature of Filtertek, the
Company or of any Subsidiary, nor any of their respective businesses or
properties, nor any relationship between Filtertek, the Company or any
Subsidiary and any other Person, nor any circumstance in connection with the
offering, issuance, sale or delivery of the Notes is such as to require any
authorization, consent, approval, exemption or other action by or notice to or
filing with any court or administrative or governmental body (other than
routine filings after the date of closing with the Securities and Exchange
Commission and/or state Blue Sky authorities) in connection with the execution
and delivery of this Agreement, the offering, issuance, sale or delivery of the
Notes or fulfillment of or compliance with the terms and provisions hereof or
of the Notes.
8L. ENVIRONMENTAL COMPLIANCE. Filtertek, the Company and each
Subsidiary and all of their respective properties and facilities have complied
at all times and in all respects with all federal, state, local and regional
statutes, laws, ordinances and judicial or administrative orders, judgments,
rulings and regulations relating to protection of the environment except, in
any such case, where failure to comply would not result in a material adverse
effect on the business, condition (financial or
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otherwise) or operations of the Company and its Subsidiaries taken as a whole.
8M. DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement furnished to any Purchaser by or on behalf of the
Company or Filtertek in connection herewith contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein not misleading. There is no fact
peculiar to Filtertek, the Company or any Subsidiary which materially adversely
affects or in the future may (so far as Filtertek or the Company can now
foresee) materially adversely affect the business, property or assets, or
financial condition of Filtertek, the Company or any Subsidiary and which has
not been set forth in this Agreement or in the other documents, certificates
and statements furnished to each Purchaser by or on behalf of the Company prior
to the date hereof in connection with the transactions contemplated hereby.
9. REPRESENTATIONS OF EACH PURCHASER. Each Purchaser represents
as follows:
9A. NATURE OF PURCHASE. Such Purchaser is not acquiring the Notes
to be purchased by it hereunder with a view to or for sale in connection with
any distribution thereof within the meaning of the Securities Act, provided
that the disposition of such Purchaser's property shall at all times be and
remain within its control.
9B. SOURCE OF FUNDS. No part of the funds being used by such
Purchaser to pay the purchase price of the Notes being purchased by such
Purchaser hereunder constitutes assets allocated to any separate account
maintained by such Purchaser in which any employee benefit plan, other than
employee benefit plans identified on a list (if any) which has been furnished
by such Purchaser to the Company, participates to the extent of 10% or more.
For the purpose of this paragraph 9B, the terms "separate account" and
"employee benefit plan" shall have the respective meanings specified in section
3 of ERISA.
10. DEFINITIONS. For the purpose of this Agreement, the terms
defined in the text of any paragraphs hereof shall have the respective meanings
specified therein, and the following terms shall have the meanings specified
with respect thereto below:
10A. YIELD-MAINTENANCE TERMS.
"BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday or a day on which commercial banks in New York City are required or
authorized to be closed.
"CALLED PRINCIPAL" shall mean, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to paragraph 4B or
purchased by Filtertek pursuant to paragraph 5E or
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is declared to be immediately due and payable pursuant to paragraph 7A, as the
context requires.
"DISCOUNTED VALUE" shall mean, with respect to the Called
Principal of any Note, the amount obtained by discounting all Remaining
Scheduled Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a discount
factor (applied on the same periodic basis as that on which interest on the
Notes is payable) equal to the Reinvestment Yield with respect to such Called
Principal.
"REINVESTMENT YIELD" shall mean, with respect to the Called
Principal of any Note, the Specified Spread over the yield to maturity implied
by (i) the yields reported, as of 10:00 a.m. (New York City time) on the
Business Day next preceding the Settlement Date with respect to such Called
Principal, on the display designated as "Page 678" on the Telerate Service (or
such other display as may replace Page 678 on the Telerate Service) for
actively traded U.S. Treasury securities having a maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date, or
if such yields shall not be reported as of such time or the yields reported as
of such time shall not be ascertainable, (ii) the Treasury Constant Maturity
Series yields reported, for the latest day for which such yields shall have
been so reported as of the Business Day next preceding the Settlement Date with
respect to such Called Principal, in Federal Reserve Statistical Release H.15
(519) (or any comparable successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date. Such implied yield
shall be determined, if necessary, by (a) converting U.S. Treasury bill
quotations to bond-equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between yields reported for various
maturities.
"REMAINING AVERAGE LIFE" shall mean, with respect to the
Called Principal of any Note, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the
sum of the products obtained by multiplying (a) each Remaining Scheduled
Payment of such Called Principal (but not of interest thereon) by (b) the
number of years (calculated to the nearest one-twelfth year) which will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the
Called Principal of any Note, all payments of such Called Principal and
interest thereon that would be due on or after the Settlement Date with respect
to such Called Principal if no payment of such Called Principal were made prior
to its scheduled due date.
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"SETTLEMENT DATE" shall mean, with respect to the Called
Principal of any Note, the date on which such Called Principal is to be prepaid
pursuant to paragraph 4B or purchased pursuant to paragraph 5E or is declared
to be immediately due and payable pursuant to paragraph 7A, as the context
requires.
"SPECIFIED SPREAD" shall mean (i) in the case of the payment
or prepayment of the Notes other than pursuant to paragraph 5E, 0%, and (ii) in
the case of the purchase of the Notes pursuant to paragraph 5E, .50%.
"YIELD-MAINTENANCE AMOUNT" shall mean, with respect to any
Note, an amount equal to the excess, if any, of the Discounted Value of the
Called Principal of such Note over the sum of (i) such Called Principal plus
(ii) interest accrued thereon as of (including interest due on) the Settlement
Date with respect to such Called Principal. The Yield-Maintenance Amount shall
in no event be less than zero.
10B. OTHER TERMS.
"ADJUSTED NET EARNINGS" shall mean, for any period,
Consolidated Net Earnings for such period, excluding any extraordinary gains
and extraordinary losses taken into account in determining Consolidated Net
Earnings for such period.
"AFFILIATE" of any Person shall mean any Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such first Person, except a Subsidiary shall not be an Affiliate
of the Company. A Person shall be deemed to control a corporation if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.
"ANNUAL TRANSFERRED ASSETS" on any date shall mean all assets
of the Company and its Subsidiaries Transferred pursuant to paragraph
6C(7)(iii), and all assets of any Subsidiary the shares of stock or
Indebtedness of which the Company or any Subsidiary sold, otherwise disposed
of, or parted control pursuant to paragraph 6C(5), during the twelve month
period most recently ended on or prior to such date or after the end of such
twelve month period and on or prior to such date.
"BANK AGREEMENT" shall mean that certain Multicurrency Credit
Agreement and Multicurrency Short Term Credit Agreement, each dated as of June
30, 1995, among the Company, Filtertek, Bank of America National Trust and
Savings Association, as agent, and the other financial institutions party
thereto, as either such agreement shall be amended or otherwise modified or
replaced from time to time.
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"BANKRUPTCY LAW" shall have the meaning specified in clause
(viii) of paragraph 7A.
"CAPITAL STOCK" means, with respect to any Person, any and all
shares, interest, participations, rights in or other equivalents (however
designated) of such Person's capital stock and any rights (other than debt
securities convertible into or exchangeable for capital stock), warrants or
options exchangeable for or convertible into such capital stock.
"CAPITALIZED LEASE OBLIGATION" shall mean any rental
obligation which, under generally accepted accounting principles, would be
required to be capitalized on the books of the Company or any Subsidiary, taken
at the amount thereof accounted for as indebtedness (net of interest expense)
in accordance with such principles.
"CHANGE OF CONTROL EVENT" shall mean the occurrence of any of
the following events: (i) the Schawk Family shall cease to own, free and clear
of all Liens, at least 51% of the outstanding shares of Voting Stock of the
Company on a fully diluted basis; or (ii) during any period of twelve
consecutive calendar months, individuals who at the beginning of such period
constituted the Company's board of directors (together with any new directors
whose election by the Company's board of directors or whose nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reasons other than death or disability to
constitute a majority of the directors then in office; or (iii) the Company
shall cease to own, free and clear of all Liens, 100% of the outstanding shares
of capital stock of Filtertek.
"CLOSING" OR "DATE OF CLOSING" shall have the meaning
specified in paragraph 2.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"COMPANY" shall have the meaning specified in the introductory
paragraph of this Agreement.
"CONSOLIDATED CAPITALIZATION" shall mean, as at any time of
determination thereof, the sum of Consolidated Net Worth at such time plus the
aggregate amount of all Funded Debt of the Company and its Subsidiaries,
determined on a consolidated basis, as of such time.
