<PAGE> 1
UNITED STATES
Securities and Exchange Commission
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
---------------------------------------------------
THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended February 29, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to _______________________
Commission File No. 0-11488
PENWEST, LTD.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Washington 91-1221360
- --------------------------------------------------------------------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
777-108th Avenue N.E., Suite 2390, Bellevue, WA 98004-5193
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (206) 462-6000
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of March 31, 1996.
<TABLE>
<CAPTION>
Class Outstanding
----- -----------
<S> <C>
Common stock, par value $1.00 6,844,413
</TABLE>
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PENWEST, LTD. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
February 29, 1996 and August 31, 1995 3
Condensed Consolidated Statements of Income
Three Months Ended February 29, 1996
and February 28, 1995 4
Condensed Consolidated Statements of Income
Six Months Ended February 29, 1996 and
February 28, 1995 4
Condensed Consolidated Statements of Cash Flow
Six Months Ended February 29, 1996 and
February 28, 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security-Holders 9
Item 6 - Exhibits and Reports on Form 8-K 9-11
SIGNATURES 12
INDEX TO EXHIBITS 13-14
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
PENWEST, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
February 29, August 31,
1996 1995
----------- ----------
<S> <C> <C>
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,123 $ 5,334
Receivables 26,904 23,943
Inventories:
Raw materials, supplies and other 5,423 3,828
Work in progress 472 483
Finished goods 11,007 9,898
--------- ---------
16,902 14,209
Prepaid expenses and other 3,031 5,447
--------- -----------
Total current assets 48,960 48,933
Property, plant and equipment, net 113,969 111,440
Deferred income taxes 9,932 9,927
Other assets 18,658 16,460
--------- ----------
Total assets $ 191,519 $186,760
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 11,103 $ 8,749
Accrued liabilities 6,608 6,728
Current portion of long-term debt 1,270 4,270
---------- ----------
Total current liabilities 18,981 19,747
Long-term debt 60,243 58,628
Other postretirement benefits 9,937 10,155
Deferred income taxes and other 26,851 26,248
Shareholders' equity:
Common stock 8,677 8,591
Additional paid-in capital 13,306 12,550
Retained earnings 86,940 84,949
Treasury stock (30,637) (30,637)
Note receivable from PENWEST Savings and
Stock Ownership Plan (2,279) (2,978)
Cumulative translation adjustment (500) (493)
---------- ------------
Total shareholders' equity 75,507 71,982
--------- ----------
Total liabilities and
shareholders' equity $ 191,519 $186,760
========= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
PENWEST, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended February 29/28 Ended February 29/28
--------------------------------- ---------------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 46,313 $ 42,429 $ 91,936 $ 85,199
Cost of sales 35,184 30,517 68,640 62,044
----------- ----------- ----------- -----------
Gross margin 11,129 11,912 23,296 23,155
Operating expenses 8,558 8,408 17,125 15,936
----------- ----------- ----------- -----------
Income from operations 2,571 3,504 6,171 7,219
Interest expense, net (1,254) (1,063) (2,307) (2,105)
Other 899 899
----------- ----------- ----------- -----------
Income before taxes 1,317 3,340 3,864 6,013
Income taxes 409 1,187 1,208 2,103
----------- ----------- ----------- -----------
Net income $ 908 $ 2,153 $ 2,656 $ 3,910
=========== =========== =========== ===========
Weighted average common shares and
equivalents outstanding 7,012,949 7,025,975 6,993,377 7,084,538
Earnings per common share $ 0.13 $ 0.31 $ 0.38 $ 0.55
=========== =========== =========== ===========
Dividends declared per common share $ 0.05 $ 0.05 $ 0.10 $ 0.10
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
PENWEST, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended February 29/28
---------------------------
1996 1995
-------- --------
<S> <C> <C>
Operating Activities:
Net income $ 2,656 $ 3,910
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 5,616 5,051
Deferred income taxes 598 375
Gain on the sale of assets -- (899)
Change in operating assets and liabilities:
Receivables (2,961) (925)
Inventories (2,693) 4,243
Accounts payable and other 5,349 3,316
-------- --------
Net cash flow from operating activities 8,565 15,071
Investing Activities:
Additions to plant and equipment (8,145) (13,983)
Proceeds from sale of assets 2,500
Other 89 (99)
-------- --------
Net cash used by investing activities (8,056) (11,582)
Financing Activities:
Proceeds from unsecured line of credit 20,282 9,040
Payments from unsecured line of credit (20,282) (9,040)
Proceeds of long-term debt 15,250 20,000
Payments on long-term debt (16,635) (1,965)
Purchase of treasury stock -- (1,310)
Exercise of stock options 842 22
Purchase of life insurance for officers' benefit plan (2,501) (2,501)
Payment of dividends (676) (683)
Other -- 709
-------- --------
Net cash from (used by) financing activities (3,720) 14,272
-------- --------
Net increase (decrease) in cash and cash equivalents (3,211) 17,761
Cash and cash equivalents (bank overdraft) at
beginning of period 5,334 (635)
-------- --------
Cash and cash equivalents at end of period $ 2,123 $ 17,126
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
PENWEST, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation for
the interim periods presented have been included. Operating results for
the three and six month periods ended February 29, 1996 are not
necessarily indicative of the results that may be expected for the year
ending August 31, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in
PENWEST's annual report on Form 10-K for the fiscal year ended August
31, 1995.
2. DEBT
On December 22, 1995, the Company completed an unsecured $35 million
credit agreement with four banks expiring on December 30, 1998 under
which there were $15.3 million outstanding at quarter end. Borrowing
rates available to the Company under the agreement are based on prime
rate or the interbank offered rate depending on the selection of
borrowing options. The agreement replaced an unsecured term agreement
which at December 22, 1995, had $15.3 million of borrowings
outstanding and an unsecured $15 million revolving line of credit
under which there were no outstanding borrowings at December 22, 1995.
The new debt agreement contains, among other terms, certain
restrictions related to limitations on indebtedness and minimum net
worth, which are similar to restrictions on previously existing debt.
In addition, the Company is required to maintain a minimum fixed charge
coverage ratio.
3. INCOME TAXES
The effective tax rate for the six-month period ended February 29, 1996
was 31% compared to the statutory rate of 34%. The effective rate was
lower than the statutory rate due to state tax refunds received by the
Company.
4. SALE OF COGENERATION ASSETS
During the second quarter of fiscal year 1995, the Company completed a
sale of the turbine and the boilers constituting the assets of its
cogeneration facility in Vancouver, Washington. A pretax gain on the
sale of $899,000 was recorded in such second quarter and is shown as
other income.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity
PENWEST maintains a highly liquid position. Liquidity at February 29, 1996
consisted of the following: cash and cash equivalents of $2.1 million, working
capital of approximately $30.0 million, and several uncommitted lines of credit
with various banks aggregating $15 million that may be used for overnight
borrowings under which there were no borrowings outstanding. On December 22,
1995, the Company completed a new $35 million credit agreement with four banks,
replacing both an unsecured term agreement which had $15.3 million outstanding
and a $15 million revolving credit agreement under which there were no
borrowings outstanding at December 22, 1995.
Cash flow from operations for the six months ended February 29, 1996 was $8.6
million compared to $15.3 million in the corresponding period a year ago. The
decrease is primarily due to increases in receivables and inventories, and lower
profitability. The Company used operating cash flow and short-term borrowings to
finance capital expenditures during the first six months of the year.
The Board of Directors declared a $0.05 per share dividend which was paid on
March 1, 1996, to shareholders of record as of February 16, 1996.
Capital Resources
Additions to property, plant and equipment during the six months ended February
29, 1996 were $8.1 million. Second quarter additions of $5.3 million were
directed primarily to ongoing operating enhancements at Penford Products Co. in
Cedar Rapids, Iowa.
Results of Operations
Net income was $908,000, or $0.13 per share, for the second quarter compared to
net income of $2.2 million, or $0.31 per share, for the corresponding period a
year ago. The prior year period included a non-recurring gain of $899,000, or
$593,000 on an after tax basis, from the sale of the assets of Pacific
Cogeneration Inc. Net income for the six months was $2.7 million, or $0.38 per
share, compared with $3.9 million, or $0.55 per share, in the year earlier
period.
Sales increased in the second quarter and the first six months of fiscal year
1996 to $46.3 million and $91.9 million, respectively, representing a 9.2% and
7.9% increase, respectively, from the corresponding periods a year ago. Most of
the second quarter increase is due to acutely higher corn costs, a key component
used in pricing Penford's paper chemical products, which are generally passed
through to customers. Sales volumes at Penford were down from a year ago
primarily due to a sharp drop in production by the paper industry. Lower
production in the paper industry led to reduced shipments to existing customers
during the quarter and delayed shipments of new business. Even with sharp
reductions in output by the paper industry, our customers' finished goods
inventory levels remain high because of soft end-user demand for paper. Penwest
Pharmaceuticals Group experienced continued volume growth and posted record
revenues for the quarter. Although shipments were down
7
<PAGE> 8
from the first quarter resulting from seasonal downtime, Penwest Foods' revenues
increased over the same period a year ago primarily due to higher volumes of its
line of starch-based coatings for french fries.
The gross margin for the three-month period ended February 29, 1996 was 24.0%
compared to 28.1% in the corresponding period a year ago. Lower volumes of
Penford's high end starches and the negative effect of a rapidly rising corn
market contributing approximately the same gross margin dollars on higher sales
dollars resulted in a lower gross margin percentage.
Operating expenses in the second quarter rose $150,000, or 1.8%. For the year
operating expenses are up 7.5% which is primarily due to increased investment in
research and development especially in the Penwest Pharmaceuticals Group.
Net interest expense for the second quarter of fiscal year 1996 was $1.3 million
compared to $1.1 million for the corresponding period a year ago. The increase
reflects lower capitalized interest and lower investment income throughout the
current quarter.
Forward-looking Statements
Penford's net corn costs have continued to rise subsequent to the end of the
second quarter and are expected to negatively impact gross margins on fixed
sales contracts in the foreseeable future. Price increases for byproduct sales,
which are netted against the cost of corn, have not kept up with the increases
in corn cost. Conditions in the corn market are such that the changes in the
value of the Company's futures contracts have not completely offset rising net
corn costs on its fixed price contracts. These are unusual market conditions and
the Company continues to pursue ways to better protect its margins on fixed
sales contracts.
If the paper industry rebounds later this calendar year, stronger starch sales
volume could result from the resumption of alkaline-based conversions, and from
a rebound in demand stimulated by reductions in our customers' inventories and
recent lower paper prices. Gross margin percentages are also anticipated to
improve if the paper industry strengthens and corn costs recede from historical
highs.
The above discussion contains forward-looking statements. There are certain
important factors that could cause results to differ materially from those
anticipated by the statements made above. These factors include, but are not
limited to, the market price of corn and corn byproducts, the economic condition
of the paper industry, and competition. Additional information on these and
other factors which could affect the Company's financial results is included in
the Company's 1995 Annual Report to Shareholders, its Form 10-K for the fiscal
year ended August 31, 1995, and its Form 10-Q for the fiscal quarter ended
November 30, 1995, on file with the Securities and Exchange Commission.
8
<PAGE> 9
PART II - OTHER INFORMATION
Item 4 Submission Of Matters To A Vote Of Security Holders
(a) The annual meeting of shareholders of PENWEST, LTD. was held on
January 23, 1996.
(b) The following directors were elected to serve a term of three
years:
Richard E. Engebrecht, William G. Parzybok, Jr., and William K.
Street. The board is comprised of those elected this year and the
following directors completing their terms: Harry Mullikin, N.
Stewart Rogers, Paul H. Hatfield, Tod R. Hamachek, Sally G.
Narodick, and James H. Wiborg.
(c) The following matters were voted upon at the meeting:
1. For the election of directors:
<TABLE>
<CAPTION>
For % Withheld %
--- - -------- -
<S> <C> <C> <C> <C>
Richard E. Engebrecht 5,873,660 98.37% 97,058 1.63%
William G. Parzybok, Jr. 5,909,966 98.98% 60,752 1.02%
William K. Street 5,871,586 98.34% 99,132 1.66%
</TABLE>
2. Approval of the PENWEST, LTD. Stock Option Plan for
Non-Employee Directors.
<TABLE>
<CAPTION>
For Against Abstain Non-Vote
--- ------- ------- --------
<S> <C> <C> <C> <C>
3,657,802 1,337,417 279,896 695,603
</TABLE>
3. Approval of an amendment to the PENWEST, LTD. 1994 Stock
Option Plan.
<TABLE>
<CAPTION>
For Against Abstain Non-Vote
--- ------- ------- --------
<S> <C> <C> <C> <C>
5,493,193 312,103 92,156 73,266
</TABLE>
4. Ratification of selection of Ernst & Young LLP as
independent auditors of the Company.
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
5,915,075 24,581 31,062
</TABLE>
(d) Not applicable.
Item 6 Exhibits and Reports on Form 8-K.
(a) Exhibits:
3.1 Restated Articles of Incorporation of Registrant
9
<PAGE> 10
3.2 Bylaws of Registrant as amended and restated as of
June 27, 1995
4.1 PENWEST, LTD. Common Stock Purchase Rights, dated
June 3, 1988 (filed on Form 8-A dated June 3, 1988)
10.1 Senior Note Agreement among PENWEST, LTD. as Borrower
and Mutual of Omaha and Affiliates as lenders, dated
November 1, 1992 (filed as an Exhibit to Registrant's
Form 10-Q for the quarter ended February 28, 1993)
10.2 Term Loan Agreement among Penford Products Co., and
PENWEST, LTD. as Borrowers, and First Interstate Bank
of Washington, N.A. as Lender, dated September 27,
1990 (Registrant agrees to furnish a copy of this
instrument to the Commission on request)
10.3 Loan Agreement among PENWEST, LTD. as Borrower and
Seattle-First National Bank as Lender, dated December
1, 1989 (Registrant agrees to furnish a copy of this
instrument to the Commission on request)
10.4 PENWEST, LTD. Supplemental Executive Retirement Plan,
dated March 19, 1990 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal year ended
August 31, 1991)
10.5 PENWEST, LTD. Supplemental Survivor Benefit Plan,
dated January 15, 1991 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal year ended
August 31, 1991)
10.6 PENWEST, LTD. Deferred Compensation Plan, dated
January 15, 1991 (filed as an Exhibit to Registrant's
Form 10-K for the fiscal year ended August 31, 1991)
10.7 Change of Control Agreements with Messrs. Hamachek,
Reed, Cook, Widmaier, Schmelzer, Talley, Horn and
Rydzewski (a representative copy of these agreements
is filed as an exhibit to Registrant's Form 10-K for
the fiscal year ended August 31, 1995.)
10.8 PENWEST, LTD. 1993 Non-Employee Director Restricted
Stock Plan (filed as an Exhibit to Registrant's Form
10-Q for the quarter ended November 30, 1993)
10
<PAGE> 11
10.9 Note Agreement dated as of October 1, 1994 among
PENWEST, LTD., Principal Mutual Life Insurance
Company and TMG Life Insurance Company (filed as an
Exhibit to Registrant's Form 10-Q for the quarter
ended February 28, 1995)
10.10 PENWEST, LTD. 1994 Stock Option Plan (filed as an
Exhibit to the Registration Statement dated April 25,
1995 on Form S-8, Commission File No. 33-58799)
10.11 Credit Agreement dated as of December 22, 1995 among
PENWEST, LTD., and its subsidiaries, Bank of America
National Trust and Savings Association, ABN-AMRO
Bank, N.V., The Bank of Nova Scotia, and
Seattle-First National Bank
11 Statement re: Computation of Earnings Per Share
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PENWEST, LTD.
-------------------------------------
(Registrant)
April 12, 1996 /S/ Tod R. Hamachek
- ----------------- -------------------------------------
Date Tod R. Hamachek
President and
Chief Executive Officer
April 12, 1996 /S/ Jeffrey T. Cook
- ----------------- -------------------------------------
Date Jeffrey T. Cook
Vice President, Finance and
Chief Financial Officer (Principal
Financial Officer)
12
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INDEX TO EXHIBITS
Exhibits identified in parentheses below, on file with the Securities and
Exchange Commission, are incorporated by reference.
Exhibit No. Item
(3.1) Restated Articles of Incorporation of Registrant
(3.2) Bylaws of Registrant as amended and restated as of
June 27, 1995
(4.1) PENWEST, LTD. Common Stock Purchase Rights, dated
June 3, 1988 (filed on Form 8-A dated June 3, 1988)
(10.1) Senior Note Agreement among PENWEST, LTD. as
Borrower and Mutual of Omaha and Affiliates as lenders,
dated November 1, 1992 (filed as an Exhibit to
Registrant's Form 10-Q for the quarter ended February
28, 1993)
(10.2) Term Loan Agreement among Penford Products Co.,
and PENWEST, LTD. as Borrowers, and First Interstate
Bank of Washington, N.A. as Lender, dated September
27, 1990 (Registrant agrees to furnish a copy of this
instrument to the Commission on request)
(10.3) Loan Agreement among PENWEST, LTD. as Borrower
and Seattle-First National Bank as Lender, dated December
1, 1989 (Registrant agrees to furnish a copy of this
instrument to the Commission on request)
(10.4) PENWEST, LTD. Supplemental Executive
Retirement Plan, dated March 19, 1990 (filed as
an Exhibit to Registrant's Form 10-K for the fiscal
year ended August 31, 1991)
(10.5) PENWEST, LTD. Supplemental Survivor Benefit
Plan, dated January 15, 1991 (filed as an Exhibit
to Registrant's Form 10-K for the fiscal year ended
August 31, 1991)
(10.6) PENWEST, LTD. Deferred Compensation Plan,
dated January 15, 1991 (filed as an Exhibit to
Registrant's Form 10-K for the fiscal year ended
August 31, 1991)
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(10.7) Change of Control Agreements with Messrs.
