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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): December 15, 1997
MATERIAL SCIENCES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-8803 95-2673173
- ----------------------------- ------------------------ ---------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2200 East Pratt Boulevard 60007
Elk Grove Village, Illinois ---------------------
- ------------------------------- (Zip Code)
(Address of principal executive
offices)
Registrant's telephone number, including area code: (847) 439-8270
---------------------
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Item 2. Acquisition or Disposition of Assets.
On December 19, 1997, the Registrant issued the press releases
attached hereto as Exhibit 99.1, the text of which is incorporated by reference
under this Item 2.
Item 5. Other Events.
On December 19, 1997, the Registrant issued the press releases
attached hereto as Exhibit 99.1, the text of which is incorporated by reference
under this Item 5.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
To be filed by amendment to this initial report on Form 8-K not later
than 60 days after the date that this initial report on Form 8-K is required to
be filed.
(b) Pro Forma Financial Information.
To be filed by amendment to this initial report on Form 8-K not later
than 60 days after the date that this initial report on Form 8-K is required to
be filed.
(c) Exhibits.
See the exhibits listed in the Index to Exhibits.
2
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SIGNATURE
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 hereunto duly authorized.
MATERIAL SCIENCES CORPORATION
/s/ James J. Waclawik, Sr.
Dated: December 29, 1997 By: ____________________________________
Vice President and Chief
Financial Officer
Title: _____________________________
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Index to Exhibits
-----------------
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<CAPTION>
Exhibit No. Description of Document
<C> <S>
2.1 Asset Purchase Agreement by and among Colorstrip, Inc., the
Registrant and MSC Pinole Point Steel Inc. dated as of November 14,
1997 (without schedules and exhibits which will be supplementally
furnished to the Securities and Exchange Commission upon request).
10.1 Credit Agreement, dated as of December 12, 1997, among the
Registrant, Bank of America National Trust and Savings Association,
as Agent and Letter of Credit Issuing Bank, and the other financial
institutions party thereto (without schedules and exhibits which
will be supplementally furnished to the Securities and Exchange
Commission upon request).
99.1 Press releases of the Registrant issued on December 19, 1997.
</TABLE>
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- --------------------------------------------------------------------------------
Asset Purchase Agreement
By And Among
Colorstrip, Inc.,
Material Sciences Corporation
And
MSC Pinole Point Steel Inc.
Dated as of November 14, 1997
- --------------------------------------------------------------------------------
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Table of Contents
<TABLE>
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Page
<C> <S> <C>
Article I Purchase And Sale Of Assets.................................. 1
1.1 Basic Transaction............................................ 1
1.2 Purchase Price for Purchased Assets.......................... 6
1.3 Closing...................................................... 8
1.4 Nonassignable Contracts...................................... 8
Article II Conditions To Closing........................................ 9
2.1 Conditions to Designated Buyer's Obligations................. 9
2.2 Conditions to the Seller's Obligations....................... 11
Article III Representations And Warranties Concerning Seller............. 12
3.1 Organization and Corporate Power............................. 13
3.2 Subsidiaries; Investments.................................... 13
3.3 Authorization of Transactions................................ 13
3.4 Absence of Conflicts......................................... 13
3.5 Financial Statements......................................... 13
3.6 Absence of Certain Developments.............................. 14
3.7 Personal Property............................................ 15
3.8 Real Property................................................ 15
3.9 Contracts and Commitments.................................... 17
3.10 Proprietary Rights........................................... 18
3.11 Litigation; Proceedings...................................... 19
3.12 Brokerage.................................................... 19
3.13 Governmental Licenses and Permits............................ 19
3.14 Employees.................................................... 19
3.15 Employee Benefit Plans....................................... 20
3.16 Insurance.................................................... 20
3.17 Compliance with Laws......................................... 21
3.18 Environmental Matters........................................ 21
3.19 Product Warranties........................................... 22
3.20 Product Liability; Recalls................................... 23
3.21 Absence of Undisclosed Liabilities........................... 23
3.22 Disclosure................................................... 23
3.23 Knowledge.................................................... 23
Article IV Representations And Warranties Of
MSC And Designated Buyer..................................... 23
4.1 Organization and Corporate Power............................. 23
4.2 Authorization of Transaction................................. 24
4.3 Absence of Conflicts......................................... 24
4.4 Litigation................................................... 24
4.5 Brokerage.................................................... 24
4.6 Availability of Financing.................................... 24
4.7 Liability Categories......................................... 24
4.8 Inventory.................................................... 25
</TABLE>
ASSET PURCHASE AGREEMENT Page ii
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Article V Termination.................................................. 25
5.1 Termination.................................................. 25
5.2 Effect of Termination........................................ 26
Article VI Indemnification And Related Matters.......................... 26
6.1 Survival..................................................... 26
6.2 Indemnification.............................................. 26
Article VII Pre-Closing Covenants........................................ 30
7.1 General...................................................... 30
7.2 Notices and Consents......................................... 30
7.3 Operation of Business........................................ 30
7.4 Preservation of Business..................................... 31
7.5 Full Access.................................................. 31
7.6 Notice of Developments....................................... 31
7.7 Title Insurance.............................................. 31
7.8 Surveys...................................................... 32
7.9 Customer, Supplier and Employee Contact...................... 32
7.10 Expenses..................................................... 32
Article VIII Certain Environmental Matters................................ 32
8.1 Definitions.................................................. 32
8.2 Phase II Audits.............................................. 33
8.3 Seller's Responsibility for On-Site Environmental Matters.... 34
8.4 Buyer's Responsibility for On-Site Environmental Matters..... 34
8.5 Shared Responsibility for On-Site Environmental Matters...... 34
8.6 Reimbursement................................................ 35
8.7 Remedial Action.............................................. 35
Article IX Other Agreements............................................. 35
9.1 Continuing Assistance........................................ 35
9.2 Tax Matters.................................................. 36
9.3 Press Releases and Announcements............................. 37
9.4 Further Assurances........................................... 37
9.5 Confidentiality.............................................. 37
9.6 Change of Corporate Name and Trade Name...................... 38
9.7 Real Property Adjustments.................................... 38
9.8 Agreements Regarding Certain Labor Matters................... 38
9.9 MSC Obligation............................................... 39
9.10 Certain Uses of Proceeds..................................... 40
9.11 Maintenance of Net Worth; Stockholder Guaranties............. 40
Article X Certain Payments And Fees.................................... 41
10.1 Initial Payment into Escrow.................................. 41
10.2 Delay Fees................................................... 42
10.3 Break-up Fees................................................ 43
10.4 Topping Fee.................................................. 44
</TABLE>
ASSET PURCHASE AGREEMENT Page iii
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Article XI Miscellaneous................................................ 44
11.1 Amendment and Waiver......................................... 44
11.2 Notices...................................................... 44
11.3 Binding Agreement; Assignment................................ 45
11.4 Severability................................................. 46
11.5 No Strict Construction....................................... 46
11.6 Captions..................................................... 46
11.7 Entire Agreement............................................. 46
11.8 No Third-Party Beneficiaries................................. 46
11.9 Counterparts................................................. 46
11.10 Governing Law................................................ 47
11.11 Waiver Of Jury Trial......................................... 47
11.12 Consent To Jurisdiction...................................... 47
11.13 Attorneys' Fees.............................................. 47
11.14 Aid to Interpretation........................................ 48
</TABLE>
ASSET PURCHASE AGREEMENT Page iv
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Index of Exhibits
Exhibit A Form of Promissory Note
Exhibit B Form of Shareholder Guaranty
Exhibit C Capital Expenditures Schedule
Exhibit D Intentionally Omitted
Exhibit E Purchase Price Allocation Schedule
Exhibit F Consulting Agreement
Exhibit G Seller's Certificate
Exhibit H Buyer's Certificate
Exhibit I Opinion of Seller's Counsel
Exhibit J Opinion of Buyer's Counsel
Exhibit K Intentionally Omitted
Exhibit L Real Property Adjustments
Exhibit M Audited Financial Statements
Exhibit N Unaudited Financial Statements
Exhibit O Escrow Agreement
Exhibit P [Intentionally Omitted]
Exhibit Q Shareholder Guaranties
Exhibit R Designated Buyer's Reports
Index of Schedules
Schedule 1.1(a)(i) Purchased Assets - List of Categories
Schedule 1.1(b)(xii) Certain Excluded Assets
Schedule 1.1(c)(i) Assumed Liabilities - List of Categories
Schedule 1.1(d)(xviii) Excluded Liabilities
Schedule 1.2(c) Working Capital Accounts
Schedule 2.1 Required Consents
Schedule 3.4 Absence of Conflicts
Schedule 3.6 Absence of Certain Developments
Schedule 3.7 Personal Property
Schedule 3.8(a) Owned Real Property
Schedule 3.8(b) Leased Real Property
Schedule 3.9 Contracts and Commitments
Schedule 3.10 Proprietary Rights
Schedule 3.11 Litigation; Proceedings
Schedule 3.12 Brokerage
Schedule 3.13 Governmental Licenses and Permits
Schedule 3.14 Employees
Schedule 3.15 Employee Benefit Plans
Schedule 3.16 Insurance
Schedule 3.18 Environmental Matters
Schedule 3.19 Product Warranties
Schedule 3.20 Product Liability; Recalls
Schedule 3.23 Due Diligence "Knowledge" Individuals
Schedule 4.7 MSC Liability Categories
Schedule 7.3 Extraordinary Actions
Schedule 8.2(a) Scope of Environmental Work
Schedule 8.2(b) Listing of Environmental Consultants Approved by B of A
Schedule 9.8 Arbitration Procedures
ASSET PURCHASE AGREEMENT Page v
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Index of Defined Terms
Adjustments................................................................. 38
Affiliated Group............................................................ 4
Agreement................................................................... 1
Alleged Harassment Action................................................... 38
Apportioned Obligations..................................................... 36
Apportionment Claims........................................................ 39
Approved Capital Expenditures............................................... 7
Assumed Contracts........................................................... 2
Assumed Liabilities......................................................... 3
Benefit Plans............................................................... 20
Business.................................................................... 1
Buyer Break-up Fee.......................................................... 43
Buyer Delay Fee............................................................. 42
Buyer Indemnified Parties................................................... 26
Buyer Indemnifying Parties.................................................. 28
Buyer Starting Date......................................................... 42
Cap......................................................................... 27
CERCLA...................................................................... 5
Closing..................................................................... 8
Closing Approved Capital Expenditures....................................... 7
Closing Capital Expenditure Statement....................................... 7
Closing Date................................................................ 8
Closing Working Capital Balance............................................. 7
Closing Working Capital Statement........................................... 7
COBRA....................................................................... 20
Code........................................................................ 37
Confidential Information.................................................... 37
Consent Decree.............................................................. 4
Consulting Agreement........................................................ 10
Controlled Group............................................................ 20
Deductible.................................................................. 28
Designated Buyer............................................................ 1
Designated Buyer Parcel..................................................... 11
Designated Buyer's Phase II Audit Report.................................... 34
Designated Buyer's Phase II Audit........................................... 34
Environmental and Safety Requirements....................................... 22
Environmental Lien.......................................................... 22
Environmental Losses........................................................ 32
Environmental Matters....................................................... 33
ERISA....................................................................... 20
Escrow Account.............................................................. 41
Escrow Agent................................................................ 41
Escrow Amount............................................................... 41
Excluded Assets............................................................. 2
Excluded Employees.......................................................... 2
Excluded Liabilities........................................................ 4
Final Purchase Price........................................................ 6
GE.......................................................................... 40
Government Consents......................................................... 9
Governmental Entity......................................................... 2
HSR Act..................................................................... 10
Improvements................................................................ 16
Indemnified Party........................................................... 29
Indemnifying Party.......................................................... 29
Independent Accountants..................................................... 8
Intangible Property......................................................... 2
Knowledge................................................................... 23
Known On-Site Environmental Matters......................................... 33
Latest Balance Sheet........................................................ 13
Leased Properties........................................................... 16
Lender...................................................................... 40
Letter of Credit............................................................ 6
Lien........................................................................ 15
Loss(es).................................................................... 26
Mark........................................................................ 2
Material Adverse Effect..................................................... 9
Matters..................................................................... 33
MSC......................................................................... 1
Offsite Environmental Liabilities........................................... 5
On-Site Environmental Matters............................................... 33
Owned Real Property......................................................... 15
Party(ies).................................................................. 1
Permit...................................................................... 2
Phase II Audit.............................................................. 33
Post-Closing On-Site Environmental
Preliminary Determination Notice............................................ 34
Preliminary Purchase Price.................................................. 6
Preliminary Sampling........................................................ 33
Promissory Note............................................................. 6
Purchased Assets............................................................ 1
Release..................................................................... 22
Remedial Action............................................................. 35
Remediation Cost Threshold.................................................. 33
Remediation Costs........................................................... 33
Scope of Work............................................................... 33
Seller...................................................................... 1
Seller Break-up Fee......................................................... 43
Seller Delay Fee............................................................ 42
Seller Indemnified Parties.................................................. 28
Seller Starting Date........................................................ 42
Seller's Phase II Audit Report.............................................. 34
Seller's Phase II Audit..................................................... 33
Shareholder Guaranty........................................................ 10
Subsequent Sale Fee......................................................... 44
Survey...................................................................... 32
Tax......................................................................... 37
Tax Returns................................................................. 37
Temporary Easement.......................................................... 11
Undiscovered Post-Closing On-Site
Working Capital Balance..................................................... 7
Asset Purchase Agreement Page vi
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Asset Purchase Agreement
This Asset Purchase Agreement (this "Agreement") is made as of
November 14, 1997, by and among Colorstrip, Inc., a California corporation
("Seller") Material Sciences Corporation, a Delaware corporation ("MSC"), and
MSC Pinole Point Steel Inc., a Delaware corporation ("Designated Buyer").
Seller, MSC and Designated Buyer are each individually referred to as a "Party"
and together as the "Parties."
Whereas, Seller operates one plant which hot dip galvanizes steel and
another plant which continuously coats steel coils located at 5000 and 5200
Giant Road, Richmond, California (collectively the "Business"); and
Whereas, Designated Buyer desires to acquire from Seller, and Seller
desires to sell to Designated Buyer, to the extent provided herein,
substantially all of the assets and property of Seller related to the Business
(other than Excluded Assets) in exchange for cash, a promissory note and the
assumption of certain of the liabilities of Seller.
Now, Therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
Article I
Purchase And Sale Of Assets
1.1 Basic Transaction.
(a) Purchased Assets. On the terms and subject to the
conditions contained in this Agreement, on the Closing Date (as defined in
Section 1.3), Designated Buyer shall purchase from Seller, and Seller shall
sell, convey, assign, transfer and deliver to Designated Buyer, all of Seller's
right, title and interest in and to the following assets used in, useful for or
otherwise associated with the Business, but excluding all Excluded Assets
(collectively, the "Purchased Assets"):
(i) All assets of the types that are set forth on
Schedule 1.1(a)(i);
(ii) All of Seller's transferable rights and interests
arising under or in connection with any Contracts to which Seller is a
party and which relate to the Business and other documents relating to
the Business, but excluding Seller's insurance policies ("Assumed
Contracts"). "Contract" means any agreement, arrangement, bond,
commitment, franchise, indemnity, indenture, instrument, lease,
license or understanding, whether or not in writing, but excluding
Seller's insurance policies;
(iii) Sales data, customer lists, other information relating
to customers, suppliers' names, mailing lists, and, if any,
advertising matter and all rights thereto relating to the Business;
Asset Purchase Agreement Page 1
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(iv) All of Seller's Intangible Property and corporate names
(including without limitation "Colorstrip, Inc." and "Pinole Point
Steel Company") and Marks, including all of Seller's rights in the
corporate names and Marks in any location in the United States or in
any foreign country; all of Seller's books and records relating to the
Business, including employees other than Peter Wais, Bruce Carrier,
Janine DeHart and Whaite Clark (the "Excluded Employees"); and
transferable Permits. "Intangible Property" means any trade secret,
secret process or other confidential information or know-how and any
and all Marks. "Mark" means any brand name, copyright, patent, service
mark, trademark, tradename, and all registrations or applications for
registration of any of the foregoing. "Permit" means any license,
permit, franchise, certificate of authority, or order, or any waiver
of the foregoing, required to be issued by any Governmental Entity.
