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 Quarter Ended MARCH 31, 1998
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. 1-12714
OSMONICS, INC
____________________________________________________________________
(Exact name of registrant as specified in its charter)
Minnesota 41-0955759
____________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
5951 Clearwater Drive, Minnetonka, MN 55343
____________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612)933-2277
______________
N/A
_____________________________________________________________________
Former name, former address and former
fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for at least the past 90 days.
Yes X No
___ ___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. At April 30, 1998,
13,961,658 shares of the issuer's Common Stock, $0.01 par value, were
outstanding.
OSMONICS, INC.
INDEX
______
PART I. FINANCIAL INFORMATION PAGE
_____________________ ____
ITEM I. FINANCIAL STATEMENTS
Consolidated Statements of Income -................ 2
For the Three Months Ended
March 31, 1998 and 1997
Consolidated Balance Sheets -...................... 3
March 31, 1998 and December 31, 1997
Consolidated Statements of Cash Flows.............. 4
For the Three Months Ended
March 31, 1998 and 1997
Notes to Consolidated Financial Statements......... 5
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 6-8
PART II. OTHER INFORMATION
_________________
ITEM 5. A. ACQUISITION OF COMPANY .................. 9
B. SUBSEQUENT EVENT ........................ 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.............. 10
SIGNATURES................................................11
ITEM I - FINANCIAL STATEMENTS
____________________
OSMONICS, INC.
CONSOLIDATED STATEMENTS OF INCOME
__________________________________
(In Thousands Except Per Share Data)
THREE MONTHS ENDED MARCH 31,
1998 1997
---- ----
Sales $42,150 $42,313
Cost of sales 26,043 25,964
------ ------
Gross profit 16,107 16,349
Less:
Selling, general and administrative 9,874 9,717
Research, development
and engineering 2,328 2,786
----- -----
Income from operations 3,905 3,846
Other income (expense) (576) (101)
----- -----
Income from continuing operations
before income taxes 3,329 3,745
Income taxes 1,165 1,311
----- -----
Income from continuing operations 2,164 2,434
Recovery on discontinued operations - 325
----- ------
Net income $ 2,164 $ 2,759
======= =======
Earnings per share - basic
Income from continuing operations $0.16 $0.17
Net Income $0.15 $0.17
Earnings per share _ assuming dilution
Income from continuing operations $0.16 $0.19
Net Income $0.15 $0.19
Average shares outstanding
Basic 13,949 14,202
Assuming dilution 14,210 14,516
OSMONICS, INC.
CONSOLIDATED BALANCE SHEETS
____________________________
(In Thousands Except Share Data)
MARCH 31, DECEMBER 31,
1998 1997
---- ----
ASSETS
Current assets
Cash and cash equivalents $ 4,458 $ 4,872
Marketable securities 16,411 17,004
Trade accounts receivable, net of
allowance for doubtful accounts of
$980 in 1998, and $888 in 1997 30,825 28,969
Inventories 38,458 35,228
Deferred tax assets 6,441 1,413
Other current assets 2,752 1,639
------ ------
Total current assets 99,345 89,125
------ ------
Property and equipment, at cost
Land and land improvements 5,606 5,535
Building 30,045 29,278
Machinery and equipment 65,353 62,770
------ ------
101,004 97,583
Less accumulated depreciation (44,930) (42,550)
-------- --------
56,074 55,033
Other assets 35,844 20,325
------ ------
$191,263 $164,483
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 11,172 $ 9,728
Notes payable and current portion
of long-term debt 16,250 16,174
Other accrued liabilities 20,972 17,950
------ ------
Total current liabilities 48,394 43,852
------ ------
Long-term debt 33,696 13,792
Other liabilities 22 25
Deferred income taxes 4,470 4,439
Shareholders' equity
Common stock, $0.01 par value
Authorized -- 50,000,000 shares
Issued -- 1998: 13,957,623 and
1997: 13,943,544 shares 140 140
Capital in excess of par value 20,445 20,261
Retained earnings 82,292 80,128
Unrealized gain on
marketable securities 2,249 2,180
Foreign currency translation
adjustments (445) (334)
------ ------
Total liabilities and
shareholders' equity $191,263 $164,483
======== ========
OSMONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
THREE MONTHS ENDED
MARCH 31,
1998 1997
---- ----
Cash flows from operations:
Net income $ 2,164 $ 2,759
Non-cash items included in net income:
Depreciation and amortization 1,794 1,190
Deferred income taxes 333 111
Gain on sale of investments (105) -
Changes in assets and liabilities:
(net of business acquisitions)
Accounts receivable (353) (1,439)
Inventories and other
current assets (2,065) 2,371
Accounts payable and accrued
liabilities 2,416 (4,084)
------- -------
Net cash provided by operations 4,184 908
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisition
(net of cash acquired) (23,452) (10,470)
Purchase of investments (268) (317)
Sale of investments 1,074 400
Purchase of property and equipment (1,932) (1,350)
Sales of property and equipment 73 -
Other (146) (125)
------ ------
Cash provided by (used in)
investing activities (24,651) (11,862)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable and debt 20,076 9,398
Reduction of debt (96) (136)
Issuance of common stock 184 311
Purchase of company stock - (1,184)
------ ------
Net cash provided by (used in)
Financing activities 20,164 8,389
------ ------
Effect of exchange rate changes on cash (111) 141
Decrease in cash and cash equivalents (414) (2,424)
Cash and cash equivalents -
beginning of year 4,872 5,392
------ ------
Cash and cash equivalents -
end of quarter $ 4,458 $ 2,968
====== ======
OSMONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all the informa
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
normal recurring accruals) considered necessary for a fair presentation have bee
included.
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards (_SFAS_ ) No. 130, _ Reporting Comprehensive Income_ which establishe
standards for the reporting of comprehensive income and its components. The Com
has the following components of comprehensive income:
1st Qtr. 1st Qtr.
1998 1997
---- ----
Net income $2,164 $2,764
Other comprehensive income, before tax:
Foreign currency translation adjustments (111) (255)
Unrealized gains on securities:
Unrealized holding gains arising
during period 174 (594)
Less: reclassified adjustment
for gains included in net income (105) 69 - (594)
----- --- --- -----
Other comprehensive income, before tax (42) (849)
Income tax expense related to items of
other comprehensive income (15) (297)
----- -----
Other comprehensive income, net of tax (27) (552)
----- -----
Comprehensive income $2,137 $2,207
====== ======
Operating results for the three months ended March 31, 1998, are not necessarily
indicative of the results that may be expected for the full year 1998.
These statements should be read in conjunction with the financial statements and
related notes included in the Company's Annual Report to shareholders and Form 1
for the year ended December 31, 1997.
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
_________________________________________________
(Dollars in thousands, except share data)
As an aid to understanding the Company's operating results, the following table
shows the percentage of sales that each income statement item represents for the
three months ended March 31, 1998 and 1997.
PERCENT OF SALES
THREE MONTHS ENDED
MARCH 31,
1998 1997
---- ----
Sales 100.0% 100.0%
Cost of sales 61.8 61.4
----- -----
Gross profit 38.2 38.6
Selling, general and administrative 23.4 23.0
Research, development and engineering 5.5 6.6
----- -----
Operating expenses 28.9 29.6
Income from operations 9.3 9.1
Other income (expense) (1.4) (0.2)
----- -----
Income from continuing operations
before income taxes 7.9 8.9
Income taxes 2.8 3.1
----- -----
Income from continuing operations 5.1 5.8
Recovery on discontinued operations - 0.8
----- -----
Net income 5.1% 6.5%
===== =====
SALES
Sales for the first quarter ended March 31, 1998 of $42,150 decreased 0.4% from
sales for the first quarter of 1997. Sales of equipment represent 49% and
replaceable products represent 51% of first quarter 1998 sales. Comparing same
business activity before acquisitions, sales were 7.9% lower in first quarter of
1998 than first quarter of 1997 and were up 6.3% over sales for the fourth
quarter of 1997. Approximately 50% of the lower sales was reduced domestic
shipments of large capital equipment and 50% was reduced business split evenly
between the Asia/Pacific and Latin America markets.
GROSS MARGIN
Gross margin for the first quarter of 1998 was 38.2% versus 38.6% for the
corresponding period in 1997. Gross margins have been affected by product mix,
price competition and a lower level of plant utilization at several locations.
OPERATING EXPENSES
Operating expenses decreased to 28.9% in the first quarter of 1998 from 29.6% in
the first quarter of 1997. The first quarter of 1998 result is an improvement
from 30.4% operating expense experienced in calendar year 1997. This
improvement is a result of continued expense controls in response to reduced
sales levels in late and early 1998.
OTHER EXPENSE
Other expense increased by $475 in the first three months of 1998 versus the
same period for 1997. The increase is primarily the result of an increase in
interest expense of $175 and $150 for the additional borrowing of $20,000 and
$12,000 for acquisition of Micron Separations, Inc. on February 17, 1998 and
Aquamatic on February 25, 1997, respectively.
INCOME TAXES
The effective tax rate for the three months ended March 31, 1998 was 35.0% based
on the forecast for the full year. This rate is equivalent to the same period
in 1997. However, this represents an increase over the 31.7% rate incurred for
calendar year 1997, due primarily to lower R&D tax credits on reduced spending,
and other non-recurring tax credits received in 1997.
RECOVERY ON DISCONTINUED OPERATIONS
The Company recognized $325 ($0.02 per share assuming dilution) in after tax
income in the first quarter of 1997 from a reduction in the reserve for
discontinued operations from the Autotrol merger, after a lawsuit was
successfully defended.
NET INCOME
Net income for the quarter ended March 31, 1998 was $2,164 versus $2,759 for the
quarter ended March 31, 1997. Net income per common share assuming dilution for
the quarter was $0.15 versus $0.19 for the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company had cash, cash equivalents and marketable
securities of $20,869 versus $21,876 at December 31, 1997. The current ratio was
2.1 at March 31, 1998 as compared to 2.0 at year end 1997.
The Company's long-term debt increased from $13,792 at December 31, 1997 to
$33,696 at March 31, 1998. The increase was the result of entering into a new
$20,000 long-term unsecured loan from an insurance company in March. The
Company's current debt remained relatively flat from December 31, 1997 to
March 31, 1998. Also, in March 1998 the Company expanded its revolving line of
credit with a commercial bank to $30,000 from $22,000. As of March 31, 1998,
the Company had borrowings outstanding under the line of $14,000.
The Company believes that its current cash and investments position, its cash
flow from operations, and amounts available from bank credit will be adequate to
meet anticipated cash needs for working capital, capital expenditures, and
potential acquisitions during the foreseeable future.
PRIVATE SECURITIES LITIGATION REFORM ACT
The Private Securities Litigation Reform Act provides a 'safe harbor' for
forward-looking statements. Certain information included in this Form 10-Q and
other materials filed or to be filed with the Securities and Exchange
Commission (as well as information included in statements made or to be made by
the Company) contain statements that are forward looking. Such statements may
relate to plans for future expansion and acquisitions, business development
activities, capital spending, financing, or the effects of regulation and
competition. Such information involves important risks and uncertainties that
could significantly affect results in the future. Such results may differ from
those expressed in any forward-looking statements made by the Company. These
risks and uncertainties include, but are not limited to, those relating to
product development, computer systems development, dependence on existing
management, global economic and market conditions, and changes in federal or
state laws.
OSMONICS, INC.
PART II
OTHER INFORMATION
Item 5. OTHER INFORMATION
A. ACQUISITION OF COMPANY
The Company announced during the first quarter of 1998 the acquisition for cash
all the equity interest in Micron Separations, Inc. (MSI) of Westborough,
Massachusetts, for a total consideration of approximately $25,000.
MSI develops, manufactures and markets microfilter membrane products for
diagnostic laboratory and industrial use. The Company believes that these
products are complementary to the cartridge filters Osmonics manufactures for
the pharmaceutical, beverage and ultrapure water filtration markets. Also,
the Company believes that MSI's line of diagnostic and laboratory membrane
products will complement the Company's Poretics track-etch membrane and give
Osmonics a broader portfolio of products to offer the laboratory and
analytical testing market.
MSI's products will be sold through existing Osmonics distribution channels.
The revenues of MSI were less than $15,000 in each of the last three years. The
acquisition was recorded under the purchase method of accounting. Finalization
of the related purchase accounting is anticipated in the second quarter of 1998.
B. SUBSEQUENT EVENT
The Company announced during the first quarter that it signed a definitive
agreement to purchase all of the equity interest in Membrex Corp. of Fairfield,
New Jersey. Membrex shareholders approved the purchase on April 15, 1998. The
acquisition was for cash of approximately $16 million and will be recorded
under the purchase method of accounting. Membrex sales in 1997 were less than
$10 million.
Membrex, a 13-year-old, privately held company, designs and manufactures
membrane products and fluid treatment systems for industrial customers.
Applications include recycling machine tool coolant and cleaners, and minimizing
oily waste water.
Membrex has developed, what the Company believes is, the most hydrophilic
ultrafiltration (UF) membrane on the market today. The patented, solvent-
resistant membrane separates oil from water and recyclable cleaners at least
five times faster than competitive products, without fouling. This technology
allows service stations, repair facilities and manufacturing plants to more
cost-effectively clean oily parts, meet stricter environmental regulations and
reuse valuable cleansing agents. Other potential markets for the membrane
include high fouling applications in biotechnology, laboratory operations and
chemical processes.
To finance the acquisition, the Company expanded its revolving line of credit
with a commercial bank to $35,000.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) (27) Financial Data Schedule
(b) During the quarter ended March 31, 1998 the Registrant filed a
Form 8-K and a Form 8-K/A report. Financial statements were not
included with either filing.
(1) FORM 8-K - The following documents were included as an exhibit to
Form 8-K, filed March 4, 1998, and are incorporated herein by
reference:
(i) First Amended Disclosure Statement to Joint Plan of
Reorganization submitted by Micron Separations, Inc. and
Osmonics, Inc.
(ii) Joint Plan of Reorganization submitted by Micron
Separations, Inc. and Osmonics, Inc., dated December 15, 1997.
(2) FORM 8-K/A - This form was filed on April 27, 1998 and
incorporates the documents filed in Form 8-K by reference.
(c) $20,000 Note Purchase Agreement
(d) $30,000 Amended and Restated Revolving Note Agreement
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.
Dated: ___________________
OSMONICS, INC.
___________________________________
(Registrant)
/s/ L. Lee Runzheimer
___________________________________
L. Lee Runzheimer
Chief Financial Officer
/s/ Howard W. Dicke
___________________________________
Howard W. Dicke
Treasurer and Vice President
Corporate Development
/s/ D. Dean Spatz
___________________________________
D. Dean Spatz
Chief Executive Officer
OSMONICS, INC.
NOTE PURCHASE AGREEMENT
WITH
NORTHERN LIFE INSURANCE COMPANY
RELIASTAR LIFE INSURANCE COMPANY
RELIASTAR LIFE INSURANCE COMPANY OF NEW YORK
RELIASTAR UNITED SERVICES LIFE INSURANCE COMPANY
AND
WASHINGTON SQUARE ADVISERS PRIVATE PLACEMENT TRUST FUND
Dated as of March 18, 1998
$15,000,000 Floating Rate Notes Due 2008
$5,000,000 Fixed Rate Notes Due 2008
TABLE OF CONTENTS
1. Purchase and Sale of Notes 1
(a) The Notes 1
(b) Purchases to be Several 2
(c) Late Charge 3
(d) Manner of Payment 3
(e) Application of Proceeds 3
(f) Security 3
2. Voluntary Prepayments of the Notes 3
(a) Voluntary Prepayments of Floating Rate Notes with Premium 3
(b) Voluntary Prepayments of Fixed Rate Notes with Yield Maintenance
Amount 4
(c) Manner of Effecting Prepayment 4
(d) Limitations on Voluntary Prepayments 5
(e) Retirement of Notes 5
3. Representations and Warranties 5
(a) Corporate Organization 5
(b) No Prohibition 6
(c) Due Authorization 6
(d) Legal Proceedings 6
(e) Financial Statements 7
(f) Title to Assets 7
(g) Securities Matters 8
(h) Licenses and Permits 8
(i) No Defaults on Indebtedness 9
(j) Tax Returns 9
(k) No Margin Stock 9
(l) ERISA Matters 10
(m) Brokers and Finders 11
(n) Investment Company Act 11
(o) Full Disclosure 11
4. Affirmative Covenants 11
(a) Payment 12
(b) Maintenance of Books and Records 12
(c) Inspection of Books and Records 12
(d) Financial Information 12
(e) Quarterly Financial Statements 13
(f) Annual Financial Statements 14
(g) Financial Certification 14
(h) Copies of Management Letters or Similar Documents 15
(i) Copies of Regulatory Reports 15
(j) Corporate Existence; Compliance with Laws 15
(k) Payment of Taxes and Claims 16
(l) Maintenance of Properties 17
(m) Insurance 17
(n) Debt to Capitalization. 17
(o) Fixed Charge Coverage 17
(p) Current Ratio 17
(q) Notice of Default and Other Events 18
(r) Exchange of Notes 18
(s) Qualified Retirement Plans 18
5. Negative Covenants 19
(a) Permitted Indebtedness 19
(b) Permitted Investments 20
(c) Subordination of Claims 22
(d) Sale of Assets 22
(e) Merger and Consolidation 22
(f) Maintenance of Present Business 22
(g) Transactions with Affiliates 23
(h) Permitted Liens 23
(i) Restricted Payments 25
(j) Sale and Leaseback 25
6. Conditions Precedent 26
7. Defaults 27
8. Payments on and Registration and Transfer of Notes 30
9. Expenses 31
10. Delivery of Documents; Pro Rata Payments; Amendments and Consents 32
(a) Delivery of Documents 32
(b) Pro Rata Payments 32
(c) Amendments and Consents 33
11. Investment Purpose 33
12. Definitions 34
13. Survival of Representations and Warranties 41
14. Successors and Assigns 41
15. Notices 41
16. Integration 41
17. Governing Law 41
18. Counterparts 42
19. Captions 42
20. Confidentiality 42
Appendix I - Purchasers and Allocation of Notes
Appendix II - Wire Transfer and Payment Instructions
Exhibit A - Form of Floating Rate Note
Exhibit B - Form of Fixed Rate Note
Exhibit C - Form of Opinion of Company Counsel
Exhibit D - Form of Security Agreement
Exhibit E - Form of Intercreditor Agreement
Schedule 3(a) - Subsidiaries
Schedule 3(d) - Litigation
Schedule 3(e) - Financial Statements
Schedule 3(j) - Taxes
Schedule 3(l) - ERISA Plans
Schedule 4(g) - Officer's Certificate
Schedule 5(a) - Indebtedness
Schedule 5(b) - Investments
Schedule 5(h) - Liens
OSMONICS, INC.
NOTE PURCHASE AGREEMENT
This Agreement is entered into this 18th day of March, 1998, by and among
Osmonics, Inc., a Minnesota corporation (the 'Company'), and the parties listed
on Appendix I hereto (the 'Purchasers'). Reference is made to paragraph 12
hereof for definitions of capitalized terms used herein and not otherwise
defined.
1. PURCHASE AND SALE OF NOTES.
(a) THE NOTES. Subject to the terms and conditions herein, the Company
will sell to each of the Purchasers indicated on Appendix I hereto on such date
as may be mutually agreed upon with the Purchasers (the date of sale being
herein called the 'Closing Date'), and each of such Purchasers will purchase
from the Company on the Closing Date, at 100% of the principal amount thereof,
the following:
(1) a floating rate promissory note of the Company (which, together with
any note or notes issued in substitution therefor, are herein collectively
called the 'Floating Rate Notes' and individually a 'Floating Rate Note'),
in the principal amount specified on Appendix I hereto with respect to each
such Purchaser, dated the Closing Date. The principal amount of the
Floating Rate Notes shall be due in seven (7) consecutive equal annual
installments in the aggregate amount of $2,142,857.14, commencing March 30,
2002 with the balance due March 30, 2008. The Floating Rate Notes shall
bear interest, payable quarterly in arrears beginning April 1, 1998 and the
first day of each April, July, October and January thereafter, at the three
(3) month LIBOR Rate (reserve adjusted as required by applicable law or
regulation, if any, there being no reserve adjustment required as of the
date hereof) plus 0.75%. The interest rate for the Floating Rate Notes
shall be fixed for the interim period commencing on the Closing Date and
for subsequent quarterly interest periods beginning each April 1, July 1,
October 1 and January 1 commencing April 1, 1998. Rates shall be set five
business days prior to the beginning of the interim period commencing on
the Closing Date and each such subsequent quarterly period.
(2) a fixed rate promissory note of the Company (which, together with any
note or notes issued in substitution therefor, are herein collectively
called the 'Fixed Rate Notes' and individually a 'Fixed Rate Note'), in the
principal amount specified on Appendix I hereto with respect to each such
Purchaser, dated the Closing Date. The principal amount of the Fixed Rate
Notes shall be due in seven (7) consecutive equal annual installments in
the aggregate amount of $714,285.71, commencing March 30, 2002 with the
balance due March 30, 2008. The Fixed Rate Notes shall bear interest at
6.72% per annum, payable quarterly in arrears beginning April 1, 1998 and
the first day of each April, July, October and January thereafter.
The Floating Rate Notes and the Fixed Rate Notes are herein collectively called
the 'Notes' and individually a 'Note'. The Notes shall be subject to optional
prepayment as hereinafter provided, and shall in all respects be subject to the
terms of this Agreement. The Floating Rate Notes and the Fixed Rate Notes shall
be substantially in the form of Exhibits A and B hereto, respectively.
(b) PURCHASES TO BE SEVERAL. The purchase of each of the Notes by the
respective Purchasers shall be separate and several, but the purchase of each
Note shall be a condition concurrent to the purchase of each other Note.
(c) LATE CHARGE. A late charge of 2% or the highest amount permitted by
law, whichever is less, shall be assessed on the amount of any payment of
principal or interest due on the Notes, or any of them, which has not been paid
by the close of the fifth business day after the date on which such payment was
due. For purposes of determining whether a default exists or a late payment
penalty is due, payment shall be deemed made when funds are sent by the Company
by means of properly addressed wire transfer even though not received on the
date sent as long as payment is sent by the time specified by the wire transfer
agent as the latest time to make wire transfer so as to be received on the day
sent or the day payment is due.
(d) MANNER OF PAYMENT. The Purchasers will pay the purchase price of the
Notes by wire transfer of immediately available Federal funds to such accounts
as shall be specified by the Company, or in such other funds or in such other
manner as may be mutually agreed upon by the Purchasers and the Company, against
delivery to the Purchasers of the Notes.
(e) APPLICATION OF PROCEEDS. The purchase price for the Notes shall be
used for general corporate purposes.
(f) SECURITY. The obligations of the Company under this Agreement and the
Notes shall be secured as provided in the Security Agreement substantially in
the form of Exhibit D hereto.
2. VOLUNTARY PREPAYMENTS OF THE NOTES.
(a) VOLUNTARY PREPAYMENTS OF FLOATING RATE NOTES WITH PREMIUM. The
Company may, at its option on any Quarterly Payment Date, prepay the Floating
Rate Notes in whole or in part (but if in part, only in the aggregate amount of
$100,000 or integral multiples thereof) upon 30 days prior written notice to the
holders of the Notes at 100% of the principal amount of the Floating Rate Notes
so prepaid and, if such voluntary prepayment occurs on or before March 30, 2001,
upon payment of a prepayment premium equal to 1% of the principal amount so
prepaid.
(b) VOLUNTARY PREPAYMENTS OF FIXED RATE NOTES WITH YIELD MAINTENANCE
AMOUNT. The Company may, at its option at any time, prepay the Fixed Rate Notes
in whole or part (but if in part, only in the aggregate amount of $100,000 or
integral multiples thereof) upon 30 days prior written notice to the holders of
the Fixed Rate Notes at 100% of the principal amount of the Fixed Rate Notes so
prepaid together with the Yield Maintenance Amount, if any, with respect to each
such Fixed Rate Note.
(c) MANNER OF EFFECTING PREPAYMENT. In the event the Company shall give
notice of any prepayment in accordance with paragraph 2(a) or 2(b) above, such
notice shall specify the principal amount of the Floating Rate Notes or Fixed
Rate Notes to be prepaid and the date of proposed prepayment, and shall include
a calculation of the premium or Yield Maintenance Amount, if any, payable in
connection with such prepayment, and thereupon such principal amount, together
with accrued and unpaid interest thereon to the prepayment date and together
with the applicable premium or, in the case of the Fixed Rate Notes, the
applicable Yield Maintenance Amount, if any, shall become due and payable on the
prepayment date. In the event any prepayment shall be less than the entire
unpaid principal amount of the Floating Rate Notes or Fixed Rate Notes, the
amount of such prepayment shall be applied pro-rata on all Floating Rate Notes
or Fixed Rate Notes being prepaid on the last maturing required installment or
installments of principal in inverse order of maturity.