"CONSOLIDATED CURRENT ASSETS" shall mean, as at any time of
determination thereof, the consolidated current assets of the Company and its
Subsidiaries as of such time.
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"CONSOLIDATED CURRENT LIABILITIES" shall mean, as at any time
of determination thereof, the consolidated current liabilities of the Company
and its Subsidiaries, excluding current maturities of Funded Debt.
"CONSOLIDATED EARNINGS AVAILABLE FOR FIXED CHARGES" shall
mean, with respect to any period, (i) Consolidated Net Earnings for such
period, plus (ii) to the extent deducted in determining Consolidated Net
Earnings for such period, provision for income taxes, plus (iii) Fixed Charges
for such period; provided that, in determining Consolidated Earnings Available
for Fixed Charges, Consolidated Net Earnings with respect to any period shall
be adjusted to exclude the effect on such Consolidated Net Earnings for the
entirety of such period of any Subsidiary or assets that were disposed of
during such period, and shall be adjusted to include the effect that any
Subsidiary (or assets or portion thereof, if constituting an integrated
business) that was acquired during such period would have had on such
Consolidated Net Earnings if such Subsidiary had been acquired on the first day
of such period, provided further, that, with respect to any such acquisition,
the assets, liabilities and business of such Subsidiary shall be substantially
the same at any later date of determination of Consolidated Net Earnings for
Fixed Charges as at the date of such acquisition, and in each case only so long
as such contribution to Consolidated Net Earnings can be reasonably determined.
"CONSOLIDATED NET EARNINGS" shall mean, with respect to any
period, the consolidated net earnings of the Company and its Subsidiaries for
such period. When computing the consolidated net earnings of the Company and
its Subsidiaries for any fiscal year or for any fiscal year within a period,
the consolidated net earnings of the Company and its Subsidiaries for such
fiscal year shall be the consolidated net earnings of the Company and its
Subsidiaries for such fiscal year as reflected on the consolidated statement of
income of the Company and its Subsidiaries for such fiscal year delivered
pursuant to paragraph 5A(ii) and as certified to by independent public
accountants, and when computing the consolidated net earnings of the Company
and its Subsidiaries for any fiscal quarter (other than the last fiscal quarter
in any fiscal year) or for any fiscal quarter (other than the last fiscal
quarter in any fiscal year) within a period less than a fiscal year, the
consolidated net earnings of the Company and its Subsidiaries for any such
fiscal quarter shall be the consolidated net earnings of the Company and its
Subsidiaries for such fiscal quarter as reflected on the consolidated statement
of income of the Company delivered pursuant to paragraph 5A(i) and as certified
by an authorized financial officer of the Company, subject to changes resulting
from year-end adjustments.
"CONSOLIDATED NET WORTH" shall mean, as at any time of
determination thereof, the sum of (i) the par value of the
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Company's capital stock of all classes at such time, plus (or minus in the case
of a surplus deficit) (ii) the amount of the Company's consolidated surplus,
whether capital or earned at such time, plus (iii) the amount of the Company's
paid in capital at such time, minus (iv) the amount of any treasury stock and
other contra-equity accounts of the Company at such time.
"CUMULATIVE ADJUSTED NET EARNINGS" shall mean, as of any date
of determination thereof, Adjusted Net Earnings for the period beginning on
January 1, 1995 and ending on the last day of the fiscal year (if any) most
recently ended on or prior to such date, taken as one accounting period.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA AFFILIATE" shall mean any corporation which is a member
of the same controlled group of corporations as the Company within the meaning
of section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.
"EVENT OF DEFAULT" shall mean any of the events specified in
paragraph 7A, provided that there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act, and "DEFAULT" shall mean
any of such events, whether or not any such requirement has been satisfied.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
"FIXED CHARGES" shall mean for any period the sum of (i) rent
expense for such period for all leases of the Company and its Subsidiaries,
other than Capitalized Lease Obligations, having an original term in excess of
one year, (ii) interest expense of the Company and its Subsidiaries (including
interest expense relating to Capitalized Lease Obligations) for such period and
(iii) amortization for such period of debt discount and expense on all
Indebtedness of the Company and its Subsidiaries, all determined on
consolidated basis.
"FUNDED DEBT" shall mean, with respect to any Person, all
Indebtedness of such Person which by its terms or by the terms of any
instrument or agreement relating thereto matures, or which is otherwise payable
or unpaid, more than one year from, or is directly or indirectly renewable or
extendible at the option of the debtor to a date more than one year (including
an option of the debtor under a revolving credit or similar agreement
obligating the lender or lenders to extend credit over a period of more than
one year) from, the date of the creation thereof.
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"GUARANTEE" shall mean, with respect to any Person, any direct
or indirect liability, contingent or otherwise, of such Person with respect to
any indebtedness, lease, dividend or other obligation of another, including,
without limitation, any such obligation directly or indirectly guaranteed,
endorsed (otherwise than for collection or deposit in the ordinary course of
business) or discounted or sold with recourse by such Person, or in respect of
which such Person is otherwise directly or indirectly liable, including,
without limitation, any such obligation in effect guaranteed by such Person
through any agreement (contingent or otherwise) to purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide funds
for the payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise), or to maintain
the solvency or any balance sheet or other financial condition of the obligor
of such obligation, or to make payment for any products, materials or supplies
or for any transportation or services regardless of the non-delivery or
non-furnishing thereof, in any such case if the purpose or intent of such
agreement is to provide assurance that such obligation will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such obligation will be protected against loss in respect
thereof. The amount of any Guarantee shall be equal to the outstanding
principal amount of the obligation guaranteed or such lesser amount to which
the maximum exposure of the guarantor shall have been specifically limited.
"GUARANTORS" shall mean, collectively, the Company, PMC,
Packaging and each other Subsidiary that becomes liable by way of a Guarantee
for all or any portion of the Obligations whether pursuant to paragraph 6E or
otherwise.
"INDEBTEDNESS" shall mean, with respect to any Person, without
duplication, (i) all items (excluding items of contingency reserves or of
reserves for deferred income taxes) which in accordance with generally accepted
accounting principles would be included in determining total liabilities as
shown on the liability side of a balance sheet of such Person as of the date on
which Indebtedness is to be determined, (ii) all indebtedness secured by any
Lien on any property or asset owned or held by such Person subject thereto,
whether or not the indebtedness secured thereby shall have been assumed, (iii)
all indebtedness of others with respect to which such Person has become liable
by way of a Guarantee and (iv) all Swaps of such Person.
"INVESTMENTS" shall have the meaning specified in paragraph
6C(4).
"LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, lien (statutory or otherwise) or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in
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the nature thereof, and the filing of or agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction) or any other
type of preferential arrangement for the purpose, or having the effect, of
protecting a creditor against loss (other than an unsecured guarantee) or
securing the payment or performance of an obligation.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a
"multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA).
"NOTE" or "NOTES" shall have the meaning specified in
paragraph 1.
"OBLIGATIONS" shall mean all indebtedness, obligations
(including any obligation to perform) and liabilities existing on the date
hereof or arising from time to time hereafter, whether direct or indirect,
joint, several or joint and several, actual, absolute or contingent, matured or
unmatured, liquidated or unliquidated, secured or unsecured, arising by
contract, operation of law or otherwise, of Filtertek to the holders of the
Notes, including, without limitation, the outstanding principal amount of the
Notes and all of the other present or future indebtedness, liabilities and
obligations of Filtertek now or hereafter owed to the holders of the Notes
evidenced by or arising under, by virtue of or pursuant to this Agreement, the
Notes and all renewals and extensions thereof, including, without limitation,
all interest on the Notes and any Yield-Maintenance Amounts and interest on the
Notes accruing before, during or after any bankruptcy, insolvency
reorganization, arrangement, readjustment of debt, liquidation or dissolution
proceeding, and, if interest ceases to accrue by operation of law by reason of
any such proceeding, interest which otherwise would have accrued in the absence
of such proceeding.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the
name of the Company by its President, one of its Vice Presidents or its
Treasurer.
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.
"PERSON" shall mean and include an individual, a partnership,
limited liability company, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.
"PLAN" shall mean any "employee pension benefit plan" (as such
term is defined in section 3 of ERISA) which is or has been established or
maintained, or to which contributions are or have been made, by Filtertek, the
Company or any ERISA Affiliate.