Hamachek, Reed, Cook, Widmaier, Schmelzer, Talley,
Horn and Rydzewski (a representative copy of these
agreements is filed as an exhibit to Registrant's Form 10-K
for the fiscal year ended August 31, 1995)
(10.8) PENWEST, LTD. 1993 Non-Employee Director
Restricted Stock Plan (filed as an Exhibit to Registrant's
Form 10-Q for the quarter ended November 30, 1993)
(10.9) Note Agreement dated as of October 1, 1994 among PENWEST, LTD.,
Principal Mutual Life Insurance Company and TMG Life Insurance
Company (filed as an Exhibit to Registrant's Form 10-Q for the
quarter ended February 28, 1995)
(10.10) PENWEST, LTD. 1994 Stock Option Plan (filed as an
Exhibit to the Registration Statement dated April 25, 1995
on Form S-8, Commission File No. 33-58799)
10.11 Credit Agreement dated as of December 22, 1995 among
PENWEST, LTD., and its subsidiaries, Bank of America
National Trust and Savings Association, ABN-AMRO Bank,
N.V., The Bank of Nova Scotia, and Seattle-First National Bank
11 Statement Regarding Computation of Per Share Earnings
27 Financial Data Schedule
14
<PAGE> 1
==============================================================================
CREDIT AGREEMENT
DATED AS OF DECEMBER 22, 1995
AMONG
PENWEST, LTD.
PENFORD PRODUCTS CO.
EDWARD MENDELL CO., INC.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS AGENT FOR THE BANKS,
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
ARRANGED BY
BA SECURITIES, INC.
==============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
ARTICLE I
DEFINITIONS............................................................... 1
1.01 Certain Defined Terms...................................... 1
1.02 Other Interpretive Provisions.............................. 16
1.03 Accounting Principles...................................... 17
ARTICLE II
THE CREDITS............................................................... 17
2.01 Amounts and Terms of Commitments........................... 17
2.02 Loan Accounts.............................................. 18
2.03 Procedure for Borrowing.................................... 18
2.04 Conversion and Continuation Elections...................... 19
2.05 Voluntary Termination or Reduction of
Commitments............................................. 20
2.06 Optional Prepayments....................................... 21
2.07 Repayment.................................................. 21
2.08 Interest................................................... 21
2.09 Fees....................................................... 22
(a) Agency Fees........................................... 22
(b) Commitment Fees....................................... 22
2.10 Computation of Fees and Interest........................... 23
2.11 Payments by the Companies.................................. 23
2.12 Payments by the Banks to the Agent......................... 24
2.13 Sharing of Payments, Etc................................... 24
2.14 Extension of Termination Date.............................. 25
ARTICLE III
TAXES, YIELD PROTECTION, ILLEGALITY, JOINT AND SEVERAL LIABILITY.......... 25
3.01 Taxes...................................................... 25
3.02 Illegality................................................. 27
3.03 Increased Costs and Reduction of Return.................... 28
3.04 Funding Losses............................................. 29
3.05 Inability to Determine Rates............................... 29
3.06 Joint and Several Liability................................ 30
3.07 Survival................................................... 31
ARTICLE IV
CONDITIONS PRECEDENT...................................................... 31
4.01 Conditions of Initial Loans................................ 31
(a) Credit Agreement and Notes............................ 31
(b) Resolutions; Incumbency............................... 31
(c) Legal Opinions........................................ 32
(d) Payment of Fees....................................... 32
(e) Certificate........................................... 32
</TABLE>
i
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<TABLE>
<CAPTION>
Section Page
<S> <C>
(f) Prior Credit Agreements............................... 32
(g) Other Documents....................................... 32
4.02 Conditions to All Borrowings............................... 32
(a) Notice of Borrowing or
Conversion/Continuation............................... 32
(b) Continuation of Representations and
Warranties............................................ 33
(c) No Existing Default................................... 33
(d) No Material Adverse Effect............................ 33
ARTICLE V
REPRESENTATIONS AND WARRANTIES............................................ 33
5.01 Corporate Existence and Power.............................. 33
5.02 Corporate Authorization; No Contravention.................. 33
5.03 Governmental Approvals, Etc................................ 34
5.04 Binding Effect............................................. 34
5.05 Litigation................................................. 34
5.06 Financial Condition........................................ 34
5.07 Title to Properties........................................ 35
5.08 Taxes...................................................... 35
5.09 No Event of Default........................................ 35
5.10 Use of Proceeds; Margin Regulations........................ 35
5.11 Regulated Entities......................................... 36
5.12 ERISA Compliance........................................... 36
5.13 Environmental Matters...................................... 36
5.14 No Burdensome Restrictions................................. 37
5.15 Copyrights, Patents, Trademarks and Licenses,
etc..................................................... 37
5.16 Subsidiaries............................................... 37
5.17 Insurance.................................................. 37
5.18 Full Disclosure............................................ 37
ARTICLE VI
AFFIRMATIVE COVENANTS..................................................... 38
6.01 Use of Proceeds............................................ 38
6.02 Preservation of Corporate Existence, Etc................... 38
6.03 Inspection of Property and Books and Records............... 38
6.04 Maintenance of Property.................................... 39
6.05 Compliance with Laws....................................... 39
6.06 Compliance with ERISA...................................... 39
6.07 Environmental Laws......................................... 39
6.08 Payment of Obligations..................................... 39
6.09 Insurance.................................................. 39
6.10 Financial Statements....................................... 40
6.11 Certificates; Other Information............................ 40
6.12 Notices.................................................... 41
6.13 Cooperation................................................ 42
6.14 Maintain Ownership and Control............................. 42
</TABLE>
ii
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<TABLE>
<CAPTION>
Section Page
<S> <C>
ARTICLE VII
NEGATIVE COVENANTS........................................................ 42
7.01 Liquidations, Merger, Sale of Assets....................... 42
7.02 Limitation on Indebtedness................................. 43
7.03 Guaranties, Etc............................................ 44
7.04 Investments................................................ 44
7.05 Limitation on Liens........................................ 45
7.06 Deliberately left blank.................................... 47
7.07 Transactions with Affiliates............................... 47
7.08 Use of Proceeds............................................ 47
7.09 Joint Ventures............................................. 48
7.10 Restricted Payments........................................ 48
7.11 Minimum Tangible Net Worth................................. 48
7.12 Maximum Leverage Ratio..................................... 48
7.13 Minimum Fixed Charge Coverage Ratio........................ 48
7.14 ERISA...................................................... 49
7.15 Uninvited Acquisitions..................................... 49
7.16 Change in Business......................................... 49
7.17 Accounting Changes......................................... 49
ARTICLE VIII
EVENTS OF DEFAULT......................................................... 49
8.01 Event of Default........................................... 49
(a) Non-Payment........................................... 49
(b) Representation or Warranty............................ 49
(c) Specific Defaults..................................... 50
(d) Other Defaults........................................ 50
(e) Cross-Default......................................... 50
(f) Insolvency; Voluntary Proceedings..................... 50
(g) Involuntary Proceedings............................... 50
(h) ERISA................................................. 51
(i) Monetary Judgments.................................... 51
(j) Non-Monetary Judgments................................ 51
(k) Change in Control..................................... 51
(l) Loss of Licenses...................................... 51
(m) Government Approvals, Etc............................. 52
8.02 Remedies................................................... 52
8.03 Rights Not Exclusive....................................... 52
8.04 Certain Financial Covenant Defaults........................ 52
ARTICLE IX
THE AGENT................................................................. 53
9.01 Appointment and Authorization; "Agent"..................... 53
9.02 Delegation of Duties....................................... 53
9.03 Liability of Agent......................................... 53
9.04 Reliance by Agent.......................................... 54
9.05 Notice of Default.......................................... 54
9.06 Credit Decision............................................ 55
9.07 Indemnification of Agent................................... 55
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Section Page
<S> <C>
9.08 Agent in Individual Capacity............................... 56
9.09 Successor Agent............................................ 56
9.10 Withholding Tax............................................ 57
ARTICLE X
MISCELLANEOUS............................................................. 58
10.01 Amendments and Waivers.................................... 58
10.02 Notices................................................... 59
10.03 No Waiver; Cumulative Remedies............................ 60
10.04 Costs and Expenses........................................ 60
10.05 Companies Indemnification................................. 61
10.06 Payments Set Aside........................................ 61
10.07 Successors and Assigns.................................... 61
10.08 Assignments, Participations, etc.......................... 62
10.09 Confidentiality........................................... 63
10.10 Set-off................................................... 64
10.11 Notification of Addresses, Lending Offices,
Etc..................................................... 65
10.12 Counterparts.............................................. 65
10.13 Severability.............................................. 65
10.14 No Third Parties Benefited................................ 65
10.15 Governing Law and Jurisdiction............................ 65
10.16 Waiver of Jury Trial...................................... 65
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Section Page
<S> <C>
SCHEDULES
Schedule 2.01 Commitments
Schedule 5.12 ERISA
Schedule 5.13 Environmental Matters
Schedule 5.15 Copyrights, Patents, etc.
Schedule 5.16 Subsidiaries and Minority Interests
Schedule 5.17 Insurance Matters
Schedule 7.02 Existing Indebtedness
Schedule 7.05 Permitted Liens
Schedule 10.02 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Compliance Certificate
Exhibit B Form of Promissory Note
Exhibit C Form of Notice of Borrowing
Exhibit D Form of Notice of Conversion/Continuation
Exhibit E Legal Opinion of Companies' Counsel
Exhibit F Form of Assignment and Acceptance
</TABLE>
v
<PAGE> 7
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of December 22, 1995, among
PENWEST, LTD., a Washington corporation ("Penwest"), Penford Products Co., a
Delaware corporation, and Edward Mendell Co., Inc., Washington corporation
(Penwest, Penford Products Co., and Edward Mendell Co., Inc. are collectively
referred to in this Agreement as the "Companies"; and individually, a
"Company"), 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.
WHEREAS, the Banks have agreed to make available to the Companies a
revolving 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
1.01 Certain Defined Terms. The following terms have the
following meanings:
"Acquisition" means any transaction or series of related
transactions by a Company 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 such Company or 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
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<PAGE> 8
Banks hereunder, and any successor agent arising under Section 9.09.
"Agent-Related Persons" means BofA and any successor agent
arising under Section 9.09, together with their respective Affiliates
(including, in the case of BofA, the Arranger), and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Agent's Payment Office" means the address for payments set
forth on Schedule 10.02 or such other address as the Agent may from
time to time specify.
"Agreement" means this Credit Agreement.
"Applicable Margin" means for the period from the date of this
Agreement until two Business Days after receipt by the Agent of the
Compliance Certificate delivered together with the financial statements
referred to in Section 6.10(a) for Penwest's 1995 fiscal year ended
August 31, 1995, 0.625% for Offshore Rate Loans and 0.00% for Base Rate
Loans, thereafter the Applicable Margin shall be determined as follows:
<TABLE>
<CAPTION>
================================================================================
If the Consolidated Total Debt to EBITDA
Ratio of Penwest shown on the most recent
Compliance Certificate (starting with the
Compliance Certificate delivered together
with the financial statements referred to
in Section 6.10(a) for Penwest's 1995
fiscal year ended August 31, 1995)
furnished pursuant to Section 6.11(a) is
as set forth below and an Event of Default
has not occurred:
------------------------------------------------------
Greater than or equal to Less than
3.00 to 1.0 3.00 to 1.0
- --------------------------------------------------------------------------------
<S> <C> <C>
Offshore
Rate Loans 0.750% 0.625%
- --------------------------------------------------------------------------------
Base Rate
Loans 0.000% 0.000%
================================================================================
</TABLE>
Each subsequent change in the Applicable Margin shall take effect two
Business Days after receipt by the Agent of Penwest's Compliance
Certificate pursuant to Section 6.11(a).
"Arranger" means BA Securities, Inc., a Delaware
corporation.
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<PAGE> 9
"Assignee" has the meaning specified in subsection
10.08(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.
"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.
"Base Rate Loan" means a Loan that bears interest based on the
Base Rate.
"Beneficial Owner" means, with respect to any securities, a
Person who would be deemed to be a beneficial owner thereof under Rule
13d-3 of the Exchange Act as in effect on the date hereof.
"BofA" means Bank of America National Trust and Savings
Association, a national banking association.
"Borrowing" means a borrowing hereunder consisting of Loans of
the same Type made to a Company 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 2.03.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York or San
Francisco, California are authorized or required by law to close and,
if the applicable Business Day relates to any Offshore Rate Loan, means
such a day on which
3
<PAGE> 10
dealings are carried on in the applicable offshore dollar
interbank market.
"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.
"Change in Control" means any of the following events or
conditions: (i) any Interested Stockholder is or becomes a Beneficial
Owner, directly or indirectly, of 30% or more of the outstanding shares
of the any Company entitled to vote in the election of directors,
unless the acquisition of 30% or more of such shares by such Interested
Stockholder shall have been approved or ratified by a majority of the
Continuing Directors, (ii) any Interested Stockholder is or becomes a
Beneficial Owner, directly or indirectly, of 50% or more of the
outstanding shares of any Company entitled to vote in the election of
directors, or (iii) Continuing Directors no longer constitute a
majority of any Company's board of directors.
"Closing Date" means the date on which all conditions
precedent set forth in Section 4.01 are satisfied or waived by all
Banks (or, in the case of subsection 4.01(d), 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 2.01.
"Compliance Certificate" means a certificate
substantially in the form of Exhibit A.
"Consolidated Current Debt" of Penwest means all Current Debt
of Penwest and its Restricted Subsidiaries, determined on a
consolidated basis eliminating intercompany items.
"Consolidated Funded Debt" of Penwest means all Funded Debt of
Penwest and its Restricted Subsidiaries, determined on a consolidated
basis eliminating intercompany items.
"Consolidated Net Worth" of Penwest means, on a consolidated
basis, the amount by which (A) Penwest's total assets exceeds (B)
Penwest's total liabilities (including accrued and deferred income
taxes and subordinated liabilities); except that if, at the time of
computation, (C) the portion of Consolidated Net Worth attributable to
those Subsidiaries of Penwest which are not Restricted
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<PAGE> 11
Subsidiaries is more than (D) 15% of Consolidated Net Worth, then
Consolidated Net Worth shall be determined by subtracting (x) the
amount by which (C) exceeds (D) from (y) the amount by which (A)
exceeds (B).
"Consolidated Total Debt" of Penwest means the sum of
Consolidated Current Debt plus Consolidated Funded Debt.
"Consolidated Total Debt to EBITDA Ratio" of Penwest
means the ratio of Consolidated Total Debt to Penwest's EBITDA.
"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"); or (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. 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.
"Continuing Director" means a member of the any Company's
board of directors who (i) was a member of such board immediately prior
to the time any Interested Stockholder became an Interested Stockholder
or (ii) was nominated by a majority of the directors who were
Continuing Directors at the time of such nomination.
"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
5
<PAGE> 12
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 2.04, a Company (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.
"Current Debt" of any Person means, as of the date of any
determination thereof, (i) all Indebtedness of such Person for borrowed
money other than Funded Debt of such Person and (ii) Guaranty
Obligations of such Person of Current Debt of others.
"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.
"Dollars", "dollars" and "$" each mean lawful money of
the United States.
"EBITDA" of a Person means such Person's earnings before
interest expense, taxes, depreciation, and amortization, computed on a
consolidated basis and measured on a four quarter trailing basis.
"Eligible Assignee" means (a) 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 $100,000,000; (b) a commercial
bank organized under the laws of any other country which is a member of
the Organization for Economic Cooperation and Development (the "OECD"),
or a political subdivision of any such country, and having a combined
capital and surplus of at least $100,000,000, provided that such bank
is acting through a branch or agency located in the country in which it
is organized or another country which is also a member of the OECD; and
(c) a Person that is primarily engaged in the business of commercial
banking and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary of a
Person of which a Bank is a Subsidiary, or (iii) 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,
6
<PAGE> 13
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 any 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 any Company 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 any Company 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
any Company or any ERISA Affiliate.
"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 8.01.
"Exchange Act" means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.
"Extension Request" has the meaning ascribed in
Section 2.14.
"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
7
<PAGE> 14
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, New York time) on that day by each of
three leading brokers of Federal funds transactions in New York, New
York selected by the Agent.
"Fee Letter" has the meaning specified in subsection
2.09(a).
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
"Funded Debt" of any Person means all Indebtedness of such
Person in each case having a final maturity of one or more than one
year from the date of origin thereof (or which is renewable or
extendible at the option of the obligor for a period or periods more
than one year from the date of origin), including all principal
payments in respect thereof that are required to be made within one
year from the date of any determination of Funded Debt, whether or not
the obligation to make such payments shall constitute a current
liability of the obligor under GAAP.
"Further Taxes" means any and all present or future taxes,
levies, assessments, imposts, duties, deductions, fees, withholdings or
similar charges (including, without limitation, net income taxes and
franchise taxes), and all liabilities with respect thereto, imposed by
any jurisdiction on account of amounts payable or paid pursuant to
Section 3.01.
"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.
"Government Approval" means an approval, permit, license,
authorization, certificate, or consent of any Governmental Authority.
"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,
8
<PAGE> 15
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 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
obligations with respect to capital leases; (g) all indebtedness
referred to in clauses (a) through (f) 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 (h) all Guaranty Obligations in respect of
indebtedness or obligations of others of the kinds referred to in
clauses (a) through (g) above.
For all purposes of this Agreement, the Indebtedness of any Person
shall include all recourse Indebtedness of any partnership or joint
venture or limited liability company in which such Person is a general
partner or a joint venturer or a member.
"Indemnified Liabilities" has the meaning specified in
Section 10.05.
"Indemnified Person" has the meaning specified in
Section 10.05.
"Independent Auditor" has the meaning specified in
subsection 6.10(a).
"Insolvency Proceeding" means, with respect to any
Person, (a) any case, action or proceeding with respect to
9
<PAGE> 16
such Person 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.
"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 a Company 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 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 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; and
(iii) no Interest Period for any Loan shall
extend beyond the Termination Date.
"Interested Stockholder" means (i) any Person which is or
becomes the Beneficial Owner, directly or indirectly, of 5% or more of
the outstanding shares of any Company entitled to vote or (ii) any two
or more Persons which "act as a partnership, limited partnership,
syndicate or other group
10
<PAGE> 17
for the purpose of acquiring, holding, or disposing of securities" of
any Company and which are or become the Beneficial Owners, directly or
indirectly, of 5% or more of the outstanding shares of any Company
entitled to vote.