(d) LIMITATIONS ON VOLUNTARY PREPAYMENTS. Notwithstanding anything in
this Section 2 to the contrary, in no event shall any voluntary prepayment be
made pursuant to this Section 2 if, after giving effect thereto, a default or
Event of Default would exist under this Agreement.
(e) RETIREMENT OF NOTES. The Company shall not, and shall not permit any
of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or in
part prior to their stated final maturity (other than by prepayment pursuant to
paragraphs 2(a) or 2(b) or upon acceleration of such final maturity pursuant to
paragraph 7), or purchase or otherwise acquire, directly or indirectly, Notes
held by any holder unless the Company or such Subsidiary or Affiliate shall have
offered to prepay or otherwise retire or purchase or otherwise acquire, as the
case may be, the same proportion of the aggregate principal amount of Notes held
by each other holder of Notes at the time outstanding upon the same terms and
conditions.
3. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to the Purchasers as follows:
(a) CORPORATE ORGANIZATION. The Company and its Subsidiaries are
corporations organized and existing and in good standing under the laws of the
jurisdictions of their incorporation, and are duly qualified to do business and
are in good standing under the laws of each jurisdiction where the nature of the
business done or property owned require such qualification and failure to so
qualify would have a material adverse effect upon the Company or such
Subsidiary. The Company is organized under the laws of the State of Minnesota.
SCHEDULE 3(a) hereto correctly sets forth the name of each Subsidiary, its
jurisdiction of incorporation and the percentage of the outstanding capital
stock of such Subsidiary owned by the Company or another Subsidiary. Except as
set forth in SCHEDULE 3(a), the Company does not own, directly or indirectly,
more than l% of the total outstanding capital stock of any class of any other
Corporation.
(b) NO PROHIBITION. There is no provision in the Certificate of
Incorporation of any of the Company or its Subsidiaries, or in their respective
bylaws or in any indenture, contract or agreement to which the Company or any
Subsidiary is a party or by which any of them is bound, which prohibits the
execution and delivery by the Company of this Agreement or of the Notes, or the
performance or observance by the Company and its Subsidiaries of any of the
terms or conditions of this Agreement or of the Notes.
(c) DUE AUTHORIZATION. The execution, delivery and performance of this
Agreement and the Notes have been duly authorized by all necessary corporate
action of the Company and do not and will not (i) require any consent or
approval of the shareholders of the Company or any authorization, consent or
approval by any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision of any law,
rule or regulation or of any order, writ, injunction or decree presently in
effect having applicability to the Company or any Subsidiary, (iii) result in a
breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which the Company or
any Subsidiary is a party or by which it or its properties may be bound or
affected, or (iv) result in, or require, the creation or imposition of any
mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature upon or with respect to any of the properties now
owned or hereafter acquired by the Company or any Subsidiary.
(d) LEGAL PROCEEDINGS. There are no actions, suits, or proceedings
pending or, to the best knowledge of the Company, threatened against the Company
or any of its Subsidiaries or any property of the Company or any of its
Subsidiaries in any court or before any federal, state, municipal or other
governmental agency, which, if decided adversely to the Company or any of its
Subsidiaries, would have a material adverse effect upon the Company on a
consolidated basis or upon the business or properties of the Company on a
consolidated basis; and neither the Company nor any of its Subsidiaries is in
default with respect to any order of any court or governmental agency.
Schedule 3(d) lists the current litigation of the Company and its Subsidiaries.
(e) FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 3(e) are the
audited consolidated balance sheet, statement of income, statement of
shareholders' equity and statement of cash flows of the Company and its
subsidiaries for the fiscal year ended December 31, 1996, certified by Deloitte
& Touche, independent certified public accountants, and unaudited consolidated
balance sheets, statement of income and statement of cash flows of the Company
and its Subsidiaries for the twelve months ended December 31, 1997. Said
financial statements fairly present the financial condition of the Company and
its Subsidiaries at the dates thereof and the results of operations of the
Company and its Subsidiaries for the periods indicated, all in conformity with
generally accepted accounting principles consistently followed throughout the
periods involved, provided however that the unaudited financial statements shall
be subject to year-end adjustments. There have been no material adverse changes
in the condition, financial or otherwise, of the Company on a consolidated basis
since December 31, 1996.
(f) TITLE TO ASSETS. The Company and its Subsidiaries have title to all
real property and all personal property they purport to own, as reflected in the
most recent balance sheet referred to in paragraph 3(e) hereof. In the case of
property used in their trades or businesses but not owned by them, the Company
and its Subsidiaries have a valid, binding and enforceable right to use such
property pursuant to a written lease, license or other agreement (except where
the failure to have such valid, binding and enforceable right, individually or
in the aggregate, would not have a material adverse effect upon the Company on a
consolidated basis). All of the assets of the Company and its Subsidiaries are
free and clear of all mortgages, liens, pledges, charges and encumbrances (other
than liens permitted by paragraph 5(h) hereof or as listed on SCHEDULE 5(h)
hereto).
(g) SECURITIES MATTERS. Neither the Company nor any of its Subsidiaries
nor any agent acting on the behalf of the Company or any of its Subsidiaries has
offered the Notes, or any part thereof, or any similar obligation for sale to,
or solicited any offers to buy such Notes, or any part thereof, or any similar
obligation from, any person or persons so as to bring the issue or sale of the
Notes within the provisions of Section 5 of the Securities Act of 1933, as
amended, and neither the Company nor any of its Subsidiaries will sell or offer
for sale any note or any similar obligation of the Company or any Subsidiary to,
or solicit any offer to buy any similar obligation of the Company or any
Subsidiary from, any person or persons so as to bring the issue or sale of the
Notes within the provisions of Section 5 of the Securities Act of 1933, as
amended.
(h) LICENSES AND PERMITS. The Company and its Subsidiaries have procured
and are now in possession of all licenses or permits required by federal, state
or local laws rules and regulations for the operation of the business of the
Company and its Subsidiaries in each jurisdiction wherein the Company or any
Subsidiary is now conducting or proposes to conduct business, other than such
licenses or permits the absence of which, individually or in the aggregate,
would not have a material adverse effect upon the Company on a consolidated
basis.
(i) NO DEFAULTS ON INDEBTEDNESS. Neither the Company nor any of its
Subsidiaries is in default in the payment of the principal of or interest on any
indebtedness for borrowed money nor is in default under any instrument or
agreement under and subject to which any indebtedness for borrowed money has
been issued, and no event has occurred and is continuing under the provisions of
any such instrument or agreement which with or without the passing of time or
the giving of notice, or both, constitutes or would constitute an event of
default thereunder other than such defaults or events the existence of which
would not have a material adverse effect upon the Company or its Subsidiaries on
a consolidated basis.
(j) TAX RETURNS. To its knowledge, the Company and its Subsidiaries have
filed all Federal, State and local income tax returns which are required to be
filed, and have paid all taxes shown on said returns and all assessments
received by them to the extent that they have become due. No material claims
have been asserted against the Company in respect of Federal income tax returns
for any year which have not been satisfied. Except as set forth in SCHEDULE
3(j), no audit is in progress and no extension of time is in force with respect
to any date on which any return for taxes was or is to be filed and no waiver or
agreement is in force for the extension of time for the assessment or payment of
any tax.
(k) NO MARGIN STOCK. Neither the Company nor any of its Subsidiaries owns
any Margin Stock and none of the proceeds received by the Company or any
Subsidiary from the sale of the Notes will be used for the purpose of purchasing
or carrying a Margin Stock or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase a Margin Stock or for any
other purpose not permitted by Regulation G (12 CFR Part 207) of the Board of
Governors of the Federal Reserve System, as amended from time to time.
(l) ERISA MATTERS. Each qualified retirement plan of the Company and each
ERISA Affiliate in which any employees of the Company or any ERISA Affiliate
participate that is subject to any provisions of ERISA (a 'Qualified Plan') is
being administered in all material respects in accordance with the documents and
instruments governing such Qualified Plan, and such documents and instruments
are consistent with those provisions of ERISA which have become effective and
operative with respect to such Plan as of the date of this Agreement. No such
Qualified Plan has incurred any material accumulated funding deficiency within
the meaning of Section 302 of ERISA (whether or not waived), and neither the
Company nor any ERISA Affiliate has incurred any material liability (including
any material contingent liability) to the PBGC in connection with any such
Qualified Plan. No such Qualified Plan nor any trust created thereunder nor any
trustee or administrator thereof has engaged in a 'prohibited transaction'
within the meaning of ERISA or Section 4975 of the Internal Revenue Code and
which will have a material adverse effect on the financial condition of the
Company and its Subsidiaries on a consolidated basis. The issuance and sale of
the Notes as contemplated hereby will not constitute a 'prohibited transaction'.
Except as described in SCHEDULE 3(l), no such Qualified Plan nor any trust
created thereunder has been terminated, nor have there been any 'reportable
events' within the meaning of Section 4043 of ERISA with respect to any such
Qualified Plan. Neither the Company nor any ERISA Affiliate contributes to or
has any employees who are covered by any 'multi-employer Plan,' as such term is
defined in Section 3(37) of ERISA, and neither the Company nor any ERISA
Affiliate has incurred any withdrawal liability with respect to any such
multi-employer plan.
(m) BROKERS AND FINDERS. Neither the Company, any agent acting on its
behalf nor any person controlling, controlled by or under common control with
the Company has taken any action the effect of which would be to cause the
Purchasers to be liable for any broker's, finder's or agent's fee or commission
in connection with the placement of the Notes or any other transactions
contemplated by this Agreement.
(n) INVESTMENT COMPANY ACT. Neither the Company nor any of its
Subsidiaries is an 'investment company' or a company 'controlled' by an
'investment company' (as each of the quoted terms is defined or used in the
Investment Company Act of 1940, as amended).
(o) FULL DISCLOSURE. Neither this Agreement, the financial statements
referred to in Paragraph 3(e) hereof, nor any other document, certificate or
instrument delivered to the Purchasers on behalf of the Company or any
Subsidiary in connection with the transactions contemplated hereby contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained therein not misleading. There is no
material fact known at this time (other than general economic conditions or
facts or information available to the public generally) that has not been
disclosed to the Purchasers that materially adversely affects, or is likely to
materially adversely affect, the business operations or financial or other
condition of the Company on a consolidated basis, or the ability of the Company
to perform this Agreement or to pay the principal of or interest on the Notes
and other sums payable under this Agreement when due. The parties recognize
that changes in general economic conditions in the world could have a material
adverse effect on the financial condition of the Company.
4. AFFIRMATIVE COVENANTS. The Company covenants and agrees that, so long
as any amount shall remain unpaid on any of the Notes, it will:
(a) PAYMENT. Duly and punctually pay or cause to be paid the principal of
and interest on the Notes and will duly and punctually perform or cause to be
performed all things on its part or on the part of any Subsidiary to be done or
performed under this Agreement and the Notes.
(b) MAINTENANCE OF BOOKS AND RECORDS. At all times keep and cause each
Subsidiary to keep proper books of record and account in which full, true and
correct entries will be made of their transactions in all material respects in
accordance with generally accepted accounting principles applied on a consistent
basis (except for changes in application in which the accountants concur)
throughout the periods involved.
(c) INSPECTION OF BOOKS AND RECORDS. At all reasonable times permit and
cause each Subsidiary to permit the holders of the Notes and their
representatives at the holders' expense to make reasonable inspections of its
books and records and to make reasonable extracts therefrom and to make
reasonable inspections of its properties and operations, and to speak with
management of the Company and its Subsidiaries at reasonable times and places.
So long as no Event of Default exists, the expenses of the Purchasers for such
inspections shall be at the expense of the Purchasers, but any such inspection
made while any Event of Default is continuing shall be at the expense of the
Company.
(d) FINANCIAL INFORMATION. From time to time furnish the holders of the
Notes with such information and statements as the holders of the Notes may
reasonably request concerning performance by it of the covenants and agreements
contained in this Agreement, and with copies of all financial statements and
reports that it shall send or make available to its shareholders or provide to
the Securities and Exchange Commission. In the event that written notice of the
occurrence of an Event of Default shall have been given to the Company, and the
Company shall have notified the holders of the Notes that such Event of Default
has been corrected, the Company shall, upon request of the holders of at least a
majority of the unpaid Principal amount of the Notes at the time outstanding,
for the purpose of showing that such Event of Default has been corrected,
assuming that the correction of such Event of Default can be shown thereby,
furnish to the holders of the Notes a signed copy of an audit report or, if such
matter may be covered in a special report, a special report prepared and
certified by a firm of independent certified public accountants of national
standing selected by the Company, confirming that such Event of Default has been
corrected. All expenses incurred in connection with such report shall be borne
(i) by the Company if the Company is ultimately determined to have been in
default or if the Company is ultimately determined not to have been in default
and the Company gave notice under paragraph 4(q) advising the holders of an
Event of Default, or (ii) by the holders if the Company is ultimately determined
not to have been in default and the holders unilaterally advised the Company of
such alleged default. Nothing in this paragraph 4(d), however, shall diminish,
defer, postpone or otherwise limit the right of the holders of the Notes to take
any action permitted by paragraph 7 hereof.
(e) QUARTERLY FINANCIAL STATEMENTS. Furnish to the holders of the Notes,
within 50 days after the close of each of the first three quarterly accounting
periods in each fiscal year of the Company, (i) an unaudited consolidated
balance sheet of the Company and its Subsidiaries as at the end of such quarter,
(ii) unaudited consolidated statements of income of the Company and its
Subsidiaries for that quarter and for the portion of the fiscal year ending with
such quarter, and (iii) an unaudited consolidated statement of changes in cash
flow of the Company and its Subsidiaries, all such statements provided for by
clauses (i), (ii) and (iii) to be in reasonable detail, and setting forth
comparable figures for the same accounting period in the preceding fiscal year.
(f) ANNUAL FINANCIAL STATEMENTS. Furnish to the holders of the Notes, as
soon as available, but in any event within 95 days after the close of each
fiscal year of the Company, duplicate signed copies of an audit report prepared
and certified (without qualification as to the scope of the audit) by Deloitte &
Touche or another firm of independent certified public accountants of national
standing selected by the Company, which report shall include consolidated
balance sheets of the Company and its Subsidiaries, all as at the end of such
year, and consolidated statements of income, shareholders' equity and changes in
cash flow of the Company reflecting its operations during said year. All such
financial statements shall be in such detail and shall set forth comparable
figures for the preceding fiscal year as required by SEC regulations, and, in
the case of the financial statements provided for in the foregoing clause (i),
shall be accompanied by a statement by the accounting firm which performed the
audit certifying that in making the examination upon which such report was
based, no information came to its attention which to its knowledge indicated
that a default under this Agreement had occurred or specifying any such default.
(g) FINANCIAL CERTIFICATION. At the time of the delivery to the holders
of the Notes of the reports and financial statements referred to in paragraphs
4(e) and 4(f) hereof, deliver to the holders of the Notes a certificate signed
by its chief financial officer in the form attached as SCHEDULE 4(g), (i)
certifying that, to the best of his/her knowledge, such financial statements
present fairly the financial condition of the companies being reported upon and
have been prepared in accordance with generally accepted accounting principles
consistently applied (except for changes in application in which the accountants
concur), subject, in the case of interim financial statements, to year-end
adjustments, (ii) certifying that he or she has reviewed the provisions of this
Agreement and stating, in his or her opinion, if such be the fact, that the
Company and its Subsidiaries have not been and are not in default as to any of
the provisions contained in this Agreement, or, in the event the Company or any
Subsidiary is or was in default, setting forth the details of such default and
(iii) setting forth the computations upon which such officer based the
conclusion that the Company and its Subsidiaries are and have been in compliance
with paragraphs 4(n), (o) and (p) and 5(a), (b), (d), (e), (h), (i) and (j)
hereof.
(h) COPIES OF MANAGEMENT LETTERS OR SIMILAR DOCUMENTS. Upon written
request, furnish to the holders of the Notes, promptly after the receipt thereof
by the Company, copies of all management letters or similar documents submitted
to the Company by independent certified public accountants in connection with
each annual and any interim audit of the accounts of the Company or any of its
Subsidiaries.
(i) COPIES OF REGULATORY REPORTS. Furnish to the holders of the Notes,
promptly after transmittal or filing thereof by the Company, copies of all proxy
statements, notices and reports which it shall send to its shareholders, copies
of all registration statements (without exhibits) and all reports which it files
with the Securities and Exchange Commission, and copies of all financial reports
which it files with any other Federal, State or local regulatory agency, other
than routine reports (excepting those annual reports with respect to each such
plan requested by the holders of the Notes in writing pursuant to paragraph 4(s)
hereof).
(j) CORPORATE EXISTENCE; COMPLIANCE WITH LAWS. Maintain and cause each
Subsidiary to maintain its corporate existence in good standing (except that the
corporate existence of the Company or any Subsidiary may be terminated in
connection with a sale of assets permitted under paragraph 5(d) of this
Agreement or pursuant to a merger or consolidation permitted under paragraph
5(e) of this Agreement or the liquidation of the Subsidiary involving a transfer
of its assets to the Company); and comply with all applicable laws and
regulations of the United States and of each state thereof and of each political
subdivision thereof and of any and all other governmental authorities where the
failure to so comply, individually or in the aggregate, could have a material
adverse effect upon the Company or any Subsidiary.
(k) PAYMENT OF TAXES AND CLAIMS. Pay and cause each Subsidiary to pay
before they become delinquent (i) all taxes, assessments and governmental
charges or levies imposed on the Company, any Subsidiary or upon the property of
the Company or any Subsidiary, (ii) all claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like persons which, if
unpaid, might result in the creation of a lien or charge upon any property of
the Company or any Subsidiary; and (iii) all claims, assessments or levies
required to be paid by the Company or any Subsidiary pursuant to any agreement,
contract, law, ordinance or governmental rule or regulation governing any
pension, retirement, profit-sharing or any similar plan of the Company or any
Subsidiary, including without limitation claims, assessments or levies in
connection with worker's compensation or unemployment insurance; provided that
the Company or such Subsidiary shall have the right to not pay any of the above,
including but not limited to any tax assessment, charge, levy or claim, which it
contests in good faith, by appropriate proceedings promptly initiated and
diligently conducted, the validity, amount or imposition of any such tax or
claim and upon such good faith contest to delay or refuse payment thereof, if
(A) such reserve or other appropriate provision, if any, as shall be required by
generally accepted accounting principles shall have been made therefor, and (B)
if such assessment, charge, claim or levy could result in the forfeiture of or
material interference of the Company or a Subsidiaries' use of, property of the
Company or a Subsidiary, such proceedings prevent the forfeiture or sale of any
property of the Company or such Subsidiary or any material interference with the
use thereof by the Company or such Subsidiary.
(l) MAINTENANCE OF PROPERTIES. Maintain and cause each Subsidiary to
maintain and keep the properties used in its business in good repair, working
order and condition in accordance with the reasonable business judgment of the
Company, ordinary wear and tear excepted, and from time to time make all
necessary and proper repairs, renewals and replacements so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times.
(m) INSURANCE. Maintain and cause each Subsidiary to maintain, in
reputable insurance companies authorized to do business in the state in which
the property or business of the Company and its Subsidiaries which it insures is
located, insurance of types and in amounts usually maintained by similar
companies in similar businesses.
(n) DEBT TO CAPITALIZATION. At all times maintain a ratio of (a) Funded
Debt to (b) Total Capitalization not greater than 0.5:1.
(o) FIXED CHARGE COVERAGE. At all times maintain a ratio of (a)
Consolidated Income Available for Fixed Charges to (b) Fixed Charges of at least
2.0:1.
(p) CURRENT RATIO. At all times maintain Consolidated Current Assets at
an amount at least equal to 150% of Consolidated Current Liabilities.
(q) NOTICE OF DEFAULT AND OTHER EVENTS. Give the holders of Notes prompt
notice in writing of (i) any threatened or pending litigation or governmental
proceeding against the Company or any Subsidiary where the amount in controversy
is reasonably expected to exceed 5% of the Consolidated Tangible Net Worth of
the Company and its Subsidiaries, and (ii) any condition or event which
constitutes an Event of Default under Paragraph 7 hereof, or which, after notice
or lapse of time, or both, would constitute such an Event of Default.
(r) EXCHANGE OF NOTES. Subject to satisfactory compliance with applicable
federal and state securities laws, at any time, at the expense of the Company
(not including attorney fees of the holder exchanging such Note), upon written
request of such holder and surrender of the Note for such purpose, issue new
Notes in exchange therefor in such denominations of at least $500,000 as shall
be specified by the holder of such Note, in an aggregate principal amount equal
to the then unpaid principal amount of the Note surrendered and substantially in
the form of Exhibits A or B, as the case may be, with appropriate insertions and
variations, and bearing interest from the date to which interest has been paid
on the Note surrendered. Neither the Company nor the Subsidiaries shall have
any obligation to register such Notes under any securities laws. Subject to the
requirements of applicable federal and state securities laws, the Company shall
not be required to bear any outside legal or audit expenses in connection with
any such exchange.
(s) QUALIFIED RETIREMENT PLANS. Cause each Qualified Plan and the
documents and instruments governing each such Plan to be conformed to when
necessary, and to be administered in all material respects in a manner
consistent with those provisions of ERISA which may, from time to time, become
effective and operative with respect to such plans; if requested by the holders
of the Notes in writing from time to time, furnish to the holders of the Notes a
copy of any annual report with respect to each such plan that the Company files
with the Internal Revenue Service pursuant to ERISA.
5. NEGATIVE COVENANTS. The Company covenants and agrees that so long as
any amount shall remain unpaid on the Notes, it will not and will not permit any
Subsidiary to:
(a) PERMITTED INDEBTEDNESS. Borrow money, issue evidences of indebtedness
for borrowed money or create, assume, guarantee, become contingently liable for
or suffer to exist indebtedness for borrowed money in addition to the Notes
(including, without limitation, as indebtedness Capitalized Lease Obligations)
except (but at all times subject to compliance with the financial covenants set
forth in Sections 4(n), 4(o) and 4(p) hereof):
(i) existing indebtedness of the Company and its Subsidiaries set
forth in SCHEDULE 5(a) hereto, provided that all such indebtedness shall be
repaid in accordance with its terms with extensions, renewals or other
modifications (such indebtedness, upon such extension, renewal or other
modification, shall constitute Current Debt or Funded Debt otherwise
permitted by this paragraph 5(a)) and provided further that all such
extensions, renewals or other modifications shall be subject to paragraph
5(h);
(ii) Funded Debt of the Company or its Subsidiaries incurred after
the Closing Date (A) if, after giving effect thereto, the ratio of
Consolidated Income Available for Fixed Charges to pro forma Consolidated
Fixed Charges during the succeeding 12-month period is at least 2.5:1 and
(B) after giving effect to additional Funded Debt of any Subsidiary, the
aggregate Funded Debt of all Subsidiaries does not exceed 10% of
Consolidated Tangible Net Worth;
(iii) Current Debt of the Company or its Subsidiaries for money
borrowed from banks, trust companies, insurance companies and similar
financial institutions, or commercial paper issued by the Company, which
indebtedness is unsecured; provided that for a period of sixty consecutive
days in each fiscal year the Company shall reduce such Current Debt to an
amount outstanding which during such sixty day period, could have been
incurred as Funded Debt pursuant to paragraph 5(a)(ii);
(iv) other indebtedness that does not have an aggregate outstanding
principal amount greater than $1,000,000 at any time;
(v) Funded Debt of the Company's Subsidiary, AUTOTROL, S.A., Le Mee
Sur Seine, France, not exceeding $3,000,000 in outstanding principal amount
at any time; and
(vi) indebtedness of a Subsidiary to a wholly owned Subsidiary or,
subject to paragraph 5(b)(viii), to the Company.
(b) PERMITTED INVESTMENTS. Purchase, or permit to exist investments in,
stock or securities of, or make or permit to exist loans or advances to, or
other investments in, any person, firm or corporation (including investments in
or loans or advances to any corporation proposed to be acquired or created as a
Subsidiary), except:
(i) investments in direct obligations of the United States
government or any agency thereof maturing within five years from the date
of acquisition thereof;
(ii) bankers acceptances, letters of credit, eurodollar deposits,
repurchase agreements and certificates of deposit issued by United States
banks having capital and surplus aggregating at least $100,000,000 maturing
within one year from the date of acquisition thereof;
(iii) commercial paper issued by U.S. corporations rated 'A-1' or
'P-1' or better by Moody's Investors Service, Inc. or Standard & Poor's
Corporation maturing within 270 days from the date of acquisition thereof;
(iv) loans or advances to their officers or employees in the ordinary
course of business not to exceed, in the aggregate, 5% of Consolidated
Tangible Net Worth;
(v) notes receivable arising from transactions with customers and
suppliers in the normal course of business;
(vi) investments maturing within five years in (A) tax-exempt bonds
and variable rated demand securities having a rating at the date of
acquisition thereof of not less than A or such other comparable rating by
Moody's or Standard & Poors, and (B) mutual funds investing primarily in
the instruments described in the preceding clause (A);
(vii) equity investments in any Subsidiary or any corporation which,
after such equity investment, will be a Subsidiary for purposes of this
Agreement;
(viii) loans and advances to Subsidiaries constituting general
obligations of such Subsidiaries, provided (A) such obligations are not
subordinated to any other obligations of such Subsidiaries, and (B) the
aggregate outstanding amount of all such loans and advances shall at no
time exceed 20% of Consolidated Tangible Net Worth;
(ix) existing investments set forth in SCHEDULE 5(b) hereto; and
(x) investments not otherwise permitted in paragraphs 5(b)(i) through
(b)(ix) above, provided that, after giving effect to any investment under
this paragraph 5(b)(x), the Company shall be in compliance with paragraph
5(i) hereof.