"Governmental Entity" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal,
state or local, domestic or foreign;
(v) All claims, warranties, guarantees, refunds, causes of
action, rights of action, rights of recovery, rights of offset, rights
of recoupment or insurance proceeds arising in the ordinary course of
the Business, but not those related to Excluded Assets or Excluded
Liabilities;
(vi) All loans to employees (other than the Excluded
Employees); provided, however, that notwithstanding anything to the
contrary contained herein, Seller may forgive loans to employees prior
to the Closing Date not in excess of $100,000 in the aggregate;
(vii) All rights to receive mail and other communications
addressed to Seller and relating to the Purchased Assets or Assumed
Liabilities;
(viii) all of the phone numbers (including 800 numbers) and
e-mail and internet addresses of Seller which relate to the Business;
and
(ix) all goodwill as a going concern and associated with the
Business and the Purchased Assets.
(b) Excluded Assets. Notwithstanding the provisions of Section 1.1(a),
the following assets are expressly excluded from the purchase and sale
contemplated hereby (the "Excluded Assets") and, as such, are not included in
the Purchased Assets:
(i) The consideration delivered to Seller pursuant to this
Agreement (including all cash consideration, the Promissory Note and
the proceeds thereof);
(ii) Seller's articles of incorporation, non-transferable
franchises, corporate seals, minute books, stock books and other
corporate records having to do with the corporate organization and
capitalization of Seller, Seller's insurance policies and all income
tax records and nontransferable Permits; provided, however, that
copies of such corporate and tax records and nontransferable Permits
shall be provided to Buyer at the Closing;
Asset Purchase Agreement Page 2
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(iii) Seller's books of account; provided, however, that
copies of such books of account shall be provided to Buyer at the
Closing;
(iv) Any shares of the capital stock of Seller held as
treasury shares;
(v) Any Tax refund relating to any time or period ending on
or prior to the Closing Date;
(vi) all cash and cash equivalents (including, without
limitation, certificates of deposit);
(vii) Seller's rights under or pursuant to this Agreement
and the other agreements contemplated hereby;
(viii) any right to receive mail and other communications
addressed to Seller not relating to the Business, Purchased Assets or
Assumed Liabilities (which mail or other communications Designated
Buyer shall promptly forward to Seller);
(ix) the action entitled Marwais Steel v. Pacific Indemnity
and any recovery therefrom;
(x) San Francisco 49ers football tickets, rights to use the
skybox at 3Com Park (formerly Candlestick Park), and all rights to
purchase the foregoing in the future;
(xi) the company airplane;
(xii) the assets listed on Schedule 1.1(b)(xii); and
(xiii) the Marwais name and logo.
(c) Assumed Liabilities. Subject to the terms and conditions set
forth in this Agreement, in addition to the Final Purchase Price and as
additional consideration for the Purchased Assets, Designated Buyer agrees that
from and after the Closing, Designated Buyer shall assume on the Closing Date
and shall pay, perform or discharge in a timely manner, to the extent not paid,
performed or discharged by the Seller on or before the Closing, only the
following liabilities, commitments and obligations of the Business, except for
the Excluded Liabilities (the "Assumed Liabilities");
(i) all liabilities of Seller of the types that are set
forth on Schedule 1.1(c)(i).
(ii) all liabilities and obligations of the Business under
the Assumed Contracts;
Asset Purchase Agreement Page 3
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(iii) any liabilities or obligations with respect to any
products that were manufactured, marketed or sold prior to the
Closing, including without limitation product liability and
infringement claims;
(iv) all liabilities or obligations of Seller Indemnified
Parties with respect to that certain Consent Decree Regarding
Injunctive and Monetary Relief for Gender and Race Hiring Claims filed
June 18, 1996 (the "Consent Decree") executed by Seller (as successor
to Pinole Point Steel Company); and
(v) all amounts payable with respect to periods after the
Closing Date on account of the Richmond Atlas Road Refunding
assessment.
(d) Excluded Liabilities. Except for the Assumed Liabilities,
Designated Buyer shall not and does not assume any of the following liabilities,
obligations or commitments of the Business, whether accrued, absolute or
contingent, whether known or unknown, whether disclosed on the Schedules to this
Agreement, whether due or to become due and whether related to the Purchased
Assets, the Business or otherwise and regardless of when or by whom asserted,
(collectively, the "Excluded Liabilities") which shall be retained and timely
discharged by Seller:
(i) any of Seller's liabilities or obligations under this
Agreement or the agreements contemplated hereby;
(ii) any of Seller's liabilities or obligations for expenses
or fees incident to or arising out of the negotiation, preparation,
approval or authorization of this Agreement or the consummation (or
preparation for the consummation) of the transactions contemplated
hereby (including all attorneys' and accountants' fees and brokerage
fees);
(iii) except as expressly contemplated herein and except for
Tax liabilities included in the Closing Working Capital Balance, any
liability or obligation of Seller for Taxes, including any liability
or obligation of Seller in respect of any amount of federal, state or
other Taxes (including interest, penalties and additions to such Taxes
and any liabilities relating to Taxes arising as a result of Seller at
any time being a member of an affiliated group (as defined in Section
1504(a) of the Code (an "Affiliated Group"));
(iv) any liabilities or obligations relating to fines or
penalties imposed by any Governmental Entity with respect to the
period prior to the Closing relating to Seller's failure to comply
with the air emission requirements of the operating permit for the
Business;
(v) any liabilities or obligations (whether or not asserted
against Seller in the first instance) arising from the offsite
treatment, storage, disposal, or arrangement for disposal of hazardous
materials, substances or wastes generated prior to, on or after the
Closing Date by Seller, including, without limitation, all liability
with respect to the foregoing arising under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), as amended from time to time, or any state counterpart of
CERCLA ("Offsite Environmental Liabilities");
Asset Purchase Agreement Page 4
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(vi) any liabilities or obligations solely in respect of any
of the Excluded Assets (including under any contracts, leases,
commitments or understandings related thereto);
(vii) any liabilities or obligations of Seller for the
vacation pay, sick pay, salary, bonuses, severance or other payments
of liabilities of any kind to the Excluded Employees and any severance
payments to any other employee with respect to a termination of
employment prior to the Closing Date;
(viii) any liability or obligation under the Benefit Plans
(other than medical insurance for union employees);
(ix) any liabilities or obligations of Seller to indemnify
its directors and officers in connection with the transactions
contemplated by this Agreement and obligations to indemnify directors,
officers, employees and agents in connection with the Excluded Assets
or other Excluded Liabilities;
(x) any liabilities or obligations of Seller, if any,
arising as a result of breaches of, or transactions entered into in
violation of, this Agreement;
(xi) any liabilities or obligations of Seller under any
Contract which would be included in the Purchased Assets but for the
provisions of Section 1.4 (except as contemplated in Section 1.4);
(xii) any liability or obligation of Seller resulting from
any claim, action, suit or proceeding brought by any shareholder of
Seller;
(xiii) any liability or obligation of Seller resulting from
any claim, action, suit or proceeding brought by any person or entity
claiming to have a right to purchase Seller or the Business (whether
by merger, sale of assets, sale of shares, recapitalization or
otherwise);
(xiv) any liability or obligation of Seller relating to the
Alleged Harassment Action (as defined herein) solely with respect to
facts and circumstances existing on or prior to the Closing;
(xv) all liabilities or obligations of Seller arising from
Seller's activities after the Closing Date;
(xvi) all liabilities or obligations of Seller in connection
with the merger of PPSC with and into Seller;
(xvii) all liabilities or obligations of Seller set forth on
Schedule 3.11; or
(xviii) all liabilities or obligations of Seller set forth
on Schedule 1.1(d)(xviii)
Asset Purchase Agreement Page 5
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1.2 Purchase Price for Purchased Assets.
(a) Final Purchase Price. The aggregate purchase price for the
Purchased Assets (the "Final Purchase Price") shall be equal to $126,670,000,
subject to increase or decrease as provided in this Section 1.2(a):
(i) The Final Purchase Price shall be increased by:
A. the amount, if any, by which the Closing Working Capital
Balance (as defined in Section 1.2(e)), as shown on the Closing
Working Capital Statement (as defined in Section 1.2(e)) exceeds
$19,150,000; and
B. the amount, if any, by which the Closing Approved
Capital Expenditures (as defined in Section 1.2(e)) as shown on the
Closing Capital Expenditure Statement (as defined in Section 1.2(e))
exceed $1,750,000;
(ii) The Final Purchase Price shall be decreased by:
A. the amount, if any, by which $18,150,000 exceeds the
Closing Working Capital Balance; and
B. the amount, if any, by which $1,750,000 exceeds the
Closing Approved Capital Expenditures.
(b) Preliminary Purchase Price. At the Closing, Designated Buyer shall
pay Seller an amount (the "Preliminary Purchase Price") equal to the Final
Purchase Price as estimated in good faith by Seller on the basis of a projected
working capital statement of Seller as of the Closing Date and a projected
capital expenditure statement of Seller as of the Closing Date, in each case
prepared in good faith by Seller and delivered to Designated Buyer not less than
five days prior to the Closing. Designated Buyer shall pay $64,082,000 of the
Preliminary Purchase Price by Designated Buyer's promissory note (the
"Promissory Note") substantially in the form of Exhibit A issued to Seller for
the assets associated with Pinole Point Steel Company's business immediately
prior to the merger with Colorstrip, Inc. and shall pay the balance in cash
(including amounts received from the Escrow contemplated in Article X as partial
payment of the purchase price) for the assets associated with the business of
Colorstrip immediately prior to its merger with Pinole Point Steel Company and
its total working capital at the Closing Date. To secure the payment of the
Promissory Note, Designated Buyer shall obtain and deliver to Seller at the
Closing a standby letter of credit (the "Letter of Credit") substantially in the
form attached to Exhibit A issued by Bank of America NT&SA or other bank
reasonably satisfactory to Seller. The Letter of Credit shall be in a face
amount equal to the principal amount of the Promissory Note plus the interest
that will be due and payable thereon assuming payment of the Promissory Note in
accordance with its terms. The Letter of Credit shall (i) be irrevocable, (ii)
expire not earlier than thirty days after the final maturity of the Promissory
Note; and (iii) permit drawing by Seller upon presentation of Seller's
certificate that Seller has not been fully paid in accordance with the terms of
the Promissory Note.
Asset Purchase Agreement Page 6
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(c) Working Capital Balance. The "Working Capital Balance" of Seller
means, as of any date of determination, the excess of the current assets of
Seller set forth on Schedule 1.2(c) as of such date over the current liabilities
set forth on Schedule 1.2(c) as of such date, determined in accordance with the
GAAP but determined without taking into account any Excluded Assets or Excluded
Liabilities. "GAAP" means generally accepted accounting principles in the
United States, as in effect from time to time, and as consistently applied by
Seller with respect to the accounting methods used (consistent application shall
be determined by reference to the work papers of Seller's independent
accountants relating to Seller's most recent audited financial statements);
(d) Approved Capital Expenditures. "Approved Capital Expenditures" of
Seller means (i) capital expenditures made by Seller on or after January 1, 1997
and before the Closing Date as set forth on the Capital Expenditures Schedule
attached hereto as Exhibit C and (ii) any other capital expenditures made by
Seller made on or after January 1, 1997, provided that Seller obtains the
approval of Designated Buyer as to any non-emergency capital expenditure in
excess of $25,000 and, if practicable, any emergency capital expenditure in
excess of $200,000; provided that Approved Capital Expenditures shall exclude
any expenditures by Seller required by Section 15 of the Consent Decree for
building a locker room and bathroom. If it is not practicable for Seller to
seek Designated Buyer's prior approval to an emergency capital expenditure,
Seller shall give Designated Buyer notice thereof as soon as practicable.
Designated Buyer shall approve or disapprove any non-emergency capital
expenditure within three business days and any emergency capital expenditure
within four hours after notice thereof from Seller, such approval in any case
not to be unreasonably withheld.
(e) Purchase Price Adjustment.
(i) Within 45 days after the Closing Date, Seller shall prepare
and deliver to Designated Buyer together with supporting information, and
its outside accountants will issue a report in accordance with the
standards specified in such report on the following: (A) a computation of
the Final Purchase Price and (B) a working capital statement (the "Closing
Working Capital Statement") of the Business setting forth its determination
of the Working Capital Balance as of the Closing Date (the "Closing
Working Capital Balance") and (C) a capital expenditure statement of the
Closing Date ("Closing Capital Expenditure Statement") of the Business
setting forth Approved Capital Expenditures (the "Closing Approved Capital
Expenditures"), all as defined in this Agreement. In each case (A), (B) and
(C) above, the information will be prepared in accordance with GAAP
consistent with the financial statements prepared by Seller and furnished
in accordance with Section 3.5. Within 30 days following receipt,
Designated Buyer shall notify Seller whether it accepts or disputes the
determination of the Final Purchase Price. If Designated Buyer disputes the
Final Purchase Price, Designated Buyer shall concurrently with such
notification furnish Seller with a reasonably detailed explanation in
writing of its reasons for the dispute. Seller's and Designated Buyer's
respective outside accountants shall meet to resolve the dispute. If
Seller's and Designated Buyer's respective outside accountants are not able
to resolve the dispute within 30 days, such dispute shall be referred to
Price Waterhouse or if Price Waterhouse is unavailable or unwilling to
perform such services, then an accounting firm of national reputation which
does not provide material services to either Party (the "Independent
Accountants") for resolution. The Independent Accountant's determination of
the dispute
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shall be made within 30 days and shall be final and binding on the parties.
Designated Buyer and Seller shall each bear the fees and expenses of its
outside accountants, and shall evenly split the fees and expenses of the
Independent Accountants. Seller and Designated Buyer shall cooperate in the
resolution of any dispute involving the Final Purchase Price and shall
provide each other's outside accountants and the Independent Accountants
access to their respective books and records and facilities. The review by
Designated Buyer's outside accountants and the Independent Accountants will
be limited to determining whether GAAP has been followed and whether any
difference for any general ledger item exceeds by $5,000 or more Seller's
accountant's determination (any lesser difference shall be disregarded).
(ii) For purposes of determining Closing Working Capital Balance
and Closing Approved Capital Expenditures, Designated Buyer and Seller
shall jointly take a physical count of all inventory included in the
Purchased Assets as of the Closing, conducted and valued in accordance with
GAAP.
(iii) If the Final Purchase Price is greater than the
Preliminary Purchase Price, Designated Buyer shall pay the difference in
cash to Seller within three business days of the final determination of the
Final Purchase Price. If the Preliminary Purchase Price is greater than
the Final Purchase Price, Seller shall refund the difference in cash to
Designated Buyer within three business days of the final determination of
the Final Purchase Price.
(iv) The party making the payment under (iii) above shall
concurrently pay interest on such payment between the Closing Date and the
date of such payment at the annual rate set forth in the Promissory Note.
1.3 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Coblentz, Cahen,
McCabe & Breyer, LLP, Attorneys at Law, Seventh Floor, 222 Kearny Street, San
Francisco, California, commencing at 10:00 a.m. on the later of the date 30 days
following the execution and delivery of this Agreement or at such place and
date promptly following (but not more than five business days following) the
satisfaction of all conditions precedent to the Closing or at such other place
and time as may be agreed by the Parties, but in no event later than April 30,
1998. The date and time of the Closing are herein referred to as the "Closing
Date."
1.4 Nonassignable Contracts. To the extent that the assignment hereunder
by Seller to Designated Buyer of any Assumed Contract is not permitted or is not
permitted without the consent of any other party to such Assumed Contract, this
Agreement shall not be deemed to constitute an assignment of any such Assumed
Contract if such consent is not given or if such assignment otherwise would
constitute a breach of, or cause a loss of contractual benefits under, any such
Assumed Contract, and Designated Buyer shall assume no obligations or
liabilities under any such Assumed Contract until such consent is obtained.