"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 any 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
10.02, or such other office or offices as such Bank may from time to
time notify the Companies 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 Company
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 at least
66-2/3% of the then aggregate unpaid principal amount of the Loans, or,
if no such principal amount is then outstanding, Banks then having at
least 66-2/3% of the Commitments.
"Margin Stock" means "margin stock" as such term is
11
<PAGE> 18
defined in Regulation G, T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change
in, or a material adverse effect upon, the operations, business,
properties, condition (financial or otherwise) or prospects of the
Companies and their Subsidiaries taken as a whole; or (b) a material
adverse effect upon the legality, validity, binding effect or
enforceability against any Company of any Loan Document.
"Multiemployer Plan" means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, to which any Company 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 Companies in
favor of a Bank pursuant to subsection 2.02(b), in substantially the
form of Exhibit B.
"Notice of Borrowing" means a notice in substantially
the form of Exhibit C.
"Notice of Conversion/Continuation" means a notice in
substantially the form of Exhibit D.
"Obligations" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document owing
by the Companies 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 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 deposits exceeding $5,000,000,000 in
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respect of 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 dollar deposits
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 dollar interbank market at their request at
approximately 11:00 a.m. (New York, New York 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.
"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, court 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, performance, enforcement or registration of, or
otherwise with respect to, this Agreement or any other Loan Documents.
"Participant" has the meaning specified in subsection
10.08(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 any Company 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 plan years.
"Permitted Liens" has the meaning specified in Section
7.05.
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"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 any Company sponsors or maintains or to which any
Company makes, is making, or is obligated to make contributions and
includes any Pension Plan.
"Prior Credit Agreements" means that certain (a) Secured Term
Credit Agreement dated as of November 9, 1990, among Penwest, Ltd. and
Penford Products Co. as Borrowers; Security Pacific Bank Washington,
N.A., Seattle-First National Bank, Continental Bank N.A., and U.S.
Bank of Washington, National Association as Lenders and Security
Pacific Bank Washington, N.A. as Agent for the Lenders as amended from
time to time and as in effect as of the opening of business on the date
of this Agreement, and (b) Revolving Credit Agreement dated as of April
15, 1989 among Penwest, Ltd. and Penford Products Co. as Borrowers;
Security Pacific Bank Washington, N.A., Seattle-First National Bank,
continental Bank N.A., and U.S. Bank of Washington, National
Association as Lenders and Security Pacific Bank Washington, N.A. as
Agent for the Lenders as amended from time to time and as in effect as
of the opening of business on the date of this Agreement.
"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.
"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" of a Person means the chief executive
officer or the president of such Person, 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 such Person, or any other officer having substantially
the same authority and responsibility.
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"Restricted Subsidiary" of Penwest means any Subsidiary of
Penwest (i) which is organized under the laws of the United States or
any State thereof; (ii) which conducts substantially all of its
business and has substantially all of its assets within the United
States; and (iii) of which more than 80% (by number of votes) of the
Voting Stock is beneficially owned, directly or indirectly, by Penwest.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"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
relevant Company.
"Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
"Tangible Net Worth" of a Person means, on a consolidated
basis, total assets (exclusive of goodwill, patents, trademarks, trade
names, organization expense, treasury shares, unamortized debt discount
and premium, deferred charges and other like intangibles) less all
liabilities (including accrued and deferred income taxes and
subordinated liabilities).
"Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar
charges, and all liabilities with respect thereto, excluding, in the
case of each Bank and the Agent, respectively, taxes imposed on or
measured by its net income or gross receipts (to the extent such taxes
measured by gross receipts are in the nature of or in lieu of income
taxes) 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.
"Termination Date" means the earlier to occur of:
(a) December 30, 1998 (or the later date provided by
an extension pursuant to Section 2.14); and
(b) the date on which the Commitments terminate in
accordance with the provisions of this Agreement.
"Total Capitalization" of Penwest means the sum of
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Consolidated Total Debt plus Consolidated Net Worth.
"Type" has the meaning specified in the definition of
"Loan."
"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.
"Voting Stock" means securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies,
entitled to elect a majority of the corporate directors (or Persons
performing similar functions).
"Wholly-Owned" used in connection with any Subsidiary means
any corporation 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 relevant Company, or
by one or more of the other Wholly-Owned Subsidiaries, or both.
1.02 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) (1) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices
and other writings, however evidenced.
(2) The term "including" is not limiting and means
"including without limitation."
(3) 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."
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(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. Unless otherwise expressly
provided, any reference to any action of the Agent or the Banks by way of
consent, approval or waiver shall be deemed modified by the phrase "in its/their
sole discretion."
(g) This Agreement and the other Loan Documents are the result
of negotiations among and have been reviewed by counsel to the Agent, the
Companies, 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.
1.03 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 Penwest.
ARTICLE II
THE CREDITS
2.01 Amounts and Terms of Commitments. Each Bank severally agrees,
on the terms and conditions set forth herein, to make loans to the Companies
from time to time on any Business Day during the period from the Closing Date
to the Termination Date, in an aggregate amount not to exceed at any time
outstanding the amount set forth on Schedule 2.01 (such amount as the same may
be reduced under Section 2.05 or as a result of one or more assignments under
Section 10.08, the Bank's "Commitment");
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provided, however, that, after giving effect to any Borrowing, the aggregate
principal amount of all outstanding Loans shall not at any time exceed the
combined Commitments. Within the limits of each Bank's Commitment, and subject
to the other terms and conditions hereof, the Companies may borrow under this
Section, prepay under Section 2.06 and reborrow under this Section.
2.02 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 conclusive, absent manifest error, of the amount of the Loans made by
the Banks to the Companies 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 Companies hereunder to pay any amount owing with respect
to the Loans.
(b) Upon the request of any Bank made through the Agent, the
Loans made by such Bank may be evidenced by one or more Notes, instead of or in
addition to loan accounts. 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 of each payment of principal made by the Companies with respect thereto.
Each such Bank is irrevocably authorized by the Companies 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 Companies hereunder or under any such Note to such Bank.
2.03 Procedure for Borrowing.
(a) Each Borrowing shall be made on a Business Day upon a
Company's irrevocable written notice delivered to the Agent in the form of a
Notice of Borrowing, which notice must be received by the Agent prior to (i)
10:00 a.m. San Francisco, California time, three Business Days prior to the
requested Borrowing Date, in the case of Offshore Rate Loans; and (ii) 9:00 a.m.
on the requested Borrowing Date, in the case of Base Rate Loans, specifying:
(1) the amount of the Borrowing, which shall be in an
aggregate minimum amount (y) of $2,000,000 or any integral multiple of
$500,000 in excess thereof in the case of Offshore Rate Loans or (z)
which is an integral multiple of $500,000 in the case of Base Rate
Loans;
(2) the requested Borrowing Date, which shall be a Business
Day;
(3) the Type of Loans comprising the Borrowing; and
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<PAGE> 25
(4) 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;
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
10:00 a.m. San Francisco, California time) one Business Day before the Closing
Date and such Borrowing will consist of Base Rate Loans only.
(b) The Agent will promptly notify each Bank of its receipt of
any Notice of Borrowing and of the amount of such Bank's Pro Rata Share of that
Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share of
each Borrowing available to the Agent for the account of the borrowing Company
at the Agent's Payment Office by 12:00 noon San Francisco, California time) on
the Borrowing Date requested by the such Company in funds immediately available
to the Agent. The proceeds of all such Loans will then be made available to the
borrowing Company by the Agent at such office by crediting the account of such
Company on the books of BofA with the aggregate of the amounts made available to
the Agent by the Banks and in like funds as received by the Agent.
(d) After giving effect to any Borrowing, unless the Agent
shall otherwise consent, there may not be more than five different Interest
Periods in effect.
2.04 Conversion and Continuation Elections.
(a) A Company may, upon irrevocable written notice to the
Agent in accordance with subsection 2.04(b):
(1) elect, as of any Business Day, in the case of its Base
Rate Loans, or as of the last day of the applicable Interest Period, in
the case of Offshore Rate Loans, to convert any Base Rate Loans or any
part thereof in an amount not less than $2,000,000 or that is an
integral multiple of $500,000 in excess thereof into Offshore Rate
Loans or to convert any Offshore Rate Loans or any part thereof in
integral multiples of $500,000 into Base Rate Loans; or
(2) elect, as of the last day of the applicable Interest
Period, to continue any of its Offshore Rate Loans having Interest
Periods expiring on such day (or any part thereof in an amount not less
than $2,000,000 or that is in an integral multiple of $500,000 in
excess thereof);
provided, that if at any time the aggregate amount of Offshore Rate Loans in
respect of any Borrowing to a Company is reduced, by payment, prepayment, or
conversion of part thereof to be less
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than $2,000,000, such Offshore Rate Loans shall automatically convert into Base
Rate Loans, and on and after such date the right of such Company to continue
such Loans as, and convert such Loans into, Offshore Rate Loans shall terminate.
(b) A Company shall deliver a Notice of
Conversion/Continuation to be received by the Agent not later than (i) 10:00
a.m. San Francisco, California time at least three Business Days in advance of
the Conversion/Continuation Date, if its Loans are to be converted into or
continued as Offshore Rate Loans; and (ii) 9:00 a.m. San Francisco, California
time on the Business Day of the Conversion/Continuation Date, if the Loans are
to be converted into Base Rate Loans, specifying:
(1) the proposed Conversion/Continuation Date;
(2) the aggregate amount of Loans to be converted or
continued;
(3) the Type of Loans resulting from the proposed
conversion or continuation; and
(4) 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 its Offshore Rate Loans, a Company has failed to select timely a new Interest
Period to be applicable to such Offshore Rate Loans or if any Default or Event
of Default then exists, a Company shall be deemed to have elected to convert its
Offshore Rate Loans into Base Rate Loans effective as of the expiration date of
such Interest Period.
(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
borrower Company, 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 consent, during the
existence of a Default or Event of Default, a Company may not elect to have a
Loan converted into or continued as an Offshore Rate Loan.
(f) After giving effect to any conversion or continuation of
Loans, unless the Agent shall otherwise consent, there may not be more than five
different Interest Periods in effect.
2.05 Voluntary Termination or Reduction of Commitments.
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Penwest may, upon not less than five Business Days' prior notice to the Agent,
terminate the Commitments, or permanently reduce the Commitments by integral
multiples of $1,000,000; unless, after giving effect thereto and to any
prepayments of Loans made on the effective date thereof, the then outstanding
principal 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 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.
2.06 Optional Prepayments. Subject to Section 3.04, a Company may,
at any time or from time to time, upon not less than three Business Days
irrevocable notice to the Agent with respect to Offshore Rate Loans made to it
and one Business Day irrevocable written notice to the Agent with respect to
Base Rate Loans made to it, ratably prepay Loans in whole or in part, in minimum
amounts of (y) $2,000,000 or any integral multiple of $500,000 in excess thereof
with respect to Offshore Rate Loans, and (z) $500,000 or any integral multiple
of $100,000 in excess thereof with respect to Base Rate Loans. Such notice of
prepayment shall specify the date and amount of such prepayment and the Loan to
be prepaid. The Agent will promptly notify each Bank of its receipt of any such
notice, and of such Bank's Pro Rata Share of such prepayment. If such notice is
given by a Company, such Company 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 3.04.
2.07 Repayment. The Companies shall repay to the Banks on the
Termination Date the aggregate principal amount of Loans outstanding on such
date.
2.08 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 for the relevant Interest Period or the Base Rate, as the case
may be (and subject to the borrowing Company's right to convert to other Types
of Loans under Section 2.04), plus the Applicable Margin.
(b) Interest on each Loan shall be paid in arrears on each
Interest Payment Date. Interest shall also be paid on the date of any prepayment
of Loans under Section 2.06 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 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 Companies 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 3% per annum to the Applicable Margin then in
effect for such Loans and, in the case of Obligations not subject to an
Applicable Margin, at a rate per annum equal to the Base Rate plus 3%; 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 3%.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Companies 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 Companies shall pay such Bank interest at the highest rate
permitted by applicable law.
2.09 Fees.
(a) Agency Fees. The Companies shall pay an agency fee to the
Agent for the Agent's own account, as required by the letter agreement ("Fee
Letter") between Penwest and the Arranger and Agent dated August 11, 1995.
(b) Commitment Fees. The Companies shall 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 at a rate equal to 0.25% per annum. Such
commitment fee shall accrue from the Closing Date to the Termination Date and
shall be due and payable quarterly in arrears on the last Business Day of each
calendar quarter commencing on December 29, 1995, with the final payment to be
made on the Termination Date; provided that, in connection with any reduction or
termination of Commitments under Section 2.05, 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
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during which one or more conditions in Article IV are not met.
2.10 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) Each determination of an interest rate by the Agent shall
be conclusive and binding on the Companies and the Banks in the absence of
manifest error.
2.11 Payments by the Companies.
(a) All payments to be made by the Companies shall be made
without set-off, recoupment or counterclaim. Except as otherwise expressly
provided herein, all payments by the Companies shall be made to the Agent for
the account of the Banks at the Agent's Payment Office, and shall be made in
dollars and in immediately available funds, no later than 10:00 a.m. San
Francisco, California 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 payment in like funds as received. Any
payment received by the Agent later than 10:00 a.m. (San Francisco, California
time) 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 Penwest prior to the
date on which any payment is due from any of the Companies to the Banks that
such payment in full will not be made as and when required, the Agent may assume
that such payment in full has been made to the Agent on such date in immediately
available 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 such payment in full has
not been made to the Agent by a Company or the Companies, each Bank shall repay
to the Agent on demand such amount distributed to such Bank, together with
interest thereon at the Federal Funds Rate for each day from
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<PAGE> 30
the date such amount is distributed to such Bank until the date repaid.
2.12 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 any Company 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
immediately available funds on the Borrowing Date and the Agent may (but shall
not be so required), in reliance upon such assumption, make available to the
borrowing Company 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 immediately
available funds and the Agent in such circumstances has made available to the
borrowing Company 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 for each day during such period. A notice of
the Agent submitted to any Bank with respect to amounts owing under this
subsection (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 Company or Companies receiving such amount of such
failure to fund and, upon demand by the Agent, the Companies shall 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.
(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.
2.13 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 ratable share (or other share
contemplated hereunder), 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
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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 Companies 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 10.10) with respect to such participation as fully as if such Bank
were the direct creditor of the Companies 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.
2.14 Extension of Termination Date.
(a) Unless the Banks' commitments to lend under this Agreement
shall have sooner terminated pursuant to the terms of this Agreement, upon
written request from the Companies (an "Extension Request"), received by the
Agent not more than 60 days and not less than 30 days prior to the date that is
two years before the Termination Date then in effect, the Companies may request
that the Termination Date be extended to the date that is one year after the
current Termination Date.
(b) Each Bank shall use reasonable commercial efforts to
notify the Agent and the Companies by facsimile, telegram, telex or otherwise in
writing within 20 days after receipt of an Extension Request as to whether it
consents to the extension requested. If a Bank has not replied by facsimile,
telegram, telex or otherwise in writing to the Agent and to the Companies by the
end of such 20 day period, that Bank shall be deemed not to have consented to
the requested extension. The Agent shall promptly notify each Bank and the
Companies of any Bank's decision to reject the proposed extension.
(c) The Termination Date shall be extended pursuant to an
Extension Request if all of the Banks agree to such Extension Request.
ARTICLE III
TAXES, YIELD PROTECTION, ILLEGALITY, JOINT AND SEVERAL LIABILITY
3.01 Taxes.
(a) Any and all payments by any Company 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
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withholding for, any Taxes. In addition, the Companies shall pay all Other
Taxes.
(b) If any Company shall be required by law to deduct or
withhold any Taxes, Other Taxes or Further 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 and
retains an amount equal to the sum it would have received and retained
had no such deductions or withholdings been made;
(ii) such Company shall make such deductions and
withholdings;
(iii) the Companies shall pay the full amount deducted
or withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv) the Companies shall also pay to each Bank or the
Agent for the account of such Bank, at the time interest is paid,
Further Taxes in the amount that the respective Bank specifies as
necessary to preserve the after-tax yield the Bank would have received
if such Taxes, Other Taxes or Further Taxes had not been imposed.
(c) The Companies agree to indemnify and hold harmless each
Bank and the Agent for the full amount of i) Taxes, ii) Other Taxes, and iii)
Further Taxes in the amount that the respective Bank specifies as necessary to
preserve the after-tax yield the Bank would have received if such Taxes, Other
Taxes or Further Taxes had not been imposed, and any liability (including
penalties, interest, additions to tax and expenses) arising therefrom or with
respect thereto, whether or not such Taxes, Other Taxes or Further 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.
(d) Within 30 days after the date of any payment by any
Company of Taxes, Other Taxes or Further Taxes, the Companies shall furnish to
each Bank or the Agent the original or a certified copy of a receipt evidencing
payment thereof, or other evidence of payment satisfactory to such Bank or the
Agent.
(e) If the Companies are required to pay any amount to any
Bank or the Agent pursuant to subsection (b) or (c) of this Section, then such
Bank shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the
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jurisdiction of its Lending Office so as to eliminate any such additional
payment by the Companies which may thereafter accrue, if such change in the sole
judgment of such Bank is not otherwise disadvantageous to such Bank.