(c) SUBORDINATION OF CLAIMS. Subordinate or permit to be subordinated any
claim against, or obligation of another person, firm or corporation held or
owned by it to any other claim against, or obligation of, such other person,
firm or corporation other than in the ordinary course of business and not in
excess of $500,000 in the aggregate.
(d) SALE OF ASSETS. Sell, convey, assign, transfer, lease or otherwise
dispose of all or any substantial part of its assets, other than (i) sales of
inventory in the ordinary course of business, and (ii) the sale, lease or other
disposition of assets by a Subsidiary to the Company or to another Subsidiary.
For purposes of this paragraph, a disposition shall be deemed to be substantial
if it, together with all other dispositions of assets in the preceding
twelve-month period, either (A) exceeds in value 15% of the total assets of the
Company and its Subsidiaries, on a consolidated basis or (B) consists of assets
which contributed 15% or more of Consolidated Net Income in the preceding four
(4) fiscal quarters.
(e) MERGER AND CONSOLIDATION. Merge or consolidate with or into, or
acquire, any other corporation, provided that (i) any Subsidiary may be merged
or consolidated with the Company if the Company is the surviving corporation or
with another Subsidiary and (ii) the Company may merge or consolidate with
another corporation provided that either (A) the Company is the surviving
entity, or (B) (I) the surviving entity would be a U.S. corporation; (II) the
surviving entity would not be in default under the covenants contained in this
Agreement; and (III) the Notes would become a valid, binding and enforceable
obligation of the surviving entity.
(f) MAINTENANCE OF PRESENT BUSINESS. Substantially alter the nature of
the primary business in which it is presently engaged, or purchase or invest,
directly or indirectly, in any substantial amount of assets or property other
than assets or property useful and to be used in its business as presently
conducted.
(g) TRANSACTIONS WITH AFFILIATES. Except on terms no less favorable to
the Company than would be obtainable if no such relationship existed, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or loan or advance money to, or otherwise deal with (i) any director, officer or
employee of the Company or any Subsidiary, or (ii) any person who, directly or
indirectly either individually or together with his spouse, his lineal
descendants and ascendants and brothers and sisters by blood or adoption or
spouses of such descendants, ascendants, brothers and sisters, beneficially owns
5% or more of the voting stock of the Company or (iii) any spouse, lineal
descendant or ascendant, brother or sister, by blood, adoption or marriage, of
any person listed in clause (i) or (ii) above, and spouses of such descendants,
ascendants, brothers and sisters or (iv) any company in which any person
described in clause (i), (ii) or (iii) above owns a 5% or greater equity
interest.
(h) PERMITTED LIENS. Create, assume, or suffer to exist any mortgage,
pledge, encumbrance, lien, security interest or charge of any kind, whether
presently effective, springing, conditional or contingent, (including any charge
upon property subject to Purchase Money Obligations or under leases which
constitute Capitalized Lease Obligations) upon any of its property or assets,
whether now owned or hereafter acquired, except:
(i) liens incurred in connection with the acquisition, after the
Closing Date, of property used in the business of the Company or its
Subsidiaries, which liens secure Funded Debt constituting Purchase Money
Obligations or Capitalized Lease Obligations permitted by paragraph
5(a)(ii) hereof, provided that (A) the indebtedness secured by any such
lien does not exceed the lower of cost or fair market value of the assets
acquired subject thereto on the date such lien was incurred, (B) such lien
shall not encumber any property of the Company or any Subsidiary other than
the assets acquired subject thereto and (C) all liens permitted by
paragraph (h)(i) shall not secure indebtedness which, in the aggregate,
exceeds 15% of Total Capitalization;
(ii) presently existing liens set forth in SCHEDULE 5(h) hereto
securing presently existing indebtedness permitted by paragraph 5(a)(i)
hereof;
(iii) liens under the Security Agreement;
(iv) liens for taxes or claims of the nature described in paragraph
4(k) hereof which are not yet due or which are being contested as permitted
by such paragraph 4(k) including but not limited to special assessments on
real property owned by the Company or its Subsidiaries;
(v) deposits or pledges in connection with or to secure payment of
workers' compensation, unemployment insurance, old-age pensions or other
social security, or in connection with the good faith contest of any tax
lien;
(vi) encumbrances in the nature of zoning restrictions, easements,
rights and restrictions of record on the use of real property, landlord's
and lessor's liens, arising in the ordinary course of business, which were
not incurred in connection with borrowing of money or the obtaining of
advances or credit and which do not materially detract from the value of
such property or impair the use thereof in the operation of the business;
(vii) liens securing other indebtedness that does not have an
aggregate outstanding principal amount at any time greater than $1,000,000;
and
(viii) liens on real and personal property located in Le Mee Sur
Seine, France, to secure the Funded Debt referred to in Section 5(a)(v).
(i) RESTRICTED PAYMENTS. Make Restricted Payments, except that:
(i) any Subsidiary may make Restricted Payments to the Company or to
another Subsidiary;
(ii) the Company may make investments pursuant to paragraph 5(b)(x) in
the aggregate (determined on a cost basis) any time outstanding not to
exceed $8,000,000; and
(iii) provided there exists no default or Event of Default hereunder,
the Company may make Restricted Payments if immediately after giving effect
to any such Restricted Payment, the aggregate amount of all such Restricted
Payments (not including those permitted in paragraphs 5(i)(i) and 5(i)(ii)
above) made after January 1, 1998 does not exceed (A) $5,000,000 PLUS (B)
75% of Cumulative Consolidated Net Income after December 31, 1997.
(j) SALE AND LEASEBACK. Enter into any arrangement with any bank,
insurance company or other lender or investor or to which such lender or
investor is a party providing for the leasing by the Company or any Subsidiary
of real or personal property which has been or is to be sold or transferred by
the Company or any Subsidiary to such lender or investor or to any person to
whom funds have been or are to be advanced by such lender or investor on the
security of such property or rental obligations of the Company or any
Subsidiary.
6. CONDITIONS PRECEDENT. The obligations of the Purchasers to purchase
the Notes, as provided in paragraph l hereof, shall be subject to the
satisfaction, on or before the Closing Date, of the following conditions.
(a) The representations and warranties contained in paragraph 3 hereof
shall be true and correct as of the Closing Date; the Company shall not be in
default with respect to any of the provisions hereof, and there shall exist no
event known to the Company as of the Closing which, with the passage of time or
the giving of notice, or both, would constitute such a default; and the Company
shall have delivered to the Purchasers a certificate signed by a responsible
officer of the Company to such effects.
(b) The Purchasers shall have received from Maslon, Edelman, Borman &
Brand, P.L.L.P., special counsel for the Company, a favorable opinion in form
and substance satisfactory to the Purchasers as to all matters specified in
Exhibit C hereto and such other matters incident to the transaction herein
contemplated as the Purchasers may reasonably request.
(c) The Purchasers shall have received from their special counsel,
Lindquist & Vennum P.L.L.P., a favorable opinion in form and substance
satisfactory to the Purchasers, as to such matters incident to the transaction
herein contemplated as the Purchasers may reasonably request.
(d) The Purchasers shall have received a Uniform Commercial Code Search
against the Company, from the State of Minnesota and from such other
jurisdictions as the Purchasers may reasonably request, as of a date no more
than fifteen days prior to the Closing Date, certified by a reporting service
satisfactory to the Purchasers, and disclosing no security interests other than
those permitted under paragraph 5(h) of this Agreement.
(e) The Company and its Subsidiaries on a consolidated basis shall not
have suffered a material adverse change in financial condition since December
31, 1996, nor shall there exist any material action, suit or proceeding pending,
other than the suits or proceedings set forth in SCHEDULE 3(d) (which the
Company believes are not material) or to the knowledge of the Company
threatened, against the Company or any of its Subsidiaries which, if decided
adversely to the Company or any of its Subsidiaries, would have a materially
adverse effect upon the Company and its Subsidiaries on a consolidated basis or
upon any of their businesses or properties.
(f) The Purchasers shall have received a fully executed copy of the
Security Agreement and the Intercreditor Agreement.
(g) All proceedings to be taken in connection with the transaction
contemplated by this Agreement and all documents incident thereto shall be
satisfactory in form and substance to the Purchasers and their counsel and the
Purchasers shall have received copies of all documents which the Purchasers may
reasonably request.
7. DEFAULTS. If one or more Events of Default shall occur, that is to
say, if
(a) default shall be made in the punctual payment of the principal of or
premium, if any, on any of the Notes when due, whether by regular installment,
upon prepayment, by acceleration, at maturity or otherwise; or
(b) default shall have been made in the punctual payment of any interest
on any of the Notes when due, whether by regular installment, upon prepayment,
by acceleration, at maturity or otherwise, and such default shall have continued
for a period of five (5) business days; or
(c) the Company or any Subsidiary defaults in any payment of principal of
or interest on any other obligation for borrowed money having a principal amount
of at least $500,000 beyond any period of grace provided with respect thereto;
or
(d) the Company or any Subsidiary defaults in the performance of any other
agreement, term or condition contained in any agreement under which any
obligation for borrowed money having a principal amount of at least $500,000 is
created, or there occurs any other default or event of default under any such
agreement, if as a result of such default or event of default such obligation is
declared or automatically becomes due prior to its stated maturity or the holder
of such obligation is permitted by the terms of such obligation to accelerate
any such obligation; or
(e) an order for relief shall be entered in any Federal Bankruptcy
proceeding in which the Company or any Subsidiary is the debtor; or bankruptcy,
receivership, insolvency, reorganization, relief, dissolution, liquidation or
other similar proceedings shall be instituted by or against the Company or any
Subsidiary or all or any part of the property of the Company or any Subsidiary
under the Federal Bankruptcy Code or any other law of the United States or any
bankruptcy or insolvency law of any state of competent jurisdiction unless, if
such proceedings are instituted against the Company or any Subsidiary, such
proceedings are dismissed or discharged within 60 days after they are
instituted; or
(f) the Company or any Subsidiary shall have become insolvent or unable to
pay its debts as they mature, cease doing business as a going concern, make an
assignment for the benefit of creditors, admit in writing its inability to pay
its debts as they become due, or if a trustee, receiver or liquidator shall be
appointed for the Company or any Subsidiary or for any substantial portion of
the assets of the Company or any Subsidiary and such appointment shall not be
vacated within 60 days; or
(g) default shall be made in the performance or observance of any of the
covenants set forth in paragraphs 4(n), 4(o), 4(p) or paragraph 5; or
(h) default shall be made in the performance or observance of any of the
other terms, covenants or conditions of this Agreement not otherwise covered by
this paragraph 7 and such default shall continue for a period of thirty days
after written notice thereof shall have been given by the holders of the Notes
to the Company; or
(i) final judgments or orders for the payment of money in excess of
$1,000,000, individually or in the aggregate, shall be rendered against the
Company or any Subsidiary and such judgments or orders shall not be fully
covered by funded reserves or insurance (without reservation of rights) or shall
remain unsatisfied, unstayed and unbonded for a period of 60 days after the date
such judgments or orders are entered unless fully covered by funded reserves or
insurance (without reservation of rights); or
(j) any representation or warranty contained in this Agreement or in any
certificate delivered to the Purchasers by the Company pursuant to this
Agreement proves to be false in any material respect as of the time was made and
such false representation or warranty has, or may have, a material adverse
effect on either (i) the financial condition of the Company or its Subsidiaries
on a consolidated basis, or (ii) the ability of the Company to repay the Notes,
then the holder of the Note if only one Note shall be outstanding, or the
holders of at least a majority of the principal amount of the Notes, if more
than one Note shall be outstanding, may at its or their option, by notice in
writing to the Company, declare the Note or all of the Notes, as the case may
be, to be forthwith due and payable and thereupon the Note, or all of the Notes,
shall be and become due and payable, (provided that if an Event of Default
results from the filing of a voluntary or involuntary petition in any bankruptcy
proceeding in which the Company or any Subsidiary is the debtor, the Notes
thereupon shall immediately become due and payable, with interest accrued
thereon, without any notice from the holders of the Notes or otherwise),
together with interest accrued thereon and, a premium equal to the premium
specified in paragraph 2(a) hereof and the holder or holders of the Note or
Notes may take any action or proceeding at law or in equity which it or they
deem advisable for the protection of its or their interests to collect and
enforce payment, including the exercise of any and all rights under the Security
Agreement and the Company shall pay all costs of enforcement and collection,
including without limitation court costs, and reasonable attorneys' fees
incurred in connection with or arising out of any default hereunder.
8. PAYMENTS ON AND REGISTRATION AND TRANSFER OF NOTES. The Company
agrees that it will make payment of the principal of, premium, if any and
interest on the Notes by wire transfer of immediately available Federal funds
not later than 11:00 a.m. (Minneapolis, Minnesota time) with sufficient
information to identify the source and application of funds to each of the
Purchasers in accordance with the wire transfer instructions set forth in
APPENDIX II hereto, or to such other accounts or in such other manner as may
from time to time be designated by the holder of a Note, (without presentment of
the Notes and without the rendering of any bills therefor) in writing at least
two business days before payment is due. The Company shall keep at its
principal office a register in which the Company shall provide for the
registration of the Notes and of transfers of the Notes (the 'Note Register').
Upon surrender of any Note for transfer at the office of the Company, subject to
compliance with applicable federal and state securities laws, the Company shall
execute and deliver, in the name of the designated transferee, a new Note in a
principal amount equal to the unpaid principal amount of, and dated the date to
which interest has been paid on, the Note so surrendered. Nothing contained
herein shall require the Company or any Subsidiary to register such Notes under
any securities laws. When a Note shall be presented or surrendered for transfer
it shall be duly endorsed, or be accompanied by a written instrument of transfer
duly executed, by the holder thereof or its attorney duly authorized in writing.
The Company may treat the person in whose name the Note is registered on the
Note Register as the owner of the Note for the purpose of receiving payment of
principal of and interest on the Note and for all other purposes and the Company
shall not be affected by notice to the contrary. No Note shall be transferred
within the five (5) day period preceding the due date of any payment required
under the Note. The Company may require the transferee to provide such
documents and statements as the Company may reasonably require to assure itself
of compliance with the applicable securities laws or that an exemption from the
securities laws exists. Each Note shall bear a legend satisfactory to the
Company that the Notes and any substitutes have not been registered under the
securities laws. Notwithstanding any transfer (i) the Purchaser and the
transferee shall remain bound by the confidentiality requirements of paragraph
20 and each such transferee or prospective transferee or assignee shall agree to
be bound by the same confidentiality provisions; and (ii) the transfer expenses
associated with such sale or assignment will not result in any material
increased cost to the Company.
9. EXPENSES. The Company agrees, whether or not the purchase of the
Notes herein contemplated shall be consummated, to pay and save the Purchasers
harmless against liability for the payment of all reasonable out-of-pocket
expenses arising in connection with this transaction including any documentary
stamp taxes (including interest and penalties, if any), which may be determined
to be due and payable with respect to the execution and delivery of the Notes,
and the reasonable fees and expenses of counsel to the Purchasers. The Company
also agrees to pay, and to save the purchasers harmless against liability for
the payment of, the reasonable fees and expenses of counsel to the Purchasers in
connection with any documentation and related services arising after the Closing
Date in connection with the preparation of waivers or amendments of any
provisions of this Agreement or the Notes. In addition, the Company agrees to
pay, and to save the holders of the Notes harmless against, any loss or damage
arising from any claim of any person claiming by, under or through the Company
for brokerage or finders' fees incurred in connection with the transaction
contemplated by this Agreement.
10. DELIVERY OF DOCUMENTS; PRO RATA PAYMENTS; AMENDMENTS AND CONSENTS.
(a) DELIVERY OF DOCUMENTS. All notices, certificates, requests,
statements and other documents required or permitted to be delivered to the
Purchasers or the holders of Notes by any provision hereof shall also be
delivered to each holder of a Note, except that financial statements and other
documents provided for in paragraphs 4(e) and 4(f) need not be delivered to any
holder, other than the Purchasers, holding less than 10% of the aggregate
principal amount of Notes from time to time outstanding.
(b) PRO RATA PAYMENTS. Subject to the Company's ability to make
prepayments of principal on the Floating Rate Notes as a group or the Fixed Rate
Notes as a group pursuant to paragraph 2(c), all interest payments and payments
or prepayments of principal shall be made and applied pro rata on all Floating
Rate Notes and Fixed Rate Notes outstanding in accordance with the respective
unpaid principal amounts thereof.
(c) AMENDMENTS AND CONSENTS. The registered holder or holders of at least
66 2/3% of the unpaid principal amount of the Notes at the time outstanding may
by agreement with the Company amend this Agreement, and any consent, notice,
request, demand or waiver required or permitted to be given by the Purchasers or
the holders of the Notes by any provision hereof shall be sufficient and binding
on all holders of the Notes if given by the holder or holders of at least
66 2/3% of the unpaid principal amount of Notes at the time outstanding except
that, without the written consent of the holder or holders of all Notes at the
time outstanding, no amendment to this Agreement shall extend the maturity of
any Note, or alter the rate of interest or any premium payable with respect to
any Note, or affect the amount or timing of any required prepayments, or reduce
the proportion of the principal amount of the Notes required with respect to any
consent.
11. INVESTMENT PURPOSE. Each Purchaser represents that the acquisition of
the Notes by it will be for investment for its own account and not with a view
to resale in connection with any distribution thereof nor with any present
intention of distributing or selling such Notes, it being understood, however,
that the disposition of the property of each Purchaser shall at all times be
within its control. Each of the Purchasers acknowledges that the Note to be
purchased by it has not been registered under the Securities Act of 1933, as
amended, or registered and/or qualified under the securities laws of any State
and, therefore, cannot be resold unless (i) registered under the Securities Act
of 1933, as amended, and applicable state securities laws, or (ii) an exemption
from registration is available.
12. DEFINITIONS. For purposes of this Agreement the following terms shall
have the following meanings:
'BUSINESS DAY' shall mean any day other than a Saturday, a Sunday or a day
on which commercial banks in Minneapolis, Minnesota are required or authorized
to be closed.
'CALLED PRINCIPAL' shall mean, with respect to any Fixed Rate Note, the
principal of such Fixed Rate Note that is to be prepaid pursuant to paragraph
2(b), or is declared to be immediately due and payable pursuant to paragraph 7,
as the context requires.
'CAPITALIZED LEASE OBLIGATIONS' shall mean lease payment obligations under
leases that are required to be capitalized under generally accepted accounting
principles.
'CLOSING DATE' shall have the meaning set forth in paragraph 1(a).
'COMPANY' shall have the meaning set forth in the preamble.
'CONSOLIDATED CURRENT ASSETS' shall mean, as of any date, the consolidated
current assets of the Company and its Subsidiaries determined in accordance with
generally accepted principles consistent with those followed in preparation of
the financial statements referred to in paragraph 3(e).
'CONSOLIDATED CURRENT LIABILITIES' shall mean, as of any date, the
consolidated current liabilities of the Company and its Subsidiaries determined
in accordance with generally accepted accounting principles consistent with
those followed in preparation of the financial statements referred to in
paragraph 3(e).
'CONSOLIDATED INCOME AVAILABLE FOR FIXED CHARGES' shall mean, as of any
date, Consolidated Net Income for the most recently completed four consecutive
fiscal quarters, plus (i) all deductions for taxes levied in respect of income
which are taken into account in computing Consolidated Net Income for such
period, and (ii) Fixed Charges deducted in computing Consolidated Net Income for
such period.
'CONSOLIDATED NET INCOME (NET LOSS)' shall mean, for any period, the net
after-tax income (or net loss) of the Company and its Subsidiaries on a
consolidated basis determined in accordance with generally accepted principles
consistent with those followed in preparation of the financial statements
referred to in paragraph 3(e), excluding the sum of (i) any net loss or
undistributed net income of any nonmajority owned Subsidiary and (ii) net income
or loss of any Subsidiary for any period prior to the date it became a
Subsidiary.
'CONSOLIDATED TANGIBLE NET WORTH' shall mean the aggregate amount of
Shareholders' Equity of the Company and its Subsidiaries on a consolidated basis
determined in accordance with generally accepted accounting principles con-
sistent with those followed in preparation of the financial statements referred
to in paragraph 3(e), less intangible assets of the Company and its
Subsidiaries.
'CUMULATIVE CONSOLIDATED NET INCOME' shall mean, as of any date, the
excess, if any, of:
(i) the sum of (A) Consolidated Net Income, if any, for each completed
fiscal year of the Company ending after December 31, 1997, and (B)
Consolidated Net Income, if any, for any completed fiscal quarter(s) ending
after the end of the most recently completed fiscal year of the Company;
MINUS
(ii) the sum of (A) Consolidated Net Loss, if any, for each completed
fiscal year of the Company ending after December 31, 1997, and (B)
Consolidated Net Loss, if any, for any completed fiscal quarter(s) ending
after the end of the most recently completed fiscal year of the Company.
'CURRENT DEBT' shall mean any obligation for borrowed money or for the
acquisition of property or assets payable one year or less from the date of its
creation and not renewable or extendible without the consent of the lender,
including guaranties and endorsements (other than endorsements of negotiable
instruments for collection or deposit in the ordinary course of business) and
other contingent liabilities of or relating to such obligations, but excluding
the current maturities of Funded Debt.
'DISCOUNTED VALUE' shall mean, with respect to the Called Principal of any
Fixed Rate Note, the amount obtained by discounting all Remaining Scheduled
Payments with respect to such Called Principal from their respective scheduled
due dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor (applied on
the same periodic basis as that on which interest on the Fixed Rate Notes is
payable) equal to the Reinvestment Yield with respect to such Called Principal.
'ERISA' shall mean the Employee Retirement Income Security Act of 1974 and
the regulations adopted pursuant thereto.
'ERISA Affiliate' shall mean each trade or business (whether or not
incorporated) which, together with the Company, would be deemed to be a single
employer within the meaning of Section 4001(b)(1) of ERISA.
'EVENT OF DEFAULT' shall have the meaning set forth in Paragraph 7.
'FIXED CHARGES' shall mean, for any period, all interest expense on all
indebtedness (including, without limitation, imputed interest expense on
Capitalized Lease Obligations) and all rental expense on all leases deducted in
computing Consolidated Net Income for such period, determined in accordance with
generally accepted accounting principles consistent with those followed in
preparation of the financial statements referred to in paragraph 3(e) for the
most recent four quarters.
'FUNDED DEBT' shall mean any obligation of the Company or its Subsidiaries
for borrowed money or for the acquisition of property or assets (including
Capitalized Lease Obligations) payable more than one year from the date of its
creation (or which is renewable at the option of the obligor to a date more than
one year from the date of its creation), including guaranties, endorsements
(other than endorsements of negotiable instruments for collection or deposit in
the ordinary course of business) and other contingent liabilities of or relating
to such obligations, including the current portion thereof.
'INTANGIBLE' shall mean the purchase price of acquired businesses in excess
of the fair market value of tangible net assets, other items of good will,
patents, trade marks, trade names, copyrights, organization expense, unamortized
debt discount and expense, any write up of the value of any assets, and other
like intangibles, all determined on a consolidated basis in accordance with
generally accepted accounting principles consistent with those followed in the
preparation of the financial statements referred to in Paragraph 3(e).
'INTERCREDITOR AGREEMENT' shall mean the Intercreditor Agreement dated
March 18, 1998 by and among (a) the banks (the 'Banks') which are parties to the
letter loan agreement dated as of February 13, 1998 among the Company, such
Banks and U.S. Bank National Association as agent for such Banks, and (b) the
Purchasers, in the form attached hereto as Exhibit E.
'LIBOR RATE' shall mean the average of the 11:00 a.m. offered quotations
for deposits for a three (3) month maturity of the banks listed in the Bloomberg
'LIBO' page on the fifth London Banking Day preceding the Closing Date or the
next occurring April 1, July 1, October 1 or January 1, as the case may be.
'MARGIN STOCK' shall have the meaning ascribed to that term in Section
207.2(i) of Regulation G (12 CFR Part 207) of the Board of Governors of the
Federal Reserve Board.