Seller shall use its best efforts to advise Designated Buyer promptly in writing
with respect to any Assumed Contract which either Seller knows or has
substantial reason to believe will or may not be subject to assignment to
Designated Buyer hereunder. If any consent or waiver necessary for the sale,
transfer, assignment and delivery of an Assumed Contract is not obtained or if
such assignment is not permitted irrespective of consent and the Closing
hereunder is consummated, Seller shall cooperate with
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Designated Buyer following the Closing Date in any reasonable arrangement
designed to provide Designated Buyer with the rights and benefits (subject to
Designated Buyer's assumption of all of the obligations and liabilities
thereunder) under any such Assumed Contract, including enforcement for the
benefit of Designated Buyer and at Designated Buyer's expense of any and all
rights of Seller against any other party arising out of any breach or
cancellation of any such Assumed Contract by such other party and, if requested
by Designated Buyer, acting as an agent on behalf of Designated Buyer or as
Designated Buyer shall otherwise reasonably require; provided that Designated
Buyer shall bear Seller's out-of-pocket expenses as such agent (and shall
advance Seller's anticipated out-of-pocket expenses).
Article II
Conditions To Closing
2.1 Conditions to Designated Buyer's Obligations. The obligation of
Designated Buyer to consummate the transactions contemplated by this Agreement
is subject to the satisfaction of the following conditions as of the Closing
Date:
(a) the representations and warranties set forth in Article III hereof
are true and correct at and as of the Closing Date as though then made and as
though the Closing Date were substituted for the date of this Agreement
throughout such representations and warranties, except to the extent that a
breach or breaches of such representations and warranties would not have a
material adverse effect on the Business or financial condition, results of
operations or assets of the Business, in any case taken as a whole ("Material
Adverse Effect") (disregarding (i) any such effect caused by changes in the
United States or Northern California economy or capital markets in general,
changes in the industry in which the Business operates or changes in law and
(ii) any such effect directly or indirectly resulting from contact between
Designated Buyer and Seller's labor union) and except that any such breach or
breaches discovered by Seller and disclosed to Designated Buyer shall be
disregarded if Seller has an indemnification obligation therefor under Section
6.2(a)(i)(A);
(b) Seller shall have performed and complied in all material respects
with all of the covenants and agreements required to be performed by it under
this Agreement on or prior to the Closing, except to the extent that such
failure would not have a Material Adverse Effect;
(c) all consents by the third parties identified in Schedule 2.1 shall
have been obtained unless the goods or services provided for in the contracts
with such parties may be obtained on a commercially equivalent basis, and, with
respect to any other third party consents, except to the extent that the failure
to obtain such consent would not have a Material Adverse Effect;
(d) all governmental filings, authorizations and approvals that are
required of Seller for the transfer of the Purchased Assets to Designated Buyer
and the consummation of the transactions contemplated hereby ("Government
Consents") shall have been duly made and obtained, except Government Consents
the absence of which would not have a Material Adverse Effect;
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(e) all applicable waiting periods (and any extensions thereof) under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), shall have expired or otherwise been terminated;
(f) no action, suit, or proceeding shall be pending or, to the Knowledge
(as defined in Section 3.23) of Seller, threatened by any Governmental Entity
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable judgment, decree, injunction, order or ruling would prevent the
performance of this Agreement or any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement, cause such
transactions to be rescinded or materially and adversely affect the right of
Designated Buyer to own, operate or control the Purchased Assets, and no
judgment, decree, injunction, order or ruling shall have been entered which has
any of the foregoing effects;
(g) Peter Wais shall have entered into a Consulting agreement (the
"Consulting Agreement"), in the form set forth in Exhibit F, and such Consulting
Agreement shall be in full force and effect concurrently with the Closing;
(h) Designated Buyer shall have received an opinion, dated the Closing
Date, of Coblentz, Cahen, McCabe & Breyer, LLP, counsel to Seller, in form and
substance as set forth in Exhibit I addressed to MSC and Designated Buyer;
(i) Marshall I. Wais shall have entered into a shareholder guaranty (a
"Shareholder Guaranty"), substantially in the form of Exhibit B and such
guaranty shall be in full force and effect;
(j) on or prior to the Closing Date, Seller shall have delivered to
Designated Buyer all of the following:
(i) a certificate from the Seller in the form set forth in
Exhibit G, dated the Closing Date, stating that the preconditions specified
in Sections 2.1(a) and (b) have been satisfied;
(ii) certified copies of the resolutions duly adopted by Seller's
board of directors and shareholders authorizing the execution, delivery
and performance of this Agreement and the other agreements contemplated
hereby to which Seller is a party, and the consummation of all other
transactions contemplated hereby and thereby;
(iii) copies of all third party and Government Consents,
approvals, filings, releases and terminations required by this Agreement;
(iv) certificate of the Secretary of State of California stating
that Seller is in good standing;
(v) a recordable temporary access easement agreement ("Temporary
Easement") benefitting the Owned Real Property (hereafter defined) parcel
located in Richmond, California to be acquired by Designated Buyer (the
"Designated Buyer Parcel") and burdening Seller's adjacent parcel which
Temporary Easement shall be on mutually
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satisfactory terms and conditions (including Designated Buyer's
indemnification of Seller for claims arising from the use of the Temporary
Easement in the operation of the Business) and shall expire at such time as
the Designated Buyer Parcel has direct access to a public road; and
(vi) such other documents or instruments as Designated Buyer may
reasonably request to effect the transactions contemplated hereby.
Any condition specified in this Section 2.1 may be waived by Designated Buyer;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by Designated Buyer or unless Designated Buyer agrees in
writing to consummate the transactions contemplated by this Agreement without
satisfaction of such condition.
2.2 Conditions to the Seller's Obligations. The obligation of Seller to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions as of the Closing Date:
(a) the representations and warranties set forth in Article IV are true
and correct in all material respects at and as of the Closing Date as though
then made and as though the Closing Date were substituted for the date of this
Agreement throughout such representations and warranties;
(b) Designated Buyer shall have performed and complied in all material
respects with all of the covenants and agreements required to be performed by it
under this Agreement on or prior to the Closing;
(c) all Government Consents shall have been duly made and obtained,
except Government Consents the absence of which would not have a material
adverse effect on MSC's and Designated Buyer's ability to perform their
obligations under this Agreement and the other instruments and agreements
contemplated hereby;
(d) Seller shall have received an opinion dated the Closing Date from
Kirkland & Ellis, MSC's and Designated Buyer's counsel in form and substance as
set forth in Exhibit J addressed to Seller and on which Peter Wais may rely in
pertinent part.
(e) all applicable waiting periods (and any extensions thereof) under
the HSR Act, shall have expired or otherwise been terminated;
(f) no action, suit or proceeding shall be pending or, to the knowledge
of Designated Buyer, threatened by any Governmental Entity before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable judgment, decree,
injunction, order or ruling would prevent the performance of this Agreement or
any of the transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause such transactions to be rescinded, and
no judgment, decree, injunction, order or ruling shall have been entered which
has any of the foregoing effects;
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(g) Designated Buyer shall have entered into the Consulting Agreement
and such Consulting Agreement shall be in full force and effect as of the
Closing;
(h) Designated Buyer shall have delivered a resale certificate with
respect to California sales tax on the inventory contained in the Purchased
Assets;
(i) on or prior to the Closing Date, Designated Buyer shall have
delivered to Seller all of the following:
(i) a certificate from Designated Buyer in the form set forth in
Exhibit H attached hereto, dated the Closing Date, stating that the
preconditions specified in Sections 2.2(a) and (b) have been satisfied;
(ii) certified copies of the resolutions duly adopted by MSC's
and Designated Buyer's respective boards of directors authorizing the
execution, delivery and performance of this Agreement and the other
agreements contemplated hereby (including without limitation the Promissory
Note and the Consulting Agreement), and the consummation of all other
transactions contemplated hereby and thereby;
(iii) copies of all third party and Government Consents,
approvals, filings, releases and terminations required by this Agreement;
(iv) certificates of the Secretary of State of Delaware that MSC
and Designated Buyer are each in good standing and of the Secretary of
State of Illinois that MSC is duly qualified and in good standing; and
(v) such other documents or instruments as Seller may reasonably
request to effect the transactions contemplated hereby.
Any condition specified in this Section 2.2 may be waived by Seller;
provided that no such waiver shall be effective unless it is set forth in a
writing executed by Seller or unless Seller agrees in writing to consummate the
transactions contemplated by this Agreement without the satisfaction of such
condition.
Article III
Representations And Warranties
Concerning Seller
As a material inducement to Designated Buyer to enter into this Agreement,
Seller hereby represents and warrants that as of the date of this Agreement and
at the Closing Date; provided, however, that such warranty as of the Closing
Date shall not be deemed to be a covenant that the representations and
warranties will be true as of the Closing Date:
3.1 Organization and Corporate Power. Seller is a corporation duly
organized, validly existing and in good standing under the laws of California
and is qualified to do business in every jurisdiction in which its ownership of
property or conduct of business requires it to
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qualify, except where failure to qualify would not have a Material Adverse
Effect. Seller possesses all requisite corporate power and authority and all
licenses, permits and authorizations necessary to own and operate the Purchased
Assets, to carry on the Business as now conducted and presently proposed to be
conducted and to enter into this Agreement and perform its obligations
hereunder. The copies of Seller's charter documents and bylaws which have been
furnished to Designated Buyer reflect all amendments made thereto at any time
prior to the date of this Agreement and are correct and complete.
3.2 Subsidiaries; Investments. Seller does not own or hold any rights to
acquire any shares of stock or any other security or interest in any other
person or entity, and Seller has never had any subsidiary.
3.3 Authorization of Transactions. This Agreement and all other
transactions contemplated hereby to which Seller is a party have been duly
authorized by all necessary corporate action on the part of Seller and its
shareholders. No other corporate proceedings on the part of Seller are necessary
to approve and authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by Seller and constitutes the
valid and binding agreement of Seller, enforceable against Seller in accordance
with its terms.
3.4 Absence of Conflicts. Except as set forth in Schedule 3.4, Seller is
not subject to or obligated under its articles of incorporation, its bylaws, any
applicable law or rule or regulation of any governmental authority, or any
material agreement or instrument, or any material license, franchise or Permit,
or subject to any order, writ, injunction or decree, which would be breached or
violated by its execution, delivery or performance of this Agreement.
3.5 Financial Statements. Attached hereto as Exhibits M and N,
respectively, are the following financial statements:
(a) the audited balance sheets of Seller and of Pinole Point Steel
Company ("PPSC") as of December 31, 1996, December 31, 1995 and December 31,
1994, and the related statements of income and cash flows (or the equivalent)
for the respective twelve-month periods then ended; and
(b) the unaudited balance sheet of Seller as of September 30, 1997 (the
"Latest Balance Sheet"), and the related pro forma combined statements of income
and cash flows (or the equivalent) for the nine-month period then ended.
All such financial statements referred to in clauses (a) and (b) have been
prepared in conformity with GAAP (except for changes, if any, disclosed
therein). Such statements of income and cash flow referred to in clauses (a)
and (b) present fairly in all material respects the results of operations and
cash flows of Seller and PPSC for the respective periods covered, and the
balance sheets referred to in clauses (a) and (b) present fairly in all material
respects the financial condition of Seller and PPSC as of their respective
dates. The unaudited statements of income and cash flows (or the equivalent) for
the nine month period ended September 30, 1997 referred to in clause (b) reflect
the operations of Seller and PPSC independently owned and operated from January
1, 1997 through July 5, 1997, and merged on July 5, 1997. Such statements to
the extent
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of the period from January 1, 1997 to July 5, 1997 have been prepared on a pro
forma combined basis, eliminating intercompany items.
3.6 Absence of Certain Developments. Except as set forth in Schedule 3.6
and except as expressly contemplated by this Agreement, since September 30,
1997, Seller has not suffered a change which could reasonably be anticipated to
have a Material Adverse Effect. Without limiting the generality of the
foregoing, since that date Seller has not taken any of the following actions
outside of the ordinary course of business:
(a) made or granted any bonus or any wage, salary or compensation
increase to any director, officer, employee or sales representative, group of
employees or consultant or made or granted any increase in any employee benefit
plan or arrangement, or amended or terminated any existing employee benefit plan
or arrangement or adopted any new employee benefit plan or arrangement;
(b) issued any notes, bonds or other debt securities or any capital
stock or other equity securities or any securities convertible, exchangeable or
exercisable into any capital stock or other equity securities;
(c) borrowed any amount or consensually incurred any material
liabilities or incurred liabilities under contracts;
(d) mortgaged or pledged any of its properties or assets or subjected
them to any Lien, except Liens for current property taxes not yet due and
payable;
(e) sold, assigned or transferred any of its tangible assets or
canceled any debts or claims;
(f) sold, assigned, licensed or transferred any Intangible Property
or disclosed any Intangible Property to any person or entity;
(g) suffered any losses or waived any rights of material value;
(h) made capital expenditures or commitments other than as
contemplated by this Agreement;
(i) suffered any casualty loss exceeding in the aggregate $50,000,
whether or not covered by insurance;
(j) made any investment in or taken steps to incorporate any
subsidiary;
(k) entered into any employment agreement or collective bargaining
agreement, written or oral, or modified the terms of any existing such
agreements;
(l) lost any material contracts with any customer or supplier;
(m) made any change in the Seller's charter or bylaws; or
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(n) entered into any other material transaction.
3.7 Personal Property.
(a) Seller has good and marketable title to, or a valid leasehold
interest in, the personal property used by it, located on its premises or shown
on the Latest Balance Sheet or acquired after the date thereof, free and clear
of all Liens, except for personal property disposed of in the ordinary course of
the Business since the date of the Latest Balance Sheet and except as disclosed
in Schedule 3.7. Without limiting the generality of the foregoing, Seller has
good and marketable title to all of the personal property included in the
Purchased Assets, free and clear of all Liens except as disclosed in Schedule
3.7. For purposes of this Agreement, "Lien" means any mortgage, pledge,
security interest, encumbrance, lien or charge of any kind (including, without
limitation, any conditional sale or other title retention agreement or lease in
the nature thereof), any sale of receivables with recourse against Seller, any
filing or agreement to file a financing statement as debtor under the applicable
Uniform Commercial Code or any similar statute other than to reflect ownership
by a third party of property leased to any Seller under a lease which is not in
the nature of a conditional sale or title retention agreement, or any
subordination arrangement in favor of another Person (other than any
subordination arising in the ordinary course of the Business).
(b) Except as set forth in Schedule 3.7, to Seller's Knowledge, the
machinery, equipment, vehicles and other personal property of Seller included in
the Purchased Assets are in good condition and repair, reasonable wear and tear
excepted, and are usable in the ordinary course of the Business. Seller owns or
leases under valid leases all machinery, equipment and other personal property
reasonably necessary for the conduct of the Business as currently conducted.
3.8 Real Property.
(a) Schedule 3.8(a) lists and describes briefly all real property
that Seller owns (the "Owned Real Property"). With respect to each such parcel
of Owned Real Property:
(i) Seller has good and marketable title to the parcel of real
property, free and clear of any Lien, easement, covenant, or other
restriction, except for "Permitted Encumbrances" which means installments
of real property taxes not yet due and payable, recorded easements,
covenants, and other restrictions, and utility easements, building
restrictions, zoning restrictions, and other easements and restrictions
existing generally with respect to properties of a similar character which
do not adversely affect the current use, occupancy, or value, or the
marketability of title, of the property subject thereto;
(ii) there are no pending or, to Seller's Knowledge, threatened
condemnation proceedings, lawsuits, or administrative actions relating to
the property or other matters affecting materially and adversely the
current use, occupancy, or value thereof;
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(iii) the legal description for the parcel contained in the deed
thereof describes such parcel fully and adequately, each such parcel is
independently assessed for real property tax purposes, the buildings are
improvements are located within the boundary lines of the described parcels
of land, are not in material violation of applicable setback requirements,
zoning laws, and ordinances (and none of the properties or buildings or
improvements thereon are subject to "permitted non-conforming use" or
"permitted non-conforming structure" classifications), and do not encroach
on any easement which may burden the land;
(iv) to Seller's Knowledge, all facilities have received all
approvals of Governmental Entities (including material licenses and
permits) required in connection with the ownership or operation thereof,
and have been operated and maintained in accordance with applicable laws,
rules, and regulations in all material respects;
(v) except as contemplated by Section 9.7 of this Agreement,
there are no leases, subleases, licenses, concessions or other agreements,
written or oral, granting to any party or parties the right of use or
occupancy of any portion of any such parcel of real property;
(vi) there are no outstanding options or rights of first
refusal to purchase any such parcel of real property, or any portion
thereof or interest therein;
(vii) there are no parties (other than Seller) in possession of
any such parcel of real property; and
(viii) each building on the Owned Real Property has direct
access to a public street or will have direct access upon recordation of
the Temporary Easement.