(f) If any claim shall be made against the Agent or any Bank
(for purposes of this subsection, the "Indemnitee") or if any proceeding shall
be commenced against the Indemnitee (including a written notice of such
proceeding) for any Taxes, Other Taxes, or Further Taxes as to which the
Companies are required to pay pursuant to this Section, the Indemnitee shall
promptly, upon receiving notice thereof, notify the Companies in writing of such
claim; provided that, without prejudice to any rights the Companies may have in
connection therewith, including any claim for damages for failure to give such
notice, the failure to provide such notice shall not release the Companies from
any of its obligations hereunder. If reasonably requested by the Companies in
writing within 30 days from receipt of such notice from the Indemnitee (or such
shorter period as the Indemnitee has notified the Companies is required by law
or regulation for the Companies to commence such contest), and upon
determination by the Indemnitee that the action to be taken will not result in
criminal liability, or any substantial risk of the sale, forfeiture, or loss of,
or the filing of a Lien on any asset of the Indemnitee, the Indemnitee shall
upon receipt of indemnity satisfactory to it and at the expense of the Companies
(including, without limitation, all reasonable out-of-pocket expenses, Attorney
Costs, reasonable accounting and investigatory fees and disbursements), and
provided that the Companies shall have delivered to the Indemnitee a written
acknowledgement of their indemnification obligations hereunder in respect of
such contest, in good faith contest the validity, applicability or amount of
such Taxes, Other Taxes, or Further Taxes by, in such Indemnitee's sole
discretion, (i) resisting payment thereof, (ii) not paying the same except under
protest, if protest is necessary and proper, or (iii) if payment is made, using
reasonable efforts to obtain a refund thereof in appropriate administrative and
judicial proceedings. Any contest required pursuant to the next preceding
sentence shall, at the option of such Indemnitee, be conducted by such
Indemnitee or the Companies in the name of Companies or such Indemnitee. If any
such contest involves payment of the Tax in question, the Companies shall either
make such payment directly to the appropriate authority or furnish to such
Indemnitee, at no net after-tax cost, sufficient funds to make such payment. No
Indemnitee shall settle, compromise, or close such a contest without first
giving the Companies at least 30 days prior written notice of its intent to do
so.
3.02 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
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Governmental Authority has asserted that it is unlawful, for any Bank or its
applicable Lending Office to make Offshore Rate Loans, then, on notice thereof
by the Bank to the Companies through the Agent, any obligation of that Bank to
make Offshore Rate Loans shall be suspended until the Bank notifies the Agent
and the Companies 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 Companies shall, upon its 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 3.04, 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 the Companies are
required to so prepay any Offshore Rate Loan, then concurrently with such
prepayment, the borrower Company(ies) shall borrow from the affected Bank, in
the amount of such repayment, a Base Rate Loan.
3.03 Increased Costs and Reduction of Return.
(a) If any Bank determines that, due to either:
(i) the introduction of or any change after the date
of this Agreement (other than any change by way of imposition of or
increase in reserve requirements included in the calculation of the
Offshore Rate) in, or in the interpretation or administration 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), but only if and to the extent that
such compliance is required or requested by the introduction of or any
change (after the date of this Agreement) in or in the interpretation
or administration of any guideline or request;
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 Companies 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 compliance by the
Bank (or its Lending Office) or any corporation controlling the Bank with (i)
any Capital Adequacy Regulation introduced after the date of this Agreement,
(ii) any change in any Capital Adequacy Regulation, or (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 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)
determines that such Bank's rate of return on capital is decreased as a
consequence of its Commitment, loans, credits or obligations under this
Agreement to a level below that which would otherwise have been achieved, then,
upon demand of such Bank to the Companies through the Agent, the Companies shall
pay to the Bank, from time to time as specified by the Bank, additional amounts
sufficient to compensate the Bank for such decrease.
3.04 Funding Losses. The Companies 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 the Companies to make on a timely basis any
payment of principal of any Offshore Rate Loan;
(b) the failure of any Company to borrow, continue or convert
a Loan after such Company has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/Continuation;
(c) the failure of any Company to make any prepayment in
accordance with any notice delivered under Section 2.06; or
(d) the prepayment 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;
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.
3.05 Inability to Determine Rates. If the Agent or the Majority
Banks determine 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 2.08(a) for any requested Interest Period with respect to a
proposed Offshore Rate Loan does not adequately and fairly reflect the cost to
the Majority Banks of funding such Loan, the Agent will promptly so notify the
Companies 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, a Company may revoke any Notice of
Borrowing or Notice of Conversion/Continuation then submitted by it. If a
Company does not revoke such Notice, the Banks shall make, convert or continue
the Loans, as proposed by such Company, in the amount specified
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in the applicable notice submitted by such Company, but such Loans shall be
made, converted or continued as Base Rate Loans instead of Offshore Rate Loans.
3.06 Joint and Several Liability. The Companies covenant and agree
that they are jointly and severally liable for payment of all sums due under
this Agreement and every other Loan Document and performance of all other
Obligations. The Companies agree that:
(a) A separate action or actions may be brought and prosecuted
against any Company whether action is brought against the other Companies or
whether the other Companies are joined in any such action or actions. Each
Company waives the benefit of any statute of limitations affecting its liability
hereunder.
(b) Each Company authorizes Agent and Banks, without notice or
demand and without affecting its liability hereunder, from time to time:
(1) to renew, compromise, extend, accelerate or otherwise
change the time for payment, or otherwise change the terms, of the
Obligations of the other Companies to Agent or to Banks, including
increase or decrease of the rates of interest thereon, or otherwise
change the terms of this Agreement with respect to such other
Companies; and
(2) to release or substitute any one or more of any
endorsers or guarantors of the Obligations.
(c) Each Company waives any right to require Agent and Banks:
(1) to proceed against any other Company or other Person;
(2) to exercise any right, assert any claim or demand, or
proceed against or exhaust any security for any indebtedness to Agent
and Banks under this Agreement; or
(3) to pursue any other remedy in Agent's, Banks', or any
Bank's power whatsoever.
(d) Each Company waives any defense arising by reason of any
disability or other defense of any other Company, or the cessation from any
cause whatsoever of the liability of any other Company, whether consensual or
arising by operation of law or any bankruptcy, insolvency or debtor relief
proceeding, or from any other cause, or any claim that such Company's
Obligations exceed or are more burdensome than those of any other Company. Each
Company waives any defense arising by reason of any statute of limitations
affecting the liability of any other Company. Each Company waives all rights and
defenses arising out of an election of remedies by the Agent or any Bank.
(e) Each Company waives any right of subrogation,
reimbursement, indemnification, and contribution (contractual, statutory or
otherwise), including without limitation, any claim
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or right of subrogation under the Bankruptcy Code or any successor statute,
against any Company arising from the existence or performance of its joint and
several liability.
(f) Each Company waives any right to enforce any remedy which
Agent and Banks now have or may hereafter have against any other Company, and
waives any benefit of, and any right to participate in, any security now or
hereafter held by Agent and Banks securing the Obligations.
(g) Each Company waives all presentments, demands for
performance, notices of nonperformance, protests, notices of protest, notices of
dishonor, and notices of the existence, creation, or incurring of new or
additional Obligations or any other indebtedness of each of the other Companies
to the Agent or any Bank.
(h) If any payment or transfer of any interest in property by
any Company to the Agent or any Bank in fulfillment of any Obligation is
rescinded or must at any time (including after the termination of the Banks'
commitments to extend credit under this Agreement) be returned, in whole or in
part, by the Agent or any Bank to such Company or any other Person, upon the
insolvency, bankruptcy or reorganization of such Company or otherwise, the
obligations under this Section shall be reinstated with respect to any such
payment or transfer, regardless of such termination.
3.07 Survival. The agreements and obligations of the Companies in
this Article III shall survive the payment of all other Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
4.01 Conditions of Initial Loans. The obligation of each Bank to
make its initial Loan hereunder is subject to the condition that the Agent shall
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) Credit Agreement and Notes. This Agreement and any
requested Notes executed by each party thereto;
(b) Resolutions; Incumbency.
(1) Copies of the resolutions of the board of directors of
each Company authorizing the transactions contemplated hereby,
certified as of the Closing Date by the Secretary or an Assistant
Secretary of such Company; and
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(2) A certificate of the Secretary or Assistant Secretary
of each Company certifying the names and true signatures of the
officers of such Company authorized to execute, deliver and perform, as
applicable, this Agreement, and all other Loan Documents to be
delivered by it hereunder;
(c) Legal Opinions. An opinion of Bogle & Gates P.L.L.C.,
counsel to the Companies and addressed to the Agent and the Banks, substantially
in the form of Exhibit E;
(d) Payment of Fees. Evidence of payment by the Companies 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, including any such costs, fees and
expenses arising under or referenced in Sections 2.09 and 10.04;
(e) Certificates. Certificates signed by a Responsible Officer
of each Company, dated as of the Closing Date, stating that:
(1) 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;
(2) no Default or Event of Default exists or would result
from the initial Borrowing; and
(3) there has occurred since August 31, 1994 no event or
circumstance that has resulted or could reasonably be expected to
result in a Material Adverse Effect other than the electrical downtime
described in the Company's press release of August 23, 1995;
(f) Prior Credit Agreements. Evidence that (i) all commitments
to lend under the Prior Credit Agreements have been terminated and (ii) all
credit extended under the Prior Credit Agreements and all other sums due and
payable under the Prior Credit Agreements have been paid in full; and
(g) Other Documents. Such other approvals, opinions, documents
or materials as the Agent or any Bank may request.
4.02 Conditions to All Borrowings. The obligation of each Bank to
make any Loan to be made by it (including its initial Loan) or to continue or
convert any Loan under Section 2.04 is subject to the satisfaction of the
following conditions precedent on the relevant Borrowing Date or
Conversion/Continuation Date:
(a) Notice of Borrowing or Conversion/Continuation. The Agent
shall have received (with, in the case of the initial Loan only, a copy for each
Bank) a Notice of Borrowing or a Notice of Conversion/Continuation, as
applicable;
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(b) Continuation of Representations and Warranties. The
representations and warranties in Article V shall be true and correct in all
material respects on and as of such Borrowing Date or Conversion/Continuation
Date with the same effect as if made on and as of such Borrowing Date or
Conversion/Continuation Date, except where such representations by their terms
speak as to a particular date and except, in the case of a conversion of Loans
into Base Rate Loans, the representations in Sections 5.05 and 5.06(b);
(c) No Existing Default. No Default or Event of Default shall
exist or shall result from such Borrowing or continuation or conversion. This
subsection shall not be deemed to prohibit the conversion of Offshore Rate Loans
pursuant to Section 2.04(c) or the continuation of Base Rate Loans prior to the
acceleration of such Loans by the Banks pursuant to the other provisions of this
Agreement; and
(d) No Material Adverse Effect. Except in the case of a
conversion of Loans into Base Rate Loans, no Material Adverse Effect shall exist
or shall result from such Borrowing or continuation or conversion.
Each Notice of Borrowing and Notice of Conversion/Continuation submitted by a
Company hereunder shall constitute a representation and warranty by the
Companies hereunder, as of the date of each such notice and as of each Borrowing
Date or Conversion/Continuation Date, as applicable, that the conditions in this
Section are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Companies jointly and severally represent and warrant to the Agent
and each Bank that:
5.01 Corporate Existence and Power. Each Company and each of its
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, is qualified
to do business in each other jurisdiction where the failure so to qualify would
have a material adverse effect on the business of such Company or its
operations, and has full corporate power, authority and legal right to carry on
its business as presently conducted, to own and operate its properties and
assets, and to execute, deliver and perform the Loan Documents.
5.02 Corporate Authorization; No Contravention. The execution,
delivery and performance by the Companies of this Agreement and each other Loan
Document to which each Company is party, and any borrowing under this Agreement
have been duly authorized by all necessary corporate action of the Companies,
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and do not and will not require any shareholder approval or the approval or
consent of any trustee or the holders of any Indebtedness of any of the
Companies, except such as have been obtained and certified copies thereof
delivered to the Agent (in sufficient number of copies for each Bank) do not
contravene any law, regulation, rule or order binding on the Companies or their
Organization Documents and do not contravene the provisions of or constitute a
default under any indenture, mortgage, contract or other agreement or instrument
to which any Company or any of its Subsidiaries is a party or by which any
Company or any of its Subsidiaries or any of their properties may be bound or
affected.
5.03 Governmental Approvals, Etc. No Government Approval or filing
or registration with or other action by or notice to any Governmental Authority
is required or necessary for the making and performance by, and enforcement
against, the Companies of this Agreement and the other Loan Documents or in
connection with any of the transactions contemplated hereby and thereby, except
such as have been heretofore obtained and are in full force and effect
(certified copies thereof having been delivered to the Agent in sufficient
number of copies for each Bank).
5.04 Binding Effect. This Agreement and each other Loan Document to
which each Company is a party constitute the legal, valid and binding
obligations of such Company, enforceable against such Company 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.
5.05 Litigation. There are no actions, suits, proceedings,
investigations, disputes or claims against or affecting the Companies or any of
them now pending before any Governmental Authority or any arbitrator (nor to the
knowledge of the Companies has any thereof been threatened in writing) which (a)
purport to affect or pertain to this Agreement or any other Loan Document, or
any of the transactions contemplated hereby or thereby; and (b) if determined
adversely to any Company would be likely to have a Material Adverse Effect on
the financial condition or operations of the Companies or any of them, except as
reflected in the financial statements referred to in Section 5.06.
5.06 Financial Condition.
(a) The financial statements of Penwest as included in
Penwest's most recent annual report on Form 10-K, relating thereto as filed with
the SEC for its fiscal year ended August 31, 1994, fairly present the financial
condition of Penwest and its Subsidiaries as at the dates thereof and the
results of operations of Penwest and its Subsidiaries for the periods then
ended, all in accordance with generally accepted accounting principles
consistently applied. Penwest and its Subsidiaries
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did not have on such date any material contingent liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
such financial statements. As used in this subsection, "taxes" means any tax,
assessment, duty, levy, impost or other charge imposed by any Governmental
Authority on any Person or on any property, revenue, income, or franchise of any
Person and any interest or penalty with respect to any of the foregoing.
(b) Since August 31, 1994, there has been no Material Adverse
Effect other than the electrical downtime described in the Company's press
release of August 23, 1995.
5.07 Title to Properties. Such 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. The property
of such Company and its Subsidiaries is subject to no Liens, other than
Permitted Liens.
5.08 Taxes. Such 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. The charges, accruals and reserves on the
books of the Companies in respect of Taxes for all fiscal periods to date have
been computed in accordance with generally accepted accounting principles
consistently applied. There is no proposed tax assessment against such Company
or any Subsidiary that would, if made, have a Material Adverse Effect. There are
no questions or disputes between any of the Companies and any Governmental
Authority with respect to any taxes of a material amount except as disclosed in
the financial statements referred to in Section 5.06 or otherwise previously
disclosed to the Banks, through the Agent, in writing.
5.09 No Event of Default. No Event of Default exists or would
result from the incurring of any Obligations by such Company. Each Company and
each Subsidiary is not 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 8.01(e).
5.10 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
6.01 and Section 7.08. None of the
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Companies or any Subsidiary of any Company is generally engaged in the business
of purchasing or selling Margin Stock or extending credit for the purpose of
purchasing or carrying Margin Stock.
5.11 Regulated Entities. None of the Companies, any Person
controlling any Company, or any Subsidiary of any Company, is an "Investment
Company" within the meaning of the Investment Company Act of 1940. Each Company
is not 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.
5.12 ERISA Compliance. Except as specifically disclosed in
Schedule 5.12:
(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 such Company, nothing has occurred which would cause the loss of such
qualification. Such Company 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 Company,
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
such Company 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 such Company 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 such Company nor any ERISA Affiliate has engaged in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
5.13 Environmental Matters. Such Company conducts in the ordinary
course of business a review of the effect of existing
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Environmental Laws and existing Environmental Claims on its business, operations
and properties, and as a result thereof such Company has reasonably concluded
that, except as specifically disclosed in Schedule 5.13, such Environmental Laws
and Environmental Claims could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
5.14 No Burdensome Restrictions. Neither such 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. No Company or
any Subsidiary is in breach of or default under any agreement to which it is a
party or which is binding on it or any of its assets, which breach or default
could reasonably be expected to have a Material Adverse Effect.
5.15 Copyrights, Patents, Trademarks and Licenses, etc. Such
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 such Company, no
slogan or other advertising device, product, process, method, substance, part or
other material now employed, or now contemplated to be employed, by such Company
or any Subsidiary infringes upon any rights held by any other Person. Except as
specifically disclosed in Schedule 5.15, 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 such Company, proposed, which, in either
case, could reasonably be expected to have a Material Adverse Effect.
5.16 Subsidiaries. Such Company has 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 such Company and its Subsidiaries are insured with financially
sound and reputable insurance companies not Affiliates of such 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 such Company or such Subsidiary operates.
5.18 Full Disclosure. None of the representations or warranties
made by such Company or any Subsidiary in the Loan Documents as of the date such
representations and warranties are
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made or deemed made, and none of the statements contained in any exhibit,
report, statement or certificate furnished by or on behalf of such Company or
any Subsidiary in connection with the Loan Documents (including the offering and
disclosure materials delivered by or on behalf of such Company to the Banks
prior to the Closing Date), 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:
6.01 Use of Proceeds. Each Company shall use the proceeds of the
Loans made to it for working capital and other general corporate purposes not in
contravention of any Requirement of Law or of any Loan Document. The proceeds of
the initial Loans shall be used, to the extent required, to repay all sums owed
under the Prior Credit Agreement.
6.02 Preservation of Corporate Existence, Etc. Each Company shall,
and shall cause each Subsidiary 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 (except as the same may cease pursuant to mergers,
consolidations, and the like not prohibited by Section 7.01);
(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;
(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.
6.03 Inspection of Property and Books and Records. At any
reasonable time, and from time to time, each Company will permit the Agent and
any Bank to examine and make copies of and abstracts from the records and books
of account of and to visit the properties of such Company and to discuss the
affairs,
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finances and accounts of such Company and each of its Subsidiaries with any of
their officers or directors.
6.04 Maintenance of Property. Each Company shall maintain, and
shall cause each Subsidiary to maintain, and preserve all its operating
properties 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.
6.05 Compliance with Laws. Each Company shall comply, and shall
cause each Subsidiary 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 any thereof whose
validity is being contested in good faith by appropriate proceedings upon stay
of execution of the enforcement thereof and except where the failure so to
comply could not reasonably be expected to have a Material Adverse Effect.
6.06 Compliance with ERISA. Each Company shall, and shall cause
each of its 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.
6.07 Environmental Laws. Each Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
compliance in all material respects with all Environmental Laws.