'NOTE REGISTER' shall have the meaning set forth in paragraph 8.
'NOTE' OR 'NOTES' shall have the meaning set forth in paragraph 1(a).
'PBGC' shall mean the Pension Benefit Guaranty Corporation established
under ERISA, or any successor thereto.
'PLAN' shall mean any employee benefit or other plan which is covered by
Title IV of ERISA or to which Section 412 of the Internal Revenue Code applies.
'PURCHASE MONEY OBLIGATIONS' shall mean indebtedness incurred in connection
with the acquisition of property used in the business of the Company or its
Subsidiaries, which indebtedness is secured by purchase money security interests
or purchase money mortgages.
'PURCHASER' OR 'PURCHASERS' shall have the meaning set forth in the
preamble.
'REINVESTMENT YIELD' shall mean, with respect to the Called Principal of
any Fixed Rate Note, the yield to maturity implied by (i) fifty (50) basis
points, plus the yields reported, as of 10:00 a.m. (New York City time) on the
Business Day next preceding the Settlement Date with respect to such Called
Principal, on the display designated as 'Page 678' on the Telerate Service (or
such other display as may replace Page 678 on the Telerate Service) for actively
traded U.S. Treasury securities having a maturity equal to the Remaining Average
Life of such Called Principals of such Settlement Date, or (ii) if such yields
shall not be reported as of such time or the yields reported as of such time
shall not be ascertainable, the Treasury Constant Maturity Series yields
reported, for the latest day for which such yields shall have been so reported
as of the Business Day next preceding the Settlement Date with respect to such
Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury securities
having a constant maturity equal to the Remaining Average Life of such Called
Principals of such Settlement Date. Such implied yield shall be determined, if
necessary, by (x) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (y) interpolating
linearly between yields reported for various maturities.
'REMAINING AVERAGE LIFE' shall mean, with respect to the Called Principal
of any Fixed Rate Note, the number of years (calculated to the nearest one-
twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum
of the products obtained by multiplying (A) each Remaining Scheduled payment of
such Called Principal (but not of interest thereon) by (B) the number of years
(calculated to the nearest one-twelfth year) which will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.
'REMAINING SCHEDULED PAYMENTS' shall mean, with respect to the Called
Principal of any Fixed Rate Note, all payments of such Called Principal and
interest thereon that would be due on or after the Settlement Date with respect
to such Called Principal if no payment of such Called Principal were made prior
to its scheduled due date.
'RESTRICTED PAYMENTS' shall mean (i) any payment in cash, property or other
assets upon or in respect of any shares of any class of capital stock including,
without limitation, payments as dividends and payments for the purpose of
redeeming, purchasing, or otherwise acquiring any shares of any class of its
capital stock, or making any other distribution in respect of any such shares of
stock, including in the term 'stock' any warrant or option or other right to
purchase such stock; (ii) any optional payments or prepayments of subordinated
debt; provided, however, that Restricted Payments shall not include any
distribution which may be payable solely in common stock of the corporation
making the distribution; and (iii) any investment permitted by paragraph
5(b)(x).
'SECURITY AGREEMENT' shall mean the Amended and Restated Security Agreement
dated March 18, 1998 among the Company and U.S. Bank National Association as
collateral agent for the Banks and the Purchasers, in the form of Exhibit D
hereto.
'SETTLEMENT DATE' shall mean, with respect to the Called Principal of any
Fixed Rate Note, the date on which such Called Principal is to be prepaid
pursuant to paragraph 2(b) or is declared to be immediately due and payable
pursuant to paragraph 7, as the context requires.
'SHAREHOLDERS' EQUITY' shall mean the aggregate amount of shareholders'
equity of the Company and its Subsidiaries determined in accordance with
generally accepted accounting principles consistent with those followed in
preparation of the financial statements referred to in paragraph 3(e).
'SUBSIDIARY' OR 'SUBSIDIARIES' shall mean the corporations listed on
SCHEDULE 3(a) hereto, and any other corporation more than 50% of the outstanding
capital stock of every class of which is owned, directly or indirectly, by the
Company.
'TOTAL CAPITALIZATION' shall mean the sum of Funded Debt of the Company and
its Subsidiaries, on a consolidated basis, plus Consolidated Tangible Net Worth.
'YIELD MAINTENANCE AMOUNT' shall mean, with respect to any Fixed Rate Note,
an amount equal to the excess, if any, of the Discounted Value computed with
respect to the Called Principal of such Fixed Rate Note over the sum of (i) such
Called Principal plus (ii) interest accrued thereon as of (including interest
due on) the Settlement Date with respect to such Called Principal. In no event
shall the Yield Maintenance Amount be less than zero.
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein or made in writing by the Company in connection
herewith shall survive the execution and delivery of this Agreement and of the
Notes.
14. SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Agreement contained by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto whether so expressed or not.
15. NOTICES. All communications provided for hereunder shall be sent by
first class mail and, if to the Purchasers, addressed to the Purchasers at the
notice address listed on Appendix II hereto, and if to the Company, addressed to
5951 Clearwater Drive, Minnetonka, Minnesota 55349, Attention: Lee Runzheimer,
Chief Financial Officer or his successor, or to such other address with respect
to any party as such party shall notify the others in writing.
16. INTEGRATION. This Agreement supersedes, replaces and terminates any
prior oral offers, negotiations, understandings or agreements and any commitment
letters or similar writings relating to any of the matters contemplated herein.
17. GOVERNING LAW. This Agreement is being delivered and is intended to
be performed in the State of Minnesota, and shall be construed and enforced in
accordance with the laws of such State.
18. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be an original, but all of which shall
constitute but one agreement.
19. CAPTIONS. The captions in this Agreement are for convenience only
and shall not be considered in the interpretation of any of the provisions
hereof.
20. CONFIDENTIALITY. The Purchasers (and any transferees under Paragraph
8) and any of their employees, officers, representatives, agents, successors and
assigns shall maintain in confidence and not publish, disseminate or disclose in
any manner or to any person and shall not use (i) any material nonpublic
information relating to the Company and its Subsidiaries or (ii) any technical,
nonfinancial information, date or know-how which is identified as confidential
by the Company, in either case which may be furnished pursuant to this
agreement, (hereinafter collectively called 'Confidential Information'), subject
to the Purchaser's (a) obligation to disclose any such Confidential Information
pursuant to a request or order under applicable laws and regulations or pursuant
to a subpoena or other legal process, (b) right to disclose any such
nontechnical or financial Confidential Information to bank or insurance
examiners, its affiliates, auditors, counsel and other professional advisors,
provided such disclosure is made only if the recipient is legally bound not to
disclose such Confidential Information, (c) right to use any such Confidential
Information in connection with the transactions set forth herein including, but
not limited to, assignments or the sale or proposed sale of the Notes as
provided in Paragraph 8 hereof and (d) the right to disclose any such
Confidential Information in connection with the transactions set forth herein or
in connection with any litigation or dispute involving the Purchasers and the
Company or any of its Subsidiaries or any transfer or other disposition made or
proposed to be made by the Purchasers of the Notes or other extensions of credit
to the Company or any of its Subsidiaries. Notwithstanding the foregoing
provisions of this paragraph, the foregoing obligation of confidentiality shall
not apply to any Confidential Information that (i) was known to the Purchasers
or their affiliates prior to the time they received such Confidential
Information from the Company or its Subsidiaries pursuant to this Agreement,
other than as a result of the disclosure thereof by a person who the Purchasers
knew or should have known, was prohibited from disclosing it by any duty of
confidentiality arising (under this Agreement or otherwise) by contract or law;
and (ii) that becomes part of the public domain independently of any act of the
Purchasers not permitted hereunder (through publication, the issuance of a
patent disclosing such information or otherwise), or (iii) is received by the
Purchasers without restriction as to its disclosure or use, from a person who,
to the knowledge or reasonable belief of the Purchasers, was not prohibited from
disclosing it by any duty of confidentiality arising (under this Agreement or
otherwise) by contract or law. Any transferee of the Notes shall agree to be
bound by the provisions of this paragraph as a condition of transfer.
If the Purchasers are in agreement with the foregoing, please sign the
form of acceptance on the enclosed counterpart of this letter and return the
same to the undersigned. Upon acceptance by all the Purchasers, this letter
shall become a binding agreement between the Purchasers and the undersigned.
OSMONICS, INC.
By ___________________________
Its _______________________
and
By ___________________________
Its _______________________
The foregoing Agreement is accepted
as of the date first above written
by the following 'Purchasers'
RELIASTAR LIFE INSURANCE COMPANY RELIASTAR UNITED SERVICES LIFE
INSURANCE COMPANY
By _________________________ By ___________________________
Its _____________________ Its _______________________
NORTHERN LIFE INSURANCE COMPANY WASHINGTON SQUARE ADVISERS PRIVATE PLACEMENT
TRUST FUND
By _________________________ By ___________________________
Its _____________________ Its _______________________
RELIASTAR LIFE INSURANCE COMPANY
OF NEW YORK
By _________________________
Its _____________________
APPENDIX I
ALLOCATION OF NOTES
Principal Amount of Principal Amount of
Purchaser Floating Rate Notes Fixed Rate Notes
- ----------------------------------------------------------------------
Northern Life Insurance $7,000,000 0
ReliaStar Life
Insurance Company $4,000,000 0
ReliaStar Life Insurance
Company of New York $500,000 $1,500,000
ReliaStar United Services $3,500,000 0
Life Insurance Company
Washington Square Advisers
Private Placement trust Fund 0 $3,500,000
Placement Trust Fund ----------- ----------
Total $15,000,000 $5,000,000
APPENDIX II
NOTICE, WIRE TRANSFER AND PAYMENT INSTRUCTIONS
Purchaser: ReliaStar Life Insurance Company
Tax ID#: 41-0451140
Wire Payments To: First National Bank N.A./Mpls.
601 Second Avenue South
Minneapolis, MN
Bank ABA #091000022
Acct. Name: ReliaStar Life Insurance Co.
Acct. #1102-4001-4461
ATTN: Securities Accounting
Ref: Issuer, Cusip, Coupon, Maturity and P&I breakdown
Correspondence To: ReliaStar Investment Research, Inc.
100 Washington Avenue South
Suite 800
Minneapolis, MN 55401-2147
Ref: Steven Nelson
Tel #612 372-5257
Fax #612-372-5368
Company Name: Northern Life Insurance Company
Tax ID#: 41-1295933
Wire Payments To: First National Bank N.A./Mpls.
601 Second Avenue South
Acct. #1602-3237-6105
Bank ABA #091000022
ATTN: Securities Accounting
Ref: Issuer, Cusip, Coupon & Maturity
Correspondence To: ReliaStar Investment Research, Inc.
100 Washington Square, Suite 800
Minneapolis, MN 55401-2121
Attn: Steven Nelson
Tel #612 372-5773
Fax #612-372-5368
Company Name: ReliaStar Life Insurance Company of New York
Tax ID#: 53-0242530
Wire Payments To: Chase Manhattan
New York, NY
A/C #544755102
FF/C #G53095 Dept. 571 NonStandard Securities Acct. #1960
Bank ABA #021000021
Ref: Issue Name, PPN and P&I Breakdown
Correspondence To: ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Ref: Steven Nelson
Tel #612 372-5257
Fax #612-372-5368
Company Name: ReliaStar United Services Life Insurance Company
Tax ID#: 53-0159267
Wire Payments To: Bankers Trust
New York, NY
ABA #021001033
A/C #99-911-145
FBO ReliaStar United Service Life Insurance
Acct. #10604230
Ref: Security description, PPN# and P&I breakdown
Correspondence To: ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Ref: Steven Nelson
Tel #612-372-5257
Fax #612-372-5368
Company Name: Washington Square Advisers Private Placement Trust Fund
Tax ID#: 41-6424976
Wire Payments To: Acct. #10604960
Bank ABA #091000022
First Bank N.A. (DTC #2839; Inst. ID#93696; Agent Bank
#93697)
601 Second Avenue South
F/F/C First Trust Company
A/C 180121167365
ITG A/C 47300020
ATTN: Washington Square Advisers Private Placement Trust
Fund
Ref: Issuer, Cusip, Coupon & Maturity
Correspondence To: Washington Square Advisers, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, MN 55401-2121
Ref: Steve Nelson
Tel #612-342-7128
Fax #612-342-3656
EXHIBIT A
OSMONICS, INC.
FLOATING RATE NOTE DUE 2008
$_________________ March 18, 1998
FOR VALUE RECEIVED, the undersigned, Osmonics, Inc., a Minnesota
corporation (the 'Company'), hereby promises to pay to ________________ or its
registered assigns, by wire transfer of Federal or other immediately available
funds, with sufficient information to identify the source and application of
funds, to such other accounts or in such other manner as the holder of this Note
may from time to time designate to the Company, in lawful money of the United
States, the principal sum of _____________________________ Dollars ($__________)
in seven (7) consecutive equal annual installments of $__________ each, in each
year commencing March 30, 2002 through and including March 30, 2007, with the
balance due and payable on March 30, 2008, and to pay interest in like money on
the unpaid principal balance hereof as hereinafter provided.
This Note is given pursuant to a Note Purchase Agreement entered into
among the Company and Northern Life Insurance Company, ReliaStar Life Insurance
Company, ReliaStar Life Insurance Company of New York, ReliaStar United Services
Life Insurance Company and Washington Square Advisers Private Placement Trust
Fund dated as of March 18, 1998 (the 'Agreement').
This Note shall bear interest from the date hereof until the principal
amount is repaid in full at the LIBOR Rate plus 0.75%, payable quarterly on the
first day of each April, July, October and January commencing April 1, 1998.
From the date hereof through March 31, 1998, amounts outstanding under this Note
shall bear interest at the rate of 6.4375%. The interest rate for the quarterly
period beginning April 1, 1998 and each quarter thereafter shall be set five (5)
business days prior to the commencement of such quarter. For purposes of this
Note, LIBOR Rate shall have the same meaning as that ascribed thereto in the
Agreement.
A late charge of 2% or the highest amount permitted by law, whichever is
less, shall be assessed on the amount of any payment of principal or interest
due on this Note which has not been paid by the close of the fifth business day
after the date on which such payment was due.
As provided in the Agreement, this Note is subject to prepayment in whole
or in part, only in the amounts, upon the notice, with the premium and subject
to the conditions specified in the Agreement.
As provided in the Agreement, this Note is transferable only on the Note
Register of the Company, upon surrender of this Note for transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed by
the registered holder hereof or its attorney duly authorized in writing. The
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
In case an Event of Default, as defined in the Agreement, shall occur, the
principal of this Note may be declared due and payable in the manner and with
the effect provided in the Agreement.
This Note shall be construed and enforced in accordance with the laws of
the State of Minnesota.
OSMONICS, INC.
By _________________________________
Its _____________________________
And
By _________________________________
Its _____________________________
This Note has not been registered under the Securities Act of 1933 or under
applicable state securities laws and may not be sold or transferred in the
absence of such registration unless pursuant to an exemption from the
registration requirements of the Securities Act of 1933 and applicable state
securities laws.
EXHIBIT B
OSMONICS, INC.
FIXED RATE NOTE DUE 2008
$_________________ March 18, 1998
FOR VALUE RECEIVED, the undersigned, Osmonics, Inc., a Minnesota
corporation (the 'Company'), hereby promises to pay to ________________ or its
registered assigns, by wire transfer of Federal or other immediately available
funds, with sufficient information to identify the source and application of
funds, to such other accounts or in such other manner as the holder of this Note
may from time to time designate to the Company, in lawful money of the United
States, the principal sum of _____________________________ Dollars ($__________)
in seven (7) consecutive equal annual installments of $__________ each, in each
year commencing March 30, 2002 through and including March 30, 2007, with the
balance due and payable on March 30, 2008, and to pay interest in like money on
the unpaid principal balance hereof as hereinafter provided.
This Note is given pursuant to a Note Purchase Agreement entered into
among the Company and Northern Life Insurance Company, ReliaStar Life Insurance
Company, ReliaStar Life Insurance Company of New York, ReliaStar United Services
Life Insurance Company and Washington Square Advisers Private Placement Trust
Fund dated as of March 18, 1998 (the 'Agreement').
This Note shall bear interest from the date hereof until the principal
amount is repaid in full at a rate of interest equal to 6.72% per annum, payable
quarterly on the first day of each April, July, October and January commencing
April 1, 1998.
A late charge of 2% or the highest amount permitted by law, whichever is
less, shall be assessed on the amount of any payment of principal or interest
due on this Note which has not been paid by the close of the fifth business day
after the date on which such payment was due.
As provided in the Agreement, this Note is subject to prepayment in whole
or in part, only in the amounts, upon the notice, with the Yield Maintenance
Amount and subject to the conditions specified in the Agreement.
As provided in the Agreement, this Note is transferable only on the Note
Register of the Company, upon surrender of this Note for transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed by
the registered holder hereof or its attorney duly authorized in writing. The
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.
In case an Event of Default, as defined in the Agreement, shall occur, the
principal of this Note may be declared due and payable in the manner and with
the effect provided in the Agreement.
This Note shall be construed and enforced in accordance with the laws of
the State of Minnesota.
OSMONICS, INC.
By _________________________________
Its _____________________________
And
By _________________________________
Its _____________________________
This Note has not been registered under the Securities Act of 1933 or under
applicable state securities laws and may not be sold or transferred in the
absence of such registration unless pursuant to an exemption from the
registration requirements of the Securities Act of 1933 and applicable state
securities laws.
EXHIBIT C
March 18, 1998
Northern Life Insurance Company
ReliaStar Life Insurance Company
ReliaStar Life Insurance Company of New York
ReliaStar United Services Life Insurance Company
Washington Square Advisers Private Placement Trust Fund
c/o ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, Minnesota 55401-2121
Gentlemen:
We have acted as counsel to Osmonics, Inc., a Minnesota corporation (the
'Company'), in connection with the execution and delivery by the Company of that
certain Note Purchase Agreement (the 'Agreement') dated as of March 18, 1998 by
and among the Company and each of you.
This opinion is delivered to you pursuant to Section 6(b) of the
Agreement. Capitalized terms not otherwise defined herein shall have the
respective meanings ascribed to them in the Agreement.
In connection with this opinion, we have examined executed originals or
counterparts of the Agreement and the Notes. We have also examined and relied
upon originals or copies, certified or otherwise identified to our satisfaction,
of the certificate of incorporation and by-laws of the Company and those
Subsidiaries incorporated under the laws of any state of the United States of
America ('Domestic Subsidiaries'), and such corporate records, agreements and
other instruments, and certificates of public officials and of officers and
other representatives of the Company and the Domestic Subsidiaries and such
other documents, and have made such other investigations, as we have deemed
necessary or appropriate in connection with the opinions hereinafter set forth.
As to various questions of fact material to our opinion, we have relied
upon the representations and warranties made in the Agreement and upon
certificates of officers of the Company and Domestic Subsidiaries and government
officials and have made such other inquiries as we have deemed necessary. In
stating our opinion, we have assumed the genuineness of all signatures of, and
the incumbency, authority and power of, the officers and other persons and
entities signing the Agreement as or on behalf of each Purchaser, the
authenticity of all documents submitted to us as originals, and the conformity
to authentic original documents of all documents submitted to us as certified,
conformed or photostatic copies.
Based upon and subject to the foregoing, giving effect to the consummation
of the transactions contemplated by the Agreement, we are of the opinion that:
1. The Company is duly organized, validly existing and in good
standing under the laws of the State of its incorporation and has the
corporate power to own and operate its properties and to carry on its
business and to enter into and perform the Agreement and the Notes.
2. Each Domestic Subsidiary is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation
and has the corporate power to own and operate its properties and to carry
on its business.
3. Each of the Company and its Domestic Subsidiaries is duly
qualified to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it require
such qualification and where failure to so qualify could materially
adversely affect the properties, business, prospects, profits or condition
(financial or otherwise) of the Company or such Domestic Subsidiary.
4. The Agreement and the Notes have been duly authorized by all
necessary corporate action on the part of the Company, have been duly
executed and delivered by authorized officers of the Company. The
Agreement and the Notes are the legal, valid and binding obligations of
the Company enforceable in accordance with their terms, except as such
enforceability may be limited by bankruptcy, insolvency, moratorium and
other laws of general application relating to or affecting the enforcement
of creditors' rights and subject to the availability of equitable
remedies.
5. There is no maximum indebtedness specified in the Certificate of
Incorporation or Bylaws of the Company.
6. The loans evidenced by the Notes are not subject to any
restriction imposed by the State of Minnesota as to the maximum rate of
interest which may be charged.
7. There is no provision in the Certificate of Incorporation or
Bylaws of the Company, or in the comparable charter or governing documents
of any Domestic Subsidiary, or in any indenture, contract or agreement to
which the Company or any Subsidiary is a party or by which any of them is
bound of which we, after due inquiry, have knowledge, which prohibits the
execution and delivery by the Company of the Agreement or the Notes or the
performance or observance by the Company or any Subsidiary of the terms
and conditions of the Agreement or the Notes or which would result in the
imposition of any lien on the property of the Company or any Subsidiary.
8. There are no actions, suits or proceedings pending or threatened
against or affecting the Company or any Subsidiary, or any property or the
Company or any Subsidiary, in any court or before any governmental
authority or arbitration board or tribunal which, if decided adversely to
the Company or any Subsidiary, could materially adversely affect the
properties, business, prospects, profits or condition (financial or
otherwise) of the Company or any Subsidiary, or the ability of the Company
to enter into, or the Company or any Subsidiary to perform, the Agreement
or the Notes.
9. The sale and delivery of the Notes to the Purchasers pursuant to
the Agreement do not require registration under the Securities Act of
1933, as amended.
10. The purchase of the Notes as contemplated by the Agreement and
the Company's performance of its obligations thereunder, in and of itself
and without regard to any other activities of the Purchasers in the State
of Minnesota, will not require the Purchasers to qualify to do business in
the State of Minnesota (whether for general or limited purposes) or to
otherwise obtain any license, permit, authorization or other approval of
or any exemption by, or make any registration, recording or filing with,
any court, administrative agency or governmental authority of the State of
Minnesota (or any political subdivision thereof), except where failure on
a timely basis to so qualify, or to obtain any such license, permit,
authorization, recording or filing, would not adversely affect the ability
of the Purchasers to enforce their rights under the Agreement or the Notes
if the Purchasers then took the required action, including the payment of
all taxes, interest, penalties, fines, fees or other charges.
Very truly yours,
___________________________________
EXECUTION
March 18, 1998
Osmonics, Inc.
5951 Clearwater Drive
Minnetonka, Minnesota 55343
Re: Amended and Restated Credit Facility
Ladies/Gentlemen:
U.S. Bank National Association (d/b/a First Bank National Association), a
national banking association ('First Bank'), or in its capacity as agent for the
Banks described below, the 'Agent'), and Osmonics, Inc., a Minnesota corporation
(the 'Borrower'), have heretofore entered into a letter Credit Agreement dated
February 13, 1998 (the 'Existing Credit Agreement'). The Borrower's obligations
to the Bank under the Existing Credit Agreement are further evidenced by a
revolving note of the Borrower in favor of First Bank dated February 13, 1998,
in the maximum principal amount of $20,000,000 (the 'Existing Revolving Note'),
and a term note of the Borrower in favor of First Bank dated February 13, 1998,
in the maximum principal amount of $35,000,000 (the 'Existing Term Note').
First Bank is pleased to advise Osmonics, Inc., a Minnesota corporation (the
'Borrower'), that First Bank, together with any other lenders that hereafter
become parties hereto (individually, a 'Bank' and, collectively, the 'Banks'),
is willing to make certain amendments to and to restate in its entirety the
Existing Credit Agreement in this Amended and Restated Credit Agreement (the
'Agreement'), and to cause the Existing Revolving Note to be amended and
restated in its entirety, to provide for a revolving credit facility in an
amended aggregate amount not to exceed $30,000,000, all as further described
herein. Capitalized terms used herein shall have the meanings set forth in
Section 7.
SECTION 1: ADVANCES, INTEREST AND FEES.
1.1 THE REVOLVING LOANS. Subject to the terms and conditions of this
Agreement, each Bank severally agrees to make Revolving Loans ratably in
proportion to such Bank's respective Revolving Commitment Amount as set forth on
Schedule 1.1 hereto as its Revolving Commitment Amount to the Borrower until the
earlier of March 31, 2003, or the date on which the Commitment is terminated as
provided herein (such earlier date being the 'Termination Date'). The Banks
shall not make any Revolving Loan if the aggregate outstanding principal amount
of the Revolving Loans plus the Letter of Credit Obligations would exceed the
Aggregate Revolving Commitment, as reduced as hereinafter provided. Each
borrowing of Revolving Loans shall be shared ratably among the Banks. The
Borrower may repay and reborrow.