(b) Schedule 3.8(b) lists and describes briefly all real property
leased or subleased to Seller (the "Leased Properties"). Seller has delivered
to Designated Buyer correct and complete copies of the leases and subleases
listed in Schedule 3.8(b) (as amended to date). Seller warrants that none of
such leases is material to the Business.
(c) Other than those defects set forth in Schedule 3.8 and in
Designated Buyer's reports described in Exhibit R, to Seller's Knowledge all
buildings and all components of all buildings, structures and other improvements
included within the Owned Real Property (the "Improvements"), including,
without limitation, the roofs and structural elements thereof and the heating,
ventilation, air conditioning, air pollution emission capture and abatement,
plumbing, electrical, mechanical, sewer, waste water and paving and parking
equipment systems and facilities included therein, are (subject to reasonable
wear and tear) in operating condition and repair and adequate to operate such
facilities as currently used. Other than those defects set forth in Schedule 3.8
and in such Designated Buyer's reports, to Seller's Knowledge, there are no
facts or conditions affecting any of the Improvements (including latent defects)
which would, individually or in the aggregate, materially interfere with the
use, occupancy or operation thereof as currently used or occupied.
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3.9 Contracts and Commitments.
(a) Except as specifically contemplated by this Agreement and except
as set forth in Schedule 3.8, Schedule 3.9, Schedule 3.10 or Schedule 3.15,
Seller is not a party to or bound by, whether written or oral, any of the
following executory agreements or arrangements if an Assumed Contract or an
Assumed Liability:
(i) contract for the employment of any officer, individual
employee or other person on a full-time, part-time, consulting or other
basis or contract relating to loans to officers, directors, employees or
Affiliates or any severance agreements;
(ii) agreement or indenture relating to the borrowing of money
or to mortgaging, pledging or otherwise placing a Lien on any of the
Purchased Assets;
(iii) guarantee of any obligation for borrowed money or
otherwise in excess of $10,000;
(iv) material license or royalty agreements relating to the
Purchased Assets (other than off-the-shelf software);
(v) material lease or agreement under which it is lessee of,
or holds or operates, any personal property owned by any other party which
constitutes a part of the Purchased Assets;
(vi) lease or agreement under which it is lessor of or permits
any third party to hold or operate any Purchased Assets owned or controlled
by Seller;
(vii) contract relating to the distribution, marketing or sales
of its products or the products of others by the Business;
(viii) contract or group of related contracts with the same
party or group of affiliated parties the performance of which involves
consideration in excess of $25,000, other than purchase orders cancelable
upon less than 30 days notice;
(ix) assignment, license, indemnification or agreement with
respect to any Intangible Property (other than off-the-shelf software);
(x) warranty agreement with respect to its services rendered
or its products sold or leased;
(xi) agreement relating to any business acquisition, merger,
sale or purchase of substantial assets, equity financings, recapitalizing
or reorganizations;
(xii) agreement involving payments in excess of $10,000 with a
term of more than six months which is not terminable by Seller upon less
than 30 days notice without penalty;
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(xiii) contract or agreement prohibiting it from freely engaging
in any business or competing anywhere in the world; or
(xiv) any other agreement which is material to the Business.
(b) All of the contracts, agreements and instruments set forth on
Schedule 3.9 are valid, binding and enforceable against Seller in accordance
with their respective terms. Seller has performed in all material respects all
obligations required to be performed by it under the contracts, agreements and
instruments listed on Schedule 3.9 and is not in default under or in breach of
nor in receipt of any claim (other than credit or debit memos of less than
$60,000) of default or breach under any contract, agreement or instrument listed
on Schedule 3.9; no event has occurred which with the passage of time or the
giving of notice or both would result in a default, breach or event of
noncompliance by Seller under any contract, agreement or instrument listed on
Schedule 3.9 ; Seller does not have any present expectation or intention of not
fully performing all such obligations; Seller has no Knowledge of any breach or
anticipated breach by the other parties to any contract, agreement, instrument
or commitment listed on Schedule 3.9; and Seller is not a party to any contract
or commitment which would have a Material Adverse Effect.
(c) Seller has provided Designated Buyer with a true and correct copy
of all written contracts which are required to be disclosed on Schedule 3.9, in
each case together with all amendments, waivers or other changes thereto (all of
which are disclosed on Schedule 3.9). Schedule 3.9 contains an accurate and
complete description of all material terms of all oral contracts referred to
therein.
3.10 Proprietary Rights.
(a) Except as set forth on Schedule 3.10, Seller does not have any
Intangible Property that is material to the Business, including (i) patents or
registered Marks and pending patent applications or other applications for
registrations of the Marks; (ii) unregistered trademarks, unregistered service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names; (iii) unregistered copyrights; (iv) non-confidential descriptions
of trade secrets and confidential information; (v) computer software; (vi) any
other Intangible Property; and (vii) all licenses or similar agreements or
arrangements covering Intangible Property to which Seller is a party, either as
licensee or licensor, or a third-party beneficiary.
(b) Except as set forth in Schedule 3.10: (i) the Seller owns and
possesses free and clear of all Liens and without restriction as to use, all
right, title and interest in and to the Intangible Property necessary for the
operation of the Business as currently conducted; (ii) no claim by any third
party contesting the validity, enforceability, use or ownership of any of the
Intangible Property has been made, is currently outstanding or to the Knowledge
of Seller is threatened; (iii) to the Knowledge of Seller, Seller has not
interfered with, infringed upon, misappropriated or otherwise conflicted with,
and the operation of the Business of the Seller as currently conducted will not
infringe, misappropriate or otherwise conflict with, the Intangible Property of
third parties; (iv) to the Knowledge of Seller, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any
Intangible Property; and (v) immediately subsequent to the Closing, Seller's
Intangible Property will be owned by or available for use by Buyer on terms and
conditions identical to those under which Designated
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Seller owned and used such Intangible Property immediately prior to the Closing.
Seller has informed Designated Buyer that all the computer software and hardware
used by Seller will not correctly process, provide and receive date-related data
into and between the twentieth and twenty-first centuries or beyond.
3.11 Litigation; Proceedings. Except as set forth in Schedule 3.11, there
are no actions, suits, proceedings, orders, judgments, decrees or investigations
pending or, to Seller's Knowledge, threatened against or affecting Seller, the
Purchased Assets or the Business at law or in equity, or pending or threatened
by Seller against any third party, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which would reasonably be expected to
result in a judgment in excess of $250,000; Seller is not subject to any
arbitration proceedings under collective bargaining agreements or otherwise or,
to Seller's Knowledge, any governmental investigations or inquiries (including,
without limitation, inquiries as to the qualification to hold or receive any
license or permit) which would reasonably be expected to result in a judgment in
excess of $250,000. Seller is not subject to any outstanding order, judgment or
decree issued by any court or quasi-judicial or administrative agency of any
federal, state, local or foreign jurisdiction or any arbitrator relating to the
Purchased Assets, the Business or the transactions contemplated by this
Agreement which would reasonably be expected to result in a judgment in excess
of $250,000.
3.12 Brokerage. Except as set forth in Schedule 3.12, there are no claims
for brokerage commissions, finders' fees or similar compensation in connection
with the transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of Seller or Seller's shareholder. Seller shall
pay, and hold Designated Buyer and MSC harmless against, any liability, loss or
expense (including, without limitation, reasonable attorneys' fees and out-of-
pocket expenses) arising in connection with any such claim.
3.13 Governmental Licenses and Permits. Schedule 3.13 contains a complete
listing and summary description of all material Permits owned or possessed by
Seller. To Seller's knowledge, except as indicated on Schedule 3.13, Seller owns
or possesses all right, title and interest in and to all Permits. To Seller's
Knowledge, no loss or expiration of any Permit is pending or threatened
(including, without limitation, as a result of the transactions contemplated
hereby) other than expiration in accordance with the terms thereof.
3.14 Employees. Except as set forth on Schedule 3.14, to the Knowledge of
Seller, no employee and no group of employees or independent contractors of
Seller has any plans to terminate his, her or its employment or independent
contractor relationship with Seller. Seller has complied in all material
respects with all applicable laws relating to the employment of personnel and
labor, including provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other taxes, the
Worker Adjustment and Retraining Act, and the Immigration Reform and Control Act
of 1986. Except as set forth on Schedule 3.14, Seller is not a party to or bound
by any collective bargaining agreement, nor since January 1, 1996, has it
experienced any strikes, material grievances, material unfair labor practices
claims or other material employee or labor disputes. To Seller's Knowledge,
Seller has not engaged in any unfair labor practice. Schedule 3.14 sets forth
the names, present annual or, as the case may be, hourly rate of compensation
(including salary, bonuses and commissions) of all persons employed by Seller
(including independent contractors, but excluding the Excluded
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Employees), their job descriptions and whether each employee is absent from
active employment for any reason, including, without limitation, leave of
absence or disability.
3.15 Employee Benefit Plans.
(a) Except as set forth on Schedule 3.15, with respect to current or
former employees of Seller, Seller does not maintain or contribute to or have
any actual or potential liability with respect to any (i) deferred compensation
or bonus or retirement plans or arrangements, (ii) qualified or nonqualified
defined contribution or defined benefit plans or arrangements which are employee
pension benefit plans (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974 ("ERISA")), or (iii) employee welfare benefit
plans, (as defined in Section 3(1) of ERISA), (iv) stock option or stock
purchase plans, or (v) material fringe benefit plans or programs whether in
writing or oral and whether or not terminated (collectively, the "Benefit
Plans").
(b) Except for obligations which are accrued but not yet paid with
respect to current periods, Seller has not incurred any liability to the Pension
Benefit Guaranty Corporation, the Internal Revenue Service, any multiemployer
plan or otherwise with respect to any employee pension benefit plan currently or
previously maintained by members of the controlled group of Seller (as defined
in Section 414 of the Code, the "Controlled Group") that has not been
satisfied in full, and to Seller's Knowledge no condition exists that would
reasonably be expected to present a material risk to Seller or any member of the
Controlled Group of incurring such a liability.
(c) To Seller's Knowledge, none of the Benefit Plans has any
material unfunded liabilities.
(d) To Seller's Knowledge, all reporting and disclosure obligations
as they apply to the Benefit Plans and the requirements of Section 4980B of the
Code ("1 COBRA") and Health Insurance Portability and Accountability Act of 1996
have been timely met.
(e) To Seller's Knowledge, with respect to any Benefit Plan which
intended to be a qualified plan which meets the requirements of Code Section
401(a), a favorable determination letter from the Internal Revenue Service has
been received by Seller with respect to any such Benefit Plan to the effect that
it is qualified under Section 401(a) of the Code (including requirements imposed
by the Tax Reform Act of 1986 and subsequent legislation with an effective date
prior to January 1, 1995), and, to Seller's Knowledge, there are no
circumstances which would reasonably be expected to cause the Benefit Plan to
lose such qualified status.
3.16 Insurance. Schedule 3.16 lists and briefly describes each insurance
policy maintained by Seller with respect to the Purchased Assets and the
Business. All of such insurance policies are in full force and effect, and
Seller is not in default with respect to its obligations under any such
insurance policies and Seller has not been denied insurance coverage. None of
such policies are transferrable or will inure to the benefit of Designated
Buyer.
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3.17 Compliance with Laws. To the Knowledge of Seller, Seller and its
respective officers, directors and employees have complied with all applicable
material laws, regulations and ordinances of foreign, federal, state and local
governments and all agencies thereof which are material to the Business.
3.18 Environmental Matters.
(a) Except as disclosed on Schedule 3.18, to the Knowledge of
Seller, Seller has complied with and is currently in compliance in all material
respects with all Environmental and Safety Requirements, and Seller has not
received any oral or written notice, report or information regarding any
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
or any corrective, investigatory or remedial obligations arising under
Environmental and Safety Requirements which relate to Seller, the Business, the
Owned Real Property or the Leased Real Property.
(b) Without limiting the generality of the foregoing, except as
disclosed on Schedule 3.18, to the Knowledge of Seller, Seller has obtained and
complied with, and is currently in compliance with, all material permits,
licenses and other authorizations that have been required pursuant to any
Environmental and Safety Requirements for the occupancy of the Leased Properties
or the operation of the Business. A list of all such permits, licenses and other
authorizations which are material to Seller is set forth on Schedule 3.18.
(c) Neither this Agreement nor the consummation of the transactions
contemplated hereby shall impose any obligations for site investigation or
cleanup, or notification to or consent of any government agencies or third
parties under any Environmental and Safety Requirements (including, without
limitation, any so called "transaction-triggered" or "responsible property
transfer" laws and regulations), except for any such obligations which arise as
a result of facts or circumstances peculiar to Designated Buyer's future use of
the Owned Real Property or Leased Real Property.
(d) Except as set forth on Schedule 3.18, to Seller's Knowledge,
none of the following exists at any Owned Real Property or Leased Real Property:
(i) underground storage tanks or surface impoundments; (ii) asbestos-containing
material in any form or condition; (iii) materials or equipment containing
polychlorinated biphenyls; or (iv) landfills, surface impoundments or other
disposal areas.
(e) Except as set forth on Schedule 3.18, to Seller's Knowledge,
Seller has not treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled or Released any substance (including, without
limitation, any hazardous substance) or owned, occupied or operated any facility
or property (and no such facility or property (including without limitation the
Owned Real Property and the Leased Real Property is contaminated with such
substances), so as to give rise to material or potentially material liabilities
or investigatory, corrective or remedial obligations of Seller or the Business
under Environmental and Safety Requirements, including without limitation
liability for response costs, natural resource damages or attorneys fees
pursuant to CERCLA.
(f) No Environmental Lien has attached to any Owned Real Property or
Leased Real Property.
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(g) Seller has disclosed to the Designated Buyer all material facts,
and have provided copies of all material documents, in its possession with
respect to environmental, health or safety liabilities or obligations relating
to the past or present properties, facilities, and operations of the Business.
(h) For purposes of this Agreement, the following terms shall have
the following respective meanings:
(i) "Environmental and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and
other provisions having the force or effect of law, all judicial and
administrative orders and determinations, all contractual obligations and
all common law, in each case concerning public health and safety, worker
health and safety and pollution or protection of the environment
(including, without limitation, all those relating to the presence, use,
production, generation, handling, transport, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, Release, threatened
Release, control or cleanup of any hazardous or otherwise regulated
materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products
or byproducts, asbestos, polychlorinated biphenyls, noise or radiation) as
such of the foregoing are constituted prior to, on, or after the Closing
Date.
(ii) "Release" shall have the meaning set forth in CERCLA.
(iii) "Environmental Lien" shall mean any Lien, whether
recorded or unrecorded, in favor of any governmental entity, relating to
any liability of Seller arising under any Environmental and Safety
Requirements.
(i) To the extent there is a breach of a representation or warranty
contained in this Section 3.18 relating to contamination at or beneath, or
emanating onto or from the Owned Real Property or Leased Real Property, the
indemnification for any resulting Loss shall be governed by Article VIII.
3.19 Product Warranties. Except as disclosed in Schedule 3.19, Seller has
not made any warranties with respect to the products manufactured and/or sold by
it other than those warranties expressly made in the literature accompanying
such products, true and complete copies of which are attached hereto as Schedule
3.19. Substantially all of the products manufactured, sold, leased and delivered
by Seller have conformed in all material respects with all applicable
contractual commitments and all express and implied warranties and the Seller
does not have any material liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due) for
replacement or repair thereof or other damages in connection therewith, subject
only to the reserve for product liability claims set forth on the Latest Balance
Sheet, as adjusted for operations and transactions through the Closing Date in
the ordinary course of the Business.
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3.20 Product Liability; Recalls. Except as set forth in Schedule 3.20,
there is no existing liability, claim or obligation arising from or alleged to
arise from any actual or alleged injury to persons or property as a result of
the ownership, possession or use of any product manufactured, sold, leased or
delivered by Seller. Except as set forth on the Schedule 3.20, there have been
no product recalls or requests therefor by any governmental authorities or
customers.