6.08 Payment of Obligations. Each Company shall, and shall cause
each Subsidiary to, pay and discharge as the same shall become due and payable,
all their respective obligations and liabilities, unless the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by such Company or such Subsidiary,
including:
(a) all Indebtedness, as and when due and payable, but subject
to any subordination provisions contained in any instrument or agreement
evidencing such Indebtedness, all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets; and
(b) all lawful claims which, if unpaid, would by law become a
Lien upon its property.
6.09 Insurance. Each Company shall maintain, and shall cause each
Subsidiary to maintain, with financially sound and reputable independent
insurers, insurance with respect to its properties and business against loss or
damage of the kinds
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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.
6.10 Financial Statements. Penwest shall deliver to the Agent, in
form and detail satisfactory to the Agent and the Majority Banks, with
sufficient copies for each Bank:
(a) (1) as soon as available and but not later than 120 days
after the end of each fiscal year of Penwest (commencing with the fiscal year
ended August 31, 1995), the consolidated balance sheet of Penwest and its
Subsidiaries as of the end of such fiscal year and the related consolidated
statements of income and retained earnings and statement of cash flow of Penwest
and its Subsidiaries for such year, accompanied by the audit report thereon by a
nationally recognized independent certified public accountant selected by
Penwest (the "Independent Auditor") (which reports 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 report shall not be qualified by reason of restricted or
limited examination by the Independent Auditor of any material portion of the
Companies' or any Subsidiary's records;
(2) as soon as available and but not later than 120 days
after the end of each fiscal year of Penwest (commencing with the fiscal year
ended August 31, 1995), the consolidating balance sheet of Penwest and its
Subsidiaries as of the end of such fiscal year and the related consolidating
statements of income and retained earnings and statement of cash flow of Penwest
and its Subsidiaries for such year;
(b) as soon as available but not later than 60 days after the
end of each fiscal quarter of Penwest, (commencing with the fiscal quarter ended
November 30, 1995) the unaudited consolidated balance sheets, consolidated
statements of income, and consolidated and consolidating statements of cash flow
of Penwest and its Subsidiaries as of the end of such fiscal quarter (including
the fiscal year to the end of such fiscal quarter), and certified by a
Responsible Officer of Penwest 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 Penwest and its Subsidiaries.
6.11 Certificates; Other Information. Penwest shall furnish to the
Agent, with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial statements
referred to in subsections 6.10(a) and (b), a Compliance Certificate executed by
a Responsible Officer of Penwest;
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(b) as soon as available but not later than 10 days after
filing with the SEC, copies of all financial statements and reports that Penwest
sends to its shareholders, and copies of all financial statements and regular,
periodical or special reports (including Forms 10K, 10Q and 8K) that Penwest or
any of its Subsidiaries may make to, or file with, the SEC; and
(c) promptly, such additional information regarding the
business, financial or corporate affairs of Penwest or any of its Subsidiaries
as the Agent, at the request of any Bank, may from time to time reasonably
request.
6.12 Notices. Penwest shall, or shall cause a Company to, promptly
notify the Agent and each Bank:
(a) of the occurrence of any Default or Event of Default;
(b) any material dispute, litigation, investigation,
proceeding, or suspension between any Company and any Governmental Authority;
(c) any labor controversy which has resulted in or, to any
Company's knowledge, threatens to result in a strike which would materially
affect the business operations of any Company;
(d) any material breach or non-performance of, or any material
default under, a Contractual Obligation of any Company or any Subsidiary;
(e) the commencement of, or any material development in, any
litigation or proceeding affecting any Company or any Subsidiary, including
pursuant to any applicable Environmental Laws, that is reasonably expected to
result in a Material Adverse Effect;
(f) of the occurrence of any of the following events affecting
any Company 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 any Company or any ERISA Affiliate with
respect to such event:
(1) an ERISA Event;
(2) a material increase in the Unfunded Pension Liability
of any Pension Plan;
(3) the adoption of, or the commencement of contributions
to, any Plan subject to Section 412 of the Code by any Company or any
ERISA Affiliate; or
(4) the adoption of any amendment to a Plan
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subject to Section 412 of the Code, if such amendment results in a
material increase in contributions or Unfunded Pension Liability.
(g) of any matter that has resulted or is reasonably expected
to result in a Material Adverse Effect or to result in a judgment or order
against any Company (in excess of insurance coverage) of more than $1,000,000
or, when combined with all other pending or threatened claims against all of the
Companies, more than $1,000,000;
(h) of any material change in accounting policies or financial
reporting practices by Penwest, such Company or any of the consolidated
Subsidiaries of Penwest or such Company.
Each notice under this Section shall be accompanied by a written statement by a
Responsible Officer of the Company furnishing such notice, setting forth details
of the occurrence referred to therein, and stating what action such Company or
any affected Subsidiary proposes to take with respect thereto and at what time.
Each notice under subsection 6.12(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.
6.13 Cooperation. The Companies jointly and severally agree to
execute and deliver such instruments and perform all such acts as the Banks may
reasonably request to carry out the transactions contemplated by this Agreement.
6.14 Maintain Ownership and Control. Each of Penford Products Co.
and Edward Mendell Co., Inc. shall at all times remain Wholly-Owned Subsidiaries
of Penwest.
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:
7.01 Liquidations, Merger, Sale of Assets. Each Company:
(a) shall not liquidate, dissolve or enter into any merger,
consolidation, or other combination or sell, lease, or dispose of such portion
of its business or assets as constitutes in the reasonable opinion of the
Majority Banks a substantial portion thereof, except (i) sales of goods in the
ordinary course of business, (ii) sales and dispositions of other assets for
proceeds that do not exceed 10% of the total assets of Penwest (determined on a
consolidated basis and net of accumulated depreciation) in any 12-month period,
(iii) mergers or
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consolidations involving only the Companies; and (iv) mergers or consolidations
to effect acquisitions of other Persons if (A) the business of such Person is
related to the businesses currently conducted by the Company involved in the
merger or consolidation, (B) the surviving corporation is one of the Companies,
and (C) immediately after such merger or consolidation there shall not exist any
Default or Event of Default; and
(b) shall not, except in the ordinary course of business,
enter into any joint venture, partnership, or other similar combination.
7.02 Limitation on Indebtedness.
(a) Penwest will not, and will not permit any Restricted
Subsidiary to, create, assume or incur or in any manner be or become liable in
respect of any Current Debt or Funded Debt, except:
(1) Indebtedness pursuant to this Agreement;
(2) Indebtedness existing on the Closing Date and set
forth in Schedule 7.02;
(3) other unsecured Funded Debt of Penwest and its
Restricted Subsidiaries and Funded Debt of Penwest and its Restricted
Subsidiaries secured by Liens permitted by Sections 7.05(f) through
(j); provided, however, that at the time of issuance thereof and after
giving effect thereto and to the application of the proceeds thereof:
(A) Consolidated Total Debt shall not exceed 55% of
Total Capitalization;
(B) in the case of the issuance of any Funded Debt by
a Restricted Subsidiary, the aggregate amount of all
Indebtedness of Restricted Subsidiaries (other than
Indebtedness owed to Penwest or any Wholly-owned Restricted
Subsidiary) shall not exceed 10% of Total Capitalization; and
(C) in the case of the issuance of any Funded Debt of
Penwest or a Restricted Subsidiary secured by Liens permitted
by Section 7.05(j), the aggregate amount of all Indebtedness
of Penwest and its Restricted Subsidiaries secured by Liens
permitted by Section 7.05(j) shall not exceed 10% of
Consolidated Net Worth;
(4) unsecured Current Debt of Penwest; provided, that
Consolidated Total Debt shall not exceed 55% of Total Capitalization;
(5) unsecured Current Debt of any Restricted
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Subsidiary and Current Debt of Penwest and its Restricted Subsidiaries
secured by Liens permitted by Section 7.05(f) through (j) if at the
time of issuance thereof Penwest could then issue unsecured Current
Debt; provided, however, that at the time of issuance thereof and after
giving effect thereto and to the application of the proceeds thereof:
(A) in the case of the issuance of any Current Debt by
a Restricted Subsidiary, the aggregate amount of all
Indebtedness of Restricted Subsidiaries (other than
Indebtedness owed to Penwest or any Wholly-owned Restricted
Subsidiary) shall not exceed 10% of Total Capitalization; and
(B) in the case of the issuance of any Current Debt of
Penwest or a Restricted Subsidiary secured by Liens permitted
by Section 7.05(j) the aggregate amount of all Indebtedness of
Penwest and its Restricted Subsidiaries secured by Liens
permitted by Section 7.05(j) shall not exceed 10% of
Consolidated Net Worth; and
(6) Funded Debt or Current Debt of a Restricted Subsidiary
to Penwest or to a Wholly-owned Restricted Subsidiary.
(b) Any corporation which becomes a Restricted Subsidiary
after the date hereof shall for all purposes of this Section be deemed to have
created, assumed or incurred at the time it becomes a Restricted Subsidiary all
Funded Debt of such corporation existing immediately after it becomes a
Restricted Subsidiary.
7.03 Guaranties, Etc. Each Company shall not assume or otherwise
incur any Contingent Obligations except for (i) Guaranty Obligations not
exceeding in the aggregate outstanding at any one time $1,000,000 for all of the
Companies and (ii) by endorsement of negotiable instruments for deposit or
collection or by similar transactions in the ordinary course of business.
7.04 Investments. Each Company shall not make any loan or advance
to any person or purchase or otherwise acquire the capital stock, assets or
obligations of, or any interest in, any person, except:
(a) direct obligations of the U.S. Government;
(b) repurchase agreements collateralized by direct obligations
of the U.S. Government;
(c) bank time deposits, certificates of deposit, bankers
acceptances, bank guaranteed commercial paper with a
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Standard and Poors (S & P) rating of A-2 or better or a Moody's rating of P-2 or
better;
(d) money market or mutual funds fully invested in direct
obligations of the U.S. Government and agencies thereof;
(e) tax exempt securities rated BBB or better by S & P and Baa
by Moody's;
(f) commercial paper or bank loan participations issued by
finance or industrial companies rated A1 or A2 by S & P or Pl or P2 by Moody's;
(g) tax free money market fund accounts holding the highest
ratings using the Donoghue Money Fund Index;
(h) money market auction preferred share issues rated AA or
better by S & P and Moody's;
(i) debt instruments of States or Municipalities rated Al by S
& P or MIG1 by Moody's;
(j) diversified funds invested in adjustable rate preferred
stock;
(k) corporate debt obligations rated A or better by S & P and
Moody's;
(l) loans under employee benefit programs or employer stock
purchase plans;
(m) Acquisitions of another Person if the business of such
Person is related to the business currently conducted by the Companies; or
(n) extensions of credit not otherwise covered by any of the
preceding subsections, up to an aggregate outstanding amount of not more than
$500,000 at any one time for all of the Companies.
7.05 Limitation on Liens. Each Company shall not, and shall not
suffer or permit any Subsidiary 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 such Company or any
Subsidiary on the Closing Date and set forth in Schedule 7.05 securing
Indebtedness outstanding on such date and refinancings thereof provided that the
Lien securing any such refinancing shall attach solely to the property
originally encumbered, the principal amount of such refinancing shall not exceed
the principal amount of the Indebtedness secured by such Lien as set
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forth in Schedule 7.05 and all such Indebtedness shall be permitted under the
other provisions of this Agreement;
(b) 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 6.08, provided that no
notice of lien has been filed or recorded under the Code;
(c) 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 or delaying the forfeiture or sale of
the property subject thereto;
(d) 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;
(e) Liens on the property of such 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;
(f) 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 such Company in excess of those set forth by regulations promulgated
by the FRB, and (ii) such deposit account is not intended by such Company or any
Subsidiary to provide collateral to the depository institution;
(g) Liens incurred after the Closing Date given to secure the
payment of the purchase price (whether to the vendor or to a third party lender)
incurred in connection with the acquisition of fixed assets useful and intended
to be used in carrying on the business of Penwest or a Subsidiary, including
Liens existing on such fixed assets at the time of acquisition thereof or at the
time of acquisition by Penwest or a Subsidiary of any business entity then
owning such fixed assets, whether or not such existing Liens were given to
secure the payment of the purchase price of the fixed assets to which they
attach so long as they were not incurred, extended or renewed in contemplation
of such acquisition, provided that (i) the Lien shall attach solely to the fixed
assets acquired or purchased, (ii) at the
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time of acquisition of such fixed assets, the aggregate principal amount
remaining unpaid on all Indebtedness secured by Liens on such fixed assets
whether or not assumed by Penwest or a Subsidiary shall not exceed the total
purchase price at the time of acquisition of such fixed assets, and (iii) all
such Indebtedness shall have been incurred within the applicable limitations
provided in Section 7.02;
(h) Liens on any assets of any corporation existing at the
time such corporation is merged or consolidated with or into any Company and not
created in contemplation of such event;
(i) Liens existing on assets prior to the acquisition thereof
by any Company and not created in contemplation of such acquisition; or
(j) Liens not otherwise permitted by the foregoing subsections
of this Section securing Indebtedness of Penwest and its Subsidiaries if, after
giving effect thereto and the application of any proceeds received by Penwest or
its Subsidiary therefrom, such Indebtedness shall have been incurred within the
applicable limitations provided in Section 7.02.
7.06 Deliberately left blank.
7.07 Transactions with Affiliates. Each Company shall not, and
shall not suffer or permit any Subsidiary to, enter into any transaction with
any Affiliate of such Company, except upon fair and reasonable terms no less
favorable to such Company or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate of such Company or such
Subsidiary.
7.08 Use of Proceeds.
(a) Each Company shall not, and shall not suffer or permit any
Subsidiary 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 such Company 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.
(b) Each Company shall not, directly or indirectly, use any
portion of the Loan proceeds (i) knowingly to purchase Ineligible Securities
from the Arranger during any period in which the Arranger makes a market in such
Ineligible Securities, (ii) knowingly to purchase during the underwriting or
placement period Ineligible Securities being underwritten or privately placed by
the Arranger, or (iii) to make payments of principal or interest on Ineligible
Securities underwritten or privately placed by the Arranger and issued by or for
the benefit of such Company or any Affiliate of such Company. The Arranger is a
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registered broker-dealer and permitted to underwrite and deal in certain
Ineligible Securities; and "Ineligible Securities" means securities which may
not be underwritten or dealt in by member banks of the Federal Reserve System
under Section 16 of the Banking Act of 1933 (12 U.S.C. ss. 24, Seventh), as
amended.
7.09 Joint Ventures. Each Company shall not, and shall not suffer
or permit any Subsidiary to enter into any Joint Venture, other than in the
ordinary course of business.
7.10 Restricted Payments. Each Company shall not, and shall not
suffer or permit any Subsidiary 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; except that such Company and any Wholly-Owned Subsidiary may:
(a) declare and make dividend payments or other distributions
payable solely in its common stock;
(b) 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) 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 which in the aggregate
would not exceed in any fiscal year $6,500,000 plus 75% of net income of such
Company and its Subsidiaries in such fiscal year and computed on a cumulative
consolidated basis, provided, that, immediately after giving effect to such
proposed action, no Default or Event of Default would exist; and
(d) declare and make dividend payments or other distributions
solely to a Company.
7.11 Minimum Tangible Net Worth. Penwest shall not permit its
consolidated Tangible Net Worth at the end of each fiscal quarter, to be less
than the sum of (i) 85% of Penwest's actual Tangible Net Worth as of the end of
its third fiscal quarter of 1995, plus (ii) 50% of net income (with no deduction
for losses) since June 1, 1995, plus (iii) 75% of the net issuance proceeds of
new stock issued after Penwest's third fiscal quarter of 1995.
7.12 Maximum Leverage Ratio. Penwest shall not permit at any time,
its ratio of (i) Consolidated Total Debt to (ii) Total Capitalization to exceed
0.55 to 1.00.
7.13 Minimum Fixed Charge Coverage Ratio. Penwest shall
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not permit at any time, its ratio of (i) its earnings before interest expense,
taxes, and rental expense to (ii) the sum of its interest expense plus rental
expense to be less than 2.00 to 1.00, computed on a consolidated basis and
measured on a four quarter trailing basis.
7.14 ERISA. Each Company shall not, and shall not suffer or permit
any of its 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 such Company
in an aggregate amount in excess of 5% of Tangible Net Worth of Penwest; or (b)
engage in a transaction that could be subject to Section 4069 or 4212(c) of
ERISA.
7.15 Uninvited Acquisitions. Each Company shall not, and shall not
suffer or permit any Subsidiary to, make any Acquisition unless (a) such
Acquisition is undertaken in accordance with all applicable Requirements of Law;
and (b) the prior, effective written consent or approval to such Acquisition of
the board of directors or equivalent governing body of the acquiree is obtained;
7.16 Change in Business. Each Company shall not, and shall not
suffer or permit any Subsidiary to, engage in any material line of business
substantially different from those lines of business carried on by such Company
and its Subsidiaries on the date hereof.
7.17 Accounting Changes. Each Company shall not, and shall not
suffer or permit any Subsidiary to, make any significant change in accounting
treatment or reporting practices, except as required by GAAP, or change the
fiscal year of such Company or of any Subsidiary.