1.2 PROCEDURE FOR REVOLVING LOANS. Any request by Borrower for Revolving
Loans hereunder shall be in writing or by telephone and must be given so as to
be received by the Agent not later than 11:00 a.m. (Minneapolis time) on the
requested Revolving Loan Date if the request is for a Reference Rate Advance, or
three Eurodollar Business Days prior to the Revolving Loan Date if the request
is for a Eurodollar Advance. Each request for Revolving Loans hereunder shall
specify (i) the requested Revolving Loan Date and (ii) the aggregate amount of
Revolving Loans to be made on such date which shall be in a minimum amount of
$250,000 or, if more, an integral multiple thereof. The Borrower hereby
authorizes the Agent to rely upon the telephone or written instructions of any
person identifying himself as an Authorized Officer and upon any signature which
the Agent believes to be genuine, and the Borrower shall be bound thereby in the
same manner as of such person were authorized or such signature were genuine.
The Agent shall notify each other Bank promptly thereafter (Minneapolis time) on
the date of receipt of the receipt of such request, the matters specified
therein. On the date of the requested Revolving Loans, each Bank shall provide
the amount of its Advance to the Agent in Immediately Available Funds not later
than 1:00 p.m., Minneapolis time. Unless the Agent determines that any
applicable condition specified in this Agreement has not been satisfied, the
Agent will make available to the Borrower in Immediately Available Funds not
later than 4:00 p.m. (Minneapolis time) on the requested Revolving Loan Date the
amount of the requested Revolving Loans. If the Agent has made a Revolving Loan
to the Borrower on behalf of a Bank but has not received the amount of such
Revolving Loan from such Bank by the time herein required, such Bank shall pay
interest to the Agent on the amount so advanced at the overnight Federal Funds
rate from the date of such Revolving Loan to the date funds are received by the
Agent from such Bank, such interest to be payable with such remittance from such
Bank of the principal amount of such Revolving Loan (provided, however, that the
Agent shall not make any Revolving Loan on behalf of a Bank if the Agent has
received prior notice from such Bank that it will not make such Revolving Loan).
If the Agent does not receive payment from such Bank by the next Business Day
after the date of any Revolving Loan, the Agent shall be entitled to recover
such Revolving Loan, with interest thereon at the rate then applicable to the
such Revolving Loan, on demand, from the Borrower, without prejudice to the
Agent's and the Borrower's rights against such Bank.
1.3 NOTES. The Revolving Loans of each Bank shall be evidenced by a
single Revolving Note in the form of EXHIBIT A hereto, payable to the order of
such Bank in a principal amount equal to such Bank's Revolving Commitment Amount
originally in effect. Each Bank shall enter in its records the amount of its
Revolving Loans, and the payments made thereon and such records shall be
rebutted by presumptive evidence of the subject matters thereof.
1.4 CONVERSIONS AND CONTINUATIONS. On the terms and subject to the
limitations hereof, the Borrower shall have the option at any time and from time
to time to convert all or any portion of the Revolving Loans into Reference Rate
Advances or Eurodollar Rate Advances, or to continue a Eurodollar Rate Advance
as such; provided, however that a Eurodollar Rate Advance may be converted or
continued only on the last day of the Interest Period applicable thereto, and no
Advance may be converted to or continued as a Eurodollar Rate Advance if a
Default or Event of Default has occurred and is continuing on the proposed date
of continuation or conversion. Advances may be converted to, or continued as,
Eurodollar Rate Advances only in integral multiples, as to the aggregate amount
of the Advances of all Banks so converted or continued, of $250,000, or, in
either case, if more, in integral multiples of $250,000 in excess thereof. The
Borrower shall give the Agent written notice of any continuation or conversion
of any Advances and such notice must be given so as to be received by the Agent
not later than 12:00 noon (Minneapolis time) two Eurodollar Business Days prior
to requested date of conversion or continuation in the case of the continuation
of, or conversion to, Eurodollar Rate Advances and on the date of the requested
continuation of, or conversion to, Reference Rate Advances. Each such notice
shall specify (a) the amount to be continued or converted, (b) the date for the
continuation or conversion, and (c) in the case of conversions to or
continuations as Eurodollar Rate Advances, the Interest Period applicable
thereto. Any notice given by the Borrower under this Section shall be
irrevocable. If the Borrower shall fail to notify the Agent of the continuation
of any Eurodollar Rate Advances within the time required by this Section, such
Advances shall, on the last day of the Interest Period applicable thereto,
automatically be converted into Reference Rate Advances of the same principal
amount. All conversions and continuation of Advances must be made uniformly and
ratably among the Banks. The number of Interest Periods for Eurodollar Rate
Advances in effect at any one time shall not exceed ten.
1.5 INTEREST RATES, INTEREST PAYMENTS AND DEFAULT INTEREST. Interest
shall accrue and be payable on the Loans as follows:
(i) Subject to paragraph (iii) below, each Eurodollar Rate Advance
shall bear interest on the unpaid principal amount thereof during the
Interest Period applicable thereto at a rate per annum equal to the sum of
(A) the Eurodollar Rate for such Interest Period, plus (B) the Applicable
Margin.
(ii) Subject to paragraph (iii) below, each Reference Rate Advance
shall bear interest on the unpaid principal amount thereof at a varying
rate per annum equal to the sum of (A) the Reference Rate, plus (B) the
Applicable Margin.
(iii) Any Advance which is not paid when due shall, at the option of
the Majority Banks, bear interest until paid in full at the 'Default Rate,'
which shall be (A) during the balance of any Interest Period applicable to
an outstanding Eurodollar Rate Advance, a rate per annum equal to the sum
of the rate applicable to such Advance during such Interest Period plus 2%,
and (B) otherwise, a rate per annum equal to the sum of (1) the Reference
Rate, plus (2) the Applicable Margin for Reference Rate Advances, plus (3)
2%.
(iv) Interest shall be payable (A) with respect to each Eurodollar
Rate Advance, on the last day of the Interest Period applicable thereto;
(B) with respect to any Reference Rate Advance, on the last day of each
month; (C) with respect to all Advances, upon any permitted prepayment (on
the amount prepaid); and (D) with respect to all Advances, on the
Termination Date; provided that interest under Section 1.6 (iii) shall be
payable on demand.
(v) Revolving Commitment Fees, Letter of Credit Fees and interest on
Loans shall be computed on the basis of actual days elapsed and a year of
360 days.
1.6 COMMITMENT FEES. The Borrower shall pay to the Agent, for the account
of each Bank, fees (the 'Revolving Commitment Fees') in an amount determined by
applying the Applicable Fee Rate to the average daily Unused Revolving
Commitment of such Bank for the period from the Closing Date to the Termination
Date. Such Revolving Commitment Fees are payable in arrears quarterly on the
last day of each quarter and on the Termination Date.
1.7 (a) OPTIONAL REDUCTION OR TERMINATION OF COMMITMENTS. The Borrower
may, by written notice to the Agent, ratably reduce or terminate the Revolving
Commitment Amounts, with any such reduction in a minimum amount of $1,000,000 or
an integral multiple thereof. Upon any reduction in the Revolving Commitment
Amounts pursuant to this Section, the Borrower shall pay to the Agent for the
account of the Banks the amount, if any, by which the aggregate unpaid principal
amount of outstanding Advances plus the Letter of Credit Obligations exceeds the
reduced Commitment. Amounts so paid cannot be reborrowed. If the Commitment
is terminated, the Borrower shall pay the full amount of all outstanding
Advances, all accrued and unpaid interest and fees and all other unpaid
obligations of the Borrower to the Bank hereunder. Notwithstanding the
foregoing, the Revolving Commitments may not be reduced to an amount below
outstanding Letter of Credit Obligations, or terminated if Letters of Credit are
outstanding.
(b) MANDATORY REDUCTION OF COMMITMENTS. If the closing of the Membrex
Acquisition does not take place on or before May 29, 1998, the Revolving
Commitment Amounts shall be ratably reduced by a total amount of $10,000,000.
Upon mandatory reduction of the Revolving Commitment Amounts pursuant to this
Section, the Borrower shall pay to the Agent for the account of the Banks the
amount, if any, by which the aggregate unpaid principal amount of outstanding
Revolving Loans plus the Letter of Credit Obligations exceeds the reduced
Commitments.
1.8 PRINCIPAL REPAYMENT. The principal of the Revolving Loans shall be
payable in full on the Termination Date. If any Letters of Credit are
outstanding on the Termination Date, the Borrower shall immediately deposit into
the Holding Account an amount equal to the maximum amount then available to be
drawn under such Letters of Credit.
1.9 PAYMENTS. Payments and pre-payments of principal, interest, fees and
expenses hereunder and under the Revolving Note shall be made without set-off or
counterclaim in immediately available funds not later than 2:00 p.m.,
Minneapolis time, on the dates called for under this Agreement at the main
office of the Agent in Minneapolis, Minnesota. Funds received on any day after
such time shall be deemed to have been received on the next business day. The
Agent will promptly distribute in like funds to each Bank its ratable share of
each payment of principal, interest, Revolving Commitment Fees and Letter of
Credit Fees. Whenever any payment would be due on a day which is not a business
day, such payment shall be made on the next succeeding business day and such
extension of time shall be included in the computation of any interest or fees.
1.10 OPTIONAL PREPAYMENTS. The Borrower may prepay the Revolving Loans,
in whole or in part, at any time, without premium or penalty. Each partial
prepayment of Revolving Loans shall be in an aggregate amount for all the Banks
of $1,000,000 or an integral multiple thereof. Amounts prepaid on the Revolving
Loans may be reborrowed subject to the terms conditions of this Agreement.
Amounts paid or prepaid on the Loans shall be for the account of each Bank in
proportion to its share of such Loans.
1.11 LETTERS OF CREDIT. Upon the terms and subject to the conditions of
this Agreement, the Agent agrees to issue Letters of Credit for the account of
the Borrower from time to time between the Closing Date and the Termination Date
in such amounts as the Borrower shall request up to an aggregate amount at any
time outstanding not exceeding $10,000,000; subject to the satisfaction of the
Agent with the form, substance and beneficiary of each such Letter of Credit,
and the absence of any statutory or regulatory change or directive affecting the
issuance by the Agent of letters of credit, and provided that no Letter of
Credit will be issued in any amount which, after giving effect to such issuance,
would cause Total Revolving Outstandings to exceed the Aggregate Revolving
Commitment. Letters of Credit shall be issued in support of obligations of the
Borrower incurred in the ordinary course of the Borrower's business. No Letter
of Credit may have a term longer than twenty-four months, and the aggregate
amount available to be drawn under all Letters of Credit with a remaining term
longer than twelve months shall not exceed $5,000,000.
1.12 PROCEDURES FOR LETTERS OF CREDIT. Each request for a Letter of Credit
shall be made by the Borrower in writing, by telex, facsimile transmission or
electronic conveyance received by the Agent by 2:00 p.m., Minneapolis time, on a
Business Day which is not less than two Business Days prior to the requested
date of issuance (which shall also be a Business Day). The Agent may require
that such request be made on such letter of credit application and reimbursement
agreement form as the Agent may from time to time specify, along with
satisfactory evidence of the authority and incumbency of the officials of the
Borrower making such request. The Agent shall promptly notify the other Banks
of the receipt of the request and the matters specified therein. On the date of
each issuance of a Letter of Credit the Agent shall send notice to the other
Banks of such issuance.
1.13 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. If the Agent has
determined to pay a drawing on any Letter of Credit, it will notify the Borrower
of that fact. The Borrower shall reimburse the Agent by 10:00 a.m. (Minneapolis
time) on the day on which such drawing is to be paid in Immediately Available
Funds in an amount equal to the amount of such drawing.
1.14 OBLIGATIONS ABSOLUTE. The obligations of the Borrower to repay the
Agent for any amount drawn on any Letter of Credit shall be absolute,
unconditional and irrevocable, shall continue for so long as any Letter of
Credit is outstanding notwithstanding any termination of this Agreement, and
shall be paid strictly in accordance with the terms of this Agreement, under all
circumstances whatsoever, including without limitation the following
circumstances:
(a) Any lack of validity or enforceability of any Letter of Credit;
(b) The existence of any claim, setoff, defense or other right which
the Borrower may have or claim at any time against any beneficiary, transferee
or holder of any Letter of Credit (or any Person for whom any such beneficiary,
transferee or holder may be acting), the Agent or any Bank or any other Person,
whether in connection with a Letter of Credit, this Agreement, the transactions
contemplated hereby, or any unrelated transaction; or
(c) Any statement or any other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect whatsoever.
Neither the Agent nor any Bank nor officers, directors or employees of any
thereof shall be liable or responsible for, and the obligations of the Borrower
to the Agent and the Banks shall not be impaired by:
(i) The use which may be made of any Letter of Credit or for any acts
or omissions of any beneficiary, transferee or holder thereof in connection
therewith;
(ii) The validity, sufficiency or genuineness of documents, or of any
endorsements thereon, even if such documents or endorsements should, in
fact, prove to be in any or all respects invalid, insufficient, fraudulent
or forged;
(iii) The acceptance by the Agent of documents that appear on their
face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary; or
(iv) Any other action of the Agent in making or failing to make
payment under any Letter of Credit if in good faith and in conformity with
U.S. or foreign laws, regulations or customs applicable thereto.
Notwithstanding the foregoing, the Borrower shall have a claim against the
Agent, and the Agent shall be liable to the Borrower, to the extent, but only to
the extent, of any direct, as opposed to consequential, damages suffered by the
Borrower which the Borrower proves were caused by the Agent's willful misconduct
or gross negligence in determining whether documents presented under any Letter
of Credit comply with the terms thereof.
1.15 LOANS TO COVER UNPAID DRAWINGS. Whenever any amount drawn under a
Letter of Credit is not repaid by the Borrower as required in Section 1.14, the
Agent shall give the other Banks notice to that effect, specifying the amount
thereof, in which event each Bank is authorized (and the Borrower does hereby so
authorize each Bank) to, and shall, make a Revolving Loan (as a Reference Rate
Advance) to the Borrower in an amount equal to such Bank's ratable share of
the amount of the unpaid drawing. The Agent shall notify each Bank by 12:00
noon (Minneapolis time) of the amount of the Revolving Loan to be made by such
Bank. Each Bank shall then make such Revolving Loan (regardless of
noncompliance with the applicable conditions precedent specified in this
Agreement hereof and regardless of whether an Event of Default then exists) and
each Bank shall provide the Agent with the proceeds of such Revolving Loan in
Immediately Available Funds, at the office of the Agent, not later than 2:00
p.m. (Minneapolis time) on the day on which such Bank received such notice. The
Agent shall apply the proceeds of such Revolving Loans directly to reimburse
itself for such unpaid drawing. If any portion of any such amount paid to the
Agent should be recovered by or on behalf of the Borrower from the Agent in
bankruptcy, by assignment for the benefit of creditors or otherwise, the loss of
the amount so recovered shall be ratably shared between and among the Banks in
the manner contemplated by Section 6.9 hereof. If for any reason any Bank is
unable to make a Revolving Loan to the Borrower to reimburse the Agent for an
unpaid drawing, then such Bank shall immediately purchase from the Agent a risk
participation in such unpaid drawing, at par, in an amount equal to such Bank's
ratable share of the unpaid drawing (before deducting the amount of any
Revolving Loans made by other Banks to reimburse the Agent for such Unpaid
Drawing). Each Bank shall pay to the Agent, not later than 2:00 P.M.
(Minneapolis time) on the date it receives such notice, such Bank's ratable
share of such unpaid drawing.
1.16 LETTER OF CREDIT FEES. For each Letter of Credit issued, the Borrower
shall pay to the Agent for the account of the Banks, in advance payable on the
date of issuance, a fee (a 'Letter of Credit Fee') in an amount determined by
applying a per annum rate equal to the Applicable Margin for Eurodollar Rate
Advances in effect on such date to the original face amount of a Letter of
Credit, for the period from the date of issuance to the scheduled expiration
date of such Letter of Credit; provided that for Performance Letters of Credit,
if the Applicable Margin for Eurodollar Rate Advances exceeds one percent (1%),
the rate for calculation of such fee shall be one percent (1%). In addition to
the Letter of Credit Fee, the Borrower shall pay to the Agent, for its own
account, on demand, all issuance, amendment, drawing and other fees regularly
charged by the Agent to its letter of credit customers and all out-of-pocket
expenses incurred by the Agent in connection with the issuance, amendment,
administration or payment of any Letter of Credit.
1.17 FUNDING LOSSES; EURODOLLAR RATE ADVANCES. The Borrower shall
indemnify the Banks against any loss or expense which the Banks may sustain:
(a) if for any reason, other than a default by such Bank, a funding of a
Eurodollar Rate Advance does not occur on the date specified therefor in the
Borrower's request or notice as to such advance, or (b) if any payment of any
Eurodollar Advance occurs on a date other than the last day of the Interest
Period thereof.
1.18 ILLEGALITY. If any Regulatory Change shall make it unlawful or
impossible for any Bank to make, maintain or fund any Eurodollar Rate Advances,
such Bank shall notify the Borrower and the Agent, whereupon all of the affected
Advances shall be automatically converted to Reference Rate Advances as of the
date of such Bank's notice, and upon such conversion the Borrower shall
indemnify such Bank in accordance with Section 1.18.
1.19 INTEREST RATE NOT ASCERTAINABLE, ETC. If, on or prior to the date for
determining the Adjusted Eurodollar Rate in respect of the Interest Period for
any Eurodollar Rate Advance, any Bank reasonably determines (which determination
shall be presumptively correct) that deposits in dollars (in the applicable
amount) are not being made available to such Bank in the relevant market for
such Interest Period, or the Adjusted Eurodollar Rate will not adequately and
fairly reflect the cost to such Bank of funding or maintaining Eurodollar Rate
Advances for such Interest Period, such Bank shall forthwith give notice to the
Borrower and the other Banks of such determination, whereupon the obligation of
such Bank to make or continue, or to convert any Advances to, Eurodollar Rate
Advance shall be suspended until such Bank notifies the Borrower and the Agent
that the circumstances giving rise to such suspension no longer exist. Each
Bank shall promptly notify the Borrower and the Agent when the circumstances
giving rise to any such suspension no longer exist. While any such suspension
continues, all further Advances by such Bank shall be made as Reference Rate
Advances.
1.20 INCREASED COST. If any Regulatory Change shall subject any Bank to
any tax, duty or other charge with respect to its Eurodollar Rate Advances, the
Letters of Credit, its Notes or its obligation to make Eurodollar Rate Advances
or to make Revolving Loans to repay, or purchase participations in, drawings
under Letters of Credit, or shall change the basis of taxation of payment to any
Bank of the principal of or interest on its Eurodollar Rate Advances or such
Revolving Loans or participations, or any other amounts due under this Agreement
in respect thereof (except for changes in the rate of tax on the overall net
income of such Bank or its Applicable Lending Office imposed by the jurisdiction
in which such Bank's principal office or Applicable Lending Office is located);
or shall impose, modify or deem applicable any reserve, special deposit, capital
requirement or similar requirement (including, without limitation, any such
requirement imposed by the Board, but excluding with respect to any Eurodollar
Rate Advance any such requirement to the extent included in calculating the
applicable Adjusted Eurodollar Rate) against assets of, deposits with or for the
account of, or credit extended by, any Bank or shall impose on any Bank or the
interbank Eurodollar market any other condition affecting its Eurodollar Rate
Advances, the Letters of Credit, its Notes, or its obligation to make
Eurodollar Rate Advances or to make Revolving Loans to repay, or purchase
participations in, drawings under Letters of Credit, and the result of any of
the foregoing is to increase the cost to such Bank, or to reduce the amount of
any sum received or receivable by such Bank under this Agreement or under its
Notes, then, within 10 days after demand by such Bank (with a copy to the
Agent), the Borrower shall pay to such Bank such additional amount or amounts as
will compensate such Bank for such increased cost or reduction. A certificate
of any Bank claiming compensation under this Section, setting forth the
additional amount or amounts to be paid to it hereunder and stating in
reasonable detail the basis for the charge and the method of computation, shall
be conclusive in the absence of error. In determining such amount, any Bank may
use any reasonable averaging and attribution methods. Failure on the part of
any Bank to demand compensation for any increased costs or reduction in amounts
received or receivable with respect to any Interest Period shall not constitute
a waiver of such Bank's rights to demand compensation for any increased costs or
reduction in amounts received or receivable in any subsequent Interest Period.
If a Regulatory Change with respect to which a Bank has demanded compensation
hereunder is subsequently terminated or repealed, or the costs imposed on a Bank
as a result of a change are subsequently reduced due to an amendment thereof,
such Bank shall only be entitled to compensation hereunder to the extent of the
increased costs incurred as a result of such Regulatory Change prior to the date
such Regulatory Change no longer imposes costs on such Bank, or to reduced
compensation from and after the date the amendment of such Regulatory Change
reduces the costs incurred by such Bank.
SECTION 2: CONDITIONS PRECEDENT
2.1 CONDITIONS OF INITIAL LOANS. The making of the initial Loans and the
issuance of the initial Letter of Credit hereunder shall be subject to the prior
simultaneous satisfaction of the following conditions precedent:
(a) The closing of the ReliaStar Indebtedness shall have occurred;
(b) The amount of the Term Loan under the Existing Credit Agreement
outstanding as of the date hereof shall have been repaid in full;
(c) The Agent shall have received the following in sufficient
counterparts (except for the Notes) for each Bank:
(i) Executed counterparts of this Agreement, duly executed by the
Borrower and the Banks;
(ii) A Revolving Note drawn to the order of each Bank executed by a
duly authorized officer (or officers) of the Borrower and dated the Closing
Date.
(iii) The Security Agreement duly executed by the Borrower and all the
ReliaStar purchasers party thereto, together with:
(A) Copies of Control Agreements with all securities
intermediaries through which the property pledged thereunder is being
held,
(B) Evidence that all other action necessary or, in the opinion
of the Agent, desirable to perfect and protect the Liens created under
the Security Agreement have been taken, and
(C) Completed requests for information or other evidence
satisfactory to the Agent that there are no Liens superior to the
Liens of the Agent in the property of the Borrowers other than as
permitted by Section 6.14.
(iv) The Intercreditor Agreement executed by all the ReliaStar
purchasers party to the Security Agreement and acknowledged by the
Borrower.
(v) A copy of the resolution of the Borrower authorizing the
execution, delivery and performance of this Agreement, the Note and other
documents provided for in this Agreement, certified by the Secretary or
Assistant Secretary of the Borrower, together with a certificate showing
the names and titles, and bearing the signatures of the officers of the
Borrower authorized to execute the Loan Documents and to request Loans and
Advances hereunder.
(vi) A certified copy of any amendment or restatement of the
Articles of Incorporation or the By-laws of the Borrower made or entered
into since the date such documents were delivered to the Agent, or a
certificate by the Secretary of the Borrower that no amendment or
restatement to the Articles of Incorporation or the By-laws have been made
since such date, and
(vii) A current Certificate of Good Standing for the Borrower issued
by the appropriate state office.
(d) The representations and warranties in the Existing Credit
Agreement shall be true and correct as though made on the date hereof, except
for the changes that are permitted by the terms of the Existing Credit
Agreement.
(e) The Agent shall have received for itself and for the account of
the Banks all fees and other amounts due and payable by the Borrower on or prior
to the Closing Date, including the reasonable fees and expenses of counsel to
the Agent payable pursuant to Section 8.2.
(f) The Borrower shall have requested its counsel to prepare a
written opinion addressed to the Banks and dated the Closing Date in
form and substance satisfactory to the Agent, and such opinion shall
have been delivered to the Agent.
2.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTERS OF CREDIT. The
obligation of the Banks to make any Loans hereunder and the obligation of the
Agent to issue Letters of Credit shall be subject to the fulfillment of the
following conditions and each request for a loan shall include a representation
that the following have been fulfilled:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Section 3 shall be true and correct in all material
respects on and as of the date of each Loan or on the date each Letter of Credit
is to be issued, as though made on such date.
(b) NO DEFAULT. No Default or Event of Default shall have occurred
and be continuing on the date of each Loan, or on the date a Letter of Credit is
issued, or would result from such Loan or the issuance of such Letter of Credit.
SECTION 3: REPRESENTATIONS AND WARRANTIES.
To induce the Banks to enter into this Agreement and to make Loans
hereunder, and to induce the Agent to issue Letters of Credit, the Borrower
represents and warrants to the Banks:
3.1 ORGANIZATION, STANDING, ETC. The Borrower and each of its corporate
Subsidiaries are corporations duly incorporated and validly existing and in good
standing under the laws of the jurisdiction of their respective incorporation
and have all requisite corporate power and authority to carry on their
respective businesses as now conducted, to (in the instance of the Borrower)
enter into this Agreement and to issue the Notes and to perform its obligations
under the Loan Documents. The Borrower and each of its Subsidiaries are duly
qualified and in good standing as a foreign corporation in each jurisdiction in
which the character of the properties owned, leased or operated by it or the
business conducted by it makes such qualification necessary.