3.21 Absence of Undisclosed Liabilities. Except for Assumed Liabilities,
Excluded Liabilities and obligations expressly disclosed in the Schedules to
this Agreement, Seller does not have any material obligation or liability
(whether accrued, absolute, contingent, unliquidated or otherwise, whether or
not known to Seller, whether due or to become due and regardless of when
asserted) arising out of transactions entered into at or prior to the Closing,
or any action or inaction at or prior to the Closing, or any state of facts
existing at or prior to the Closing.
3.22 Disclosure. There is no fact which has not been disclosed to
Designated Buyer of which Seller has Knowledge which has or could reasonably be
expected to have a Material Adverse Effect (disregarding (i) any such effect
caused by changes in the United States or Northern California economy or capital
markets in general, changes in the industry in which the Business operates or
changes in law and (ii) any such effect directly or indirectly resulting from
contact between Designated Buyer and Seller's labor union).
3.23 Knowledge. As used in this Article III and elsewhere in this
Agreement, the term "Knowledge" as used in the phrases "to the Knowledge of
Seller," "to Seller's Knowledge" or phrases of similar import shall mean and
include the actual knowledge or awareness of Seller (which shall mean the actual
knowledge of Peter E. Wais or Bruce E. Carrier after due inquiry of the persons
identified in Schedule 3.23).
Article IV
Representations And Warranties Of
MSC And Designated Buyer
As a material inducement to Seller to enter into this Agreement, MSC and
Designated Buyer represent and warrant to Seller as of the date hereof and as of
the Closing Date that:
4.1 Organization and Corporate Power. Designated Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and (as of the Closing Date) California, with full corporate
power and authority to enter into this Agreement and the other agreements
contemplated hereby to which Designated Buyer is a party and perform its
obligations hereunder and thereunder. Designated Buyer possesses all requisite
corporate power and authority and (within a reasonable time after the Closing
Date will possess) all licenses, permits and authorizations necessary to own and
operate the Purchased Assets to carry on the Business as now conducted and
presently proposed to be conducted and to enter into this Agreement and perform
its obligations hereunder. MSC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with full
corporate power and authority to enter into this Agreement and the other
agreements contemplated hereby to which MSC is a party and perform its
Obligations
Asset Purchase Agreement Page 23
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hereunder and thereunder. The copies of MSC's and Designated Buyer's charter
documents and bylaws which have been (or prior to closing will be) furnished to
Seller reflect all amendments made thereto at any time prior to the Closing Date
and are correct and complete.
4.2 Authorization of Transaction. The execution, delivery and performance
of this Agreement and the other agreements contemplated hereby to which either
of Designated Buyer and MSC is a party have been duly and validly authorized by
all requisite corporate action on the part of Designated Buyer and MSC, as
applicable, and no other corporate proceedings on their part are necessary to
authorize the execution, delivery or performance of this Agreement. This
Agreement constitutes, and each of the other agreements contemplated hereby to
which either Designated Buyer or MSC is a party shall when executed constitute,
a valid and binding obligation of Designated Buyer or MSC, as applicable,
enforceable in accordance with their respective terms.
4.3 Absence of Conflicts. Neither Designated Buyer nor MSC is subject to
or obligated under its certificate of incorporation, its by-laws, any applicable
law, or rule or regulation of any governmental authority, or any material
agreement or instrument, or any material license, franchise or permit, or
subject to any order, writ, injunction or decree, which would be breached or
violated by its execution, delivery or performance of this Agreement and the
other agreements contemplated hereby to which either Designated Buyer or MSC is
a party.
4.4 Litigation. There are no actions, suits, proceedings or orders pending
or, to Designated Buyer's knowledge or MSC's knowledge, threatened against or
affecting Designated Buyer or MSC at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which would materially
and adversely affect Designated Buyer's or MSC's performance under this
Agreement and the other agreements contemplated hereby to which either
Designated Buyer or MSC is a party or the consummation of the transactions
contemplated hereby or thereby.
4.5 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of
Designated Buyer or MSC. Designated Buyer shall pay, and hold Seller harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorneys' fees and out-of-pocket expenses) arising in connection
with any such claim.
4.6 Availability of Financing. After due inquiry of MSC's financial
advisor and placement agent, neither the Chief Executive Officer nor the Vice
President and Chief Financial Officer of MSC has any reason to believe that MSC
and Designated Buyer cannot obtain the financing to perform their obligations
under this Agreement.
4.7 Liability Categories. MSC has no liability categories for its
electrogalvanizing and coil coating business except as set forth on Schedule
4.7.
4.8 Inventory. Designated Buyer is acquiring the inventory acquired
hereunder for resale.
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Article V
Termination
5.1 Termination. This Agreement may be terminated prior to the Closing:
(a) by mutual written consent of Seller and Designated Buyer at any
time;
(b) by Seller if there has been a misrepresentation or breach on the
part of MSC or Designated Buyer of its representations, warranties or covenants
set forth in this Agreement that would have a material adverse effect on MSC's
or Designated Buyer's abilities to perform their obligations hereunder or if
other events have occurred which have made it impossible to satisfy a condition
precedent to Seller's obligations to consummate the transactions contemplated
hereby unless Seller's willful or knowing breach of this Agreement has caused
the condition to be unsatisfied; provided that Seller must notify Designated
Buyer in writing that it is terminating this Agreement within five business days
after discovering the basis for the termination;
(c) by Designated Buyer if there has been a misrepresentation or
breach on the part of Seller of its representations, warranties or covenants set
forth in this Agreement that would have a Material Adverse Effect (disregarding
(i) any such effect caused by changes in the United States or Northern
California economy or capital markets in general, changes in the industry in
which the Business operates or changes in law and (ii) any such effect directly
or indirectly resulting from contact between Designated Buyer and Seller's labor
union) or if other events have occurred which have made it impossible to satisfy
a condition precedent to Designated Buyer's obligations to consummate the
transactions contemplated hereby unless Designated Buyer's willful or knowing
breach of this Agreement has caused the condition to be unsatisfied; provided
that Designated Buyer must notify Seller in writing that it is terminating this
Agreement within five business days after discovering the basis for the
termination;
(d) by Seller if Seller determines in good faith that inaccuracies or
breaches of any representations or warranties made by Seller contained in this
Agreement that are discovered on or prior to the Closing Date could reasonably
be expected to result in Losses in excess of $3,000,000; provided that Seller
must notify Designated Buyer in writing that it intends to terminate this
Agreement within five business days after discovering the basis for the
termination and provided further that Designated Buyer may negate this intention
to terminate if Designated Buyer and MSC waive any right to be indemnified by
Seller with respect to such Losses in excess of $3,000,000 within five business
days after receiving Seller's notice of intent to terminate;
(e) by Seller or Designated Buyer if the Closing has not occurred on
or prior to April 30, 1998 upon written notice to the other; or
(f) by Seller if it determines in the exercise of its sole, but
reasonable discretion prior to November 26, 1997, that Seller's Phase II Audit
has identified matters as to which Losses which otherwise would be subject to
the indemnification contained in Section 8.3 would exceed the Remediation Cost
Threshold defined in Section 8.2.
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5.2 Effect of Termination. In the event of termination of this Agreement
by either Seller or Designated Buyer as provided in Section 5.1, this Agreement
shall forthwith become void and there shall be no liability on the part of any
Party to any other Party or its shareholders or directors or officers under this
Agreement, except that the provisions of Section 9.5 and Article X shall
continue in full force and effect. The payments pursuant to Article X shall be
considered liquidated damages and no Party shall be entitled to any other
payments if the transactions contemplated by this Agreement do not close for any
reason.
Article VI
Indemnification And Related Matters
6.1 Survival. All of the representations, warranties, covenants and
agreements set forth in this Agreement or in any writing or certificate
delivered in connection with this Agreement shall survive the Closing Date and
the consummation of the transactions contemplated hereby. Notwithstanding the
foregoing, the representations and warranties set forth in this Agreement or in
any writing or certificate delivered in connection with this Agreement shall
expire as follows:
(i) Sections 3.3, 3.12, 4.2 and 4.5 shall not expire (except to
the extent of any applicable statute of limitations); and
(ii) all other Sections of Article III and IV shall expire on
the second anniversary of the Closing Date and shall be of no further force
or effect thereafter.
6.2 Indemnification.
(a) Indemnification provisions for the benefit of MSC and Designated
Buyer.
(i) Seller shall indemnify MSC, Designated Buyer and each of
their respective officers, directors, shareholders, employees, agents,
representatives, affiliates, successors and permitted assigns
(collectively, the "Buyer Indemnified Parties") and hold each of them
harmless from and against and pay on behalf of or reimburse such Buyer
Indemnified Parties in respect of any loss, liability, demand, claim,
action, cause of action, cost, damage, deficiency, Tax, penalty, fine or
expense, whether or not arising out of third party claims (including,
without limitation, interest, penalties, reasonable attorneys' fees and
expenses, court costs and all amounts paid in investigation, defense or
settlement of any of the foregoing), net of any Tax benefit or available
insurance proceeds (collectively, "Losses" and individually, a "Loss")
which any such Buyer Indemnified Party may suffer, sustain or become
subject to, as a result of, in connection with, relating or incidental to
or by virtue of (in each case, for the applicable survival period):
(A) subject to Sections 7.6 and 6.2(a)(ii)(A) hereof, the
breach of any representation or warranty made by Seller contained in
this Agreement that
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is known to Designated Buyer (regardless of how discovered or by whom)
on or prior to the Closing Date;
(B) the breach of any representation or warranty made by
Seller contained in this Agreement or any certificate delivered by
Seller to MSC or Designated Buyer in connection with the Closing other
than breaches covered by clause (A) above;
(C) the breach of any covenant or agreement made by Seller
contained in this Agreement or in the Side Labor Agreement between the
parties dated the date hereof or any certificate delivered by Seller
to MSC or Designated Buyer in connection with the Closing;
(D) any Excluded Assets;
(E) any Excluded Liabilities;
(F) any claim or action by any shareholder of Seller
challenging Seller's ability to perform this Agreement or any aspect
of the transactions contemplated by this Agreement;
(G) any claim or action by any third party to the extent
based on an allegation that such third party has the right to buy the
Business;
(H) any liability or obligation as set forth in Article
VIII.
(ii) The indemnification provided for in Section 6.2(a)(i) above
is the Buyer Indemnified Parties' exclusive remedy for breaches of
representations, warranties, covenants, agreements and the other matters
for which indemnification is made and is subject to the following
limitations:
(A) Seller's liability pursuant to Section 6.2(a)(i)(A)
shall be subject to the following limitations: (1) Seller shall be
responsible for the first $500,000 in Losses; (2) Seller shall be
responsible for 75% of the next $2,500,000 in Losses; (3) Seller shall
be responsible for all Losses in excess of $3,000,000 unless
Designated Buyer and MSC waived any right to be indemnified by Seller
with respect to Losses in excess of $3,000,000 to reinstate the
Agreement pursuant to Section 5.1(d), in which event Seller shall not
be responsible for any Losses in excess of $3,000,000; and (4) Seller
shall not be responsible for Losses pursuant to Section 6.2(a)(i)(A)
and (B) exceeding 10% of the Final Purchase Price (the "Cap");
(B) Seller's liability pursuant to Section 6.2(a)(i)(B)
shall be subject to the following limitations: (1) Seller shall not
be responsible for any individual Loss less than $10,000; (2) Seller
shall not be responsible for any Losses unless and to the extent all
such Losses exceed an amount equal to 1% of the Final Purchase Price
(the "Deductible") (at which time Seller shall only be liable for
the amount of such Losses in excess of the Deductible) and (3) Seller
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shall not be responsible for Losses pursuant to Section 6.2(a)(i)(A)
and (B) exceeding the Cap.
(b) Indemnification Provisions for the Benefit of Seller.
(i) MSC and Designated Buyer (the "1 Buyer Indemnifying
Parties") shall jointly and severally indemnify Seller and its respective
officers, directors, shareholders, employees, agents, representatives,
affiliates, successors and permitted assigns (collectively, the "1 Seller
Indemnified Parties") and hold each of them harmless from and against and
pay on behalf of or reimburse such Seller Indemnified Parties in respect of
any Loss which any such Seller Indemnified Party may suffer, sustain or
become subject to, as the result of, in connection with, relating to or
incidental to or by virtue of :
(A) the breach by MSC or Designated Buyer of any
representation or warranty made by MSC or Designated Buyer contained
in this Agreement or any certificate delivered by MSC or Designated
Buyer to Seller with respect thereto in connection with the Closing;
(B) the breach of any covenant or agreement made by MSC or
Designated Buyer contained in this Agreement or in the Side Labor
Agreement, dated as of the date hereof, by and among the Parties;
(C) any Assumed Liability;
(D) any Purchased Asset;
(E) with respect to employees who are employed by Seller
immediately prior to the Closing, any liability or obligation of MSC
or Designated Buyer from Designated Buyer's decision not to hire such
employees or decision to hire such employees but change the terms and
conditions of their employment with Designated Buyer from the terms
and conditions such employees maintained with Seller prior to the
Closing Date;
(F) any liability or obligation as set forth in Article
VIII; and
(G) Post-closing operations of the Business.
(ii) MSC and Designated Buyer shall not be liable to the Seller
Indemnified Parties pursuant to Section 6.2(b)(i)(A) for (A) any individual
Loss less than $10,000, (B) any Losses unless and until the aggregate of
all Losses exceed the Deductible (at which time the Buyer Indemnified
Parties shall only be liable for the amount of such Losses in excess of the
Deductible) or (C) any Losses exceeding the Cap.
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(c) If a party hereto seeks indemnification under this Article VI,
such party (the "1 Indemnified Party") shall give prompt written notice to the
other party (the "1 Indemnifying Party") after receiving written notice of any
action, lawsuit, proceeding, investigation or other claim against it (if by a
third party) or discovering the liability, obligation or facts giving rise to
such claim for indemnification, describing the claim, the amount thereof (if
known and quantifiable), and the basis thereof; provided that the failure to so
notify the Indemnifying Party shall not relieve the Indemnifying Party of its
obligations hereunder except to the extent such failure prejudices the defense
of the claim. If any action, lawsuit, proceeding, investigation or other claim
shall be brought or asserted by any third party which would entitle the
Indemnified Party to indemnity pursuant to Article VI, the Indemnifying Party
shall undertake the defense of such action, lawsuit, proceeding, investigation
or other claim giving rise to the Indemnified Party's claim for indemnification
at the Indemnifying Party's expense; provided that the Indemnified Party shall
have the right to defend at the Indemnifying Party's expense if the claim (i)
primarily seeks non-monetary relief against the Indemnified Party, (ii) involves
criminal allegations against the Indemnified Party, (iii) involves a claim
which, upon petition by the Indemnified Party, the appropriate court rules that
the Indemnifying Party failed or is failing to prosecute or defend vigorously,
or (iv) involves a claim which could reasonably be expected to involve a Loss in
excess of the Cap. In any such case, the Indemnifying Party may participate in
the defense thereof at its expense. The Indemnifying Party shall (and shall
cause its counsel to) fully inform the Indemnified Party (and its counsel) from
time to time of the status of the action, lawsuit, proceeding, investigation or
other claim.
If the Indemnifying Party is conducting the defense, the Indemnified
Party shall have the right to employ counsel separate from counsel employed by
the Indemnifying Party in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel employed by the Indemnified
Party shall be at the expense of the Indemnified Party unless (i) the employment
thereof has been specifically authorized by the Indemnifying Party in writing or
(ii) the Indemnifying Party has been advised by its counsel that a conflict of
interest prevents it from representing the Indemnified Party without consent and
such consent is reasonably withheld, in which case, the fees and expenses of
such counsel will be the expense of the Indemnifying Party.
If the Indemnifying Party shall control the defense of any such claim,
the Indemnifying Party shall obtain the prior written consent of the Indemnified
Party (which shall not be unreasonably withheld) before entering into any
settlement of a claim or ceasing to defend such claim, if pursuant to or as a
result of such settlement or cessation, an injunction or other equitable relief
will be imposed against the Indemnified Party or if such settlement does not
expressly unconditionally release the Indemnified Party from all liabilities and
obligations with respect to such claim, without prejudice.
(d) The Indemnified Party and the Indemnifying Party shall use their
reasonable best efforts to mitigate any Losses arising under this Agreement.
The Parties will cooperate in the defense of any third party action, claim or
lawsuit.