ARTICLE VIII
EVENTS OF DEFAULT
8.01 Event of Default. Any of the following shall constitute an
"Event of Default":
(a) Non-Payment. Any Company fails to pay, (i) when and as
required to be paid herein, any amount of principal of any Loan, or (ii) within
five 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 any Company made or deemed made herein, in any other Loan Document, or which
is contained in any certificate, document or financial or other statement by
such Company, any Subsidiary, or any Responsible Officer of such Person,
furnished at any time
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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 Company fails to perform or observe
any term, covenant or agreement contained in any of Sections 6.02 or 6.12 or in
Article VII; or
(d) Other Defaults. Any Company 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 written notice thereof to the Companies from the Agent or any Bank; or
(e) Cross-Default. (i) Any Company or any Subsidiary (A) 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 $1,000,000 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 (B) 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. Any Company ceases or
fails to be solvent, or any Company or any Subsidiary (i) 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; (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 any Company or any Subsidiary, or any
writ, judgment, warrant of attachment, execution or similar process, is issued
or levied against a substantial part of any Company's or any Subsidiary's
properties, and any such proceeding or petition shall not be dismissed, or
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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) any 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) any 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 any Company under Title IV of ERISA to the
Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
5% of Tangible Net Worth of Penwest; (ii) the aggregate amount of Unfunded
Pension Liability among all Pension Plans at any time exceeds 5% of Tangible Net
Worth of Penwest; or (iii) any Company 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 5% of Tangible
Net Worth of Penwest; or
(i) Monetary Judgments. One or more non-interlocutory
judgments, non-interlocutory orders, decrees or arbitration awards is entered
against any 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 $1,000,000 or more (or when combined
with all such judgments or orders against all of the Companies is more than
$1,000,000), and the same shall remain unsatisfied, unvacated and unstayed
pending appeal for a period of 30 days after the entry thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment, order
or decree is entered against any Company or any Subsidiary which does or would
reasonably be expected to have a Material Adverse Effect, and there shall be any
period of 30 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 in Control. There occurs any Change in Control; or
(l) Loss of Licenses. Any Governmental Authority revokes or
fails to renew any material license, permit or franchise of any Company or any
Subsidiary, or such Company or any Subsidiary for any reason loses any material
license, permit or franchise, or such Company or any Subsidiary suffers the
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imposition of any restraining order, escrow, suspension or impound of funds in
connection with any proceeding (judicial or administrative) with respect to any
material license, permit or franchise; or
(m) Government Approvals, Etc. Any Government Approval or
registration or filing with any Governmental Authority now or hereafter required
in connection with the performance by the Companies, or any of them, of their
obligations set forth in this Agreement or any other Loan Document shall be
revoked, withdrawn or withheld or shall fail to remain in full force and effect.
8.02 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 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 Companies; 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 8.01 (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.
8.03 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.
8.04 Certain Financial Covenant Defaults. In the event that, after
taking into account any extraordinary charge to earnings taken or to be taken as
of the end of any fiscal period of any Company (a "Charge"), and if solely by
virtue of such Charge, there would exist an Event of Default due to the breach
of any of Sections 7.11, 7.12, or 7.13 as of such fiscal period end date, such
Event of Default shall be deemed to arise upon the earlier of (a) the date after
such fiscal period end date on
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which any Company announces publicly it will take, is taking or has taken such
Charge (including an announcement in the form of a statement in a report filed
with the SEC) or, if such announcement is made prior to such fiscal period end
date, the date that is such fiscal period end date, and (b) the date such
Company delivers to the Agent its audited annual or unaudited quarterly
financial statements in respect of such fiscal period reflecting such Charge as
taken.
ARTICLE IX
THE AGENT
9.01 Appointment and Authorization; "Agent". Each Bank hereby
irrevocably (subject to Section 9.09) 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. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with reference
to the Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
9.02 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.
9.03 Liability of Agent. None of the Agent-Related Persons shall
(i) be liable 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 any Company or any
Subsidiary or Affiliate of any Company, or any officer thereof, contained in
this Agreement or in any other Loan
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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 Company 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 Company or any Subsidiaries or Affiliates of
any Company.
9.04 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 any
Company), 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 4.01, 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.
9.05 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 Company referring to this
Agreement, describing such Default or Event of Default and
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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.
9.06 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
Companies and their 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
credit worthiness of the Companies and their 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
Companies 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 credit worthiness of the Companies.
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 credit worthiness of any Company which may come into the possession
of any of the Agent-Related Persons.
9.07 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 not reimbursed by or on behalf of the
Companies and without limiting the obligation of the Companies 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
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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 not reimbursed for such expenses by or on behalf of the Companies. The
undertaking in this Section shall survive the payment of all Obligations
hereunder and the resignation or replacement of the Agent.
9.08 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 any of the Companies and
their 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 any Company, its Subsidiaries or Affiliates (including information
that may be subject to confidentiality obligations in favor of such Company,
Subsidiary, or Affiliate) 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.
9.09 Successor Agent. The Agent may, and at the request of 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. 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 Penwest, 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 10.04 and 10.05 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.
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9.10 Withholding Tax.
(a) If any Bank is a "foreign corporation, partnership or
trust" within the meaning of the Code, such Bank agrees with and in favor of the
Agent and the Companies, to deliver to the Agent and Penwest:
(1) if such Bank claims an exemption from withholding tax
under a United States tax treaty, two properly completed and executed
copies of IRS Form 1001 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;
(2) 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
(3) 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 United States withholding tax;
unless there is a change in any treaty, law, regulation, or official
interpretation thereof which results in such Bank no longer being able to
deliver such a form or forms, and (y) with respect to a Bank party to this
Agreement as of the date of this Agreement, such change occurs after the date of
this Agreement, or (z) with respect to a Bank that becomes such after the date
of this Agreement, such change occurs after the date such Bank becomes a Bank
under this Agreement.
(b) No Bank shall sell, assign, delegate, grant a
participation in, or otherwise transfer all or part of the obligations of the
Companies to such Bank under this Agreement, or its commitment to extend credit
under this Agreement, to any Person that is not incorporated or organized under
the laws of the United States or a state thereof unless such Person first
delivers to Penwest the form or forms required by clauses (1), (2), and (3) of
subsection (a) of this Section.
(c) No Company shall be required to pay any additional amounts
pursuant to Section 3.01 if (i) the obligation to pay such additional amount
would not have arisen but for a failure by any Bank to comply with the
requirements of subsections (a) and (b) of this Section.
(d) If any Bank claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing
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IRS Form 1001 and such Bank sells, assigns, grants a participation in, or
otherwise transfers all or part of the Obligations of the Companies 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 Companies to such Bank.
To the extent of such percentage amount, the Agent will treat such Bank's IRS
Form 1001 as no longer valid.
(e) 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
Companies 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.
(f) 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. However, 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
imposed by Sections 1441 and 1442 of the Code, without reduction.
(g) 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 or 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
MISCELLANEOUS
10.01 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 Companies (or any of them) therefrom, shall be
effective unless the same shall be in writing and signed by the Majority Banks
(or by the Agent at
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the written request of the Majority Banks) and the Companies 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 Companies 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 8.02);
(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; or
(e) amend this Section, or Section 2.11, 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.
10.02 Notices.
(a) All notices, requests, consents, approvals, waivers and
other communications shall be in writing (including, unless the context
expressly otherwise provides, by facsimile transmission, provided that any
matter transmitted by any Company by facsimile shall be immediately confirmed by
a telephone call to the recipient at the number specified on Schedule 10.02, and
mailed, faxed or delivered, to the address or facsimile number specified for
notices on Schedule 10.02; or, as directed to any Company 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 Companies and the
Agent.
(b) All such notices, requests and communications
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shall be effective when transmitted and received in legible form by facsimile
machine, 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 to the Agent 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 Companies. The Agent and the Banks shall be entitled to rely
on the authority of any Person purporting to be a Person authorized by a Company
to give such notice and the Agent and the Banks shall not have any liability to
such Company 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 Companies 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.
10.03 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.
10.04 Costs and Expenses. The Companies shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Agent) within
30 Business Days after demand (subject to subsection 4.01(d)) for all costs and
expenses incurred by BofA (including in its capacity as Agent) in connection
with the 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, the Arranger and each Bank
within five Business Days after demand (subject to subsection 4.01(d)) 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
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during the existence of an Event of Default or after acceleration of the Loans
(including in connection with any "workout" or restructuring regarding the
Loans, and including in any Insolvency Proceeding or appellate proceeding).
10.05 Companies Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Companies shall indemnify, defend 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, whether or not any Indemnified Person is a party
thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided, that the Companies 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.
10.06 Payments Set Aside. To the extent that a Company 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.
10.07 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 a Company may not assign or
transfer any of its
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rights or obligations under this Agreement without the prior written consent of
the Agent and each Bank. Each individual voluntary assignment by a Bank (other
than assignments by operation of law such as statutory assignments resulting
from mergers) shall be subject to Section 10.08.
10.08 Assignments, Participations, etc.
(a) Any Bank may, with the written consent of the Companies at
all times other than during the existence of an Event of Default and the Agent,
which consents of the Companies shall not be unreasonably withheld, at any time
assign and delegate to one or more Eligible Assignees (provided that no written
consent of the Companies 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 and falling within clauses (a) or (b) of the definition of Eligible
Assignee) (each an "Assignee") all, or any ratable part of all, of the Loans,
the Commitments and the other rights and obligations of such Bank hereunder, in
a minimum amount of $10,000,000; provided, however, that the Companies 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 Companies
and the Agent by such Bank and the Assignee; (ii) such Bank and its Assignee
shall have delivered to the Companies and the Agent an Assignment and Acceptance
in the form of Exhibit F ("Assignment and Acceptance") together with any Note or
Notes subject to such assignment and (iii) the assignor Bank or Assignee has
paid to the Agent a processing fee in the amount of $3,500.
(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 10.08(a)), the Companies, if so requested, shall
execute and deliver to the Agent, new Notes evidencing such Assignee's assigned
Loans and Commitment and, if the assignor Bank has
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retained a portion of its Loans and its Commitment, replacement Notes in the
principal amount of the Loans retained by the assignor Bank (such Notes to be 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 any of the Companies (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
Companies 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 10.01. In the case of any such
participation, the Participant shall be entitled to the benefit of Sections
3.01, 3.03 and 10.05 as though it were also a Bank hereunder (except to the
extent the Participant has the right to greater compensation or payments or may
be excused from obligations under any of such sections, in any case, at the time
of such sale), 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.
10.09 Confidentiality. Each Bank agrees to take and to
63
<PAGE> 70
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 a Company and provided to it by such Company or by
the Agent on such Company's behalf, under this Agreement or any other Loan
Document, and neither it nor any of its Affiliates shall use any 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 such Company; 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 such Company, provided that such
source is not bound by a confidentiality agreement with such Company 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 such Company or any Subsidiary is party or is deemed party with such Bank
or such Affiliate; and (I) to its Affiliates.
10.10 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 Company, any such notice being waived by the Companies 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 any Company 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 relevant Company 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.
64
<PAGE> 71
10.11 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.
10.12 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.
10.13 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.
10.14 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Companies, 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.
10.15 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 CALIFORNIA; 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 CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA,
AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANIES, THE
AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANIES, 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
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE
COMPANIES, 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
CALIFORNIA LAW.
10.16 Waiver of Jury Trial. THE COMPANIES, 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
65
<PAGE> 72
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 COMPANIES, 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
PENWEST, LTD.
By: /s/ Jeffrey T. Cook
------------------------------------
Name:
Title: Chief Financial Officer
By: /s/ Jennifer L. Good
------------------------------------
Name:
Title: Secretary
PENFORD PRODUCTS CO.
By: /s/ Jeffrey T. Cook
------------------------------------
Name:
Title: Vice President
By: /s/ Jennifer L. Good
------------------------------------
Name:
Title: Secretary
66
<PAGE> 73
EDWARD MENDELL CO., INC.
By: /s/ Jeffrey T. Cook
------------------------------------
Name:
Title: Vice President
By: /s/ Jennifer L. Good
------------------------------------
Name:
Title: Secretary
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By: /s/ Ivo Bakovic
------------------------------------
Name; Ivo Bakovic
Title: Vice President
67
<PAGE> 74
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
By: /s/ Michael J. Dasher
------------------------------------
Name; Michael J. Dasher
Title: Managing Director
68
<PAGE> 75
ABN-AMRO BANK N.V., Seattle Branch
By: /s/ J. J. Rice
------------------------------------
Name; J. J. Rice
Title: Vice President
By: /s/ Lee-Lee Miao
------------------------------------
Name; Lee-Lee Miao
Title: Vice President
69
<PAGE> 76
THE BANK OF NOVA SCOTIA
By: /s/ M. Brown
------------------------------------
Name; M. Brown
Title: Officer
70
<PAGE> 77
SEATTLE-FIRST NATIONAL BANK
By: /s/ John Wilson
------------------------------------
Name; John Wilson
Title: Vice President
71
<PAGE> 78
SCHEDULE 2.01
COMMITMENTS
AND PRO RATA SHARES
<TABLE>
<CAPTION>
BANK COMMITMENT COMMITMENT
PERCENTAGE AMOUNT
<S> <C> <C>
Bank of America National Trust and
Savings Association 30% $10,500,000
ABN-AMRO Bank, N.V. 30% 10,500,000
The Bank of Nova Scotia 30% 10,500,000
Seattle-First National Bank 10% 3,500,000
TOTAL 100% $35,000,000
</TABLE>
72
<PAGE> 79
SCHEDULE 5.12
ERISA COMPLIANCE
None.
<PAGE> 80
SCHEDULE 5.13
ENVIRONMENTAL MATTERS
None.
<PAGE> 81
SCHEDULE 5.15
COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES
None.
<PAGE> 82
SCHEDULE 5.16
SUBSIDIARIES
(a) Penford Products, Co.
Edward Mendell Co., Inc.
Pacific Cogeneration, Inc.
Edward Mendell GmBH
Edward Mendell Finland OY
PENWEST Foreign Sales Corporation
(b) None
<PAGE> 83
SCHEDULE 5.17
INSURANCE
None.
<PAGE> 84
SCHEDULE 7.02
INDEBTEDNESS
<TABLE>
<CAPTION>
November 20, 1995
(in 000's)
<S> <C>
Unsecured term agreement, quarterly principal payments, final maturity
in 2000, 6.50% interest rate at year-end $16,000
Private placement, 7.93% interest rate, semiannual interest-only
payments with principal payments beginning in 1996, final
maturity in 2005 20,000
Private placement, 7.97% interest rate, semiannual interest-only
payments with two equal principal payments, one in 1998 and
one in 2006 20,000
Unsecured note, 9.4% interest rate, due in quarterly installments
through 2000 3,570
Note payable, 8.49% interest rate, quarterly principal and interest
payments through October 1997 3,011
-----
Total long-term debt $62,581
=======
</TABLE>
<PAGE> 85
SCHEDULE 7.05
LIENS
<TABLE>
<CAPTION>
UCC
Debtor Location UCC Filed File No. Secured Party Description of Security Interest
<S> <C> <C> <C> <C> <C>
Edward Mendell Co., Inc. NY-SOS 10/03/89 244879 General Electric Capital All equipment now or hereafter leased
Putnam Co.-NY 10/03/89 1989-103 Corp. (Assigned from Yale including (1) New Advance Trac 280
Financial Services Trust Scrubber; and all accessiors
Edward Mendell Co., Inc. NY-SOS 05/23/90 108554 Pitney Bowes Credit Corp. Leased Business Equipment - filed for
notice purposes only.
Edward Mendell Co., Inc. NY-SOS 06/11/90 124040 GE Capital Corp. Mitel SX-200 as more specifically
Putnam Co.-NY 06/14/90 1990-607 described on Equipment Schedule
annexed
Edward Mendell Co. Putnam Co.-NY 02/24/88 1988-267 Modern Handling Equipt. of 1 Hyster A30XL; 1/4" Vista 3 State; 1
New Jersey Inc. Ampower 24V Battery Model:
12-75AP-21; 1 Ampower charger Model
12M-725 (leased equipment)
Edward Mendell Co. Putnam Co.-NY 6/26/87 1987-889 Wang Laboratories Inc. All word processing/data processing
equipment. Notice filing only and not
deemed evidence of any intention to
create a security interest under the
UCC
Edward Mendell Co. Putnam Co.-NY 00/00/90 1990-368 Wang Laboratories Inc. See description above.
(Assignor)
Edward Mendell Co. Inc. Putnam Co.-NY 00/00/88 1988-269 General Electric Credit Co. All RCA telephones, Accessories, etc.
as assignee of RCW Service
Company
Edward Mendell Co., Inc. Putnam Co.-NY 00/00/88 1988-454 General Electric Credit Co. All RCA telephones, accessories, etc.
Penford Products Co. IA-SOS 12/4/89 K066087 Norwest Leasing (assignee of Panasonic EP-2230 Copier an other
Tall Corn Leasing) Panasonic equipment
Automated Office Systems
Penford Products Co. Linn Co.-IA 03/04/91 G60486 2 Canon FAX 770's
Penford Products Co. Linn Co.-IA 04/00/92 G62524 Canon Fax L770 S/N
UBJ13975
Penwest Foods Co. WA-SOS 02/24/94 94-055-0125 Western Paper Company One Lanetec "Q" Series Model 400
Semi-Automatic Stretch wrapping
system. Serial No. Q-0898
</TABLE>
<PAGE> 86
SCHEDULE 10.02
OFFSHORE AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
PENWEST, LTD.
PENFORD PRODUCTS CO.
EDWARD MENDELL CO., INC.
ADDRESS FOR NOTICES:
c/o Penwest, Ltd.
777 108th Ave.N.E. - Suite 2390
Bellevue, WA 98004-5139
Attention: Chief Financial Officer
Telephone: 206/462-6000
Fax: 206/462-2819
If by mail:
c/o Penwest, Ltd.
P.O. Box 1688
Bellevue, WA 98009-1688
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
Bank of America National Trust
and Savings Association
Agency Management Services #5596
1455 Market Street, 12th Floor
San Francisco, California 94103
Attention: Ivo Bakovic
Vice President
Telephone: (415) 436-2789
Facsimile: (415) 436-2700
79
<PAGE> 87
AGENT'S PAYMENT OFFICE:
Bank of America National Trust
and Savings Association
1850 Gateway Boulevard
Concord, CA 94520
Agency Management Services #5596
ABA No. 121-000-358
For credit to account no. 12331-14798
Re: Penwest
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Bank
Domestic and Offshore Lending Office:
Bank of America National Trust
and Savings Association
1850 Gateway Boulevard, Fourth Floor
Concord, California 94520-3281
Attention: Josie Geniavich
Telephone: 510/675-7742
Fax: 510/675-7531
NOTICES (OTHER THAN BORROWING NOTICES AND NOTICES OF
CONVERSION/CONTINUATION):
Bank of America National Trust
and Savings Association
Credit Products #3838
555 California Street, 41st floor
San Francisco, CA 94104-1502
Attention: Maria Vickroy-Peralta
Telephone: 415/622-7198
Fax: 415/622-4585
ABN-AMRO BANK N.V., Seattle Branch
DOMESTIC AND OFFSHORE LENDING OFFICE:
ABN-AMRO Bank N.V.