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"PRIORITY DEBT" shall mean (i) Funded Debt and other
Indebtedness for borrowed money (a) of the Company which is secured by a Lien,
(b) of Filtertek which is secured by a Lien and (c) of a Subsidiary, other than
Filtertek, (including a Guarantee of Funded Debt or other Indebtedness of
Filtertek or the Company), whether or not secured by a Lien, and (ii) preferred
stock of a Subsidiary (other than Filtertek), except such preferred stock held
by the Company or a Wholly-Owned Subsidiary, provided, however, that Priority
Debt shall not include any Guarantee of a Subsidiary of any or all Obligations
or, except for the aggregate outstanding amount of all advances and loans made
by the Company or Filtertek to all Subsidiaries that are liable under a
Guarantee with respect to all or any portion of Indebtedness under the Bank
Agreement, any Guarantee of a Subsidiary of Indebtedness under the Bank
Agreement.
"PURCHASER" shall have the meaning specified in the
introductory paragraph of this Agreement.
"RELATED PARTY" shall mean (i) any Significant Stockholder,
(ii) all Persons to whom any Significant Stockholder is related by blood,
adoption or marriage and (iii) all Affiliates of the foregoing Persons.
"RESPONSIBLE OFFICER" shall mean the chief executive officer,
chief operating officer, chief financial officer or chief accounting officer of
Filtertek or the Company or any other officer of Filtertek or the Company
involved principally in its financial administration or its controllership
function.
"REQUIRED HOLDER(S)" shall mean the holder or holders of more
than 50% of the aggregate principal amount of the Notes from time to time
outstanding.
"RESTRICTED INVESTMENTS" shall mean any Investment other than
an Investment described in clause (i), (ii), (iii), (iv), (v), (vi), (vii),
(viii), (ix), (x) or (xi) of paragraph 6C(4).
"RESTRICTED PAYMENT" shall mean any of the following:
(i) any dividend on any class of the Company's or any
Subsidiary's capital stock;
(ii) any other distribution on account of any class of the
Company's or any Subsidiary's capital stock;
(iii) any redemption, purchase or other acquisition, direct or
indirect, of any shares of the Company's or any Subsidiary's capital
stock; or
(iv) any Restricted Investment.
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Notwithstanding the foregoing, Restricted Payments shall not include: (A)
dividends paid, or distributions made, in capital stock of the Company; or (B)
dividends paid, or distributions made, by a Subsidiary of the Company to the
Company or to a Wholly-Owned Subsidiary of the Company. As used in this
definition, the term "capital stock" shall include warrants, rights and options
to purchase capital stock. Any Restricted Payment made in property other than
cash shall, for the purposes of determining the amount thereof for all purposes
of this Agreement, be valued at the greater of such property's book value or
fair market value at the time such Restricted Payment is made.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SERIES" of Notes shall mean either the Series A Notes or the
Series B Notes.
"SERIES A NOTES" shall have the meaning specified in paragraph
1(i).
"SERIES B NOTES" shall have the meaning specified in paragraph
1(ii).
"SCHAWK FAMILY" means the persons set forth on Schedule 10B(1)
hereto, together with any children or grandchildren of such persons and any
grantor trust under which one of such persons shall be the sole trustee or one
of the co-trustees (and such person retains the sole power to remove any
Capital Stock held by such trust from such trust).
"SIGNIFICANT HOLDER" shall mean (i) each Purchaser, so long as
such Purchaser shall hold (or be committed under this Agreement to purchase)
any Note, or (ii) any other holder of at least 5% of the aggregate principal
amount of the Notes from time to time outstanding.
"SIGNIFICANT STOCKHOLDER" shall mean and include any Person
who owns, beneficially or of record, directly or indirectly, at any time during
any year with respect to which a computation is being made, either individually
or together with all persons to whom such Person is related by blood, adoption
or marriage, 5% or more of the Voting Stock of the Company.
"SUBSIDIARY" shall mean any corporation, the financial
statements of which are required to be consolidated with the financial
statements of the Company for financial reporting purposes in accordance with
generally accepted accounting principles.
"SWAPS" shall mean, with respect to any Person, payment
obligations with respect to interest rate swaps or hedges, currency
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swaps or hedges and similar obligations obligating such Person to make
payments, whether periodically or upon the happening of a contingency. For the
purposes of this Agreement, the amount of the obligation under any Swap shall
be the amount determined in respect thereof as of the end of the then most
recently ended fiscal quarter of such Person, based on the assumption that such
Swap had terminated at the end of such fiscal quarter, and in making such
determination, if any agreement relating to such Swap provides for the netting
of amounts payable by and to such Person thereunder or if any such agreement
provides for the simultaneous payment of amounts by and to such Person, then in
each such case, the amount of such obligation shall be the net amount so
determined.
"TRANSFER" shall mean, with respect to any item, the sale,
exchange, conveyance, lease, transfer or other disposition of such item.
"TRANSACTION PARTY" shall mean the Company, Filtertek, PMC and
Packaging.
"TRANSFEREE" shall mean any direct or indirect transferee of
all or any part of any Note purchased by any Purchaser under this Agreement.
"VALUE" of any property shall mean on any date the greater of
the book value of such property on such date or the fair market value of such
property on such date.
"VOTING STOCK" shall mean, with respect to any corporation,
any shares of stock of such corporation whose holders are entitled under
ordinary circumstances to vote for the election of directors of such
corporation (irrespective of whether at the time stock of any other class or
classes shall have or might have voting power by reason of the happening of any
contingency).
"WHOLLY-OWNED SUBSIDIARY" shall mean any corporation all of
the stock of every class of which, except directors' qualifying shares, shall,
at the time as of which any determination is being made, be owned by the
Company either directly or through Wholly-Owned Subsidiaries.
10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All
references in this Agreement to "generally accepted accounting principles"
shall be deemed to refer to generally accepted accounting principles in effect
in the United States at the time of application thereof. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all unaudited financial statements and certificates and reports as to financial
matters required to be furnished hereunder shall be prepared, in accordance
with generally accepted accounting principles, applied on a basis consistent
with the most
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recent audited consolidated financial statements of the Company and its
Subsidiaries delivered pursuant to clause (ii) of paragraph 5A or, if no such
statements have been so delivered, the most recent audited financial statements
referred to in clause (i) of paragraph 8B.
11. THE GUARANTEE. Each of the Company, PMC, Packaging and any
other Person becoming a Guarantor under paragraph 6E or otherwise jointly and
severally agree as follows:
11A. GUARANTY OF PAYMENT AND PERFORMANCE OF OBLIGATIONS. Each
Guarantor, jointly and severally, hereby absolutely, unconditionally and
irrevocably guaranties the full and prompt payment in United States currency
when due (whether at maturity, a stated prepayment date or earlier by reason of
acceleration or otherwise) and at all times thereafter, and the due and
punctual performance, of all Obligations. Each Guarantor hereby agrees to pay
and to indemnify and save each holder of Notes harmless from and against any
damage, loss, cost or expense (including attorneys' fees) which such Person may
incur or be subject to as a consequence, direct or indirect, of endeavoring to
enforce any rights under this paragraph 11 or to collect all or any part of the
Obligations from, or in pursuing any action against, Filtertek or any Guarantor
or enforcing any rights of any holder of Notes in any security for the
Obligations or the liabilities of any Guarantor hereunder and any taxes, fees
or penalties which may be paid or payable in connection therewith. This is a
continuing guarantee of payment and performance and not of collection.
Notwithstanding any provision of this paragraph 11, all covenants, obligations,
waivers and agreements of the Guarantors under this paragraph 11 shall be joint
and several.
Upon an Event of Default specified in clause (i) or (ii) of paragraph
7A, any holder of a Note may, and upon any Event of Default, the Required
Holders may, at its or their sole election and without notice, proceed directly
and at once against any Guarantor to seek and enforce performance of, and to
collect and recover, the Obligations, or any portion thereof, without first
proceeding against Filtertek, any other Guarantor or any other Person, or any
security for the Obligations or for the liability of any such other Person or
any Guarantor hereunder. The holders of Notes shall have the exclusive right
to determine the application of payments and credits, if any, from any
Guarantor, Filtertek, or from any other Person on account of the Obligations or
otherwise. The obligations under this paragraph 11 and all covenants and
agreements of each Guarantor contained herein shall continue in full force and
effect and shall not be discharged until such a time as all of the Obligations
shall be paid or otherwise performed in full.
Notwithstanding anything contained in this paragraph 11 to the
contrary, at all times, if any, during which any Guarantor is the
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obligor hereunder, each Guarantor and by its acceptance hereof each holder of
any Note hereby confirms that it is the intention of all such parties that the
guarantee by such Guarantor pursuant to this paragraph 11 not constitute a
fraudulent transfer or conveyance for purposes of any bankruptcy law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar Federal or state law. To effectuate the foregoing intention, the
obligations of each Guarantor under this paragraph 11 shall be limited to the
maximum amount as will result in the obligations of such Guarantor under this
paragraph 11 not constituting such fraudulent transfer or conveyance.