(e) Amounts paid on behalf of any Party as indemnification (other
than indemnification with respect to Excluded Assets or Excluded Liabilities)
shall be treated as adjustments to the Final Purchase Price.
Asset Purchase Agreement Page 29
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(f) Within three days after any claim brought by an Indemnified Party
is fully and finally determined (as defined below) under the provisions of this
Agreement, the Indemnifying Party shall pay the Indemnified Party in immediately
available funds the amount of the Indemnified Party's Loss; provided that if the
Seller and/or the shareholders of the Seller do not pay such amount within such
three-day period then Designated Buyer may, at its election, reduce the
principal and/or accrued interest on the Promissory Note for the amount of the
Loss which is unpaid. Full and final determination as used herein shall
exclusively mean one of the following: (i) written agreement of the Parties and
(ii) a final judgment of a court of competent jurisdiction or final award of an
arbitration pursuant to Section 9.8. If at any time the Indemnifying Party
agrees that it is liable for Losses under the provisions of the Agreement, but
disputes the amount of Losses for which it is responsible, the Indemnifying
Party shall promptly pay the amount of such Losses that are not in dispute.
Article VII
Pre-Closing Covenants
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
7.1 General. Each of the Parties will use its reasonable best efforts to
take all actions and to do all things necessary in order to consummate and make
effective the transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Article
II).
7.2 Notices and Consents. Seller will give any notices to third parties,
and Seller and Designated Buyer will use their commercially reasonable efforts
to obtain any third party consents, that Designated Buyer reasonably may request
in connection with the matters referred to in Schedule 3.4. Each of the Parties
will give any notices to, make any filings with, and use its reasonable best
efforts to obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to in Section 3.4
or Schedule 3.13. Without limiting the generality of the foregoing, each of the
Parties will file any Notification and Report Forms and related material that it
may be required to file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the HSR Act, will use
its reasonable best efforts to obtain a termination from the applicable waiting
period, and will make reasonably promptly any further filings pursuant thereto
that may be necessary in connection therewith.
7.3 Operation of Business. Prior to 30 days after the date hereof, unless
an emergency condition shall exist, Seller shall obtain Designated Buyer's prior
consent before (a) entering into any contract with a term extending beyond 30
days after the date hereof and involving in excess of $500,000 other than
purchase or sales agreements in the ordinary course of the Business aggregating
not more than $20,000,000 in case of purchases or $24,000,000 in the case of
sales or (b) make any material purchases of computer software or hardware during
such period. At all times prior to the Closing Date, Seller will not engage in
any practice, take any action, or enter into any transaction outside the
ordinary course of the Business, except as set forth on Schedule 7.3.
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7.4 Preservation of Business. Seller will use commercially reasonable
efforts to keep its Business and properties substantially intact, including its
present operations, physical facilities, working conditions and relationships
with lessors, licensors, suppliers, customers, and employees, and to maintain
insurance coverage.
7.5 Full Access. Seller will permit representatives of MSC and Designated
Buyer to have reasonable access at all reasonable times, and in a manner so as
not to unreasonably interfere with the normal business operations of Seller, to
all premises, properties, personnel, books, records (including tax records),
contracts, and documents of or pertaining to Seller. MSC and Designated Buyer
will treat and hold as such any Confidential Information they receive from
either Seller or its shareholders in the course of the reviews contemplated by
this Section 7.5, will not use any of the Confidential Information except in
connection with this Agreement, and, if this Agreement is terminated for any
reason whatsoever, will return to Seller all tangible embodiments (and all
copies) of the Confidential Information which are in its possession.
7.6 Notice of Developments. Each Party will forthwith give written
notice to the other Party of any breach of any of its own representations and
warranties in Articles III and IV or any breach of the other Party's
representations and warranties which it discovers or of which it otherwise
becomes aware (except for notice from such other Party).
7.7 Title Insurance. At Buyer's expense, Seller will obtain and deliver
within a reasonable time after the Closing Date the following title insurance
commitments, policies, and riders with respect to each parcel of real estate
included in the Purchased Assets, an ALTA Owner's Policy of Title Insurance Form
B-1987 (or equivalent policy reasonably acceptable to Designated Buyer if the
real property is located in a state in which an ALTA Owner's Policy of Title
Insurance Form B-1987 is not available) issued by a title insurer reasonably
satisfactory to Designated Buyer (and, if requested by Designated Buyer,
reinsured in whole or in part by one or more insurance companies and pursuant to
a direct access agreement reasonably acceptable to Designated Buyer), in such
amount as Designated Buyer reasonably may determine to be the fair market value
of such real property (including all improvements located thereon), insuring
title to such real property to be in Designated Buyer as of the Closing (subject
only to Permitted Encumbrances).
Each title insurance policy shall (A) insure title to the real property and
all recorded easements benefiting such real property, (B) contain an "extended
coverage endorsement" insuring over the general exceptions contained customarily
in such policies, (C) contain an ALTA Zoning Endorsement 3.1 (or equivalent),
(D) contain an endorsement insuring that the real property described in the
title insurance policy is the same real estate as shown on the Survey delivered
with respect to such property, (E) contain an endorsement insuring that each
street adjacent to the real property is a public street and that there is direct
and unencumbered pedestrian and vehicular access to such street from the real
property, (F) contain an inflation endorsement providing for annual adjustments
in the amount of coverage corresponding to the annual percentage increase, if
any, in the United States Department of Commerce Composite Construction Cost
Index (Base Year = 1997), (G) if the real property consists of more than one
record parcel, contain a "contiguity" endorsement insuring that all of the
record parcels are contiguous to one another, and (H) contain a "non-imputation"
endorsement to the effect that title defects known to the officers, directors,
and shareholders of the owner prior to the Closing shall not be deemed "facts
known to the insured" for purposes of the policy. Prior to closing, Seller
Asset Purchase Agreement Page 31
<PAGE>
shall deliver to Designated Buyer the forms of the policies of title insurance
and endorsements proposed by the title insurance company with respect to such
policies together with a statement of the exceptions proposed by the title
insurance company as of a date after the date of this Agreement. Designated
Buyer shall communicate directly with the title insurance company with respect
to any matters with which it is dissatisfied.
7.8 Surveys. With respect to each parcel of real property that Seller
owns and as to which a title insurance policy is to be procured pursuant to
Section 7.7, at Buyer's expense, Seller will procure prior to the Closing a
current survey of the real property certified to Designated Buyer and any Lender
of MSC or Designated Buyer, prepared by a licensed surveyor and conforming to
current ALTA Minimum Detail Requirements for Land Title Surveys, disclosing the
location of all improvements, easements, party walls, sidewalks, roadways,
utility lines, and other matters shown customarily on such surveys, and showing
access affirmatively to public streets and roads (the "1 Survey").
7.9 Customer, Supplier and Employee Contact. Prior to the Closing Date,
Seller and Designated Buyer shall mutually agree upon all communications with
customers, suppliers and employees of Seller relating to this Agreement and the
transactions contemplated hereunder (it being understood that Designated Buyer
shall have the right after consultation with Seller to contact such customers
and suppliers in connection with its investigation of the Business).
7.10 Expenses. Seller, MSC and Designated Buyer shall pay all of their
own fees, costs and expenses (including, without limitation, fees, costs and
expenses of legal counsel, investment bankers, brokers or other representatives
and consultants and appraisal fees, costs and expenses) incurred in connection
with the negotiation, execution and delivery of this Agreement, the performance
of its obligations hereunder and the consummation of this Agreement and the
transactions contemplated hereby. The filing fee in connection with the filing
under the HSR Act will be split evenly between Designated Buyer and Seller.
Article VIII
Certain Environmental Matters
8.1 Definitions. The following terms shall have the following meanings
for purposes of this Article VIII:
"Environmental Losses" means (i) all costs required to investigate
and/or remediate an On-Site Environmental Matter (including response costs
paid to others) to the extent required by a governmental entity with
authority to require investigations and/or remediation or otherwise
required by Environmental and Safety Requirements, and (ii) all other
Losses to the extent caused by or arising from such Onsite Environmental
Matters, including without limitation, damages for personal injury, damages
to adjacent property, and natural resource damages.
Asset Purchase Agreement Page 32
<PAGE>
"Known On-Site Environmental Matters" means On-Site Environmental
Matters that are identified by a Phase II Audit and On-Site Environmental
Matters discovered thereafter in locations assessed in the Phase II Audit
and on the Phase II Audit sites for which persuasive evidence exists of
pre-Closing origin.
"On-Site Environmental Matters" means contamination that exists on or
has emanated from the Owned Real Property or the Leased Real Property.
"Phase II Audit" means the extraction and analyzing of soil and ground
water samples from the Owned Real Property pursuant to Section 8.2 as
reported to Designated Buyer and Seller in Designated Buyer's Phase II
Audit.
"Post-Closing On-Site Environmental Matters" means On-Site
Environmental Matters that (i) arise or result from operations or
activities which occur on or after the Closing Date, or (ii) are discovered
in locations assessed in the Phase II Audit but which were not discovered
or identified by such Phase II Audit (absent persuasive evidence of pre-
Closing origin, which evidence may include indications of environmental
impact occurring after completion of the Phase II Audits).
"Undiscovered Post-Closing On-Site Environmental Matters" means On-
Site Environmental Matters that are discovered in locations not assessed in
the Phase II Audit that arose or resulted from operations or activities
occurring prior to the Closing Date.
8.2 Phase II Audits. Seller shall complete its investigation to
determine the presence of hazardous materials in, on or about the soil, soil gas
or groundwater at the Owned Real Property and Leased Real Property ("Seller's
Phase II Audit") by November 26, 1997. The scope of work shall be as set forth
in Schedule 8.2(A) ("Scope of Work"). Seller shall have sole discretion to
direct the work for Seller's Phase II Audit. Seller shall have sole discretion
to select the consultant to perform the work for Seller's Phase II Audit,
provided the consultant is one appearing on the list set forth in Schedule
8.2(B). Seller may implement the Scope of Work by conducting preliminary soil
and soil vapor sampling ("Preliminary Sampling") without conducting
groundwater sampling. If Seller determines from the results of the Preliminary
Sampling that the Remediation Costs (as defined below) will exceed a sum which
makes the consummation of this Agreement commercially impractical ("Remediation
Cost Threshold"), Seller may elect to terminate this Agreement pursuant to
Section 5.1(f), and Seller shall immediately notify Buyer of that determination,
but in no event later than November 26, 1997. If Seller determines the
Remediation Costs will not likely exceed the Remediation Cost Threshold based
upon the results of the Preliminary Sampling, Seller shall complete the work set
forth in the Scope of Work. All work performed and information developed in
conjunction with the Seller's Phase II Audit shall remain the confidential
information of Seller unless and until it is disclosed to Designated Buyer.
Designated Buyer agrees to pay Seller on demand for all costs of the consultant
performing the work for Seller's Phase II Audit incurred in conducting Seller's
Phase II Audit. After Seller completes Seller's Phase II Audit, Seller shall
determine whether the cost to remove, remediate or cleanup any hazardous
materials identified in the Seller's Phase II Audit will exceed the Remediation
Cost Threshold, including, without limitation, all costs and fees for
consultants, contractors, attorneys, disposal, treatment, taxes, fees,
transportation and oversight ("Remediation Costs"). Seller's preliminary
determination shall be made by November 26, 1997.
Asset Purchase Agreement Page 33
<PAGE>
If Seller determines the Remediation Costs will not exceed the Remediation
Cost Threshold, Seller shall (i) inform Designated Buyer of that determination
in writing (the "Preliminary Determination Notice") and (ii) provide Buyer
immediately with the consultant's report which documents completion of and
contains all data gathered in the course of Seller's Phase II Audit ("Seller's
Phase II Audit Report"). Upon receipt of Seller's Phase II Audit Report,
Designated Buyer shall determine in its discretion whether to verify or
supplement the results in Seller's Phase II Audit Report. If Designated Buyer so
elects, which election must be made within two business days after receipt of
Seller's Phase II Audit Report, Designated Buyer shall immediately notify Seller
of the election, Designated Buyer shall be given reasonable access to the Owned
Real Property and Leased Real Property for the purpose of allowing Designated
Buyer's consultant to collect samples of soil, soil vapor and surface or ground
water at the locations identified in the Scope of Work at such additional
locations as are reasonably warranted by the results of the Seller's Phase II
Audit ("Designated Buyer's Phase II Audit").
Designated Buyer shall memorialize the results of Designated Buyer's Phase
II Audit in a report ("Designated Buyer's Phase II Audit Report") and provide
it immediately to Seller. If the Phase II Audit identifies hazardous materials
to be removed, transported and disposed of, to the extent such materials are not
removed prior to the Closing Date, Seller will acquire a Temporary Generator
Identification Number in order to arrange for the removal, transportation and
disposal of such hazardous materials.
8.3 Seller's Responsibility for On-Site Environmental Matters. Seller
shall be responsible and pay for Environmental Losses to the extent arising from
any Known On-Site Environmental Matters, including any Environmental Losses
relating to the offsite treatment, storage, disposal or arrangement for disposal
of materials, substances or wastes identified in the Phase II Audit.
8.4 Buyer's Responsibility for On-Site Environmental Matters. Buyer
shall be responsible and pay for Environmental Losses to the extent arising from
any Post-Closing On-Site Environmental Matters.
8.5 Shared Responsibility for On-Site Environmental Matters. Buyer and
Seller agree to share responsibility and costs between them for Environmental
Losses to the extent arising from any Undiscovered Post-Closing On-Site
Environmental Matters, in accordance with the following percentages during the
time periods specified:
<TABLE>
<CAPTION>
Seller Buyer
<S> <C> <C>
Environmental Losses as to which notification of an 75% 25%
indemnification claim is properly given pursuant to Section 6.2
hereof during the first year following the Closing Date
Environmental Losses as to which notification of an 50% 50%
indemnification claim is properly given pursuant to Section 6.2
during the second year following the Closing Date
</TABLE>
Asset Purchase Agreement Page 34
<PAGE>
<TABLE>
<S> <C> <C>
Environmental Losses as to which notification of an
indemnification claim is properly given pursuant to Section 6.2 25% 75%
during the third year following the Closing Date
Environmental Losses as to which notification of an
indemnification claim is not properly given during the first three 0% 100%
years incurred following the Closing Date incurred thereafter
</TABLE>
8.6 Reimbursement. Buyer and Seller each agree to reimburse the other for
Environmental Losses incurred by such other Party as needed to achieve the
allocation set forth in Sections 8.3, 8.4 and 8.5 above. Such reimbursement
shall be made immediately upon presentation of evidence of the Environmental
Loss incurred.
8.7 Remedial Action. With respect to any indemnification claim hereunder
with respect to Onsite Environmental Matters after the Closing Date as to which
investigatory, corrective or remedial work ("Remedial Action") is to be
conducted at the Owned Real Property or the Leased Real Property, the Party who
bears the greater proportion of liability with respect to such matters shall
have the right to principally manage the subject matter of the Claim, which
right shall include, without limitation, the right acting reasonably to select
and retain technical and legal experts, determine the type and scope of any
Remedial Action, determine appropriate cleanup levels, and conduct negotiations
and reach settlements with government agencies and third parties. In connection
therewith, such Party shall reasonably consult with the other Party throughout
the course of the Remedial Action, provide the other Party with copies of all
material reports and correspondence submitted to governmental agencies with
respect to the Remedial Action, and provide a reasonable opportunity for the
other Party to participate in the planning of and attend any material meetings
or negotiations with governmental agencies and third parties and to afford such
other Party the right to approve material decisions relating to such matter (not
to be unreasonably withheld). When the liability is identical, Designated Buyer
shall control the Remedial Action; provided, however, that if Seller desires
joint control, the Parties shall control the Remedial Action jointly.
Article IX
Other Agreements
9.1 Continuing Assistance. Seller and Designated Buyer shall (a) each
provide the other with such assistance as may reasonably be requested by either
of them including, without limitation, in connection with the preparation of any
Tax Return, audit or other examination by any taxing authority or judicial or
administrative proceedings relating to liability for Taxes (including staff
assistance without charge in connection with Seller's 1997 Tax Returns and
Seller's financial statements for the period including the Closing Date and
otherwise on a reasonable basis and at the requesting Party's expense equal to
the providing Party's base salary cost), (b) each retain and provide the other,
with any records of other information which may be relevant to such Tax Return,
audit or examination, proceeding or determination, and (c) each provide the
other with any final determination of any such audit or examination, proceeding
or determination that affects any amount required to be shown on any Tax Return
of the other for any period. Without limiting the generality of the foregoing,
MSC shall retain, and shall cause
Asset Purchase Agreement Page 35
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Designated Buyer to retain, and Seller shall retain, until the applicable
statutes of limitations (including any extensions) have expired, copies of all
Tax Returns, supporting work schedules and other records or information which
may be relevant to such Tax Returns for all tax periods or portions thereof
ending before or including the Closing Date and shall not destroy or otherwise
dispose of any such records without first providing the other Party with a
reasonable opportunity to review and copy the same.