Seattle Branch, Suite 2323
600 University Street
One Union Square
Seattle, WA 98101
Attention: Suzanne Smith
Telephone: 206/587-0281
Fax: 206/682-5641
80
<PAGE> 88
ADDRESS FOR NOTICES (OTHER THAN BORROWING NOTICES AND NOTICES OF
CONVERSION/CONTINUATION):
ABN-AMRO Bank N.V.
Seattle Branch, Suite 2323
600 University Street
One Union Square
Seattle, WA 98101
Attention: James J. Rice
Telephone: 206/587-2360
Fax: 206/682-5641
THE BANK OF NOVA SCOTIA
DOMESTIC AND OFFSHORE LENDING OFFICE
The Bank of Nova Scotia
600 Peachtree Street, NE, Suite 2700
Atlanta, GA 30308
Attention: Craig Subryan
Telephone: 404/877-1563
Fax: 404/888-8998
ADDRESS FOR NOTICES (OTHER THAN BORROWING NOTICES AND NOTICES OF
CONVERSION/CONTINUATION):
The Bank of Nova Scotia
Pioneer Tower, Suite 750
888 S.W. 5th Avenue
Portland, OR 97204
Attention: Sharon B. Bloch
Telephone: 503/222-3148
Fax: 503/222-5502
SEATTLE-FIRST NATIONAL BANK
DOMESTIC AND OFFSHORE LENDING OFFICE:
Seattle-First National Bank
701 Fifth Avenue - CSC-12
P.O. Box 94010
Seattle, WA 98124-9410
Attention: Alice Kraus Stokke
Telephone: 306/358-8009
Fax: 306/358-3113
81
<PAGE> 89
ADDRESS FOR NOTICES (OTHER THAN BORROWING NOTICES AND NOTICES OF
CONVERSION/CONTINUATION):
701 Fifth Avenue - CSC-12
P.O., Box 94010
Seattle, WA 9812-9410
Attention: John S. Wilson
Vice President
Telephone: 206/358-8945
Fax: 206/358-3113
82
<PAGE> 90
EXHIBIT A
PENWEST, LTD.
COMPLIANCE CERTIFICATE
Financial
Statement Date:__________, 199_
Reference is made to that certain Credit Agreement dated as of December
22, 1995 (as extended, renewed, amended or restated from time to time, the
"Credit Agreement") among Penwest Ltd, Penford Products Co., Edward Mendell Co.,
Inc. (collectively the "Companies" and singly a "Company"), the several
financial institutions from time to time parties to the Credit Agreement (the
"Banks") and Bank of America National Trust and Savings Association, as agent
for the Banks (in such capacity, the "Agent"). Unless otherwise defined herein,
capitalized terms used herein have the respective meanings assigned to them in
the Credit Agreement.
The undersigned Responsible Officer of PENWEST, LTD. hereby certifies
as of the date hereof that he/she is the _____________________ of PENWEST, LTD.
and that, as such, he/she is authorized to execute and deliver this Certificate
to the Banks and the Agent on the behalf of PENWEST, LTD. and its consolidated
Subsidiaries, and that:
[Use the following paragraph if this Certificate is delivered in connection with
the financial statements required by subsection 6.10(a) of the Credit
Agreement.]
1. Attached as Schedule 1 hereto are (a) a true and correct copy of
the audited consolidated balance sheet of Penwest and its Subsidiaries as at the
end of the fiscal year ended _______________, 199__ and (b) and the related
consolidated statements of income and retained earnings and statement of changes
in financial position of Penwest and its Subsidiaries for such year, accompanied
by the audit report thereon by an independent certified public accountant
selected by Penwest (the "Independent Auditor") and approved by the Agent (which
reports 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 report is not qualified by reason of
restricted or limited examination by the Independent Auditor of any material
portion of Penwest's or any Subsidiary's records.
OR
[Use the following paragraph if this Certificate is delivered in
1
<PAGE> 91
connection with the financial statements required by subsection 6.10(b) of the
Credit Agreement.]
1. Attached as Schedule 1 hereto are a true and correct copy of the
unaudited consolidated and consolidating balance sheets, consolidated and
consolidating statements of income, and consolidating statements of changes in
financial position of Penwest and its Subsidiaries as of the end of the fiscal
quarter ended _____________, 199__ (including the fiscal year to the end of
such fiscal quarter), certified by a Responsible Officer of Penwest 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
Penwest and its Subsidiaries.
2. The undersigned has reviewed and is familiar with the terms of
the Credit Agreement and has made, or has caused to be made under his/her
supervision, a detailed review of the transactions and conditions (financial or
otherwise) of Penwest during the accounting period covered by the attached
financial statements.
3. To the best of the undersigned's knowledge, Penwest and each of
the other Companies, during such period, observed, performed or satisfied all of
its covenants and other agreements, and satisfied every condition in the Credit
Agreement to be observed, performed or satisfied by Penwest and the other
Companies, and the undersigned has no knowledge of any Default or Event of
Default.
4. The following financial covenant analyses and information set
forth on Schedule 2 attached hereto are true and accurate on and as of the date
of this Certificate.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
___________________, 199__.
PENWEST, LTD.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
2
<PAGE> 92
Schedule 2 to Compliance Certificate
dated_____________________
Section 7.11 Minimum Consolidated Tangible Net Worth of Penwest
<TABLE>
<CAPTION>
(In thousands) (In thousands)
<S> <C> <C>
1. Total Assets
--------------
2. Intangible Assets
--------------
3. Total Liabilities
--------------
4. Tangible Net Worth
(1 - 2 - 3)
--------------
5. 85% of Tangible Net Worth as
of 3Q95 $ 60,951
6. 50% of net income (with no
deduction for losses) since
June 1, 1995
--------------
7. 75% of net issuance proceeds
of new stock issued after 3Q 95
--------------
9. Minimum Tangible Net Worth
Required (5 + 6 + 7)
--------------
</TABLE>
Section 7.12 Maximum Leverage Ratio of Penwest
<TABLE>
<S> <C> <C>
1. Consolidated Total Debt
--------------
2. Net Worth
--------------
3. Total Capitalization
(1 + 2)
--------------
4. Ratio of line 1 to line 3
--------------
5. Maximum Leverage Ratio
permitted 0.55 to 1.00
</TABLE>
Section 7.13 Minimum Fixed Charge Coverage Ratio of Penwest
Computations on a consolidated basis and measured on a four quarter trailing
basis
<TABLE>
<S> <C>
1. Earnings
--------------
2. Interest expense
--------------
3. Taxes
--------------
4. Rental expense
--------------
</TABLE>
3
<PAGE> 93
Schedule 2 to Compliance Certificate dated ______________________
Page 2
<TABLE>
<S> <C> <C>
5. Numerator (1 + 2 + 3 + 4)
--------------
6. Denominator (2 + 4)
--------------
7. Ratio of 5 to 6
--------------
8. Minimum Fixed Charge
Coverage Ratio Permitted 2:00 to 1:00
</TABLE>
4
<PAGE> 94
EXHIBIT B
FORM OF PROMISSORY NOTE
$____________ December 22, 1995
FOR VALUE RECEIVED, the undersigned, PENWEST, LTD., a Delaware
corporation, Penford Products Co., a Delaware corporation, and Edward Mendell
Co., Inc. a Washington corporation (collectively the "Companies" and singly a
"Company"), hereby jointly and severally promise to pay to the order of
_________________ (the "Bank") the principal sum of _________ Dollars ($_______)
or, if less, the aggregate unpaid principal amount of all Loans made by the
Bank to the Companies pursuant to the Credit Agreement dated as of December 22,
1995 (such Credit Agreement, as it may be amended, restated, supplemented or
otherwise modified from time to time, being hereinafter called the "Credit
Agreement"), among the Companies, the Bank, the other banks parties thereto,
and Bank of America National Trust and Savings Association, as Agent for the
Banks, on the dates and in the amounts provided in the Credit Agreement. The
Companies further jointly and severally promise to pay interest on the unpaid
principal amount of the Loans evidenced hereby from time to time at the rates,
on the dates, and otherwise as provided in the Credit Agreement.
The Bank is authorized to endorse the amount and the date on which each
Loan is made, the maturity date therefor and each payment of principal with
respect thereto on the schedules annexed hereto and made a part hereof, or on
continuations thereof which shall be attached hereto and made a part hereof;
provided, that any failure to endorse such information on such schedule or
continuation thereof shall not in any manner affect any obligation of the
Companies under the Credit Agreement and this Promissory Note (the "Note").
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Credit Agreement, which Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon the happening
of certain stated events and also for prepayments on account of principal hereof
prior to the maturity hereof upon the terms and conditions therein specified.
Terms defined in the Credit Agreement are used herein with their
defined meanings therein unless otherwise defined herein. This Note shall be
governed by, and construed and interpreted in accordance with, the laws of the
State of
B-1
<PAGE> 95
California applicable to contracts made and to be performed entirely within such
State.
PENWEST, LTD.
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
PENFORD PRODUCTS CO.
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
EDWARD MENDELL CO., INC.
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
B-2
<PAGE> 96
Schedule A to Note
BASE RATE LOANS AND REPAYMENT OF BASE RATE LOANS
<TABLE>
<CAPTION>
(2) (3) (4)
Amount Maturity Amount of
of Date of Base (5)
(1) Base Base Rate Loan Notation
Date Rate Loan Rate Loan Repaid Made By
---- --------- --------- --------- --------
<S> <C> <C> <C> <C>
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
</TABLE>
B-3
<PAGE> 97
Schedule B to Note
OFFSHORE RATE LOANS AND REPAYMENT OF OFFSHORE RATE LOANS
<TABLE>
<CAPTION>
(2) (3) (4)
Amount Maturity Amount of
of Date of Offshore (5)
(1) Offshore Offshore Rate Loan Notation
Date Rate Loan Rate Loan Repaid Made By
---- --------- --------- --------- --------
<S> <C> <C> <C> <C>
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
_________ _________ _________ _________ ________
</TABLE>
B-4
<PAGE> 98
EXHIBIT C
NOTICE OF BORROWING
Date:_______, 199__
To: Bank of America National Trust and Savings Association as Agent for the
Banks parties to the Credit Agreement dated as of December 22, 1995 (as
extended, renewed, amended or restated from time to time, the "Credit
Agreement") among Penwest, Ltd., Penford Products Co., Edward Mendell Co.,
Inc. (collectively the "Companies" and singly a "Company"), certain Banks
which are signatories thereto and Bank of America National Trust and
Savings Association, as Agent for the Banks
Ladies and Gentlemen:
The undersigned, ___________________________ (a "Company"), refers to the
Credit Agreement, the terms defined therein being used herein as therein
defined, and hereby gives you notice irrevocably, pursuant to Section 2.03 of
the Credit Agreement, of the Borrowing specified below:
1. The Business Day of the proposed Borrowing is ____________, 19__.
2. The aggregate amount of the proposed Borrowing is $_____________.
3. The Borrowing is to be comprised of $_______________ of
[Base Rate] [Offshore Rate] Loans.
4. The duration of the Interest Period for the Offshore Rate Loans
included in the Borrowing shall be _____ months.
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the proposed Borrowing, before
and after giving effect thereto and to the application of the proceeds
therefrom:
(a) the representations and warranties of the Companies contained in
Article V of the Credit Agreement are true and correct as though made on
and as of such date (except to the extent such representations and
warranties relate to an earlier date, in which case they are true and
correct as of such date);
(b) no Default or Event of Default has occurred and is
C-1
<PAGE> 99
continuing, or would result from such proposed Borrowing; and
(c) The proposed Borrowing will not cause the aggregate principal
amount of all outstanding Loans to exceed the combined Commitments of the
Banks.
[NAME OF COMPANY]
By:
--------------------------
Name:
Title:
By:
--------------------------
Name:
Title:
C-2
<PAGE> 100
EXHIBIT D
NOTICE OF CONVERSION/CONTINUATION
Date: ________________, 199__
To: Bank of America National Trust and Savings Association, as Agent for the
Banks parties to the Credit Agreement dated as of December 22, 1995 (as
extended, renewed, amended or restated from time to time, the "Credit
Agreement") among Penwest Ltd, Penford Products Co., and Edward Mendell
co., Inc. (collectively the "Companies" and singly a "Company"), certain
Banks which are signatories thereto and Bank of America National Trust and
Savings Association, as Agent
Ladies and Gentlemen:
The undersigned, ___________________________ (a "Company"), refers to the
Credit Agreement, the terms defined therein being used herein as therein
defined, and hereby gives you notice irrevocably, pursuant to Section 2.04 of
the Credit Agreement, of the [conversion] [continuation] of the Loans specified
herein, that:
1. The Conversion/Continuation Date is _________________________, 19__.
2. The aggregate amount of the Loans to be [converted] [continued] is
$__________________________.
3. The Loans are to be [converted into] [continued as] [Offshore Rate]
[Base Rate] Loans.
4. [If applicable:] The duration of the Interest Period for the Loans
included in the [conversion] [continuation] shall be ____________ months.
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the proposed Conversion/Continuation Date,
before and after giving effect thereto and to the application of the proceeds
therefrom:
(a) the representations and warranties of the Companies contained in
Article V of the Credit Agreement are true and correct as though made on
and as of such date (except to the extent such representations and
warranties relate to an earlier date, in which case they are true and
correct as of such date);
(b) no Default or Event of Default has occurred and is
D-1
<PAGE> 101
continuing, or would result from such proposed [conversion] [continuation];
and
(c) the proposed [conversion] [continuation] will not cause the
aggregate principal amount of all outstanding Loans to exceed the combined
Commitments of the Banks.
[NAME OF COMPANY]
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
D-2
<PAGE> 102
EXHIBIT E
[FORM OF OPINION OF BOGLE & GATES P.L.C.C.]
December ___, 1995
To the Agent and Banks
referred to below
c/o Bank of America National Trust
and Savings Association
Agency Management Services #5596
1455 Market Street, 12th floor
San Francisco, California 94103
Ladies and Gentlemen:
We have acted as counsel for Penwest, Ltd., a Washington corportion
("Penwest"), Penford Products Co., a Delaware corporation ("Penford") and
Edward Mendell Co., Inc., a Washington corporation ("Mendell") in connection
with the Credit Agreement (the "Credit Agreement") dated as of December ___,
1995 among Penwest, Penford and Mendell (each, a "Company"), Bank of America
National Trust and Savings Association, as Agent (the "Agent"), and the
financial institutions named on the signature pages thereof (each, a "Bank").
This opinion letter is being rendered to you at the request of our clients as
contemplated by Section 4.01(c) of the Credit Agreement. Capitalized terms not
otherwise defined herein are used herein as defined in the Credit Agreement.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of:
(a) the Credit Agreement, which states that it is governed by
the laws of California;
(b) the Notes(1), which state that they are governed by the
laws of California;
(c) the articles or certificate of incorporation of each Company
and amendments thereto, certified by the offices of the Secretaries of
State of Washington and Delaware as being true and correct as of
December __, 1995 and December __, 1995, respectively; a Certificate
of Existence/Authorization issued on December __, 1995 by the office of
the Secretary of State of Washington with respect to each Company, and a
Certificate issued on December __,
_________________
(1) Opinion will be appropriately modified if there are no Notes or if
there is only one Note.
<PAGE> 103
To the Agent and Banks D R A F T
December __, 1995
Page 2
1995 by the ofice of the Secretary of State of Delaware with respect to
Penford; and
(d) the bylaws of each Company, certified by an officer of
such Company as being true and correct as of the date hereof;
and we have conducted such other investigations of law as we have deemed
necessary or advisable for purposes of this opinion letter.
We have assumed without independent verification:
(a) the genuineness of all signatures, the authenticity of all
documents, instruments and certificates submitted to us as originals,
and the exact conformity with the executed originals of all documents,
instruments and certificatfes submitted to us as copies; and
(b) that the execution, delivery and performance of the Credit
Agreement by the Agent and each Bank have been duly authorized by all
necessary corporate and other action and that the Agent and each Bank
has executed and delivered the Credit Agreement.
As to questions of fact material to this opinion letter, we
have relied without independent verification solely upon the documents,
instruments and certificates submitted to us.
Whenever a statement herein is qualified by "to our knowledge"
or a similar phrase, it is intended to indicate that, during the course of our
representation of the Companies, no information that would give us current
actual knowledge of the inaccuracy of such statement has come to our attention.
However, we have not undertaken any independent investigation to determine the
accuracy of such statement, and any limited inquiry undertaken by us during the
preparation of this opinion letter should not be regarded as such an
investigation; no inference as to our knowledge of any matters bearing on the
accuracy of any such statement should be drawn from the fact of our
representation of the Companies.
We are qualified to practice law in the State of Washington and
do not express any opinion in this letter concerning any laws other than the
laws of the State of Washington, the General Corporation Law of the State of
Delaware and the federal laws of the United States. Without limiting the
generality of the foregoing, we express no opinion as to the effect (if any)
of any law of any jurisdiction in which any Bank
<PAGE> 104
To the Agent and Banks D R A F T
December __, 1995
Page 3
is located which limits the rate of interest that such Bank may charge or
collect.
Based upon and subject to the foregoing, and further subject to the
qualifications set forth below, we are of the opinion that:
1. Each of Penwest and Mendell is a corporation duly incorporated,
validly existing and authorized to transact business in the corporate form
under the laws of the State of Washington. Penford is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and is duly qualified to do business as a foreign corporation in
the State of Washington. Each of the Companies has the corporate power and
authority required to carry on its business as presently conducted, to own and
operate its properties and assets and to execute, deliver and perform the
Credit Agreement and the Notes.
2. The execution, delivery and performance by each Company of the
Credit Agreement and the Notes made by it are within the corporate powers of
such Company, have been duly authorized by all necessary corporate action on
the part of such Company, do not require any shareholder approval, do not
contravene or constitute a default under (i) any applicable law, regulation or
rule, or any order known to us to be binding on such Company; (ii) the
articles of incorporation or bylaws of such Company; (iii) any applicable law
or regulation or (iv) to our knowledge, any indenture, mortgage, contract or
other agreement or instrument to which such Company is a party or by which such
Company or any of its properties is bound.