11B. OBLIGATIONS UNCONDITIONAL. The obligations of each Guarantor
under this paragraph 11 shall be continuing, absolute and unconditional,
irrespective of (i) the invalidity or unenforceability of the Note Agreement
or any Note or any provision of any thereof; (ii) the absence of any attempt by
any holder of a Note to collect the Obligations or any portion thereof from
Filtertek, any other guarantor of all or any portion of the Obligations or any
other Person or other action to enforce the same; (iii) any action taken by any
holder of a Note whether or not authorized by this paragraph 11; (iv) any
failure by any holder of a Note to acquire, perfect or maintain any security
interest or lien in, or take any steps to preserve its rights to, any security
for the Obligations or any portion thereof or for the liability of any
Guarantor hereunder or the liability of any other guarantor of any or all of
the Obligations; (v) any defense arising by reason of any disability or other
defense (other than a defense of payment, unless the payment on which such
defense is based was or is subsequently invalidated, declared to be fraudulent
or preferential, otherwise avoided and/or required to be repaid to Filtertek or
any Guarantor, as the case may be, or the estate of any such party, a trustee,
receiver or any other Person under any bankruptcy law, state or federal law,
common law or equitable cause, in which case there shall be no defense of
payment with respect to such payment) of Filtertek or any other Person liable
on the Obligations or any portion thereof; (vi) any election by a holder of any
Note in any proceeding instituted under Chapter 11 of Title 11 of the Federal
Bankruptcy Code (11 U.S.C. Section 101 et seq.) (the "Bankruptcy Code"), of the
application of Section 1111(b)(2) of the Bankruptcy Code; (vii) any borrowing
or grant of a security interest to any holder of a Note by Filtertek, as
debtor-in-possession, or extension of credit, under Section 364 of the
Bankruptcy Code; (viii) the disallowance or avoidance of all or any portion of
any claim(s) of a holder of a Note for repayment of the Obligations under the
Bankruptcy Code or any similar state law or the avoidance, invalidity or
unenforceability of any Lien securing the Obligations or the liability of any
Guarantor hereunder or of any other guarantor of all or any part of the
Obligations; (ix) any amendment to, waiver or modification of, or consent,
extension, indulgence or other action or inaction under or in respect of the
Note Agreement or the Notes, including, without limitation, any
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increase in the interest rate on any Obligations; (x) any change in any
provision of any applicable law or regulation; (xi) any order, judgment, writ,
award or decree of any court, arbitrator or governmental authority, domestic or
foreign, binding on or affecting any Guarantor or Filtertek or any of their
assets; (xii) the charter or by-laws of any Guarantor or Filtertek; (xiii) any
mortgage, indenture, lease, contract, or other agreement (including, without
limitation, any agreement with stockholders), instrument or undertaking to
which any Guarantor or Filtertek is a party or which purports to be binding on
or affect such Person or any of its assets; (xiv) any bankruptcy, insolvency,
readjustment, composition, liquidation or similar proceeding with respect to
Filtertek, any other Guarantor or any other guarantor of all or any portion of
any Obligations or such Persons's property and any failure by any holder of a
Note to file or enforce a claim against Filtertek or such other Person in any
such proceeding; (xv) any failure on the part of Filtertek for any reason to
comply with or perform any of the terms of any other agreement with any
Guarantor; or (xvi) any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor or surety.
11C. OBLIGATIONS UNIMPAIRED. Each holder of a Note is authorized,
without demand or notice, which demand and notice are hereby waived, and
without discharging or otherwise affecting the obligations of any Guarantor
hereunder (which shall remain absolute and unconditional notwithstanding any
such action or omission to act), from time to time to (i) renew, extend,
accelerate or otherwise change the time for payment of, or other terms relating
to, the Obligations or any portion thereof, including, without limitation,
increasing the interest rate on any Obligations, or otherwise modify, amend or
change the terms of the Note Agreement or the Notes; (ii) accept partial
payments on the Obligations; (iii) take and hold security for the Obligations
or any portion thereof or any other liabilities of Filtertek, the obligations
of any Guarantor under this paragraph 11 and the obligations under any other
guaranties and sureties of all or any of the Obligations, and exchange,
enforce, waive, release, sell, transfer, assign, abandon, fail to perfect,
subordinate or otherwise deal with any such security; (iv) apply such security
and direct the order or manner of sale thereof as such holder may determine in
its sole discretion; (v) settle, release, compromise, collect or otherwise
liquidate the Obligations or any portion thereof and any security therefor or
guarantee thereof in any manner; (vi) extend additional loans, credit and
financial accommodations to Filtertek or any Guarantor and otherwise create
additional Obligations; (vii) waive strict compliance with the terms of the
Note Agreement or the Notes and otherwise forbear from asserting such holder's
rights and remedies thereunder; (viii) take and hold additional guarantees or
sureties and enforce or forbear from enforcing any guarantee or surety of any
other guarantor or surety of the Obligations, any portion thereof or release or
otherwise take any action with respect to any such guarantor or surety; (ix)
assign the
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obligations hereunder in part or in whole in connection with any assignment of
the Obligations or any portion thereof; (x) exercise or refrain from exercising
any rights against Filtertek or any Guarantor; and (xi) apply any sums, by
whomsoever paid or however realized, to the payment of the Obligations as such
holder of a Note in its sole discretion may determine.
11D. WAIVERS OF GUARANTOR. Each Guarantor waives for the benefit
of each holder of a Note:
(i) any right to require any holder of a Note, as a condition of
payment or performance by such Guarantor or otherwise, to (a) proceed against
Filtertek, any other Guarantor or other guarantor of the Obligations or any
other Person, (b) proceed against or exhaust any security given to or held by
any holder of a Note in connection with the Obligations or any other guarantee,
or (c) pursue any other remedy available to any holder of a Note whatsoever;
(ii) any defense arising by reason of (a) the incapacity, lack of
authority or any disability or other defense of Filtertek, including, without
limitation, any defense based on or arising out of the lack of validity or the
unenforceability of the Obligations or any agreement or instrument relating
thereto, (b) the cessation of the liability of Filtertek from any cause other
than indefeasible payment in full of the Obligations, or (c) any act or
omission of any holder of a Note or any other Person which directly or
indirectly, by operation of law or otherwise, results in or aids the discharge
or release of Filtertek or any security given to or held by any holder of a
Note in connection with the Obligations or any other guarantee;
(iii) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount nor
in other respects more burdensome than that of the principal;
(iv) any defense based upon any holder's errors or omissions in the
administration of the Obligations;
(v) (a) any principles or provisions of law, statutory or
otherwise, which are or might be in conflict with the terms of this paragraph
11 and any legal or equitable discharge of such Guarantor's or any other
Guarantor's obligations hereunder, (b) the benefit of any statute of
limitations affecting the Obligations or such Guarantor's or any other
Guarantor's liability hereunder or the enforcement hereof, (c) any rights to
set-offs, recoupments and counterclaims, and (d) promptness, diligence and any
requirement that any holder of a Note protect, maintain, secure, perfect or
insure any Lien or any property subject thereto;
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(vi) notices (a) of nonperformance or dishonor, (b) of acceptance
of this paragraph 11 by such Guarantor or any other Guarantor, (c) of default
under the provisions of this paragraph 11 by any other Guarantor or in respect
of the Obligations or any other guarantee, (d) of the existence, creation or
incurrence of new or additional indebtedness, arising either from additional
loans extended to Filtertek or otherwise, (e) that the principal amount, or any
portion thereof, and/or any interest or Yield-Maintenance Amount on any
document or instrument evidencing all or any part of the Obligations is due,
(f) of any and all proceedings to collect from Filtertek, any Guarantor or any
other guarantor of all or any part of the Obligations, or from any other
Person, (g) of exchange, sale, surrender or other handling of any security or
collateral given to any holder of a Note to secure payment of the Obligations
or any guarantee therefor, (h) of renewal, extension or modification of any of
the Obligations, (i) of assignment, sale or other transfer of any Note to
another Person, or (j) of any of the matters referred to in paragraph 11B and
any right to consent to any thereof;
(vii) presentment, demand for payment or performance and protest and
notice of protest with respect to the Obligations or any guarantee with respect
thereto; and
(viii) any defenses or benefits that may be derived from or afforded
by law which limit the liability of or exonerate guarantors or sureties, or
which may conflict with the terms of this paragraph 11.
Each Guarantor agrees that no holder of a Note shall be under any
obligation to marshall any assets in favor of any Guarantor or against or in
payment of any or all of the Obligations.