9.2 Tax Matters.
(a) All transfer, documentary, sales, use, stamp, registration and
other such Taxes and fees (including any penalties and interest thereon)
incurred in connection with this Agreement shall be paid by Seller when due, and
Seller shall, at its own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and if required by applicable law,
Designated Buyer shall, and shall cause its affiliates to, join in the execution
of any such Tax Returns and other documentation. Promptly after the Closing
Date, Seller shall make its books and records available to the State of
California State Board of Equalization and cooperate with Designated Buyer's
request for a sales tax clearance certificate from the State of California State
Board of Equalization indicating that all sales tax, interest and penalties due
from Seller have been paid.
(b) All real property taxes, personal property taxes, ad valorem
obligations and similar taxes imposed on a periodic basis, in each case levied
with respect to the Purchased Assets, other than conveyance taxes provided for
in Section 9.2(a), for a taxable period which includes (but does not end on) the
Closing Date (collectively, the "1 Apportioned Obligations") shall be
apportioned between Seller and Designated Buyer as of the Closing Date based on
the number of days of such taxable period included in the post-Closing tax
period. Seller shall be liable for the proportionate amount of such Taxes that
is attributable to the pre-Closing tax period. Within 10 days after receiving a
bill for such Taxes, Seller and Designated Buyer shall present a statement of
the reimbursement to which each is entitled under this Section 9.2(b), together
with such supporting evidence as is reasonably necessary to calculate the
proration amount. The proration amount shall be paid by the party owing it to
the other within 10 days after delivery of such statement. Thereafter, Seller
shall notify Designated Buyer upon receipt of any bill for real or personal
property taxes relating to the Purchased Assets, part or all of which are
attributable to the post-Closing tax period, and shall promptly deliver such
bill to Designated Buyer who shall pay the same to the appropriate taxing
authority; provided that if such bill covers the pre-Closing tax period, Seller
shall also remit prior to the due date of assessment to Designated Buyer payment
for the proportionate amount of such bill that is attributable to the pre-
Closing tax period. In the event that either Seller or Designated Buyer shall
thereafter make a payment for which it is entitled to reimbursement under this
Section 9.2(b), the other party shall make such reimbursement promptly but in no
event later than 30 days after the presentation of a statement setting forth the
amount of reimbursement to which the presenting party is entitled along with
such supporting evidence as is reasonably necessary to calculate the amount of
reimbursement. Any such payment required under this Section 9.2(b) and not made
within 10 days of delivery of the statement shall bear interest at the rate per
annum determined, from time to time, under the provisions of Section 6621(a)(2)
of the Code for each day until paid.
Asset Purchase Agreement Page 36
<PAGE>
(c) Designated Buyer and Seller shall allocate the Final Purchase
Price among the Purchased Assets under the residual method as described in
Section 1060 of the Code in accordance with the fair market value of the assets
as set forth on the Purchase Price Allocation Schedule in Exhibit E and shall be
used by both Designated Buyer and Seller for all purposes (including financial
accounting and tax purposes). Designated Buyer and Seller agree to timely file
IRS Form 8594.
(d) As used in this Agreement, the following terms shall have the
following respective meanings:
(i) "Code" means the Internal Revenue Code of 1986, as
amended.
(ii) "Tax" or "Taxes" means any federal, state, local or
foreign income, gross receipts, franchise, alternative or add-on minimum,
estimated, sales, use, transfer, registration, value added, excise, stamp,
environmental, customs, duties, real property, personal property, capital
stock, license, social security, unemployment, disability, payroll,
employee or other withholding, or other tax, of any kind whatsoever,
including any interest, penalties or additions to tax or additional amounts
in respect of the foregoing.
(iii) "1 Tax Returns" means returns, declarations, reports,
claims for refund, information returns or other documents (including any
related or supporting schedules, statements or information) filed or
required to be filed in connection with the determination, assessment or
collection of Taxes of any party or the administration of any laws,
regulations or administrative requirements relating to any Taxes.
9.3 Press Releases and Announcements. Prior to the Closing Date, no press
releases related to this Agreement and the transactions contemplated herein, or
other announcements to the employees, customers or suppliers of Seller shall be
issued without the mutual approval of MSC and Seller, except for any public
disclosure which any Party in good faith believes is required by law or
regulation. After the Closing Date, Seller shall not issue a press release
related to this Agreement without Designated Buyer's consent, which shall not be
unreasonably withheld. After the Closing Date, no press releases containing any
disclosure of the dollar amounts of the consideration paid to Seller under this
Agreement or disclosure of the names of Seller's shareholders shall be issued
without Seller's consent. Designated Buyer shall attempt to obtain confidential
treatment of the dollar amount of the consideration paid to Seller in any filing
with the Securities and Exchange Commission.
9.4 Further Assurances. Seller shall execute and deliver such further
instruments of conveyance and transfer and take such additional action as
Designated Buyer may reasonably request to effect, consummate, confirm or
evidence the transfer to Designated Buyer of the Purchased Assets and any other
transactions contemplated hereby, including causing the release of any Liens
with respect to the Purchased Assets.
9.5 Confidentiality. Seller shall treat and hold as confidential any
confidential information concerning the Business, the Purchased Assets or this
Agreement (the "Confidential Information"), refrain from using any of the
Confidential Information except in connection with this Agreement, and after the
Closing deliver promptly to Designated Buyer or destroy, at the request and
option of Designated Buyer, all tangible embodiments (and all copies) of the
Asset Purchase Agreement Page 37
<PAGE>
Confidential Information (other than the Agreement) which are in its possession
or under its control except for the Excluded Assets; provided, that the term
"Confidential Information" shall not include information that is or subsequently
becomes generally available to the public through no fault of Seller. In the
event that Seller is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, Seller shall notify Designated Buyer promptly of the request or
requirement so that Designated Buyer may seek an appropriate protective order or
waive compliance with the provisions of this Section 9.5. If, in the absence of
a protective order or the receipt of a waiver hereunder, Seller is, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, Seller may disclose the Confidential
Information to the tribunal; provided that Seller shall give prior written
notice of such disclosure to Designated Buyer as promptly as possible and shall
use its best efforts to obtain, at the request of Designated Buyer, an order or
other assurance that confidential treatment shall be accorded to such portion of
the Confidential Information required to be disclosed as Designated Buyer shall
designate.
9.6 Change of Corporate Name and Trade Name. Seller shall prepare and
deliver at Closing an amendment to Seller's articles of incorporation to delete
"Colorstrip, Inc." from its corporate name and to otherwise change its corporate
name to a name dissimilar to its present name. Seller shall, at its own
expense, immediately following Closing, file such name change document with the
Secretary of State of the State of California. Seller shall not use or permit
any of its Affiliates to use the names "Colorstrip" or "Pinole Point Steel
Company" or any names confusingly similar thereto in any manner anywhere in the
world after Closing.
9.7 Real Property Adjustments. Prior to the fifth anniversary of the
date of this Agreement, Seller shall be permitted access to and across
Designated Buyer's property for the purposes identified on Exhibit L (the
"Adjustments"). Seller will give Designated Buyer written notice of its
intention to make any Adjustment. Designated Buyer and Seller shall mutually
determine a date for Seller to access Designated Buyer's property to make the
Adjustments.
9.8 Agreements Regarding Certain Labor Matters.
(a) Certain Racial Harassment Matters. With respect to that certain
litigation stylized Adams v. Pinole Point Steel Company et al., Case No. #-92-
1962 MHP (the "Alleged Harassment Action"):
(i) No Buyer Indemnified Party shall be responsible for any
Losses or have any obligation to defend any claims, including, without
limitation, claims of racial harassment relating to the Alleged Harassment
Action with respect to facts and circumstances existing on or prior to the
Closing. Seller shall indemnify, defend and hold harmless each of the
Buyer Indemnified Parties from and against any and all Losses which any
Buyer Indemnified Party may suffer, sustain or become subject to, as a
result of, in connection with, relating to or incidental to or by virtue of
the Alleged Harassment Action with respect to facts and circumstances
existing on or prior to the Closing.
(ii) No Seller Indemnified Parties shall be responsible for any
Losses or have any obligation to defend any claims, including, without
limitation, claims of racial harassment relating to the Alleged Harassment
Action with respect to facts and
Asset Purchase Agreement Page 38
<PAGE>
circumstances occurring solely due to the conduct of Designated Buyer after
the Closing. Designated Buyer shall indemnify, defend and hold harmless
each of the Seller Indemnified Parties from and against any and all Losses
which any Seller Indemnified Party may suffer, sustain or become subject
to, as a result of, in connection with, relating to or incidental to or by
virtue of the Alleged Harassment Action with respect to facts and
circumstances occurring solely due to the conduct of Designated Buyer after
the Closing.
(iii) In the event that as part of the Alleged Harassment Action,
a factual finding is made (or the record reflects that facts and
circumstances exist which indicate) that the Losses, if any, to be assessed
against Seller are due, in part, to the conduct of MSC or Designated Buyer
after the Closing, or the Losses, if any, to be assessed against MSC or
Designated Buyer are due, in part to the conduct of Seller on or prior to
the Closing, the Parties agree that such Losses which are imposed upon
Seller or Designated Buyer, as the case may be, shall be apportioned
between Seller and Designated Buyer pursuant to Section 9.8(b).
(b) Apportionment of Certain Claims. In the event that from and after
the Closing, any claims, suits, actions or proceedings relating to any employee
or former employee related matters, including, but not limited to, the Alleged
Harassment Action (collectively, the "Apportionment Claims") are initiated
which may result in liability to Seller, on the one hand, and MSC or Designated
Buyer, on the other hand, the Parties Agree that any Losses which are incurred,
suffering or sustained as a result of any Apportionment Claim shall be
apportioned between Seller and Designated Buyer as follows:
(i) by mutual written agreement within 20 days after Designated
Buyer or Seller gives written notice to Seller or Designated Buyer, as the
case may be;
(ii) If Seller and Designated Buyer are unable to reach mutual
written agreement within such 20 day period, Seller and Designated Buyer
agree to attend a non-binding, confidential mediation for the purposes of
reaching such an agreement (it being understood that such mediation shall
be held in San Francisco, California on consecutive business days, shall
commence within 15 business days after the conclusion of the 20-day period
described in the foregoing clause (i), shall continue for no longer than
three business days and shall be supervised by a mediator reasonably
acceptable to Seller and Designated Buyer); and
(iii) if Seller and Designated Buyer are unable to reach mutual
written agreement upon conclusion of the mediation described in the
foregoing clause (ii) or the mediation is not timely commenced and
completed, Seller and Designated Buyer shall submit such dispute to binding
arbitration, as the sole and exclusive method of resolving such
apportionment (it being understood that the arbitration shall be conducted
in accordance with the provisions of Schedule 9.8).
9.9 MSC Obligation. MSC shall cause Designated Buyer to perform all of its
obligations under this Agreement, the Promissory Note, the Consulting Agreement
and the Side Labor letter.
Asset Purchase Agreement Page 39
<PAGE>
9.10 Certain Uses of Proceeds.
(a) Seller has incurred certain borrowings from Bank of America
NT&SA ("Lender") under a credit agreement, and such borrowings are secured by
a security interest in certain of Seller's assets. In connection with the
Closing, Seller shall use cash proceeds of the Preliminary Purchase Price to pay
in full all of Seller's borrowings from Lender and to obtain Lender's release of
its security interest in Seller's assets.
(b) Seller has obtained financing from General Electric Capital
Corporation ("GE") to acquire ownership of a certain aircraft through a lease
arrangement, and GE has taken a security interest in certain of Seller's assets
to secure such financing until such time as Seller provides GE with a certain
letter of credit to secure such financing. In connection with the Closing,
Seller shall use cash proceeds of the Preliminary Purchase Price to obtain such
letter of credit in favor of GE and GE's release of its security interest in
Seller's assets.
9.11 Maintenance of Net Worth; Stockholder Guaranties.
(a) As set forth in this Section 9.11, Seller shall maintain
liquidity to provide means to perform its indemnification obligations hereunder.
From the Closing Date until the second anniversary of the Closing Date, Seller
shall maintain liquidity equal to the Cap. Thereafter, until the third
anniversary of the Closing Date, Seller shall maintain liquidity equal to
$7,000,000. Thereafter, until the fifth anniversary of the Closing Date, Seller
shall maintain liquidity equal to $3,500,000. At any time during any of the
foregoing periods, Seller's obligation to maintain liquidity shall be reduced by
the aggregate Losses, if any, paid by or on behalf of Seller under Sections
6.2(a)(i)(A) and (B) at or prior to such time.
(b) For purposes of determining compliance with Seller's liquidity
obligations, at any time of determination, Seller's liquidity shall be equal to
the sum of the following: (i) Seller's cash and cash equivalents at such time,
determined in accordance with GAAP, and (ii) the aggregate face amount of
standby letters of credit (issued by a reputable financial institution in favor
of Seller to support Seller's liquidity obligations to Designated Buyer)
outstanding at such time and securing demand loans from Seller to its
shareholders. Seller's indebtedness and other obligations shall be disregarded
in determining Seller's compliance with its liquidity obligations.
(c) Subject to the limitations hereinafter provided, Seller may make
distributions or loans to its shareholders from time to time provided that,
after giving effect to each such distribution, Seller is in compliance with its
liquidity obligations. Seller shall not make distributions or loans to any
shareholder unless and until such shareholder agrees in writing to reimburse
Seller on demand from the amounts distributed or loaned as needed to enable
Seller to satisfy the liquidity obligations; provided that Seller may make a
distribution or loan to its shareholders from time to time in amounts reasonably
estimated to enable them to pay income tax obligations attributable to the
transactions contemplated by this Agreement without the shareholders so agreeing
to reimburse such distribution or loan if after making such distributions or
loans Seller is in compliance with its liquidity obligations.
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Asset Purchase Agreement
<PAGE>
(d) Unless all of Seller's shareholders have executed and delivered
to Designated Buyer Stockholder Guaranties, if at any time Seller is not in
compliance with its liquidity obligations, Seller shall demand that its
shareholders contribute and repay to Seller such amounts as are necessary to
cause Seller to be in compliance with such obligations.
(e) At such time as all of the Seller's shareholders have executed
and delivered to Designated Buyer Shareholder Guaranties in the form attached
hereto as Exhibit Q (with such insertions thereto as are appropriate for such
shareholder and as approved by Designated Buyer, which approval shall not be
unreasonably withheld), Seller's obligations and limitations under this Section
9.11 shall cease.
Article X
Certain Payments And Fees
10.1 Initial Payment into Escrow. Concurrently with the execution and
delivery of this Agreement, Designated Buyer shall deposit into escrow (the
"Escrow Account") the sum of $5,000,000 (the "Escrow Amount"), pursuant to the
escrow agreement substantially in the form of Exhibit O, embodying the following
terms and conditions and such additional terms and conditions as may reasonably
be required by the Escrow Agent:
(a) The Escrow Account shall be maintained with Bank of America NT&SA
or other financial institution reasonably acceptable to Seller and Designated
Buyer (the "Escrow Agent").
(b) The fees and expenses of the Escrow Agent shall be paid from the
investment earnings on the funds on deposit in the Escrow Account; any interest
in excess of such fees and expenses shall be for the account of Designated
Buyer.
(c) Upon a written certification from either Seller or Designated
Buyer that Buyer Delay Fees are due and payable and the amount thereof, the
Escrow Agent shall make a distribution of such amount from the Escrow Account to
Seller (or in accordance with its written directions).
(d) Upon a written certification from either Seller or Designated
Buyer that the Buyer Break-up Fee is due and payable and the amount thereof, the
Escrow Agent shall make a distribution of such amount from the Escrow Account to
Seller (or in accordance with its written directions).