3. No approval, permit, license, authorization, certificate or
consent of any Washington State or federal governmental authority is required
or necessary for any Company in connection with the execution and delivery of
the Credit Agreement and the Notes made by it.
4. If the Credit Agreement and the Notes were by their terms governed
by the laws of the State of Washington, the Credit Agreement would constitute a
legal, valid and binding agreement of each Company, and each Note would
constitute a legal, valid and binding obligation of the Company that made such
Note, in each case enforceable against such Company in accordance with its
terms.
5. To our knowledge, except as described in the attachment hereto or
otherwise disclosed to the Banks, there is
<PAGE> 105
To the Agent and Banks D R A F T
December __, 1995
Page 4
no action, suit or proceeding pending against or affecting any Company before
any court or arbitrator or any governmental body, agency or official which
purports to affect the validity of the Credit Agreement or any Note or in which
there is a reasonable likelihood of an adverse decision which would materially
adversely affect the financial condition or results of operations of Penwest
and its Subsidiaries, taken as a whole.
6. Neither any Company nor any Subsidiary of any Company is (i) an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, (ii) a "holding company," an "affiliate" of a holding company or a
"subsidiary" of a holding company within the meaning of the Public Utility
Holding Company Act of 1935, as amended, or (iii) a "public service company"
within the meaning of Section 80.08 of the Revised Code of Washington, as
amended.
7. Neither any Company nor any Subsidiary of any Company is generally
engaged in the business of purchasing or selling Margin Stock or extending
credit for the purpose of purchasing or carrying Margin Stock.
The opinions expressed above are subject to the following
qualifications:
(a) The validity and enforceability of obligations and the
availability of rights and remedies are subject to and may be limited by (i)
laws relating to or affecting creditors' rights generally (including but not
limited to bankruptcy, insolvency, reorganization, arrangement and moratorium
laws), (ii) Section 548 of the United States Bankruptcy Code, state fraudulent
transfer laws and other similar laws relating to fraud on creditors
("Fraudulent Conveyance Laws") and (iii) general principles of equity
(including but not limited to concepts of materiality, reasonableness, good
faith and fair dealing and principles that may limit the availability of
specific performance or injunctive or other equitable relief), whether the
validity or enforceability of obligations or the availability of rights and
remedies may be considered in a proceeding in equity or at law.
(b) Though we express no opinion as to the effect of any Fraudulent
Conveyance Laws, we call your attention to the fact that Fraudulent Conveyance
Laws would likely be implicated by certain aspects of the proposed
transactions, including without limitation the assumption by each Company of
liability for indebtedness incurred by other Companies without receiving the
benefit of the proceeds thereof. The effect of Fraudulent Conveyance Laws
depends upon the solvency and adequacy of capital
<PAGE> 106
To the Agent and Banks D R A F T
December __, 1995
Page 5
of, and other factual matters relating to, the Companies, after giving effect to
the transactions contemplated by the Credit Agreement. We have not undertaken a
review of such factual matters.
(c) We express no opinion as to any provision in the Credit Agreement
or any Note insofar as it purports to provide that any party (i) may have
rights to indemnification or contribution, (ii) may have set-off or similar
rights, (iii) waives any right or defense or (iv) is entitled to payment of
attorneys' fees in any action or proceeding although it is not the prevailing
party or is entitled to attorneys' fees except to the extent determined by a
court to be reasonable.
(d) We express no opinion as to any federal or state securities laws.
This opinion letter is being rendered to the Agent and the Banks and is
intended solely for their benefit for use in connection with the matters
addressed herein, and may not be relied upon by the Agent or any Bank for any
other purpose, or relied upon by any other person or entity for any purpose,
without our prior written consent.
Very truly yours,
<PAGE> 107
EXHIBIT F
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and
Acceptance") dated as of __________, 199__ is made between _____________________
(the "Assignor") and ______________________ (the "Assignee").
RECITALS
WHEREAS, the Assignor is party to that certain Credit Agreement
dated as of December 22, 1995 (as amended, amended and restated, modified,
supplemented or renewed, the "Credit Agreement") among PENWEST, LTD., Penford
Products Co., Edward Mendell Co., Inc. (collectively the "Companies" and singly
a "Company"), the several financial institutions from time to time party thereto
(including the Assignor, the "Banks"), and Bank of America National Trust and
Savings Association, as agent for the Banks (the "Agent"). Any terms defined in
the Credit Agreement and not defined in this Assignment and Acceptance are used
herein as defined in the Credit Agreement;
WHEREAS, as provided under the Credit Agreement, the Assignor has
committed to making Loans (the "Loans") to the Companies in an aggregate amount
not to exceed $__________ (the "Commitment");
WHEREAS, [the Assignor has made Loans in the aggregate principal
amount of $__________ to __________, $__________ to __________, and $__________
to __________] [no Loans are outstanding under the Credit Agreement];
WHEREAS, the Assignor wishes to assign to the Assignee [part of the]
[all] rights and obligations of the Assignor under the Credit Agreement in
respect of its Commitment, together with a corresponding portion of each of its
outstanding Loans in an amount equal to $__________ (the "Assigned Amount") on
the terms and subject to the conditions set forth herein and the Assignee wishes
to accept assignment of such rights and to assume such obligations from the
Assignor on such terms and subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
F - 1
<PAGE> 108
1. Assignment and Acceptance.
(a) Subject to the terms and conditions of this Assignment and
Acceptance, (i) the Assignor hereby sells, transfers and assigns to the
Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from
the Assignor, without recourse and without representation or warranty (except as
provided in this Assignment and Acceptance) __% (the "Assignee's Percentage
Share") of (A) the Commitment and the Loans of the Assignor and (B) all related
rights, benefits, obligations, liabilities and indemnities of the Assignor under
and in connection with the Credit Agreement and the Loan Documents.
[If appropriate, add paragraph specifying payment to Assignor by
Assignee of outstanding principal of, accrued interest on, and fees with respect
to, Loans assigned.]
(b) With effect on and after the Effective Date (as defined in
Section 5 hereof), the Assignee shall be a party to the Credit Agreement and
succeed to all of the rights and be obligated to perform all of the obligations
of a Bank under the Credit Agreement, including the requirements concerning
confidentiality and the payment of indemnification, with a Commitment in an
amount equal to the Assigned Amount. The Assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Bank. It is the intent
of the parties hereto that the Commitment of the Assignor shall, as of the
Effective Date, be reduced by an amount equal to the Assigned Amount and the
Assignor shall relinquish its rights and be released from its obligations under
the Credit Agreement to the extent such obligations have been assumed by the
Assignee; provided, however, the Assignor shall not relinquish its rights under
Sections __ and __ of the Credit Agreement to the extent such rights relate to
the time prior to the Effective Date.
(c) After giving effect to the assignment and assumption set forth
herein, on the Effective Date the Assignee's Commitment will be $__________.
(d) After giving effect to the assignment and assumption set forth
herein, on the Effective Date the Assignor's Commitment will be $__________.
2. Payments.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the
Effective Date in immediately available funds an amount equal to $__________,
representing the Assignee's Pro Rata Share of the principal amount of all Loans.
(b) The [Assignor] [Assignee] further agrees to pay to
F - 2
<PAGE> 109
the Agent a processing fee in the amount specified in Section 10.08(a) of the
Credit Agreement.
3. Reallocation of Payments.
Any interest, fees and other payments accrued to the Effective Date with
respect to the Commitment and Loans shall be for the account of the Assignor.
Any interest, fees and other payments accrued on and after the Effective Date
with respect to the Assigned Amount shall be for the account of the Assignee.
Each of the Assignor and the Assignee agrees that it will hold in trust for the
other party any interest, fees and other amounts which it may receive to which
the other party is entitled pursuant to the preceding sentence and pay to the
other party any such amounts which it may receive promptly upon receipt.
4. Independent Credit Decision.
The Assignee (a) acknowledges that it has received a copy of the Credit
Agreement and the Schedules and Exhibits thereto, together with copies of the
most recent financial statements referred to in Section __________ of the Credit
Agreement, and such other documents and information as it has deemed appropriate
to make its own credit and legal analysis and decision to enter into this
Assignment and Acceptance; and (b) agrees that it will, independently and
without reliance upon the Assignor, the Agent or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit and legal decisions in taking or not taking
action under the Credit Agreement.
5. Effective Date; Notices.
(a) As between the Assignor and the Assignee, the effective date
for this Assignment and Acceptance shall be __________, 199__ (the "Effective
Date"); provided that the following conditions precedent have been satisfied on
or before the Effective Date:
(i) this Assignment and Acceptance shall be executed and
delivered by the Assignor and the Assignee;
(ii) the consent of the Companies and the Agent required for
an effective assignment of the Assigned Amount by the Assignor to the Assignee
under Section __________ of the Credit Agreement shall have been duly obtained
and shall be in full force and effect as of the Effective Date;
(iii) the Assignee shall pay to the Assignor all amounts due
to the Assignor under this Assignment and Acceptance;
[(iv) the Assignee shall have complied with Section __________
of the Credit Agreement (if applicable)];
(v) the processing fee referred to in
F - 3
<PAGE> 110
Section 2(b) hereof and in Section 10.08(a) of the Credit Agreement shall have
been paid to the Agent; and
(vi) the Assignor shall have assigned and the Assignee shall
have assumed a percentage equal to the Assignee's Percentage Share of the rights
and obligations of the Assignor under the Credit Agreement (if such agreement
exists).
(b) Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to the Companies and the Agent for
acknowledgement by the Agent, a Notice of Assignment substantially in the form
attached hereto as Schedule 1.
6. Agent.
(a) The Assignee hereby appoints and authorizes the Assignor to
take such action as agent on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Agent by the Banks pursuant to the
terms of the Credit Agreement.
[(b) The Assignee shall assume no duties or obligations held by the
Assignor in its capacity as Agent under the Credit Agreement.] [INCLUDE ONLY IF
ASSIGNOR IS AGENT]
7. Withholding Tax.
The Assignee (a) represents and warrants to the Bank, the Agent and each
Company that under applicable law and treaties no tax will be required to be
withheld by the Bank with respect to any payments to be made to the Assignee
hereunder, (b) agrees to furnish (if it is organized under the laws of any
jurisdiction other than the United States or any State thereof) to the Agent and
each Company prior to the time that the Agent or any Company is required to make
any payment of principal, interest or fees hereunder, duplicate executed
originals of either U.S. Internal Revenue Service Form 4224 or U.S. Internal
Revenue Service Form 1001 (wherein the Assignee claims entitlement to the
benefits of a tax treaty that provides for a complete exemption from U.S.
federal income withholding tax on all payments hereunder) and agrees to provide
new Forms 4224 or 1001 upon the expiration of any previously delivered form or
comparable statements in accordance with applicable U.S. law and regulations and
amendments thereto, duly executed and completed by the Assignee, and (c) agrees
to comply with all applicable U.S. laws and regulations with regard to such
withholding tax exemption.
8. Representations and Warranties.
(a) The Assignor represents and warrants that (i) it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any Lien or other adverse claim; (ii) it is
duly organized and existing and it has the full power and authority to take, and
has
F - 4
<PAGE> 111
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to fulfill
its obligations hereunder; (iii) no notices to, or consents, authorizations or
approvals of, any Person are required (other than any already given or obtained)
for its due execution, delivery and performance of this Assignment and
Acceptance, and apart from any agreements or undertakings or filings required by
the Credit Agreement, no further action by, or notice to, or filing with, any
Person is required of it for such execution, delivery or performance; and (iv)
this Assignment and Acceptance has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of the Assignor, enforceable
against the Assignor in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium, reorganization and other
laws of general application relating to or affecting creditors' rights and to
general equitable principles.
(b) The Assignor makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other instrument or document furnished pursuant thereto. The
Assignor makes no representation or warranty in connection with, and assumes no
responsibility with respect to, the solvency, financial condition or statements
of any Company, or the performance or observance by any Company, of any of its
respective obligations under the Credit Agreement or any other instrument or
document furnished in connection therewith.
(c) The Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and has
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance, and to
fulfill its obligations hereunder; (ii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance; and apart from any agreements or undertakings or
filings required by the Credit Agreement, no further action by, or notice to, or
filing with, any Person is required of it for such execution, delivery or
performance; (iii) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of the
Assignee, enforceable against the Assignee in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors' rights and to general equitable principles; and (iv) it is an
Eligible Assignee.
F - 5
<PAGE> 112
9. Further Assurances.
The Assignor and the Assignee each hereby agree to execute and deliver
such other instruments, and take such other action, as either party may
reasonably request in connection with the transactions contemplated by this
Assignment and Acceptance, including the delivery of any notices or other
documents or instruments to the Companies or the Agent, which may be required in
connection with the assignment and assumption contemplated hereby.
10. Miscellaneous.
(a) Any amendment or waiver of any provision of this Assignment
and Acceptance shall be in writing and signed by the parties hereto. No failure
or delay by either party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Assignment and Acceptance shall be without prejudice to any
rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made without any set-off
or counterclaim.
(c) The Assignor and the Assignee shall each pay its own costs and
expenses incurred in connection with the negotiation, preparation, execution and
performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any number
of counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA. The Assignor
and the Assignee each irrevocably submits to the non-exclusive jurisdiction of
any State or Federal court sitting in California over any suit, action or
proceeding arising out of or relating to this Assignment and Acceptance and
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such California State or Federal court. Each party to
this Assignment and Acceptance hereby irrevocably waives, to the fullest extent
it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR
STATEMENTS (WHETHER ORAL OR WRITTEN).
F - 6
<PAGE> 113
[Other provisions to be added as may be negotiated between the
Assignor and the Assignee, provided that such provisions are not inconsistent
with the Credit Agreement.]
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.
[ASSIGNOR]
By: ____________________________________
Name:
Title:
By: ____________________________________
Name:
Title:
Address:
[ASSIGNEE]
By: ____________________________________
Name:
Title:
By: ____________________________________
Name:
Title:
Address:
F - 7
<PAGE> 114
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
_______________, 19__
Bank of America National Trust
and Savings Association, as Agent
1455 Market Street, 12th Floor
San Francisco, CA 94103
Attn: Agency Management Services #5596
PENWEST, LTD.
Penford Products Co.
Edward Mendell Co., Inc.
___________________
___________________
___________________
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of December 22, 1995 (as
amended, amended and restated, modified, supplemented or renewed from time to
time the "Credit Agreement") among PENWEST, LTD., Penford Products Co., and
Edward Mendell Co., Inc. (collectively the "Companies" and singly a "Company"),
the Banks referred to therein and Bank of America National Trust and Savings
Association, as agent for the Banks (the "Agent"). Terms defined in the Credit
Agreement are used herein as therein defined.
1. We hereby give you notice of, and request your consent to, the
assignment by __________________ (the "Assignor") to _______________ (the
"Assignee") of _____% of the right, title and interest of the Assignor in and to
the Credit Agreement (including, without limitation, the right, title and
interest of the Assignor in and to the Commitments of the Assignor, and all
outstanding Loans made by the Assignor) pursuant to the Assignment and
Acceptance Agreement attached hereto (the "Assignment and Acceptance"). Before
giving effect to such assignment the Assignor's Commitment is $ ___________, and
the aggregate amount of its outstanding Loans is $_____________.
2. The Assignee agrees that, upon receiving the consent of the Agent,
and if applicable, PENWEST, LTD., Penford Products Co., and Edward Mendell Co.
to such assignment, the Assignee will be bound by the terms of the Credit
Agreement as fully and to the same extent as if the Assignee were the Bank
originally holding such interest in the Credit Agreement.
3. The following administrative details apply to the
F - 8
<PAGE> 115
Assignee:
(A) Notice Address:
Assignee name: __________________________
Address: _______________________________
_______________________________
_______________________________
Attention: _____________________________
Telephone: (___) _______________________
Telecopier: (___) ______________________
Telex (Answerback): ____________________
(B) Payment Instructions:
Account No.: ___________________________
At: ___________________________
___________________________
___________________________
Reference: ___________________________
Attention: ___________________________
4. You are entitled to rely upon the representations, warranties and
covenants of each of the Assignor and Assignee contained in the Assignment and
Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Notice
of Assignment and Acceptance to be executed by their respective duly authorized
officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
F - 9
<PAGE> 116
[NAME OF ASSIGNEE]
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
PENWEST, LTD.
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
PENFORD PRODUCTS CO.
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
F - 10
<PAGE> 117
EDWARD MENDELL CO. INC.
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By: ___________________________________
Name:
Title:
F - 11
<PAGE> 1
Exhibit 11
PENWEST, LTD. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
February 29 February 29
------------- ----------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PRIMARY:
Net income $ 908,000 $2,153,000 $2,656,000 $3,910,000
========== ========== ========== ==========
Weighted average number of
shares outstanding 6,770,927 6,682,942 6,700,196 6,738,142
Net effect of dilutive stock options 242,022 343,033 293,181 346,396
---------- ---------- ---------- ----------
Adjusted shares outstanding 7,012,949 7,025,975 6,993,377 7,084,538
========== ========== ========== ==========
Earnings per share $ 0.13 $ 0.31 $ 0.38 $ 0.55
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets at February 29, 1996 (unaudited), the Condensed
Consolidated Statements of Income at February 29, 1996 (unaudited), and the
Condensed Consolidated Statements of Cash Flow at February 29, 1996 (unaudited)
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 2,123
<SECURITIES> 0
<RECEIVABLES> 26,904
<ALLOWANCES> 0
<INVENTORY> 16,902
<CURRENT-ASSETS> 48,960
<PP&E> 113,969
<DEPRECIATION> 0
<TOTAL-ASSETS> 191,519
<CURRENT-LIABILITIES> 18,981
<BONDS> 0
0
0
<COMMON> 8,677
<OTHER-SE> 66,830
<TOTAL-LIABILITY-AND-EQUITY> 191,519
<SALES> 46,313
<TOTAL-REVENUES> 46,313
<CGS> 35,184
<TOTAL-COSTS> 35,184
<OTHER-EXPENSES> 8,558
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,254
<INCOME-PRETAX> 1,316
<INCOME-TAX> 409
<INCOME-CONTINUING> 908
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 908
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