No Guarantor will exercise any rights which it may have acquired by
way of subrogation under this paragraph 11, by any payment made hereunder or
otherwise, or accept any payment on account of such subrogation rights, or any
rights of contribution, reimbursement, indemnity, exoneration or any rights or
recourse to any security for the Obligations unless at the time of a
Guarantor's exercise of any such right there shall have been performed and
indefeasibly paid in full all of the Obligations.
11E. REVIVAL. Each Guarantor agrees that, if any payment made by
Filtertek or any other Person is applied to the Obligations and is at any time
annulled, set aside, rescinded, invalidated, declared to be fraudulent or
preferential or otherwise required to be refunded or repaid, or the proceeds of
any security are required to be returned by any holder of a Note to Filtertek
or its estate, trustee, receiver or any other Person, including, without
limitation, any Guarantor, under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or
repayment, each Guarantor's liability hereunder
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(and any Lien or other collateral securing such liability) shall be and remain
in full force and effect, as fully as if such payment had never been made, or,
if prior thereto the obligations under this paragraph 11 shall have been
canceled or surrendered (and if any Lien or other collateral securing such
Guarantor's liability hereunder shall have been released or terminated by
virtue of such cancellation or surrender), the obligations under this paragraph
11 (and such Lien or other collateral) shall be reinstated and returned in full
force and effect, and such prior cancellation or surrender shall not diminish,
release, discharge, impair or otherwise affect the obligations of any Guarantor
in respect of the amount of such payment (or any Lien or other collateral
securing such obligation).
11F. OBLIGATION TO KEEP INFORMED. Each Guarantor shall be
responsible for keeping itself informed of the financial condition of Filtertek
and any other Persons primarily or secondarily liable on the Obligations or any
portion thereof, and of all other circumstances bearing upon the risk of
nonpayment of the Obligations or any portion thereof, and each Guarantor
agrees that no holder of a Note shall have a duty to advise such Guarantor of
information known to such holder regarding such condition or any such
circumstance. If any holder of a Note, in its discretion, undertakes at any
time or from time to time to provide any such information to any Guarantor,
such holder shall not be under any obligation (i) to undertake any
investigation, whether or not a part of its regular business routine, (ii) to
disclose any information which such holder wishes to maintain confidential, or
(iii) to make any other or future disclosures of such information or any other
information to such or any other Guarantor.
11G. BANKRUPTCY. Upon an Event of Default specified in clause
(viii), (ix) or (x) of paragraph 7A with respect to Filtertek or the Company,
any and all obligations of each Guarantor hereunder shall forthwith become due
and payable without notice.
12. MISCELLANEOUS.
12A. NOTE PAYMENTS. Filtertek agrees that, so long as any
Purchaser shall hold any Note, it will make payments of principal of, interest
on and any Yield-Maintenance Amount payable with respect to such Note, which
comply with the terms of this Agreement, by wire transfer of immediately
available funds for credit (not later than 12:00 noon, New York City time, on
the date due) to such Purchaser's account or accounts as specified in the
Purchaser Schedule attached hereto, or such other account or accounts in the
United States as such Purchaser may designate in writing, notwithstanding any
contrary provision herein or in any Note with respect to the place of payment.
Each Purchaser agrees that, before disposing of any Note, such Purchaser will
make a notation thereon (or on a schedule attached thereto) of all principal
payments previously made thereon and of the date to which
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interest thereon has been paid. Filtertek agrees to afford the benefits of
this paragraph 12A to any Transferee which shall have made the same agreement
as each Purchaser has made in this paragraph 12A.
12B. EXPENSES. Filtertek and the Company jointly and severally
agree, whether or not the transactions contemplated hereby shall be
consummated, to pay, and save each Purchaser and any Transferee harmless
against liability for the payment of, all out-of-pocket expenses arising in
connection with such transactions, including (i) all document production and
duplication charges and the fees and expenses of any special counsel engaged by
such Purchaser or such Transferee in connection with this Agreement, the
transactions contemplated hereby and any subsequent proposed modification of,
or proposed consent under, this Agreement, whether or not such proposed
modification shall be effected or proposed consent granted, (ii) the cost of
obtaining private placement numbers with respect to the Notes and (ii) the
costs and expenses, including attorneys' fees, incurred by such Purchaser or
such Transferee in enforcing (or determining whether or how to enforce) any
rights under this Agreement or the Notes or in responding to any subpoena or
other legal process or informal investigative demand issued in connection with
this Agreement or the transactions contemplated hereby or by reason of such
Purchaser's or such Transferee's having acquired any Note, including without
limitation costs and expenses incurred in any bankruptcy case. The obligations
of Filtertek and the Company under this paragraph 12B shall survive the
transfer of any Note or portion thereof or interest therein by any Purchaser or
any Transferee and the payment of any Note.
12C. CONSENT TO AMENDMENTS. This Agreement may be amended, and
Filtertek or the Company, as the case may be, and with respect to paragraph 11
hereof, the Guarantors, may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, if Filtertek or the
Company, as the case may be, and, with respect to paragraph 11 hereof, the
Guarantors, shall obtain the written consent to such amendment, action or
omission to act, of the Required Holder(s) except that without the written
consent of the holder or the holders of all Notes at the time outstanding, no
amendment to this Agreement shall change the maturity of any Note or change or
affect the principal thereof, or change or affect the rate or time of payment
of interest or Yield-Maintenance Amount payable with respect to any Note or
affect the time, amount or allocation or any prepayments or release the Company
from its Guarantee under paragraph 11 or change the proportion of the principal
amount of the Notes required with respect to any consent, amendment, waiver or
declaration, or the rights of any individual holder of Notes to declare Notes
to be due and payable. Each holder of any Note at the time or thereafter
outstanding shall be bound by any consent authorized by this paragraph 12C,
whether or not such Note shall have been marked to
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indicate such consent, but any Notes issued thereafter may bear a notation
referring to any such consent. No course of dealing between Filtertek or any
Guarantor and the holder of any Note nor any delay in exercising any rights
hereunder or under any Note shall operate as a waiver of any rights of any
holder of such Note. As used herein and in the Notes, the term "this
Agreement" and references thereto shall mean this Agreement as it may from time
to time be amended or supplemented.
12D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST
NOTES. The Notes are issuable as registered notes without coupons in
denominations of at least $100,000, except as may be necessary to reflect any
principal amount not evenly divisible by $100,000. Filtertek shall keep at its
principal office a register in which Filtertek shall provide for the
registration of Notes and of transfers of Notes. Upon surrender for
registration of transfer of any Note at the principal office of Filtertek,
Filtertek shall, at its expense, execute and deliver one or more new Notes of
like tenor and of a like aggregate principal amount, registered in the name of
such transferee or transferees. At the option of the holder of any Note, such
Note may be exchanged for other Notes of like tenor and of any authorized
denominations, of a like aggregate principal amount, upon surrender of the Note
to be exchanged at the principal office of Filtertek. Whenever any Notes are
so surrendered for exchange, Filtertek shall, at its expense, execute and
deliver the Notes which the holder making the exchange is entitled to receive.
Every Note surrendered for registration of transfer or exchange shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed,
by the holder of such Note or such holder's attorney duly authorized in
writing. Any Note or Notes issued in exchange for any Note or upon transfer
thereof shall carry the rights to unpaid interest and interest to accrue which
were carried by the Note so exchanged or transferred, so that neither gain nor
loss of interest shall result from any such transfer or exchange. Upon receipt
of written notice from the holder of any Note of the loss, theft, destruction
or mutilation of such Note and, in the case of any such loss, theft or
destruction, upon receipt of such holder's unsecured indemnity agreement, or in
the case of any such mutilation upon surrender and cancellation of such Note,
Filtertek will make and deliver a new Note, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Note.
12E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due
presentment for registration of transfer, Filtertek may treat the Person in
whose name any Note is registered as the owner and holder of such Note for the
purpose of receiving payment of principal of, interest on and any
Yield-Maintenance Amount payable with respect to such Note and for all other
purposes whatsoever, whether or not such Note shall be overdue, and Filtertek
shall not be affected by notice to the contrary. Subject to the preceding
sentence, the holder of any Note may from time to time grant participations in
such Note to any Person on such terms and conditions as may be
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determined by such holder in its sole and absolute discretion, provided that
any such participation shall be in a principal amount of at least $100,000.