3.2 AUTHORIZATION AND VALIDITY. The execution, delivery and performance
by the Borrower of the Loan Documents have been duly authorized by all necessary
corporate action by the Borrower, and the Loan Documents constitute the legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms, subject to limitations as to
enforceability which might result from bankruptcy, insolvency, moratorium and
other similar laws affecting creditors' rights generally and subject to
limitations on the availability of equitable remedies.
3.3 NO CONFLICT; NO DEFAULT. The execution, delivery and performance by
the Borrower of the Loan Documents will not (a) violate any provision of any
law, statute, rule or regulation or any order, writ, judgment, injunction,
decree, determination or award of any court, governmental agency or arbitrator
presently in effect having applicability to the Borrower, (b) violate or
contravene any provisions of the Articles (or Certificate) of Incorporation or
by-laws of the Borrower, or (c) result in a breach of or constitute a default
under any indenture, loan or credit agreement or any other agreement, lease or
instrument to which the Borrower is a party or by which it or any of its
properties may be bound or result in the creation of any Lien on any asset of
the Borrower or any Subsidiary. Neither the Borrower nor any Subsidiary is in
default under or in violation of any such law, statute, rule or regulation,
order, writ, judgment, injunction, decree, determination or award or any such
indenture, loan or credit agreement or other agreement, lease or instrument in
any case in which the consequences of such default or violation could constitute
an Adverse Event. No Default or Event of Default has occurred and is
continuing.
3.4 GOVERNMENT CONSENT. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority is required on the
part of the Borrower or Micron to authorize, or in connection with the Micron
Acquisition or in connection with the execution, delivery and performance of, or
the legality, validity, binding effect or enforceability of the Acquisition
Documents, and the Loan Documents, except those which have already been
obtained.
3.5 FINANCIAL STATEMENTS AND CONDITION.
(a) POST-ACQUISITION BALANCE SHEET. The Post-Acquisition Balance
Sheet, a copy of which is attached hereto as EXHIBIT H, fairly represents the
Borrower's anticipated consolidated financial condition after giving effect to
the Acquisitions.
(b) FINANCIAL PROJECTIONS. The financial projections for the
Borrower and its Subsidiaries for its fiscal year ending December 31, 1998, and
the forecasted consolidated balance sheet of the Borrower and its Subsidiaries
as at the end of such fiscal year, together with supporting assumptions,
delivered to the Agent in connection with the transactions contemplated by this
Agreement, which are attached hereto as EXHIBIT I, were prepared in good faith
on the basis of information and assumptions that the Borrower believed to be
reasonable as of the date of such projections, and which the Borrower believes
to be reasonable as of the date hereof. The financial projections for the
Borrower and its Subsidiaries described in Section 4.3(g), when delivered to the
Banks, will have been prepared in good faith on the basis of information and
assumptions that the Borrower believed to be reasonable as of the date such
financial projections were delivered to the Banks.
(c) FINANCIAL STATEMENTS. The Borrower's audited financial
statements as at December 31, 1996 and its unaudited financial statements as at
September 30, 1997, as heretofore furnished to the Banks, have been prepared in
accordance with GAAP on a consistent basis and fairly present the financial
condition of the Borrower and its Subsidiaries as at such dates and the results
of its operations and cash flow for the respective periods then ended. To the
best of the Borrower's knowledge, the audited financial statements of Micron as
at October 31, 1997, as heretofore furnished to the Banks, have been prepared
in accordance with GAAP on a consistent basis and fairly present the financial
condition of Micron as at such date and the results of its operations and cash
flow for the fiscal year then ended. To the best of the Borrower's knowledge,
the audited financial statements of Membrex as at December 31, 1997, when
delivered to the Banks pursuant to Section 4.3, will have been prepared in
accordance with GAAP on a consistent basis and fairly present the financial
condition of Membrex as at such date and the results of its operations and cash
flow for the fiscal year then ended, provided that the foregoing representation
with respect to Membrex shall only be made from and after the Acquisition
Closing Date for the Membrex Acquisition. As of the dates of such financial
statements, none of the Borrower, any Subsidiary, Micron or Membrex had any
material obligation, contingent liability, liability for taxes or long-term
lease obligation which is not reflected in such financial statements or in the
notes thereto. Since December 31, 1996, with respect to the Borrower, since
October 31, 1997, with respect to Micron, and December 31, 1997, with respect to
Membrex no Adverse Event has occurred, provided that the foregoing
representation with respect to Membrex shall only be made from and after the
Acquisition Closing Date for the Membrex Acquisition.
(d) SOLVENCY. On each Acquisition Closing Date, after giving effect
to the applicable Acquisition, the payment of the purchase price and related
costs and expenses, and the Loans to be made and other financing to be obtained
in connection therewith, (a) the present date saleable value of the assets of
the Borrower is in excess of the total amount of its liabilities (including for
purposes of the definition all liabilities, whether or not reflected on a
balance sheet prepared in accordance with GAAP, and whether direct or indirect,
fixed or contingent, secured of unsecured, disputed or undisputed); and (b) the
Borrower will be able to pay its obligations as they mature in the ordinary
course of business as proposed to be conducted following the Acquisitions; and
(c) the Borrower does not have unreasonably small capital to carry out the
business as proposed to be conducted following the Acquisitions. For purposes
of this Section 4.5 (d), 'present fair saleable value' means the value which
would be realized from an interested purchaser are of all relevant information
relating to the assets or group of assets being sold and who is willing to
purchase under ordinary selling conditions in an existing and not theoretical
market if the assets or group of assets are disposed of within a period of six
(6) months to one year.
3.6 LITIGATION AND CONTINGENT LIABILITIES. Except as described in EXHIBIT
C, there are no actions, suits or proceedings pending or, to the knowledge of
the Borrower, threatened against or affecting the Borrower or any Subsidiary or
any of their properties before any court or arbitrator, or any governmental
department, board, agency or other instrumentality which might materially and
adversely affect the Borrower, any subsidiary or any of their respective
properties. Except as described in EXHIBIT C, neither the Borrower nor any
Subsidiary has any contingent liabilities which are material to the Borrower and
the Subsidiaries as a consolidated enterprise.
3.7 COMPLIANCE. The Borrower and its Subsidiaries are in material
compliance with all statutes and governmental rules and regulations applicable
to them.
3.8 ENVIRONMENTAL, HEALTH AND SAFETY LAWS. Except as disclosed on EXHIBIT
C hereto, there does not exist any violation by the Borrower or any Subsidiary
of any applicable federal, state or local law, rule or regulation or order of
any government, governmental department, board, agency or other instrumentality
relating to environmental, pollution, health or safety matters which will or
threatens to impose a material liability on the Borrower or a Subsidiary or
which would require a material expenditure by the Borrower or such Subsidiary to
cure. Except as disclosed on EXHIBIT C hereto, neither the Borrower nor any
Subsidiary has received any notice to the effect that any part of its operations
or properties is not in material compliance with any such law, rule, regulation
or order or notice that it or its property is the subject of any governmental
investigation evaluating whether any remedial action is needed to respond to any
release of any toxic or hazardous waste or substance into the environment, the
consequences of which non-compliance or remedial action could constitute an
Adverse Event.
3.9 ERISA. Each Plan, if any, complies with all material applicable
requirements of ERISA and the Code and with all material applicable rulings and
regulations issued under the provisions of ERISA and the Code setting forth
those requirements. No Reportable Event, other than a Reportable Event for
which the reporting requirements have been waived by regulations of the PBGC,
has occurred and is continuing with respect to any Plan. All of the minimum
funding standards applicable to such Plans have been satisfied and there exists
no event or condition which would permit the institution of proceedings to
terminate any Plan under Section 4042 of ERISA. The current value of the Plans'
benefits guaranteed under Title IV or ERISA does not exceed the current value of
the Plans' assets allocable to such benefits.
3.10 REGULATION U. The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (as
defined in Regulation U of the Board of Governors of the Federal Reserve System)
and no part of the proceeds of any Loan will be used to purchase or carry margin
stock or for any other purpose which would violate any of the margin
requirements of the Board of Governors of the Federal Reserve System.
3.11 OWNERSHIP OF PROPERTY; LIENS. The interests of the Borrower and its
Subsidiaries in their respective real and personal property are fairly
represented in the financial statements furnished to the Agent pursuant to
Section 3.5 hereof (other than property acquired or disposed of since the date
of such financial statement in the ordinary course of business or in
transactions permitted by this Agreement). None of the properties, revenues or
assets of the Borrower or any of its Subsidiaries is subject to a Lien, except
for (a) Liens disclosed in the financial statements referred to in SECTION
3.5(c) Liens listed on EXHIBIT D, or (c) Liens allowed under SECTION 4.11.
3.12 TAXES. Each of the Borrower and the Subsidiaries has filed all
federal, state and local tax returns required to be filed and has paid or made
provision for the payment of all taxes due and payable pursuant to such returns
and pursuant to any assessments made against it or any of its property and all
other taxes, fees and other charges imposed on it or any of its property by any
governmental authority (other than taxes, fees or charges that are not material
in amount or the amount or validity of which is currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
accordance with GAAP have been provided on the books of the Borrower). No tax
Liens have been filed and no material claims are being asserted with respect to
any such taxes, fees or charges. The charges, accruals and reserves on the
books of the Borrower in respect of taxes and other governmental charges are
adequate and the Borrower knows of no proposed material tax assessment against
it or any subsidiary or any basis therefor.
3.13 SUBSIDIARIES. EXHIBIT E sets forth as of the date of this Agreement a
list of all Subsidiaries and the number and percentage of the shares of each
class of capital stock owned beneficially or of record by the Borrower or any
Subsidiary therein, and the jurisdiction of incorporation of each Subsidiary.
3.14 TRADEMARKS, PATENTS. Except as disclosed on EXHIBIT C hereto, each of
the Borrower and the Subsidiaries possesses or has the right to use all of the
patents, trademarks, trade names, service marks and copyrights, and applications
therefor, and all technology, know-how, processes, methods and designs used in
or necessary for the conduct of its business, without known conflict with the
rights of others.
3.15 RETIREMENT BENEFITS. Except as required under Section 4980B of the
Code, Section 601 of ERISA or applicable state law, neither the Borrower nor any
Subsidiary is obligated to provide post-retirement medical or insurance benefits
with respect to employees or former employees.
3.16 FULL DISCLOSURE. Subject to the following two sentences, neither the
financial statements referred to in Section 3.5 nor any other certificate,
written statement, exhibit or report furnished by or on behalf of the Borrower,
in connection with or pursuant to the Loan Documents contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements contained therein not misleading. Certificates or
statements furnished by or on behalf of the Borrower to the Banks consisting of
projections or forecasts of future results or events have been prepared in good
faith and based on good faith estimates and assumptions of the management of the
Borrower, and the Borrower has no reason to believe that such projections or
forecasts are not reasonable. With respect to Membrex and Micron, to the best
of the Borrower's knowledge, neither the financial statements referred to in
Section 3.5 nor any other certificate, written statement, exhibit or report
furnished by or on behalf of the Borrower, in connection with or pursuant to the
Loan Documents contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements contained
therein not misleading, provided that the foregoing representation with respect
to Membrex shall only be made from and after the Acquisition Closing Date for
the Membrex Acquisition.
SECTION 4: COVENANTS
From the date of this Agreement and thereafter until the obligation of the
Banks hereunder to make the Term Loans and Advances hereunder and of the Agent
to issue Letters of Credit is terminated or expires and the Notes and all of the
other Obligations have been paid in full and all outstanding Letters of Credit
have expired or been terminated, unless the Majority Banks shall otherwise
expressly consent in writing, the Borrower will do, and will cause each
Subsidiary to do, all of the following:
4.1 MAINTAIN ASSETS. Maintain and keep its assets, properties and
equipment in good repair, working order and condition and from time to time make
or cause to be made all needed renewals, replacements and repairs so that at all
times the Borrower's and each Subsidiary's businesses can be operated
efficiently.
4.2 INSURANCE. Insure and keep insured all of its property of an
insurable value, under all-risk policies in an amount acceptable to the Bank and
workers' compensation insurance of not less than the minimum amounts required by
applicable statutes, and such other insurance as is usually carried by persons
engaged in the same or similar business, and from time to time furnish to the
Agent upon request appropriate evidence of such insurance.
4.3 FINANCIAL STATEMENTS. Furnish to the Banks:
(a) Within 95 days after the end of each of Borrower's fiscal years,
audited annual consolidated financial statements for Borrower and its
Subsidiaries, which include a balance sheet and income statement prepared by
accountants acceptable to the Agent and prepared in accordance with GAAP, which
show all liabilities, direct and contingent, of the Borrower and the
Subsidiaries. Such statement shall be accompanied by a certification of an
officer of Borrower that such information is true, correct, and complete and
that no Default or Event of Default has occurred or is continuing.
(b) Within 50 days after the end of each quarter, consolidated
financial statements for Borrower and its Subsidiaries, which include a balance
sheet and income statement, together with a certification by an officer of
Borrower that such information is true, correct and complete and that no Default
or Event of Default has occurred or is continuing.
(c) Together with the financial statements required under 4.1 (a) and
(b), a compliance certificate in the form specified by the Agent signed by the
chief financial officer of the Borrower demonstrating in reasonable detail
compliance (or noncompliance, as the case may be) with Sections 4.18 and 4.20
and stating that, as of the end of the quarter, there did not exist any Default
or Event of Default or, if such Default or Event of Default existed at such
time, specifying the nature and period of existence thereof and what action the
Borrower proposes to take with respect thereto.
(d) As soon as practicable and in any event before the beginning of
each fiscal year of the Borrower, statements of forecasted consolidated income
for the Borrower and the Subsidiaries for each fiscal year and a forecasted
consolidated balance sheet of the Borrower and the Subsidiaries, together with
supporting assumptions, as at the end of such fiscal year, all in reasonable
detail and reasonably satisfactory in scope to Majority Banks.
(e) As soon as available, audited financial statements of Membrex as
of December 31, 1997, which include a balance sheet and income statement
prepared by accountants acceptable to the Agent and prepared in accordance with
GAAP, and which show all liabilities, direct and contingent, of Membrex.
(f) Immediately upon any officer of the Borrower becoming aware of
the occurrence, with respect to any Plan, of any Reportable Event or any
Prohibited Transaction, a notice specifying the nature thereof and what action
the Borrower proposes to take with respect thereto, and, when received, copies
of any notice from PBGC of intention to terminate or have a trustee appointed
for any Plan.
(g) As soon as available, and in all events no later than March 31,
1998, financial projections for the Borrower and its Subsidiaries for each
fiscal quarter during its fiscal year ending December 31, 1998, and forecasted
consolidated balance sheets of the Borrower and its Subsidiaries as of the end
of each such fiscal quarter, together with supporting assumptions.
(h) Such other information as any Bank may reasonably request from
time to time.
4.4 ACCESS TO RECORDS. Permit any person designated by the Agent, at the
Banks' expense, to visit and inspect any of their respective properties, books
and financial records and to discuss their affairs, finances and accounts with
officers and employees of the Borrower or Subsidiaries, all at such reasonable
times and as often as Bank may reasonably request.
4.5 TAXES, ASSESSMENTS AND CHARGES. Promptly pay over to the appropriate
authorities all sums for taxes deducted and withheld from wages as well as the
employer's contributions and other governmental charges imposed upon or asserted
against their income, profits, properties and rental charges or otherwise which
are or might become a lien charged upon their respective properties, unless the
same are being contested in good faith by appropriate proceedings and adequate
reserves shall have been established on the Borrower's books with respect
thereto.
4.6 NOTIFICATION OF CHANGES. Promptly notify the Bank of:
(a) Any litigation which might materially and adversely affect the
Borrower or any Subsidiary or any of their respective properties;
(b) The occurrence of any Default or Event of Default; and
(c) Any Adverse Event.
4.7 CORPORATE EXISTENCE. Maintain its corporate existence and conduct the
same general type of business as is now being carried on and continue compliance
with all applicable statutes, laws, rules and regulations.
4.8 BOOKS AND RECORDS. Keep true and accurate books of records and
accounts in accordance with generally accepted accounting principles.
4.9 REIMBURSEMENT OF EXPENSES. Promptly reimburse the Agent for any and
all expenses, fees and disbursements, including attorneys' fees, incurred in
connection with the preparation and performance of this Agreement and the
instruments and documents related thereto, and all expenses of collection of any
loans made or to be made hereunder, including reasonable attorneys' fees.
4.10 MERGE, CONSOLIDATE OR SELL. Not transfer, lease or sell all or
substantially all of their respective properties or businesses to any other
entity or entities, other than in the ordinary course of business, and not merge
or consolidate or enter into any analogous reorganization or transaction with
any Person; provided, however, that the foregoing shall not prohibit: (a) sales
of assets not exceeding 10% of the total consolidated assets of the Borrower and
the Subsidiaries in the aggregate during any period of four consecutive fiscal
quarters and not consisting of assets which contributed 10% or more of
consolidated net income in the preceding four fiscal quarters; and (b) mergers
in which the Borrower is the surviving corporation, to the extent that before
and after giving effect to such mergers, no Default or Event of Default shall
have occurred.
4.11 LIENS AND ENCUMBRANCES. Not create, incur, assume or suffer to exist
any Lien with respect to any property, revenues or assets now owned or hereafter
arising or acquired, except:
(a) Liens in connection with the acquisition of property after the
date hereof by way of purchase money mortgage, conditional sale or other title
retention agreement, Capitalized Lease or other deferred payment contract, and
attaching only to the property being acquired if the Indebtedness secured
thereby does not exceed the fair market value of such property at the time of
acquisition and such Indebtedness is Permitted Additional Indebtedness;
(b) Liens for taxes, assessments and other governmental charges which
are not delinquent or which are being contested in good faith by appropriate
proceedings, against which required reserves have been set up;
(c) Liens incurred or deposits made in the ordinary course of
business in connection with workmen's compensation, unemployment insurance or
other similar laws or to secure the performance of statutory obligations or of a
like nature;
(d) Liens imposed by law in connection with transactions in the
ordinary course of business, such as liens of carriers, warehousemen, mechanics
and materialmen which are not delinquent or which are being contested in good
faith and by appropriate proceedings, against which adequate reserves have been
set up;
(e) Landlords' liens under leases to which the Borrower is a party;
(f) Zoning restrictions, licenses and minor encumbrances and
irregularities in title all of which in the aggregate do not materially detract
from the value of the property involved or impair its use;
(g) Liens disclosed on EXHIBIT D attached hereto;
(h) Liens securing other Indebtedness which does not have an
aggregate outstanding principal amount greater than $1,000,000;
(i) Liens on real and personal property located in Le Mee Sur Seine,
France to secure Indebtedness in an amount not exceeding $3,000,000 incurred by
AUTOTROL, S.A.; and
(j) Liens in favor of U.S. Bank National Association, as collateral
for the Agent, the Banks and the holders of the ReliaStar Indebtedness, securing
the Obligations and the ReliaStar Indebtedness.
4.12 ADDITIONAL INDEBTEDNESS. Not incur, create, issue, assume or suffer
to exist any Indebtedness, except:
(a) Indebtedness under this Agreement;
(b) Current liabilities, other than for borrowed money, incurred in
the ordinary course of business;
(c) Indebtedness existing on the date of this Agreement and disclosed
on EXHIBIT F hereto;
(d) Permitted Additional Indebtedness;
(e) Indebtedness consisting of endorsements for collection, deposit
or negotiation and warranties of products or services, in each case incurred in
the ordinary course of business; and
(f) Other Indebtedness which does not have an aggregate outstanding
principal amount greater than $1,000,000;
(g) Indebtedness not exceeding $3,000,000 incurred by AUTOTROL, S.A.,
Le Mee Sur Seine, France; and
(h) the ReliaStar Indebtedness.
4.13 GUARANTEES. Not assume, guarantee, endorse or otherwise become liable
upon the obligation of any person, firm or corporation except by endorsement of
negotiable instruments for deposit or collection in the ordinary course of
business, nor sell any notes or accounts receivable with recourse except for
product warranties and similar undertakings provided in the ordinary course of
business.
4.14 INVESTMENTS. Not acquire for value, make, have or hold any
Investments, except:
(a) Investments outstanding on the date hereof and listed on EXHIBIT
G;
(b) Travel advances to officers and employees in the ordinary course
of business;
(c) Investments in readily marketable direct obligations of the
United States of America having maturities of one year or less from the date of
acquisition;
(d) Certificates of deposit or bankers' acceptances, each maturing
within one year from the date of acquisition, issued by any commercial bank
organized under the laws of the United States or any State thereof which has (i)
combined capital, surplus and undivided profits of at least $100,000,000, and
(ii) a credit rating with respect to its unsecured indebtedness from a
nationally recognized rating service that is satisfactory to the Bank;
(e) Commercial paper maturing within 270 days from the date of
issuance and given the highest rating by a nationally recognized rating service;
(f) Repurchase agreements relating to securities issued or guaranteed
as to principal and interest by the United States of America;
(g) Extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale of goods and services in the ordinary
course of business;
(h) Shares of stock, obligations or other securities received in
settlement of claims arising in the ordinary course of business;
(i) Investments outstanding on the date hereof in Subsidiaries by the
Borrower or other Subsidiaries;
(j) Investments resulting from the Acquisitions;
(k) Acquisitions by the Borrower of substantially all of the real and
personal property of, or the capital stock of, another Person, or substantially
all of the real and personal property of any business or the assets comprising
such business, provided the amount of each such Investment made after the
Closing Date does not exceed 10% of the Borrower's consolidated tangible net
worth at the end of the quarter most recently ended prior to such Investment;
provided further that the aggregate amount of all such Investments shall not
exceed 50% of the Borrower's consolidated tangible net worth at the end of the
fiscal quarter prior to the most recent such Investment, after giving effect to
such Investment; and provided further that the aggregate amount of all such
Investments in each of the 12 month periods ending March 31, 1999 and March 31,
2000 shall not exceed 20% of the Borrower's consolidated tangible net worth as
at the end of the fiscal quarter prior to the most recent such Investment, after
giving effect to such Investment;
(l) Equity investments in (in addition to those permitted by clauses
(j)and (k)) entities, other than Subsidiaries, that are primarily engaged in the
type of business engaged in by the Borrower, in accordance with the Borrower's
investment policies on the date hereof.
4.15 RESTRICTED PAYMENTS. Not either (a) purchase or redeem or otherwise
acquire for value any shares of the Borrower's or any Subsidiary's stock,
declare or pay any dividends thereon (other than stock dividends and dividends
payable solely to the Borrower), make any distribution on, or payment on account
of the purchase, redemption, defeasance or other acquisition or retirement for
value of, any shares of the Borrower's or any Subsidiary's stock or set aside
any funds for any such purpose (other than payment to, or on account of or for
the benefit of, the Borrower only), PROVIDED, HOWEVER, that if no Default or
Event of Default shall exist or shall result from such payment, and that at the
end of the measuring period set forth in Section 4.25 (a) hereof that is next
preceding the date the dividend is declared, the Leverage Ratio was less than
2.50 to 1.00, the Borrower may pay dividends not exceeding, on a cumulative
basis, 25% of consolidated net income of the Borrower and its Subsidiaries
earned after December 31, 1997, PLUS the net proceeds received by the Borrower
from issuance of equity securities (which are not debt instruments or
convertible instruments) after the date of this Agreement; or (b) directly or
indirectly make any payment on, or redeem, repurchase, defease, or make any
sinking fund payment on account of, or any other provision for, or otherwise
pay, acquire or retire for value, any Indebtedness of the Borrower or any
Subsidiary that is subordinated in right of payment to the Loans (whether
pursuant to its terms or by operation of law), except for regularly-scheduled
payments of interest and principal (which shall not include payments
contingently required upon occurrence of a change of control or other event)
that are not otherwise prohibited hereunder or under the document or agreement
stating the terms of such subordination.
4.16 NEGATIVE PLEDGES; SUBSIDIARY RESTRICTIONS. Not enter into any
agreement, bond, note or other instrument with or for the benefit of any Person
other than the Banks which would (i) prohibit the Borrower or such Subsidiary
from granting, or otherwise limit the ability of the Borrower or such Subsidiary
to grant, to the Banks any Lien on any assets or properties of the Borrower or
such Subsidiary, except limitations created in agreements creating Liens on, and
applicable only to, property on which a Lien is granted by the Borrower or any
Subsidiary as permitted in Sections 4.11(a), (g) or (j), or (ii) require the
Borrower or such Subsidiary to grant a Lien to any other Person if the Borrower
or such Subsidiary grants any Lien to the Banks. The Borrower will not permit
any Subsidiary to place or allow any restriction, directly or indirectly, on the
ability of such Subsidiary to (a) pay dividends or any distributions on or with
respect to such Subsidiary's capital stock or (b) make loans or other cash
payments to the Borrower.