12F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein or made in writing by or on
behalf of any Transaction Party in connection herewith shall survive the
execution and delivery of this Agreement and the Notes, the transfer by any
Purchaser of any Note or portion thereof or interest therein and the payment of
any Note, and may be relied upon by any Transferee, regardless of any
investigation made at any time by or on behalf of any Purchaser or any
Transferee. Subject to the preceding sentence, this Agreement and the Notes
embody the entire agreement and understanding between the Purchasers and the
Transaction Parties and supersede all prior agreements and understandings
relating to the subject matter hereof.
12G. SUCCESSORS AND ASSIGNS. All covenants and other agreements in
this Agreement contained by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto (including, without limitation, any Transferee) whether so
expressed or not.
12H. NOTICES. All written communications provided for hereunder
shall be sent by first class mail or nationwide overnight delivery service
(with charges prepaid) and (i) if to any Purchaser, addressed to such Purchaser
at the address specified for such communications in the Purchaser Schedule
attached hereto, or at such other address as such Purchaser shall have
specified to Filtertek or the Company in writing, (ii) if to any other holder
of any Note, addressed to such other holder at such address as such other
holder shall have specified to Filtertek or the Company in writing or, if any
such other holder shall not have so specified an address to Filtertek or the
Company, then addressed to such other holder in care of the last holder of such
Note which shall have so specified an address to Filtertek or the Company, and
(iii) if to the Company, Filtertek or any Guarantor, addressed to it at 1695
River Road, Des Plaines, Illinois 60018, Attention: Clarence W. Schawk, with a
copy to A. Alex Sarkisian at such address and to John McEnroe at Vedder, Price,
Kaufman and Kammholz, 222 North LaSalle Street, Chicago, Illinois 60601-1003
or at such other address as the Company shall have specified to the holder of
each Note in writing; provided, however, that any such communication to any
such Person may also, at the option of the holder of any Note, be delivered by
any other means either to the Company or Filtertek at its address specified
above or to any officer of the Company or Filtertek.
12I. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement
or the Notes to the contrary notwithstanding, any payment of principal of or
interest on any Note that is due on a date other
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than a Business Day shall be made on the next succeeding Business Day. If the
date for any payment is extended to the next succeeding Business Day by reason
of the preceding sentence, the period of such extension shall be included in
the computation of the interest payable on such Business Day.
12J. SATISFACTION REQUIREMENT. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to any Purchaser or to the Required
Holder(s), the determination of such satisfaction shall be made by such
Purchaser or the Required Holder(s), as the case may be, in the sole and
exclusive judgment (exercised in good faith) of the Person or Persons making
such determination.
12K. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with, and the rights of the parties shall be governed by, the law
of the State of Illinois.
12L. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be
given independent effect so that if a particular action or condition is
prohibited by any one of such covenants, the fact that it would be permitted by
an exception to, or otherwise be in compliance within the limitations of,
another covenant shall not (i) avoid the occurrence of a Default or an Event of
Default if such action is taken or such condition exists or (ii) in any way
prejudice an attempt by a holder or the holders of the Notes to prohibit
(through equitable action or otherwise) the taking of any action by Filtertek,
the Company or a Subsidiary which would result in any Event of Default or
Default.
12M. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12N. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
12O. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together
shall constitute one instrument.
12P. SEVERALTY OF OBLIGATIONS. The sales of Notes to the Purchasers
are to be several sales, and the obligations of the Purchasers under this
Agreement are several obligations. Except as provided in paragraph 3H, no
failure by any Purchaser to perform its obligations under this Agreement shall
relieve any other
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Purchaser or Filtertek of any of its obligations hereunder, and no Purchaser
shall be responsible for the obligations of, or any action taken or omitted by,
any other Purchaser hereunder.
12Q. DISCLOSURE TO OTHER PERSONS. Each Purchaser agrees to use its
best efforts to hold in confidence and not disclose any Confidential
Information; provided that nothing herein shall prevent a Purchaser from
delivering or disclosing (and the Transaction Parties acknowledge that any
Purchaser may deliver or disclose) any financial statements and other documents
delivered to it, and any other information disclosed to it (including, but not
limited to, Confidential Information), by or on behalf of the Company or any
Subsidiary in connection with or pursuant to this Agreement to (i) its
directors, officers, employees, agents and professional consultants, (ii) any
other holder of any Note, (iii) any Person to which it offers to sell any Note
or any part thereof, (iv) any Person to which it sells or offers to sell a
participation in all or any part of any Note, (v) any Person from which it
offers to purchase any security of the Company or Filtertek, (vi) any federal
or state regulatory authority having jurisdiction over it, (vii) the National
Association of Insurance Commissioners or any similar organization or (viii)
any other Person to which such delivery or disclosure may be necessary or
appropriate (a) to effect compliance with any law, rule, regulation or order
applicable to such Purchaser, (b) in response to any subpoena or other legal
process, (c) in connection with any litigation to which it is a party or (d) in
order to protect its investment in any Note; provided, however, that no
Confidential Information shall be disclosed to any Person described in clause
(ii), (iii), (iv) or (v) unless such Person has agreed to the provisions of
this paragraph 12Q. "CONFIDENTIAL INFORMATION" shall mean, with respect to any
Purchaser, any written information delivered or made available by or on behalf
of the Company or any Subsidiary to such Purchaser pursuant to this Agreement
which is clearly marked or labeled as being confidential information, but in no
event shall include information (i) which was publicly known or otherwise known
to such Purchaser at the time of disclosure, (ii) which subsequently becomes
publicly known through no act or omission by such Purchaser, or (iii) which
otherwise becomes known to such Purchaser, other than through disclosure by or
on behalf of the Company or any Subsidiary.
12R. INDEPENDENT CREDIT INVESTIGATION. No Purchaser, nor any of
its directors, officers, agents or employees, shall be responsible to any of
the other Purchasers for the solvency or financial condition of Filtertek, the
Company or any Guarantor, the ability of Filtertek to repay any of the Notes or
the ability of Filtertek, the Company or any Guarantor to perform its
obligations under this Agreement, or the statements of Filtertek, the company
or any Guarantor, oral or written, or for the validity, sufficiency or
enforceability of any of the Notes, or this Agreement or any document or
agreement executed or delivered in connection with or
-46-
<PAGE> 51
pursuant to any of the foregoing. Each Purchaser has entered into this
Agreement or its respective financial agreements with Filtertek, the Company
and the Guarantors based upon its own independent investigation, and makes no
warranty or representation to the other Purchasers, nor does it rely upon any
representation by any of the other Purchasers, with respect to the matters
identified or referred to in this paragraph.
[Signature page to follow]
-47-
<PAGE> 52
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterparts of this letter and return the same to
the Company, whereupon this letter shall become a binding agreement among
Filtertek, the Company, the other Guarantors and the Purchasers.
Very truly yours,
SCHAWK, INC.
By:
---------------------------------
Title: Executive Vice President
FILTERTEK USA, INC.
By:
---------------------------------
Title: Executive Vice President
PLASTIC MOLDED CONCEPTS, INC.
By:
---------------------------------
Title: Executive Vice President
TEK PACKAGING GROUP, INC.
By:
---------------------------------
Title: Executive Vice President
<PAGE> 53
The foregoing Agreement is
hereby accepted as of the
date first above written.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By:
--------------------------
Vice President
PRUCO LIFE INSURANCE COMPANY
By:
--------------------------
Assistant Vice President
AID ASSOCIATION FOR LUTHERANS
By:
--------------------------
Title:
<PAGE> 54
PURCHASER SCHEDULE
<TABLE>
<CAPTION>
Aggregate
Principal
Amount of
Notes to be Note Denom-
Purchased ination(s)
----------- -----------
<S> <C> <C>
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
$29,000,000 of $26,000,000
Series B Notes $3,000,000
</TABLE>
(1) All payments on account of Notes held by such purchaser shall be
made by wire transfer of immediately available funds for credit
to:
Account No. 050-54-526 (in the case of payments on account of
the Note originally issued in the principal amount of
$26,000,000)
Account No. 001-01-159 (in the case of payments on account of
the Note originally issued in the principal amount of
$3,000,000)
Morgan Guaranty Trust Company
of New York
23 Wall Street
New York, New York 10015
(ABA No.: 021-000-238)
Each such wire transfer shall set forth the name of Filtertek, a
reference to "6.98% Series B Senior Notes due August 18, 2005,
Security No. !INV 5152!" (in the case of payments on account of
the Note originally issued in the principal amount of
$26,000,000), and Security No. "!INV 5153!" (in the case of
payments on account of the Note originally issued in the
principal amount of $3,000,000) and the due date and application
(as among principal, interest and Yield-Maintenance Amount) of
the payment being made.
<PAGE> 55
(2) Address for all notices relating to payments:
The Prudential Insurance Company
of America
c/o Prudential Capital Group
Gateway Center Three
100 Mulberry Street
Newark, New Jersey 07102
Attention: Manager, Investment
Operations Group
Telephone: (201) 802-5260
Telecopy: (201) 802-8055
(3) Address for all other communications and notices:
The Prudential Insurance Company
of America
c/o Prudential Capital Group
Two Prudential Plaza
Suite 5600
Chicago, Illinois 60601
Attention: Managing Director
Telecopy: (212) 540-4222
(4) Recipient of telephonic prepayment notices:
Manager, Investment Structuring
and Pricing
Telecopy: (201) 802-9425
Telephone: (201) 802-6660
(5) Tax Identification No.: 22-1211670
-2-
<PAGE> 56
<TABLE>
<CAPTION>
Aggregate
Principal
Amount of
Notes to be Note Denom-
Purchased ination(s)
----------- -----------
<S> <C> <C>
PRUCO LIFE INSURANCE COMPANY $1,000,000 of $1,000,000
Series B Notes
</TABLE>
(1) All payments on account of Notes held by such purchaser shall be
made by wire transfer of immediately available funds for credit
to:
Account No. 000-55-455
Morgan Guaranty Trust Company
of New York
23 Wall Street
New York, New York 10015
(ABA No.: 021-000-238)
Each such wire transfer shall set forth the name of Filtertek, a
reference to "6.98% Series B Senior Notes due August 18, 2005,
Security No. !INV 5154!", and the due date and application (as
among principal, interest and Yield-Maintenance Amount) of the
payment being made.
(2) Address for all notices relating to payments:
Pruco Life Insurance Company
c/o Prudential Capital Group
Gateway Center Three
100 Mulberry Street
Newark, New Jersey 07102
Attention: Manager, Investment
Operations Group
Telephone: (201) 802-5260
Telecopy: (201) 802-8055
<PAGE> 57
(3) Address for all other communications and notices:
Pruco Life Insurance Company
c/o Prudential Capital Group
Two Prudential Plaza
Suite 5600
Chicago, Illinois 60601
Attention: Managing Director
Telecopy: (212) 540-4222
(4) Recipient of telephonic prepayment notices:
Manager, Investment Structuring
and Pricing
Telecopy: (201) 802-9425
Telephone: (201) 802-6660
(5) Tax Identification No.: 22-1944557
-2-
<PAGE> 58
<TABLE>
<CAPTION>
Aggregate
Principal
Amount of
Notes to be Note Denom-
Purchased ination(s)
----------- -----------
<S> <C> <C>
AID ASSOCIATION FOR LUTHERANS
$10,000,000 of $10,000,000
Series A Notes
</TABLE>
(1) All payments on account of Notes held by such purchaser shall be
made by wire transfer of immediately available funds for credit
to:
Account No. 109-211-3
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690-0755
(ABA No.: 071 000 288)
Each such wire transfer shall set forth the name of Filtertek, a
reference to "6.58% Series A Senior Notes due August 18, 2000,
PPN 31732# AA4," and the due date and application (as among
principal, interest and Yield-Maintenance Amount) of the payment
being made.
(2) Address for all notices relating to payments:
Aid Association for Lutherans
4321 North Ballard Road
Appleton, Wisconsin 54919
Attention: Investment Accounting
with a copy to:
Harris Trust and Savings Bank
Institutional Custody - 5E
111 West Monroe Street
Chicago, Illinois 60690-0755
<PAGE> 59
(3) Address for all other communications and notices:
Aid Association for Lutherans
4321 North Ballard Road
Appleton, Wisconsin 54919
Attention: Investment Department
(4) Recipient of telephonic prepayment notices:
Investment Accounting
(414) 734-5721
(5) Tax Identification No.: 39-0123480
-2-
<PAGE> 60
EXHIBIT A-1
[FORM OF SERIES A NOTE]
FILTERTEK USA, INC.
6.58% SERIES A SENIOR NOTE DUE __________, 2000
No. _____ [Date]
$________
FOR VALUE RECEIVED, the undersigned, Filtertek USA, Inc. (herein
called the "Company"), a corporation organized and existing under the laws of
the State of ______________, hereby promises to pay to
____________________________ ___________________________, or registered
assigns, the principal sum of _________________________ DOLLARS on _________,
2000, with interest (computed on the basis of a 360-day year--30-day month) (a)
on the unpaid balance thereof at the rate of 6.58% per annum from the date
hereof, payable quarterly on the eighteenth day of February, May, August and
November in each year, commencing with the February, May, August and November
next succeeding the date hereof, until the principal hereof shall have become
due and payable, and (b) on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Yield-Maintenance Amount (as defined in the Note Agreement
referred to below), payable quarterly as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the greater of (i) 8.58% or (ii) 2.0% over the rate of interest
publicly announced by Morgan Guaranty Trust Company of New York from time to
time in New York City as its Prime Rate.
Payments of principal of, interest on and any Yield-Maintenance Amount
payable with respect to this Note are to be made at _______________ or at such
other place as the holder hereof shall designate to the Company in writing, in
lawful money of the United States of America.
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to a Note Agreement, dated as of __________, 1995
(herein called the "Agreement"), among the Company and the Guarantors (as
defined therein) and the original purchasers of the Notes named in the
Purchaser Schedule attached thereto and is entitled to the benefits thereof.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the
registered holder hereof or such holder's attorney duly authorized in writing,
a new Note for a like principal amount will be issued to, and registered in the
name of,
<PAGE> 61
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
The Company agrees to make required prepayments of principal on the
dates and in the amounts specified in the Agreement. This Note is also subject
to optional prepayment, in whole or from time to time in part, on the terms
specified in the Agreement. This Note is guarantied by certain parties to the
Agreement.
In case an Event of Default, as defined in the Agreement, shall occur
and be continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner and with the effect provided in the
Agreement.
This Note is intended to be performed in the State of Illinois and
shall be construed and enforced in accordance with the law of such State.
FILTERTEK USA, INC.
By:
-----------------------------------
Title:
--------------------------------
<PAGE> 62
EXHIBIT A-2
[FORM OF SERIES B NOTE]
FILTERTEK USA, INC
6.98% SERIES B SENIOR NOTE DUE __________, 2005
No. _____ [Date]
$________
FOR VALUE RECEIVED, the undersigned, Filtertek USA, Inc. (herein
called the "Company"), a corporation organized and existing under the laws of
the State of ______________, hereby promises to pay to
____________________________ ___________________________, or registered
assigns, the principal sum of _________________________ DOLLARS on __________,
2005, with interest (computed on the basis of a 360-day year--30-day month) (a)
on the unpaid balance thereof at the rate of 6.98% per annum from the date
hereof, payable quarterly on the eighteenth day of February, May, August and
November in each year, commencing with the February, May, August and November
next succeeding the date hereof, until the principal hereof shall have become
due and payable, and (b) on any overdue payment (including any overdue
prepayment) of principal, any overdue payment of interest and any overdue
payment of any Yield-Maintenance Amount (as defined in the Note Agreement
referred to below), payable quarterly as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time to time
equal to the greater of (i) 8.98% or (ii) 2.0% over the rate of interest
publicly announced by Morgan Guaranty Trust Company of New York from time to
time in New York City as its Prime Rate.
Payments of principal of, interest on and any Yield-Maintenance Amount
payable with respect to this Note are to be made at the main office of Morgan
Guaranty Trust Company of New York in New York City or at such other place as
the holder hereof shall designate to the Company in writing, in lawful money of
the United States of America.
This Note is one of a series of Senior Notes (herein called the
"Notes") issued pursuant to a Note Agreement, dated as of __________, 1995
(herein called the "Agreement"), among the Company, the Guarantors (as defined
therein) and the original purchasers of the Notes named in the Purchaser
Schedule attached thereto and is entitled to the benefits thereof.
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the
registered holder hereof or such holder's
<PAGE> 63
attorney duly authorized in writing, a new Note for a like principal amount
will be issued to, and registered in the name of, the transferee. Prior to due
presentment for registration of transfer, the Company may treat the person in
whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
The Company agrees to make required prepayments of principal on the
dates and in the amounts specified in the Agreement. This Note is also subject
to optional prepayment, in whole or from time to time in part, on the terms
specified in the Agreement. This Note is guarantied by certain parties to the
Agreement.
In case an Event of Default, as defined in the Agreement, shall occur
and be continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner and with the effect provided in the
Agreement.
This Note is intended to be performed in the State of Illinois and
shall be construed and enforced in accordance with the law of such State.
FILTERTEK USA, INC.