4.17 ACCOUNTING CHANGES. Not make any significant change in accounting
treatment or reporting practices, except as required by GAAP, or change its
fiscal year or the fiscal year of any Subsidiary.
4.18 CAPITAL EXPENDITURES. Not make Capital Expenditures on a consolidated
basis in any fiscal year in excess of ten percent (10%) of the Borrower's sales
on a consolidated basis for the prior fiscal year; provided that for purposes of
calculating Capital Expenditures, the purchase price of the assets acquired in
the Acquisitions and the related fees and expenses shall not be included in such
calculation.
4.19 ACQUISITION DOCUMENTS. Not supplement, amend or otherwise modify the
Acquisition Documents; provided, that the Borrower may supplement, amend or
otherwise modify the Acquisition Documents in a manner that is not materially
adverse to the Banks as long as the Borrower notifies the Banks of any such
supplement, amendment or other modification.
4.20 FINANCIAL COVENANTS.
(a) LEVERAGE RATIO. The Borrower will not permit the Leverage Ratio
(as defined in Section 7 hereof) as of the last day of any fiscal quarter ending
during any period of measurement described below to be greater than the ratio
set forth below for such period:
Measurement Period Maximum Leverage Ratio
------------------ ----------------------
Closing Date through September 30, 1998 3.50 to 1.00
October 1, 1998 through December 31, 1998 3.25 to 1.00
January 1, 1999 through March 31, 1999 3.00 to 1.00
April 1, 1999 through June 30, 1999 2.75 to 1.00
July 1, 1999 through September 30, 1999 2.50 to 1.00
October 1, 1999 through December 31, 1999 2.25 to 1.00
January 1, 2000, and thereafter 2.00 to 1.00
PROVIDED, HOWEVER, that if the Borrower elects to pay dividends at any time
prior to July 1, 1999, as permitted pursuant to the provisions in Section
4.15(a), or to request a release of the security interest granted pursuant to
the Security Agreement, as permitted pursuant to Section 9 thereof, the maximum
Leverage Ratio for the period from the date such dividends are paid or such
security interest is released until September 30, 1999 shall be 2.50 to 1.00.
(b) FIXED CHARGE COVERAGE RATIO. The Borrower will not permit the
Fixed Charge Coverage Ratio (as defined in Section 7 hereof) for the four
consecutive fiscal quarters ending on the last day of any fiscal quarter ending
during any period of measurement described below to be less than the ratio set
forth below for such period:
Minimum Fixed
Measurement Period Charged Coverage Ratio
------------------ ----------------------
Closing Date through December 31, 1998 1.20 to 1.00
January 1, 1999 through December 31, 1999 1.30 to 1.00
January 1, 2000 and thereafter 1.40 to 1.00
(c) LOSS LIMITATION. Not permit (a) its consolidated net income for
any four consecutive fiscal quarters to be less than zero, or (b) its
consolidated net loss for any fiscal quarter to exceed five percent (5%) of the
consolidated sales of the Company and its Subsidiaries for such fiscal quarter.
4.21 GOVERNMENT CONSENT. Prior to the Membrex Acquisition, the Borrower
will have obtained any order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by, an
governmental or public body or authority required on the part of Membrex to
authorize, or required in connection with, the Membrex Acquisition or in
connection with the delivery and performance of, or the legality, validity,
binding effect or enforceability of the Membrex Purchase Agreement and all other
documents executed and delivered in connection therewith.
4.22 YEAR 2000 COMPLIANCE. The Borrower has conducted a comprehensive
review and assessment of its computer applications and has made inquiry of the
Borrower's material suppliers, vendors and customers with respect to the Year
2000 Problem. Based on the foregoing review, assessment and inquiry, the
Borrower reasonably believes that the Year 2000 Problem will not result in a
material adverse change in the Borrower's business condition (financial or
otherwise), operations, properties or prospects, or its ability to perform its
obligations under this Agreement.
SECTION 5: DEFAULTS.
5.1 Any one or more of the following events shall constitute an Event of
Default:
(a) PAYMENT. The Borrower shall fail to pay, when due, any
obligations hereunder or under the Notes or any other Obligation now or
hereafter required to be made to the Agent or any Bank pursuant to this
Agreement.
(b) REPRESENTATIONS AND WARRANTIES. Any representation or warranty
contained in this Agreement or any other document or any letter or certificate
furnished or to be furnished to any Bank or the Agent proves to be false as of
the date the Agreement or such document is executed or at the time such letter
or certificate is delivered to the Bank or the Agent.
(c) NON-COMPLIANCE. The Borrower shall fail to comply with Sections
4.7 (with respect to corporate existence), 4.10, 4.11, 4.12, 4.13, 4.14, 4.15,
4.16, 4.17 (with respect to changes in fiscal year or other changes that would
materially affect covenants set forth in Section 4.20) , 4.18, 4.19, or 4.20
hereof, or Section 3 or 4 of the Security Agreement.
(d) OTHER COVENANTS OR AGREEMENTS HEREIN. The Borrower shall fail to
comply with any other agreement, covenant, condition, provision or term
contained in this Agreement, or any other Loan Document (other than those
herein above set forth in this Section 5.1) and such failure to comply shall
continue for thirty (30) calendar days after whichever of the following dates is
the earliest: (i) the date the Borrower gives notice of such failure to the
Banks, (ii) the date the Borrower should have given notice of such failure to
the Banks pursuant to Section 4.3(c), or (iii) the date the Agent or any Bank
gives notice of such failure to the Borrower.
(e) INSOLVENCY. The Borrower shall become insolvent or unable to pay
its debts generally as they mature, (ii) suspend business, (iii) make a general
assignment for the benefit of creditors, (iv) admit in writing its inability to
pay its debts generally as they mature, (v) file or have filed against it a
petition in bankruptcy or a petition or answer seeking a reorganization,
arrangement with creditors or other similar relief under the Federal bankruptcy
laws or under any other applicable law of the United States of America or any
State thereof, (vi) consent to the appointment of a trustee or receiver for the
Borrower or for a substantial part of its property, (vii) take any corporate
action for the purpose of effecting or consenting to any of the foregoing, or
(viii) have an order, judgment or decree entered appointing, without its
consent, a trustee or receiver for Borrower or for a substantial part of its
property, or approving a petition filed against the Borrower seeking a
reorganization, arrangement with creditors or other similar relief under the
Federal bankruptcy laws or under any other applicable law of the United States
of America or any State hereof, which order, judgment or decree shall not be
vacated or set aside or stayed within thirty (30) days from the date of entry.
(f) JUDGMENTS. Judgments against the Borrower for the payment of
money totaling in excess of $250,000 shall be outstanding for a period of thirty
(30) days without a stay of execution.
(g) OTHER INDEBTEDNESS. The maturity of any material Indebtedness of
the Borrower (other than Indebtedness under this Agreement) or a Subsidiary
shall be accelerated, or the Borrower or a Subsidiary shall fail to pay any such
Indebtedness when due or, in the case of such Indebtedness payable on demand,
when demanded, or any event shall occur or condition shall exist and shall
continue for more than the period of grace, if any, applicable thereto and shall
have the effect of causing, or permitting (any required notice having been given
and grace period having expired) the holder of any such Indebtedness or any
trustee or other Person acting on behalf of such holder to cause, such
Indebtedness to become due prior to its stated maturity or to realize upon any
collateral given as security therefor. For purposes of this Section,
Indebtedness of the Borrower or any Subsidiary shall be deemed 'material' if it
(i) is owed to any Bank or any Subsidiary or Affiliate of any Bank or (ii)
exceeds $250,000 as to any item of Indebtedness or in the aggregate for all
items of Indebtedness with respect to which any of the events described in this
Section has occurred.
(h) BENEFIT PLANS. The institution by the Borrower or any ERISA
Affiliate of steps to terminate any Plan if in order to effectuate such
termination, the Borrower or any ERISA Affiliate would be required to make a
contribution to such Plan, or would incur a liability or obligation to such
Plan, in excess of $250,000, or the institution by the PBGC of steps to
terminate any Plan.
(i) CHANGE OF CONTROL. Any Person, or group of Persons acting in
concert, that owned less than 5% of the shares of any voting class of stock of
the Borrower shall have acquired more than 20% of the shares of such voting
stock.
(j) SECURITY DOCUMENTS. Any Security Document shall, at any time,
cease to be in full force and effect or shall be judicially declared null and
void, or the validity or enforceability thereof shall be contested by the
Borrower, or the Agent or the Banks shall cease to have a valid and perfected
security interest having the priority contemplated thereunder in all of the
collateral described therein, other than by action or inaction of the Agent or
the Banks if (i) the aggregate value of the collateral affected by any of the
foregoing exceeds $250,000 and (ii) any of the foregoing shall remain unremedied
for ten days or more after receipt of notice thereof by the Borrower from the
Agent; or any execution or attachment shall be issued whereby any of the
property pledged to the Security Agreement or any substantial part of the
property of the Borrower or any Subsidiary shall be taken or attempted to be
taken and the same shall not have been vacated or stayed within 30 days after
the issuance thereof.
5.2 BANKS' RIGHTS ON DEFAULT. If any Event of Default described in
Sections 5.1(e) shall occur with respect to the Borrower , the Commitments shall
automatically terminate and the Notes and all other Obligations shall
automatically become immediately due and payable, and the Borrower shall without
demand pay into the Holding Account an amount equal to the aggregate face amount
of all outstanding Letters of Credit. If any other Event of Default shall occur
and be continuing, then, upon receipt by the Agent of a request in writing from
the Majority Banks, the Agent shall take any of the following actions so
requested: (i) declare the Commitments terminated, whereupon the Commitments
shall terminate, (ii) declare the outstanding unpaid principal balance of the
Notes, the accrued and unpaid interest thereon and all other Obligations to be
forthwith due and payable, whereupon the Notes, all accrued and unpaid interest
thereon and all such Obligations shall immediately become due and payable, in
each case without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived, anything in this Agreement or in the Notes
to the contrary notwithstanding; and (iii) demand that the Borrower pay into the
Holding Account an amount equal to the aggregate face amount of all outstanding
Letters of Credit. Upon the occurrence of any of the events described in clause
(a) of the preceding sentence, or upon the occurrence of any of the events
described in clause (b) of the preceding sentence when so requested by the
Majority Banks, the Agent may exercise all rights and remedies under any of the
Loan Documents, and enforce all rights and remedies under any applicable law.
5.3 OFFSET. Any Bank or any other holder of a Note shall have the right to
set off the indebtedness evidenced by such Note against any indebtedness of such
Bank or such holder or any deposit of the Borrower with such Bank or such
holder.
SECTION 6: THE AGENT
The following provisions shall govern the relationship of the Agent with
the Banks.
6.1 APPOINTMENT AND AUTHORIZATION. Each Bank appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise such respective
powers under the Loan Documents as are delegated to the Agent by the terms
thereof, together with such powers as are reasonably incidental thereto.
Neither the Agent nor any of its directors, officers or employees shall be
liable for any action taken or omitted to be taken by it under or in connection
with the Loan Documents, except for its own gross negligence or willful
misconduct. The Agent shall act as an independent contractor in performing its
obligations as Agent hereunder and nothing herein contained shall be deemed to
create any fiduciary relationship among or between the Agent, the Borrower or
the Banks.
6.2 CONSULTATION WITH COUNSEL. The Agent may consult with legal counsel
selected by it and shall not be liable for any action taken or suffered in good
faith by it in accordance with the advice of such counsel.
6.3 LOAN DOCUMENTS; CREDIT ANALYSIS. The Agent shall not be under a duty
to examine or pass upon the validity, effectiveness, genuineness or value of any
of the Loan Documents or any other instrument or document furnished pursuant
thereto, and the Agent shall be entitled to assume that the same are valid,
effective and genuine and what they purport to be. Each Bank has made, and
shall continue to make, its own independent investigation or evaluation of the
operations, business, property and condition, financial and otherwise, of the
Borrower in connection with entering into this Agreement and has made its own
appraisal of the creditworthiness of the Borrower. Except as explicitly
provided herein, the Agent has no duty or responsibility, either initially or on
a continuing basis, to provide any Bank with any credit or other information
with respect to such operations, business, property, condition or
creditworthiness, whether such information comes into its possession on or
before the first Event of Default or at any time thereafter.
6.4 FIRST BANK AND AFFILIATES. With respect to its Commitments and the
Loans made by it, First Bank shall have the same rights and powers under the
Loan Documents as any other Bank and may exercise the same as though it were not
the Agent consistent with the terms thereof, and First Bank and its Affiliates
may accept deposits from, lend money to and generally engage in any kind of
business with the Borrower as if it were not the Agent.
6.5 ACTION BY AGENT. Except as may otherwise be expressly stated in this
Agreement, the Agent shall be entitled to use its discretion with respect to
exercising or refraining from exercising any rights which may be vested in it
by, or with respect to taking or refraining from taking any action or actions
which it may be able to take under or in respect of, the Loan Documents. The
Agent shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Majority Banks, and such instructions shall be binding upon all holders of
Notes; provided, however, that the Agent shall not be required to take any
action which exposes the Agent to personal liability or which is contrary to the
Loan Documents or applicable law. The Agent shall incur no liability under or
in respect of any of the Loan Documents by acting upon any notice, consent,
certificate, warranty or other paper or instrument believed by it to be genuine
or authentic or to be signed by the proper party or parties and to be consistent
with the terms of this Agreement.
6.6 NOTICES. In the event that the Agent shall have acquired actual
knowledge of any Event of Default or Default, the Agent shall promptly give
notice thereof to the Banks. The Agent shall forward to the Banks copies of all
notices, financial reports and other communications received hereunder from the
Borrower by it as Agent, excluding, however, notices, reports and communications
which by the terms hereof are to be furnished by the Borrower directly to each
Bank.
6.7 INDEMNIFICATION. Each Bank agrees to indemnify the Agent, as Agent
(to the extent not reimbursed by the Borrower), ratably according to such Bank's
ratable share of the Loans from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on or incurred by the Agent in any way relating to or arising out of the Loan
Documents or any action taken or omitted by the Agent under the Loan Documents,
provided that no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or willful
misconduct. No payment by any Bank under this Section shall relieve the
Borrower of any of its obligations under this Agreement.
6.8 PAYMENTS AND COLLECTIONS. All funds received by the Agent in respect
of any payments made by the Borrower on the Notes shall be distributed forthwith
by the Agent among the Banks, in like currency and funds as received, ratably
according to each Bank's ratable share thereof. After any Event of Default has
occurred, all funds received by the Agent, whether as payments by the Borrower
or as realization on collateral, shall (except as may otherwise be required by
law) be distributed by the Agent in the following order: (a) first to the Agent
or any Bank who has incurred unreimbursed costs of collection with respect to
any Obligations hereunder, ratably to the Agent and each Bank in the proportion
that the costs incurred by the Agent or such Bank bear to the total of all such
costs incurred by the Agent and all Banks; (b) next to the Agent for the account
of the Banks (in accordance with their respective ratable shares of all Loans
outstanding) for application on the Notes and the unpaid drawings under Letters
of Credit; (c) next to the Agent for the account of the Banks (in accordance
with their respective ratable shares) for any unpaid Revolving Commitment Fees
or Letter of Credit Fees owing by the Borrower hereunder; and (d) last to the
Agent to be held in the Holding Account to cover the Borrower's reimbursement
and other obligations with respect to any outstanding Letters of Credit.
6.9 SHARING OF PAYMENTS. If any Bank shall receive and retain any
payment, voluntary or involuntary, whether by setoff, application of deposit
balance or security, or otherwise, in respect of Indebtedness under this
Agreement or the Notes in excess of such Bank's share thereof as determined
under this Agreement, then such Bank shall purchase from the other Banks for
cash and at face value and without recourse, such participation in the Notes
held by such other Banks as shall be necessary to cause such excess payment to
be shared ratably as aforesaid with such other Banks. If any such excess payment
or part thereof is thereafter recovered from such purchasing Bank, the related
purchases from the other Banks shall be rescinded ratably and the purchase price
restored as to the portion of such excess payment so recovered, but without
interest. Subject to the participation purchase obligation above, each Bank
agrees to exercise any and all rights of setoff, counterclaim or banker's lien
first fully against any Notes and participations therein held by such Bank, next
to any other Indebtedness of the Borrower to such Bank arising under or pursuant
to this Agreement and to any participations held by such Bank in Indebtedness of
the Borrower arising under or pursuant to this Agreement, and only then to any
other Indebtedness of the Borrower to such Bank.
6.10 RESIGNATION. If at any time First Bank shall deem it advisable, in
its sole discretion, it may submit to each of the Banks and the Borrower a
written notification of its resignation as Agent under this Agreement, such
resignation to be effective upon the appointment of a successor Agent, but in no
event later than 30 days from the date of such notice. Upon submission of such
notice, the Majority Banks may appoint a successor Agent.
SECTION 7: DEFINITIONS.
7.1 In addition to the terms defined elsewhere in this Agreement, the
following terms shall have the following respective meanings:
'ACQUISITION CLOSING DATE': With respect to either Acquisition, the date
of closing of the respective Acquisition.
'ACQUISITION DOCUMENTS': The Membrex Purchase Agreement, the Micron Plan
and all other agreements, instruments, certificates and other documents executed
and delivered pursuant to or in connection therewith, as the same may be
supplemented, amended or otherwise modified.
'ACQUISITIONS': The Membrex Acquisition and the Micron Acquisition.
'ADVANCE': Any portion of the outstanding Revolving Loans by a Bank as to
which the Borrower elected one of the available interest rate options and, if
applicable, an Interest Period. An Advance may be a Eurodollar Rate Advance or
a Reference Rate Advance.
'ADVERSE EVENT': The occurrence of any event that could have material
adverse effect on the business, operations, property, assets or condition
(financial or otherwise) of the Borrower or any Subsidiary as a consolidated
enterprise or on the ability of the Borrower to perform its obligations under
the Loan Documents.
'AGGREGATE REVOLVING COMMITMENT': As of any date, the sum of the Revolving
Commitment Amounts of all the Banks.
'APPLICABLE FEE RATE': Subject to the last two sentences of this
definition with respect to the period beginning on the first day of the third
month of each quarter and ending on the last day of the first month of the
following fiscal quarter, the percentage specified as the Applicable Fee Rate
based on the Leverage Ratio calculated as of the preceding fiscal quarter:
Leverage Ratio
(in each case, to 1.00) Applicable Fee Rate
----------------------- -------------------
Greater than 2.76 0.35
2.51 to 2.75 0.30
2.01 to 2.50 0.25
1.51 to 2.00 0.20
1.26 to 1.50 0.20
1.25 or less 0.20
During the period beginning on the Closing Date and ending on May 31, 1998, the
Applicable Fee Rate shall be 0.35%. Notwithstanding the foregoing, if the
Borrower has not furnished the quarterly financial statements and reports
required under Sections 4.3(a) and 4.3(c) for any fiscal quarter by the first
day of the record month of the such fiscal quarter, the Applicable Fee Rate
shall be 0.35% for the period from the first day of such second month until the
first day of the month following the month in which such financial statements
and reports are delivered.
'APPLICABLE MARGIN': Subject to the last two sentences of this definition,
with respect to the period beginning on the first day of the third month of each
quarter and ending on the last day of the first month of the following fiscal
quarter, the percentage specified as applicable to Reference Rate Advances or
Eurodollar Rate Advances, as appropriate, based on the Leverage Ratio calculated
as of the end of the preceding fiscal quarter:
Leverage Ratio Eurodollar Reference
(in each case to 1.00) Rate Advances Rate Advances
---------------------- ------------- -------------
Greater than 3.00 1.500% 0.00%
2.76 to 3.00 1.375 0.00
2.51 to 2.75 1.250 0.00
2.01 to 2.50 1.000 0.00
1.51 to 2.00 0.750 0.00
1.26 to 1.50 0.500 0.00
1.25 or less 0.300 0.00
During the period beginning on the Closing Date and ending on May 31, 1998, the
Applicable Margin for Eurodollar Rate Advances shall be 1.500%, and for
Reference Rate Advances shall be 0.00%. Notwithstanding the foregoing, if the
Borrower has not furnished the quarterly financial statements and reports
required under Section 4.3 (a) and 4.3(c) for any fiscal quarter by the first
day of the record month of such fiscal quarter, the Applicable Margin for
Eurodollar Rate Advances shall be 1.500%, and for Reference Rate Advances shall
be 0.00%, for the period from the first day of such record month until the first
day of the month following the month in which such financial statements are
delivered.
'BUSINESS DAY': Any day (other than a Saturday, Sunday or legal holiday in
the State of Minnesota) on which national banks are permitted to be open in
Minneapolis, Minnesota.
'CAPITALIZED LEASE': Any lease which is or should be capitalized on the
books of the lessee in accordance with GAAP.
'CLOSING DATE': Any Business Day between the date of this Agreement and
March 31, 1998 selected by the Borrower for the making of the initial Loans
hereunder.
'CODE': The Internal Revenue Code of 1986, as amended, or any successor
statute, together with regulations thereunder.
'COMMITMENTS': The Revolving Commitments.
'CONTROL AGREEMENT': An Agreement among the Borrower, the Agent and a
'securities intermediary' (as defined in Section 8-102 of the Uniform Commercial
Code), in form and substance satisfactory to the Agent, pursuant to which the
Agent officers 'control' (as defined in Section 8-106 of the Uniform Commercial
Code) over any portion of the property pledged to the Agent for the benefit of
the Banks, pursuant to the Security Agreement.
'DEFAULT': Any event which, with the giving of notice to the Borrower or
lapse of time, or both, would constitute an Event of Default.
'EBITDA': For any period of determination, the consolidated net income of
the Borrower before deductions for income taxes, Interest Expense, depreciation
and amortization, all as determined in accordance with GAAP; PROVIDED, HOWEVER
that with respect to a period of determination, any transactional fees and other
expenses incurred in connection with this Agreement which are deducted from the
Borrower's income for federal income tax purposes, and any non-cash, post-
closing adjustments or changes resulting from the write-up or write-down of
assets acquired in the Acquisitions incurred by the Borrower in connection with
the Acquisitions which are deducted from or included in the Borrower's income in
accordance with GAAP, shall be added back or subtracted, as appropriate, in
determining EBITDA for that period.
'ERISA': The Employee Retirement Income Security Act of 1974, as amended,
and any successor statute, together with regulations thereunder.<PAGE>
'ERISA AFFILIATE': Any trade or business (whether or not incorporated)
that is a member of a group of which the Borrower is a member and which is
treated as a single employer under Section 414 of the Code.
'EURODOLLAR BUSINESS DAY': A Business Day which is also a day for trading
by and between banks in United States dollar deposits in the interbank
Eurodollar market and a day on which banks are open for business in New York,
New York.
'EURODOLLAR RATE': means a rate per annum (rounded upward, if necessary,
to the nearest 1/16 of 1 %) determined pursuant to the following formula:
[ LIBO Rate ]
Eurodollar Rate = [---------------------------]
[1.00 - Eurocurrency Reserve]
Percentage
In such formula, (i) 'Eurocurrency Reserve Percentage' means the average daily
percentage (expressed as a decimal) during the applicable Interest Period
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining reserve requirements applicable to 'Eurocurrency
liabilities' pursuant to Regulation D or any other applicable regulation of the
Board of Governors which prescribes such reserve requirements, and any
Eurodollar Advance shall be deemed to be a 'Eurocurrency liability' as defined
in Regulation D, and (ii) 'LIBO Rate' means the offered rate for deposits in
United States Dollars (rounded upwards, if necessary, to the nearest 1/16 of
1%), for delivery of such deposits on the first day of such Interest Period, for
the number of days comprised therein, which appears on the Reuters Screen LIBO
Page as of 11:00 a.m., London time, on the day that is two Banking Days
preceding the date of such Eurodollar Advance or the rate determined by the
Agent at such time based on such other public service of general application as
shall be selected by the Agent for such purpose or, if the Reuters Screen LIBO
Page or such other service does not report such rates or such rates do not, in
the judgment of the Agent, accurately reflect the rates of interest applicable
to the Banks in the relevant markets, the rate for such Interest Period shall be
determined by the Agent based on rates offered to the Bank for United States
Dollar deposits in the interbank Eurodollar market. 'Reuters Screen LIBO Page'
means the display designated as page 'LIBO' on the Reuter Monitor Money Rates
Service (or such other page as may replace the LIBO Page on that service for the
purpose of displaying London interbank offered rates of major banks for United
States Dollar deposits).
'EURODOLLAR RATE ADVANCE': An Advance with respect to which the interest
rate is determined by reference to the Eurodollar Rate.
'FIXED CHARGE COVERAGE RATIO': for any period of determination, the ratio
of
(a) EBITDA minus the sum of (i) consolidated Capital Expenditures of
the Borrower and its Subsidiaries (other than borrowings under this
Agreement), and (ii) taxes paid in cash by the Borrower and its
Subsidiaries,
to
(b) the sum of Interest Expense all required principal payments with
respect to Total Liabilities (including but not limited to all payments
with respect to Capitalized Lease Obligations of the Borrower and the
Subsidiaries), plus any Restricted Payments.
in each case determined for said period on a consolidated basis in accordance
with GAAP.