By:
------------------------------------
Title:
---------------------------------
<PAGE> 64
EXHIBIT B
[FORM OF OPINION OF COMPANY'S COUNSEL]
[Letterhead of Vedder Price Kaufman & Kammholz]
[Date of Closing]
[Names and addresses of Purchasers]
Ladies and Gentlemen:
We have acted as counsel for Schawk, Inc. (the "Company"), Filtertek
USA, Inc. ("Filtertek"), Plastic Molded Concepts, Inc. ("Plastic") and Tek
Packaging Group, Inc. ("Packaging"; the Company, Filtertek, PMC and Packaging
are referred to herein collectively as the "Transaction Parties" and
individually as a "Transaction Party") in connection with the Note Agreement,
dated as of ______________, 1995, among the Transaction Parties and you (the
"Note Agreement"), pursuant to which Filtertek has issued to you today 6.58%
Series A Senior Notes due __________, 2000 of Filtertek in the aggregate
principal amount of $10,000,000 and 6.98% Series B Senior Notes due __________,
2005 of Filtertek in the aggregate principal amount of $30,000,000. All terms
used herein that are defined in the Note Agreement have the respective meanings
specified in the Note Agreement. This letter is being delivered to you in
satisfaction of the condition set forth in paragraph 3B of the Note Agreement
and with the understanding that you are purchasing the Notes in reliance on the
opinions expressed herein.
In this connection, we have examined such certificates of public
officials, certificates of officers of the Transaction Parties and copies
certified to our satisfaction of corporate documents and records of the
Transaction Parties and of other papers, and have made such other
investigations, as we have deemed relevant and necessary as a basis for our
opinion hereinafter set forth. We have relied upon such certificates of public
officials and of officers of the Transaction Parties with respect to the
accuracy of material factual matters contained therein which were not
independently established. With respect to the opinion expressed in paragraph
3 below, we have also relied upon the representation made by each of you in
paragraph 9A of the Note Agreement.
<PAGE> 65
Based on the foregoing, it is our opinion that:
1. Each of the Company, Filtertek and Packaging is a
corporation duly organized and validly existing in good standing under the laws
of the State of Delaware and PMC is a corporation duly organized and validly
existing in good standing under the laws of Wisconsin. Each of the Transaction
Parties has the corporate power and authority, and the legal right, to own its
property, to carry on its business as now being conducted and to execute,
deliver and perform its obligations under the Note Agreement and, with respect
to Filtertek, the Notes.
2. The Note Agreement and the Notes have been duly
authorized by all requisite corporate action and duly executed and delivered by
authorized officers of each Transaction Party that is a party thereto, and are
valid obligations of each such Transaction Party, legally binding upon and
enforceable against such Transaction Party in accordance with their respective
terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and (b) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3. It is not necessary in connection with the offering,
issuance, sale and delivery of the Notes under the circumstances contemplated
by the Note Agreement to register the Notes under the Securities Act or to
qualify an indenture in respect of the Notes under the Trust Indenture Act of
1939, as amended.
4. The extension, arranging and obtaining of the credit
represented by the Notes do not result in any violation of Regulation G, T or X
of the Board of Governors of the Federal Reserve System.
5. The execution and delivery of the Note Agreement and
the Notes, the offering, issuance and sale of the Notes and fulfillment of and
compliance with the respective provisions of the Note Agreement and the Notes
do not conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in any violation of, or
result in the creation of any Lien upon any of the properties or assets of any
Transaction Party or any Subsidiary pursuant to, or require any authorization,
consent, approval, exemption or other action by or notice to or filing with any
court, administrative or governmental body or other Person (other than routine
filings after the date hereof with the Securities and Exchange Commission
and/or state Blue Sky authorities) pursuant to, the charter or by-laws of the
Transaction Party or any Subsidiary, any applicable law (including any
securities or Blue Sky law), statute, rule or regulation or (insofar as is
known to us after having made due inquiry with respect thereto) any agreement
(including, without limitation, any
-2-
<PAGE> 66
agreement listed in Schedule 8G to the Note Agreement), instrument, order,
judgment or decree to which any Transaction Party or any Subsidiary is a party
or otherwise subject.
6. No Transaction Party is (a) is a "holding company"
or a "public utility company", or a "subsidiary company" or an "affiliate" of a
"holding company", as such terms are defined under the Public Utility Holding
Company Act of 1935, as amended; (b) an "investment company" or a company
"controlled" by an "investment company," as such terms are defined under the
Investment Company Act of 1940, as amended; or (c) a "public utility" as such
term is defined under the Federal Power Act, as amended.
Very truly yours,
-3-
<PAGE> 1
EXHIBIT 11
Schawk, Inc.
Computation of Net Income of Common and Common Equivalent Shares and
Pro Forma Net Income of Common and
Common Equivalent Shares Adjusted for Merger, Purchase Accounting and Income
Taxes
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Year ended December 31,
(Pro forma) (Pro forma)
1995 1994 1993
--------------------------------------
<S> <C> <C> <C>
Primary:
Average number of shares used to compute primary
earnings per share 19,138 7,330 7,134
Common stock issuable upon assumed conversion
of stock option exercises 65 247 212
Shares issued in share exchange -- 16,245 16,245
Shares cancelled in share exchange -- (4,279) (4,073)
Other --------------------------------------
Total 19,203 19,543 20,105
--------------------------------------
Net income available for common stock $ 5,576
Pro forma net income adjusted for merger, purchase
accounting and income taxes $ 12,585 $ 9,907
--------------------------------------
Primary earnings per share $ 0.29
Pro forma primary earnings per share adjusted for
merger, purchase accounting and income taxes $ 0.64 $ 0.49
--------------------------------------
Fully Diluted (1):
Average number of shares used to compute fully duluted
earnings per share 19,138 7,330 7,134
Common stock issuable upon assumed conversion of
stock option exercises 65 279 212
Shares issued in share exchange -- 16,245 16,245
Shares cancelled in share exchange -- (4,279) (4,073)
Other -- -- 587
--------------------------------------
Total 19,203 19,575 20,105
--------------------------------------
Net income available for common stock $ 5,676
Pro forma net income adjusted for merger, purchase
accounting and income taxes $ 12,585 $ 9,907
--------------------------------------
Fully diluted earnings per share $ 0.29
Pro forma fully diluted earnings per share adjusted for
merger, purchase accounting and income taxes $ 0.64 $ 0.49
--------------------------------------
</TABLE>
(1) This calculation is submitted in accordance with Regulation S-K item
601(b) (11) although it is contrary to paragraph 40 of APB Opinion No. 15
because it produces a fully diluted earnings per share within 3% of
primary earnings per share.
59
<PAGE> 1
EXHIBIT 23a
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statements (Registration Statement 33-61375, Form S-8 Registration Statement
No. 33-37884, Registration Statement No. 33-44528 and Registration Statement
No. 33-44930) pertaining to the Stockholders Investment Program, Equity Option
Plan and the Outside Directors' Formula Stock Option Plan of Schawk, Inc. of
our report dated February 9, 1996, with respect to the consolidated financial
statements and schedules of Schawk, Inc. and our report dated November 12, 1993
with the respect to the combined financial statements of Fuzere Manufacturing
Company, Inc., Robinson Industries and Fuzere Midwest included in the Annual
Report (Form 10-K) for the year ended December 31, 1995.
Chicago, Illinois ERNST & YOUNG LLP
March 21, 1996
<PAGE> 1
EXHIBIT 23b
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated February 17, 1995, included in this Form 10-K, into Schawk,
Inc.'s (formerly Filtertek, Inc.) previously filed Registration Statement No.
33-61375, Registration Statement No. 33-37884, Registration Statement No.
33-44528 and Registration Statement No. 33-44930.
Chicago, Illinois ARTHUR ANDERSEN LLP
March 22, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,917
<SECURITIES> 0
<RECEIVABLES> 30,849
<ALLOWANCES> 984
<INVENTORY> 16,806
<CURRENT-ASSETS> 53,555
<PP&E> 133,666
<DEPRECIATION> 57,126
<TOTAL-ASSETS> 184,463
<CURRENT-LIABILITIES> 26,680
<BONDS> 69,907
0
0
<COMMON> 165
<OTHER-SE> 76,264
<TOTAL-LIABILITY-AND-EQUITY> 184,463
<SALES> 172,290
<TOTAL-REVENUES> 172,290
<CGS> 122,390
<TOTAL-COSTS> 122,390
<OTHER-EXPENSES> 36,263
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,279
<INCOME-PRETAX> 8,090
<INCOME-TAX> 1,154
<INCOME-CONTINUING> 6,936
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,936
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.29
</TABLE>