'GAAP': Generally accepted accounting principles as applied in the
preparation of the audited financial statement of the Borrower referred to in
SECTION 3.5(c).
'HOLDING ACCOUNT': A deposit account belonging to the Agent for the
benefit of the Banks into which the Borrower may be required to make deposits
pursuant to the provisions of this Agreement, such account to be under the sole
dominion and control of the Agent and not subject to withdrawal by the Borrower,
with any amounts therein to be held for application toward payment of any
outstanding Letters of Credit when drawn upon.
'INDEBTEDNESS': Without duplication, all obligations, contingent or
otherwise, which in accordance with GAAP should be classified upon the obligor's
balance sheet as liabilities, but in any event including the following (whether
or not they should be classified as liabilities upon such balance sheet): (a)
obligations secured by any mortgage, pledge, security interest, lien, charge or
other encumbrance existing on property owned or acquired subject thereto,
whether or not the obligation secured thereby shall have been assumed and
whether or not the obligation secured is the obligation of the owner or another
party; (b) any obligation on account of deposits or advances; (c) any obligation
for the deferred purchase price of any property or services, except Trade
Accounts Payable, (d) any obligation as lessee under any Capitalized Lease; (e)
all guaranties, endorsements and other contingent obligations in respect to
Indebtedness of others; and (f) undertakings or agreements to reimburse or
indemnify issuers of letters of credit. For all purposes of this Agreement, the
Indebtedness of any Person shall include the Indebtedness of any partnership or
joint venture in which such Person is a general partner or a joint venturer.
'INTEREST PERIOD': means for any Eurodollar Advance, a one-month, two-month
or three-month period as agreed upon by the Borrower and the Bank at the time of
the making of the applicable Advance, commencing on the date of the Advance.
Each Interest Period that would otherwise end on a day which is not a Banking
Day shall end on the next following Banking Day (unless, in the case of a
Eurodollar Advance, such next following Banking Day is the first Banking Day of
a calendar month, in which case such Interest Period shall end on the next
preceding Banking Day). No Interest Period with respect to Eurodollar Advances
consisting of Revolving Loans shall be selected that may not be completed prior
to the Termination Date.
'INTEREST-BEARING INDEBTEDNESS': At the time of any determination, all
Indebtedness of the Borrower and its Subsidiaries other than liabilities
incurred in the ordinary course of business which are not indebtedness for
borrowed money.
'INTERCREDITOR AGREEMENT': The Intercreditor Agreement dated as of March
18, 1998, among the Banks, the Borrower and the 'Purchasers'( as defined
therein).
'INVESTMENT': The acquisition, purchase, making or holding of any stock or
other security, any loan, advance, contribution to capital, extension of credit
(except for trade and customer accounts receivable for inventory sold or
services rendered in the ordinary course of business and payable in accordance
with customary trade terms), any acquisitions of real or personal property
(other than real and personal property acquired in the ordinary course of
business) and any purchase or commitment or option to purchase stock or other
debt or equity securities of or any interest in another Person or any integral
part of any business or the assets comprising such business or part thereof.
'LETTER OF CREDIT': An irrevocable letter of credit issued by the Agent
pursuant to this Agreement for the account of the Borrower.
'LETTER OF CREDIT OBLIGATIONS': Shall mean the aggregate amount of all
possible drawings under all Letters of Credit plus all amounts drawn under any
Letter of Credit and not reimbursed by the Borrower under this Agreement.
'LEVERAGE RATIO': As of any date of determination, the ratio of
(a) the sum (without duplication) of the aggregate principal amount of
all outstanding Indebtedness of the Borrower and its Subsidiaries as of
such date,
to
(b) EBITDA for the four fiscal quarters ending on such date
determined on a consolidated basis in accordance with GAAP and including
the results for Membrex and Micron for the relevant periods prior to their
respective Acquisition Closing Date.
'LIEN': Any security interest, mortgage, pledge, lien, hypothecation,
judgment lien or similar legal process, charge, encumbrance, title retention
agreement or analogous instrument or device (including, without limitation, the
interest of the lessors under Capitalized Leases and the interest of a vendor
under any conditional sale or other title retention agreement).
'LOAN': A Revolving Loan.
'LOAN DOCUMENTS': This Agreement, the Notes and the Security Documents.
'MAJORITY BANKS': At any time, Banks holding at least 66 2/3% of the
aggregate unpaid principal amount of the Notes or, if no Loans are at the time
outstanding hereunder, Banks whose Total Percentages aggregate at least 66 2/3%.
'MEMBREX': Membrex, a Delaware corporation.
'MEMBREX ACQUISITION': The purchase by the Borrower of all or
substantially all of the assets of Membrex pursuant to the Membrex Purchase
Agreement.
'MEMBREX PURCHASE AGREEMENT': An Asset Purchase Agreement or similar
agreement between the Borrower, as purchaser, and Membrex, as seller, in form
and substance reasonably satisfactory to the Majority Banks.
'MICRON': Micron Separations, Inc., a New York corporation.
'MICRON ACQUISITION': The acquisition by the Borrower of all of the
capital assets of Micron pursuant to the Micron Plan.
'MICRON PLAN': The Joint Plan of Reorganization dated as of December 15,
1997 submitted by Micron and the Borrower in Micron's bankruptcy process, and
confirmed by the United States Bankruptcy Court for the District of
Massachusetts on January 28, 1998, and as the same may be supplemented, amended
or otherwise modified after the date hereof with the prior written consent of
the Majority Banks.
'OBLIGATIONS': The Borrower's obligations in respect of the due and
punctual payment of principal and interest on the Notes when and as due, whether
by acceleration or otherwise and all fees, expenses, indemnities, reimbursements
and other obligations of the Borrower under this Agreement or any other Loan
Document, in all cases whether now existing or hereafter arising or incurred.
'PBGC': The Pension Benefit Guaranty Corporation, established pursuant to
Subtitle A of Title IV of ERISA, and any successor thereto or to the functions
thereof.
'PERFORMANCE LETTER OF CREDIT': A 'performance-based standby letter of
credit' as such term is defined and used in Appendix A to Part 3 of Chapter 1 of
Title 12 of the Code of Federal Regulations, 12 C.F.R, SS 3.1 ET SEQ.
'PERMITTED ADDITIONAL INDEBTEDNESS': Indebtedness incurred at a time that
no Default or Event of Default shall have occurred and continued, and the
incurrence of which shall not result in a Default or Event of Default, the
aggregate amount of which incurred after the Closing Date shall not exceed 10%
of consolidated tangible net worth as of the end of the most recently-ended
fiscal quarter, PROVIDED that (a) if incurred by either the Borrower or any
Subsidiary, the projected payments of principal and interest on such
Indebtedness, when added to principal and interest payments on all other
Indebtedness then outstanding and all Restricted Payments declared, shall not
cause the Fixed Charge Coverage Ratio (calculated on a pro-forma basis for the
succeeding 12 month period) to exceed the minimum ratio applicable for such
period, and the chief financial officer shall have submitted to the Bank a
calculation of the Fixed Charge Coverage Ratio on such a pro-forma basis, which
shall show compliance with this requirement; and (b) if incurred by any
Subsidiary the aggregate amount of such Indebtedness of Subsidiaries incurred
after the Closing Date ( giving effect to such new Indebtedness) shall not
exceed 5% of consolidated tangible net worth of the Borrower as of the end of
the most recently-ended fiscal quarter.
'PERSON': Any natural person, corporation, partnership, joint venture,
firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether acting
in an individual, fiduciary or other capacity.
'PLAN': An employee benefit plan or other plan, maintained for employees
of the Borrower or of any ERISA Affiliate, and subject to Title IV of ERISA or
Section 412 of the Code.
'POST-ACQUISITION BALANCE SHEET': The consolidated pro forma balance sheet
of the Borrower as of the Acquisition Closing Date for the Membrex Acquisition,
reflecting the assets, liabilities and stockholders' equity of the Borrower as
of such date, adjusted to reflect the effect of the Loans contemplated to be
made on or prior to such date, the Acquisitions and any other financing
anticipated in connection with the Acquisitions.
'REFERENCE RATE': The rate of interest from time to time publicly
announced by the Agent as its 'reference rate.' The Agent may lend to its
customers at rates that are at, above or below the Reference Rate. For purposes
of determining any interest rate hereunder or under any other Loan Document
which is based on the Reference Rate, such interest rate shall change as and
when the Reference Rate shall change.
'REGULATORY CHANGE': Any change after the Closing Date in federal, state
or foreign laws or regulations or the adoption or making after such date of any
interpretations, directives or requests applying to a class of banks including
any Bank under any federal, state or foreign laws or regulations (whether or not
having the force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
'RELIASTAR INDEBTEDNESS': The $15,000,000 Floating Rate Notes of the
Borrower and the $5,000,000 Fixed Rate Notes of the Borrower, all due in 2008,
issued pursuant to the Note Purchase Agreement dated as of March 18, 1998 among
the Borrower, ReliaStar Life Insurance Company and the other purchasers party
thereto.
'REVOLVING COMMITMENT': With respect to a Bank, the agreement of such Bank
to make Revolving Loans, and purchase risk participations in Letters of Credit
issued by the Agent for the account of the Borrower, upon the terms and subject
to the conditions and limitations of this Agreement.
'REVOLVING COMMITMENT AMOUNT': The Bank's 'Revolving Commitment Amount'.
'REVOLVING COMMITMENT ENDING DATE': March 31, 2003.
'SECURITY AGREEMENT': The Amended and Restated Security Agreement in the
form attached hereto as EXHIBIT J as the same may be amended, supplemented,
restated or otherwise modified from time to time.
'SECURITY DOCUMENTS': The Security Agreement, the Control Agreements, the
Intercreditor Agreement and any financing statements filed or required by the
Agent in connection therewith.
'SUBSIDIARY': Any Person of which or in which the Borrower and its other
Subsidiaries own directly or indirectly 50% or more of: (a) the combined voting
power of all classes of stock having general voting power under ordinary
circumstances to elect a majority of the board of directors of such Person, if
it is a corporation, (b) the capital interest or profit interest of such Person,
if it is a partnership, joint venture or similar entity, or (c) the beneficial
interest of such Person, if it is a trust, association or other unincorporated
organization.
'TOTAL REVOLVING OUTSTANDINGS': As of any date of determination, the sum
of (a) the aggregate unpaid principal balance of Revolving Loans, (b) the
aggregate maximum amount available to be drawn under Letters of Credit, and (c)
the aggregate amount of unpaid drawings under Letters of Credit.
'UNUSED REVOLVING COMMITMENT': With respect to any Bank, as of any date of
determination, the amount by which such Bank's Revolving Commitment Amount
exceeds such Bank's ratable share of Total Revolving Outstandings.
'YEAR 2000 PROBLEM': The risk that computer applications used by any person
may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999.
7.2 ACCOUNTING TERMS AND CALCULATIONS. Except as may be expressly
provided to the contrary herein, all accounting terms used herein shall be
interpreted and all accounting determinations hereunder shall be made in
accordance with GAAP consistently applied. Any reference to 'consolidated'
financial terms shall be deemed to refer to those financial terms as applied to
the Borrower and its Subsidiaries in accordance with GAAP.
SECTION 8: MISCELLANEOUS.
8.1 MODIFICATIONS. Except as otherwise provided in this Section 8.1, any
provision of this Agreement or any other Loan Document may be amended or
modified only by an instrument or instruments in writing signed by the Majority
Banks and the Borrower. Any amendment, waiver or consent reducing any principal
of, or the amount of or rate of interest on or fees with respect to the Loans or
the Commitments, postponing any date fixed for the payment of any principal of
interest on or fees with respect to the Loans or Commitments, amending the
Security Agreement or releasing or subordinating any of the 'Collateral' (as
defined therein, except as provided therein), or amending Section 1.1, Section
1.2 or this Section 8.1 may only be made by an instrument or instruments in
writing signed by all of the Banks and the Borrower. In addition to the
foregoing requirements, (A) no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the requisite Banks indicated
above to take such action, affect the rights or duties of the Agent under this
Agreement or any Loan Document, and (B) no amendment may increase any Bank's
Commitment or Commitments unless it is in writing and signed by such Bank. No
waiver of any provision of this Agreement or any other Loan Document or consent
to any departure by the Borrower therefrom shall in any event be effective
unless the same shall be in writing and signed or consented to in writing by the
requisite Banks indicated above and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
8.2 EXPENSES. The Borrower agrees to reimburse the Agent upon demand for
all reasonable out-of-pocket expenses paid or incurred by the Agent (including
filing and recording costs and fees and expenses of Dorsey & Whitney LLP,
counsel to the Agent) in connection with the negotiation, preparation, approval,
review, execution, delivery, administration, amendment, modification and
interpretation of this Agreement and the other Loan Documents. The Borrower
shall also reimburse the Agent and each Bank upon demand for all reasonable
out-of-pocket expenses (including expenses of legal counsel) paid or incurred by
the Agent or any Bank in connection with the collection and enforcement of this
Agreement and any other Loan Document. The obligations of the Borrower under
this Section shall survive any termination of this Agreement.
8.3 SUCCESSORS AND ASSIGNS; DISPOSITION OF LOANS; TRANSFEREES. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign its rights or delegate its obligations hereunder or under any other Loan
Document without the prior written consent of all the Banks. Each Bank may at
any time sell, assign, transfer, grant participations in, or otherwise dispose
of any portion of its Commitments, and/or its Loans (each such interest so
disposed of being herein called a 'Transferred Interest') to banks or other
financial institutions ('Transferees'); PROVIDED, HOWEVER, that a Bank may
dispose of a Transferred Interest only with the consent of the Agent and, except
after the occurrence and during the continuance of an Event of Default, the
Borrower (which consent shall not be unreasonably withheld) and only upon
payment to the Agent by the parties to such disposition of a processing and
recording fee in the amount of $2,500 for each party and PROVIDED further, that
except after the occurrence and during the continuance of an Event of Default,
First Bank shall not dispose of a Transferred Interest if, after giving effect
thereto, First Bank's share of the outstanding Commitments and Loans would be
less than 51%. The Borrower agrees that each Transferee shall be entitled to
the benefits of Section 8.2 with respect to its Transferred Interest and that
each Transferee may exercise any and all rights of banker's Lien, setoff and
counterclaim as if such Transferee were a direct lender to the Borrower. If any
Bank makes any assignment to a Transferee, then upon notice to the Borrower such
Transferee, to the extent of such assignment (unless otherwise provided
therein), shall become a 'Bank' hereunder and shall have all the rights and
obligations of such Bank hereunder and such Bank shall be released from its
duties and obligations under this Agreement to the extent of such assignment.
Notwithstanding the sale by any Bank of any participation hereunder, (a) no
participant shall be deemed to be or have the rights and obligations of a Bank
hereunder except that any participant shall have a right of setoff under this
Agreement as if it were such Bank and the amount of its participation were owing
directly to such participant by the Borrower and (b) such Bank shall not in
connection with selling any such participation condition such Bank's rights in
connection with consenting to amendments or granting waivers concerning any
matter under any Loan Document upon obtaining the consent of such participant
other than on matters relating to (i) any reduction in the amount of any
principal of, or the amount of or rate of interest on, any Note or Advance in
which such participation is sold, (ii) any postponement of the date fixed for
any payment of principal of or interest on any Note or Advance in which such
participation is sold, (iii) the release or subordination of any material
portion of any collateral other than pursuant to the terms of any Security
Document or (iv) the release of any Guaranty.
8.4 GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereunder and under the Note and any other documents delivered herewith
shall be construed in accordance with and governed by the substantive laws (but
not the laws of conflict) of the State of Minnesota but giving effect to all
federal laws applicable to national banking associations. The Borrower hereby
consents to the jurisdiction of the courts of the State of Minnesota and federal
courts located in the State of Minnesota for any actions brought hereon or on
the Notes.
8.5 SEVERABILITY. Whenever possible, each provision of this Agreement and
the other Loan Documents and any other statement, instrument or transaction
contemplated hereby or thereby or relating hereto or thereto shall be
interpreted in such manner as to be effective and valid under such applicable
law, but, if any provision of this Agreement, the other Loan Documents or any
other statement, instrument or transaction contemplated hereby or thereby or
relating hereto or thereto shall be held to be prohibited or invalid under such
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement, the other Loan Documents or any
other statement, instrument or transaction contemplated hereby or thereby or
relating hereto or thereto.
8.6 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT AND THE BANKS
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
8.7 INDEMNIFICATION. The Borrower hereby agrees to defend, protect,
indemnify and hold harmless the Agent and the Banks and their respective
Affiliates and the directors, officers, employees, attorneys and agents of the
Agent and the Banks and their respective Affiliates (each of the foregoing being
an 'Indemnitee' and all of the foregoing being collectively the 'Indemnitees')
from and against any and all claims, actions, damages, liabilities, judgments,
costs and expenses (including all reasonable fees and disbursements of counsel
which may be incurred in the investigation or defense of any matter) imposed
upon, incurred by or asserted against any Indemnitee, whether direct, indirect
or consequential and whether based on any federal, state, local or foreign laws
or regulations (including securities laws, environmental laws, commercial laws
and regulations), under common law or on equitable cause, or on contract or
otherwise:
(a) by reason of the Membrex Acquisition or the Micron Acquisition;
or
(b) by reason of, relating to or in connection with any act done or
omitted by any Person in connection with, or in the exercise of any rights or
remedies under, the Acquisition Documents; provided, however, that the Borrower
shall not be liable to any Indemnitee for any portion of such claims, damages,
liabilities and expenses resulting from such Indemnitee's gross negligence or
willful misconduct. In the event this indemnity is unenforceable as a matter of
law as to a particular matter or consequence referred to herein, it shall be
enforceable to the full extent permitted by law.
This indemnification applies, without limitation, to any act, omission,
event or circumstance existing or occurring on or prior to the later of the
Termination Date or the date of payment in full of the Obligations, including
specifically Obligations arising under clause (b) of this Section. The
indemnification provisions set forth above shall be in addition to any liability
the Borrower may otherwise have. Without prejudice to the survival of any other
obligation of the Borrower hereunder the indemnities and obligations of the
Borrower contained in this Section shall survive the payment in full of the
other Obligations.
8.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
8.9 NOTICES. Any notices required or contemplated hereunder shall be
effective upon the placing thereof in the United States mails, certified mail
and with return receipt requested, postage prepaid, and addressed as follows:
If to Borrower: Osmonics, Inc.
5951 Clearwater Drive
Minnetonka, Minnesota 55343
Attention: Howard Dicke
If to Bank: U.S. Bank National Association
(d/b/a First Bank National Association)
610 Second Ave. S.
Minneapolis, Minnesota 55402
Attention: Matthew Ross
8.10 NO WAIVERS. No failure or delay on the part of any Bank or the Agent
in exercising any right, power or privilege hereunder and no course of dealing
between the Borrower and any Bank or the Agent shall operate as a waiver
thereof; nor shall any single or partial exercise or any right, power, or
privilege hereunder preclude any other or further exercise thereof of the
exercise of any other right, power or privilege.
8.11 CAPITAL ADEQUACY. In the event that the Agent or a Bank shall have
determined that the adoption of any law, treaty, rule, regulation, guideline or
order regarding capital adequacy, or any change therein or in the interpretation
or application thereof, or compliance by any Bank with any request or directive
regarding capital adequacy (whether or not having the force of law) from any
central bank, governmental agency or body having jurisdiction, does or shall
have the effect of reducing the rate of return on such Bank's or its parent's
capital as a consequence of its obligations hereunder to a level below that
which the Bank or its parent could have achieved but for such adoption, change
or compliance (taking into consideration the Bank's and its parent's policies
with respect to capital adequacy), then the Borrower shall from time to time,
within 10 days after written notice from and demand from such Bank, pay to such
Bank additional amounts sufficient to compensate such Bank for such reduction.
A certificate as to the amount of such reduction, submitted to the Borrower by
the Bank, shall, absent manifest error, be final, conclusive and binding for all
purposes.
U.S. BANK NATIONAL ASSOCIATION
(d/b/a FIRST BANK NATIONAL ASSOCIATION) in
its individual capacity and as Agent
By: ________________________________
Title: _____________________________
STATE OF MINNESOTA )
) SS.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ____ day of
March, 1998, by _________________________, the _________________________, of
U.S. Bank National Association (d/b/a First Bank National Association), a
national banking association, on behalf of said association.
________________________________
Notary Public
(NOTARIAL SEAL)
Accepted and agreed to as of March __, 1998.
OSMONICS, INC.
By: ________________________________
Title: _____________________________
STATE OF MINNESOTA )
) SS.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this ___ day of
March, 1998, by _________________________, the _________________________, of
Osmonics, Inc., a Minnesota corporation, on behalf of said corporation.
_______________________________
Notary Public
(NOTARIAL SEAL)
[signature page to letter agreement dated March 18, 1998]
SCHEDULE 1.1
REVOLVING COMMITMENT AMOUNT
Bank Amount
---- ------
U.S. Bank National Association $30,000,000
EXHIBIT A
REVOLVING NOTE
March 18, 1998
$30,000,000.00 Minneapolis, Minnesota
FOR VALUE RECEIVED, OSMONICS, INC., a Minnesota corporation, hereby
promises to pay to the order of U.S. Bank National Association (d/b/a First Bank
National Association) (the 'Bank') at the main office of U.S. Bank National
Association (d/b/a First Bank National Association) in Minneapolis, Minnesota,
in lawful money of the United States of America in Immediately Available Funds
(as such term and each other capitalized term used herein are defined in the
Credit Agreement hereinafter referred to) on the Revolving Commitment Ending
Date, the principal amount of THIRTY MILLION AND NO/100 DOLLARS ($30,000,000.00)
or, if less, the aggregate unpaid principal amount of the Revolving Loans made
by the Bank under the Credit Agreement, and to pay interest (computed on the
basis of actual days elapsed and a year of 360 days) in like funds on the unpaid
principal amount hereof from time to time outstanding at the rates and times set
forth in the Credit Agreement.
This note is one of the Revolving Notes referred to in the Credit Agreement
dated as of March 18, 1998 (as the same may hereafter be from time to time
amended, restated or otherwise modified, the 'Credit Agreement') among the
undersigned, the Bank and the other banks named therein. This note is secured,
it is subject to certain permissive prepayments and its maturity is subject to
acceleration, in each case upon the terms provided in said Credit Agreement.
This note replaces in its entirety an existing promissory note dated
February 13, 1998 issued by Osmonics, Inc. to the order of the Bank in the
original principal amount of $20,000,000.00 (the 'Prior Note'). It is expressly
intended, understood and agreed that this note shall replace the Prior Note as
evidence of indebtedness of Osmonics, Inc. to the Bank heretofore represented by
the Prior Note and the Prior Note shall be of no further force and effect; it
being further understood that all amounts outstanding under said Prior Note as
of the date hereof shall be considered outstanding hereunder from and after the
date hereof.
In the event of default hereunder, the undersigned agrees to pay all costs
and expenses of collection, including reasonable attorneys' fees. The
undersigned waives demand, presentment, notice of nonpayment, protest, notice of
protest and notice of dishonor.
THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF
THE UNITED STATES APPLICABLE TO NATIONAL BANKS.
OSMONICS, INC.
By ____________________________
Title ______________________
STATE OF MINNESOTA )
) SS.
COUNTY OF HENNEPIN )
The foregoing instrument was acknowledged before me this____ day of
_____________, 1998, by _______________________, the ____________________, of
Osmonics, Inc., a Minnesota corporation, on behalf of said corporation.
______________________________
Notary Public
(NOTARIAL SEAL)
Address:
5951 Clearwater Drive
Minnetonka, Minnesota 55343
Attention: Mr. Howard Dicke
[page 2 of Revolving Note dated March 18, 1998]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 4,458
<SECURITIES> 16,411
<RECEIVABLES> 31,805
<ALLOWANCES> 980
<INVENTORY> 38,458
<CURRENT-ASSETS> 99,345
<PP&E> 101,004
<DEPRECIATION> 44,930
<TOTAL-ASSETS> 191,263
<CURRENT-LIABILITIES> 48,394
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0
0
<COMMON> 140
<OTHER-SE> 104,541
<TOTAL-LIABILITY-AND-EQUITY> 191,263
<SALES> 42,150
<TOTAL-REVENUES> 42,150
<CGS> 26,043
<TOTAL-COSTS> 26,043
<OTHER-EXPENSES> 12,202
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<INTEREST-EXPENSE> 730
<INCOME-PRETAX> 3,329
<INCOME-TAX> 1,165
<INCOME-CONTINUING> 2,164
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<NET-INCOME> 2,164
<EPS-PRIMARY> .15
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