(e) Upon a written direction from Designated Buyer to do so, the
Escrow Agent shall make a distribution to Seller (or in accordance with its
written directions) from the Escrow Account to be applied to the Preliminary
Purchase Price.
Asset Purchase Agreement Page 41
<PAGE>
(f) Upon a written certification from Designated Buyer that this
Agreement has been terminated in accordance with Section 5.1(a), (c), (d), (e)
(unless a Buyer Breakup Fee is payable) or (f) hereof, the Escrow Agent shall
make a distribution of all amounts then remaining in the Escrow Account to
Designated Buyer (or in accordance with its written directions).
10.2 Delay Fees.
(a) Designated Buyer shall be obligated to pay Seller a delay fee
("Buyer Delay Fee") subject to the following terms and conditions:
(i) the Buyer Delay Fee shall be equal to $200,000 per week (or
partial week) for weeks ending on or before December 31, 1997; $1,000,000
for a delay from December 31, 1997 to January 1, 1998; and $400,000 per
week (or partial week) for weeks beginning on or after January 1, 1998.
(ii) the Buyer Delay Fee shall be payable for the period from
the Buyer Starting Date (as hereinafter defined) through the Closing Date
or the termination of this Agreement, as the case may be. The "Buyer
Starting Date" is the date on which all of the conditions specified in
Section 2.1 are satisfied (excluding: (A) deliveries to be made on the
Closing Date such as the legal opinion of Seller's counsel, the Consulting
Agreement executed by Peter Wais and Seller's officer's certificate
provided that Seller certifies that it is prepared to make such deliveries,
and (B) performance by Seller of its obligations under Section 9.10);
provided that the Buyer Starting Date shall not be earlier than the later
to occur of (i) 30 days following the date of this Agreement; (ii) December
15, 1997 and (iii) one day later than December 15, 1997 for each day after
November 26, 1997 that Seller has not delivered the Preliminary
Determination Notice referred to in Section 8.2 hereof.
(iii) Designated Buyer shall pay the Buyer Delay Fee without
demand in advance on the first business day of each week during any period
during which the Buyer Delay Fee is payable. Either Seller or Designated
Buyer may request the payment of the unpaid Buyer Delay Fee from the Escrow
Account from time to time.
(iv) The maximum aggregate amount of Buyer Delay Fees payable
hereunder shall be $5,000,000.
(b) Seller shall be obligated to pay Designated Buyer a delay fee
("Seller Delay Fee") subject to the following terms and conditions:
(i) the Seller Delay Fee shall be equal to $150,000 per week
(or partial week).
(ii) the Seller Delay Fee shall be payable for the period from
the Seller Starting Date (as hereinafter defined) through the Closing Date
or the termination of this Agreement, as the case may be. The "Seller
Starting Date" is the date on which all of the conditions specified in
Section 2.2 are satisfied (excluding deliveries to be made on the Closing
Date such as the legal opinion of MSC's and Designated Buyer's counsel, the
Consulting Agreement executed by Designated Buyer and Designated Buyer's
officer's
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Asset Purchase Agreement
<PAGE>
certificate provided Designated Buyer certifies that it is prepared to make
such deliveries); provided that the Seller Starting Date shall not be
earlier than January 1, 1998.
(iii) Seller shall pay the Seller Delay Fee without demand in
advance on the first business day of each week during any period during
which the Seller Delay Fee is payable.
(iv) The maximum aggregate amount of Seller Delay Fees payable
hereunder shall be $1,500,000.
(c) For purposes of determining the payment of the Buyer Delay Fees
or Seller Delay Fees, a week shall be deemed to begin on the day of the week
(e.g., Wednesday) that is the Buyer Starting Date or the Seller Starting Date,
as the case may be.
10.3 Break-up Fees.
(a) Designated Buyer shall be obligated to pay Seller a break-up fee
("Buyer Break-up Fee") in the amount of $5,000,000 (reduced by the amount of
any Buyer Delay Fees previously paid) if either: (1) Seller terminates this
Agreement pursuant to Section 5.1(b) or (2) Seller terminates this Agreement
pursuant to Section 5.1(e) and all of the conditions specified in Section 2.1
are satisfied (excluding: (A) deliveries to be made on the Closing Date such as
the legal opinion of Seller's counsel, the Consulting Agreement executed by
Peter Wais and Seller's officer's certificate provided that Seller certifies
that it is prepared to make such deliveries and (B) performance by Seller of its
obligations under Section 9.10).
(b) Seller shall be obligated to pay Designated Buyer a break-up fee
("Seller Break-up Fee") in the amount of $1,500,000 (reduced by the amount of
any Seller Delay Fees previously paid) if either: (1) Designated Buyer
terminates this Agreement pursuant to Section 5.1(c) or (2) Designated Buyer
terminates this Agreement pursuant to Section 5.1(e) and all of the conditions
specified in Section 2.2 are satisfied (excluding deliveries to be made on the
Closing Date such as the legal opinion of MSC's and Designated Buyer's counsel,
the Consulting Agreement executed by Designated Buyer and Designated Buyer's
officer's certificate provided Designated Buyer certifies that it is prepared to
make such deliveries).
(c) Notwithstanding paragraph (a) above, Designated Buyer shall not
be obligated to pay a Buyer Break-up Fee if either (i) the conditions specified
in any of Section 2.2(c), (e) or (f) have not been satisfied or (ii) Designated
Buyer has a right to terminate this Agreement under Section 5.1(c).
(d) Notwithstanding subsection (b) above, Seller shall not be
obligated to pay a Seller Break-up Fee if either (i) the conditions specified in
any of Section 2.1(c), (d), (e) or (f) have not been satisfied or (ii)
Designated Buyer has a right to terminate this Agreement under Section 5.1(b).
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Asset Purchase Agreement
<PAGE>
10.4 Topping Fee.
(a) If on or prior to the first anniversary of the date of this
Agreement, Seller sells the Business (whether by merger, sale of assets, sale of
shares, recapitalization, reorganization or otherwise) except pursuant to this
Agreement, then Seller shall promptly pay to Designated Buyer without demand a
fee (the "Subsequent Sale Fee").
(b) Notwithstanding paragraph (a) above, Seller shall not be
obligated to pay the Subsequent Sale Fee if (i) Seller terminated this Agreement
pursuant to Section 5.1(b), (ii) Designated Buyer terminated this Agreement but
Seller had the right to terminate this Agreement pursuant to Section 5.1(b),
(iii) either Designated Buyer or Seller terminated this Agreement and any of the
conditions specified in Section 2.1(c), (d), (e) or (f) were not satisfied (iv)
either Designated Buyer or Seller terminated this Agreement pursuant to Section
5.1(e) and any of the conditions specified in Section 2.2 were not satisfied
(disregarding deliveries to be made on the Closing Date such as the legal
opinion of MSC's and Designated Buyer's counsel, the Consulting Agreement
executed by Designated Buyer and Designated Buyer's officer's certificate
provided Designated Buyer certifies that it was prepared to make such
deliveries) or (v) the parties terminated this Agreement by mutual agreement.
(c) The Subsequent Sale Fee shall be in the amount of $5,000,000 if
the purchaser is any of Seller's shareholders or an entity controlled by any of
Seller's shareholders. In the case of any other purchaser and a purchase price
in excess of $126,670,000, the Subsequent Sale Fee shall be in an amount equal
to the lesser of (i) the amount by which the purchase price exceeds $126,670,000
and (ii) $5,000,000. If the purchase price is $126,670,000 or less, no
Subsequent Sale Fee shall be payable. In any case in which a Subsequent Sale Fee
is payable, such fee shall be reduced by the amount of any Seller Delay Fees and
any Seller Break-up Fee previously paid.
Article XI
Miscellaneous
11.1 Amendment and Waiver. This Agreement may be amended and any provision
of this Agreement may be waived if set forth in a writing executed by all
Parties. No course of dealing between or among any persons or entities having
any interest in this Agreement shall be deemed effective to modify, amend or
discharge any part of this Agreement or any rights or obligations of any party
under or by reason of this Agreement. No waiver of any provision of this
Agreement shall be deemed, or shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a continuing
waiver.
11.2 Notices. All notices, demands and other communications given or
delivered under this Agreement shall be in writing and shall be deemed to have
been given when personally delivered, one business day after being sent by
reputable overnight courier, transmitted by facsimile or telecopied (with hard
copy to follow). Notices, demands and communications to Seller, MSC and
Designated Buyer shall, unless another address is specified in writing, be sent
to the address or telecopy number indicated below:
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Asset Purchase Agreement
<PAGE>
<TABLE>
<CAPTION>
Notices to Seller: With a copy to:
<S> <C>
(prior to Closing) Coblentz, Cahen McCabe & Breyer, LLC
Colorstrip, Inc. 222 Kearny Street, 7th Floor
5000 Giant Road San Francisco, CA 94108
Post Office Box 4050 Attn: Barry Reder
Richmond, CA 94804
Attn: Peter E. Wais
Telecopy: (510)223-9140
(after Closing) With a copy to:
c/o Barry Reder Coblentz, Cahen McCabe & Breyer, LLC
Coblentz, Cahen McCabe & Breyer, LLC 222 Kearny Street, 7th Floor
222 Kearny Street, 7th Floor San Francisco, CA 94108
San Francisco, CA 94108 Attn: Barry Reder
Notices to MSC: With a copy to:
Material Sciences Corporation Kirkland & Ellis
2200 East Pratt Boulevard 200 East Randolph Drive
Elk Grove Village, IL 60007 Chicago, IL 60601
Attention: Chief Financial Officer Attention: Jill Sugar Factor
Telecopy: (847) 718-8643 Telecopy: (312) 861-2200
Notices to Designated Buyer: With a copy to:
MSC Pinole Point Steel Inc. Kirkland & Ellis
c/o Material Sciences Corporation 200 East Randolph Drive
2200 East Pratt Boulevard Chicago, IL 60601
Elk Grove Village, IL 60007 Attention: Jill Sugar Factor
Attention: Chief Financial Officer Telecopy: (312) 861-2200
Telecopy: (847) 718-8643
</TABLE>
Any Party may change its address for notice by giving notice of such change to
the other Parties in accordance with this Section.
11.3 Binding Agreement; Assignment.
(a) This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the Parties and their respective successors and
permitted assigns; provided that neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by Seller without the prior
written consent of Designated Buyer. Without limiting the generality of the
foregoing:
Page 45
<PAGE>
(i) Designated Buyer may (at any time prior to the Closing), at
its sole discretion, assign, in whole or in part, its rights and
obligations pursuant to this Agreement to one or more wholly owned
subsidiaries (including subsidiaries which may be organized subsequent to
the date hereof) of MSC;
(ii) MSC and Designated Buyer may assign its rights under this
Agreement for collateral security purposes to any lender providing
financing to MSC or Designated Buyer, or any of their affiliates and any
such lender may exercise all of the rights and remedies of Designated
Buyer, as applicable, hereunder; and
(iii) MSC and Designated Buyer may assign their respective
rights under this Agreement, in whole but not in part, to any subsequent
purchaser of MSC or Designated Buyer or any of their respective divisions
or any material portion of their respective assets (whether such sale is
structured as a sale of stock, a sale of assets, a merger or otherwise).
11.4 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
11.5 No Strict Construction. The language used in this Agreement shall be
deemed to be the language chosen by the Parties to express their mutual intent,
and no rule of strict construction shall be applied against any person or
entity.
11.6 Captions. The captions used in this Agreement are for convenience of
reference only and do not constitute a part of this Agreement and shall not be
deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement shall be enforced and construed
as if no caption had been used in this Agreement.
11.7 Entire Agreement. This Agreement and the documents referred to herein
contain the entire agreement between the Parties and supersede any prior
understandings, agreements or representations by or between the Parties, written
or oral, which may have related to the subject matter hereof in any way, except
for (i) any confidentiality agreement, (ii) the Labor Side Letter and (iii) the
side letter regarding proforma income statements, in each case between the
Parties which will continue in full force and effect.
11.8 No Third-Party Beneficiaries. This Agreement is for the sole benefit
of the Parties hereto, their successors, their permitted assigns and the other
Buyer Indemnified Parties and other Seller Indemnified Parties and nothing
herein expressed or implied shall give or be construed to give any person or
entity, other than the Parties hereto, such successors, such permitted assigns
and other Buyer Indemnified Parties and other Seller Indemnified Parties, any
legal or equitable rights hereunder.
11.9 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
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<PAGE>
11.10 Governing Law. All questions concerning the construction, validity
and interpretation of this Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California, without giving
effect to any choice of law or conflict of law provision (whether of the State
of California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California.
11.11 Waiver Of Jury Trial. As A Specifically Bargained Inducement For Each
Of The Parties To Enter Into This Agreement (Each Party Having Had Opportunity
To Consult Counsel), Each Party Expressly Waives The Right To Trial By Jury In
Any Lawsuit Or Proceeding Relating To Or Arising In Any Way From This Agreement
Or The Transactions Contemplated Herein.
11.12 Consent To Jurisdiction. The Parties Agree That Jurisdiction And
Venue In Any Action Brought By Any Party Pursuant To This Agreement Shall
Properly And Exclusively Lie In Any Federal Or State Court Located In The City
of San Francisco, California. By Execution And Delivery Of This Agreement, Each
Party Irrevocably Submits To The Jurisdiction Of Such Courts And In Respect Of
His Or Its Property With Respect To Such Action. The Parties Irrevocably Agree
That Venue Would Be Proper In Such Court, And Hereby Waive Any Objection That
Such Court Is An Improper Or Inconvenient Forum For The Resolution Of Such
Action. The Parties Further Agree That The Mailing By Certified Or Registered
Mail, Return Receipt Requested, Of Any Process Required By Any Such Court Shall
Constitute Valid And Lawful Service Of Process Against Them, Without Necessity
For Service By Any Other Means Provided By Statute Or Rule Of Court.
Notwithstanding The Foregoing, The Parties Agree To Submit Any Dispute Under
This Agreement To Mediation In San Francisco, California Before A Mutually
Acceptable Mediator; Provided, However, That A Party May First File A Lawsuit To
Toll Any Applicable Statute Of Limitations So Long As Such Party Does Not
Proceed With Such Lawsuit Until The Mediation Is Completed Or First File a
Lawsuit In Order To Seek Specific Performance, Injunctive Relief and/or
Equitable Relief. The Cost For Such Mediation Will Be Shared Equally By The
Parties.
11.13 Attorneys' Fees. In the event of litigation hereunder, the prevailing
party therein (as determined by the court) shall be entitled to reimbursement of
reasonable attorneys' fees and costs of suit.
[Balance of this page intentionally left blank]
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<PAGE>
11.14 Aid to Interpretation. As an aid in interpreting this Agreement,
where a matter is covered by a specific provision of this Agreement, such as a
particular representation and warranty, and would also appear to be within the
ambit of a more general provision of this Agreement, the parties intend that
matter be governed solely by the specific provision and not by the general
provision. As examples: (i) if the warranty with respect to governmental
licenses and permits is restricted to Seller's Knowledge, the existence of
unknown governmental licenses and permits would not violate any other warranty,
and (ii) environmental liabilities and warranties shall be governed solely by
the sections specifically addressing such matters and not by any other sections.
* * * *
In Witness Whereof, the parties have executed this Agreement as of the date
first written above.
Colorstrip, Inc.
By: ____________________________________
Its: ___________________________________
Material Sciences Corporation
By: ____________________________________
Its: ___________________________________
MSC Pinole Point Steel Inc.
By: ____________________________________
Its: ___________________________________
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
Asset Purchase Agreement Page 48
<PAGE>
Exhibit 10.1
================================================================================
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
Dated as of December 12, 1997
among
MATERIAL SCIENCES CORPORATION,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent,
and
Letter of Credit Issuing Bank
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
Arranged by
BANCAMERICA ROBERTSON STEPHENS
================================================================================
- --------------------------------------------------------------------------------
-2-
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms................................................ 1
1.2 Other Interpretive Provisions........................................ 22
1.3 Accounting Principles................................................ 23
ARTICLE II
THE CREDITS
2.1 Amounts and Terms of Commitments..................................... 23
2.2 Loan Accounts........................................................ 23
2.3 Procedure for Borrowing.............................................. 24
2.4 Conversion and Continuation Elections................................ 25
2.5 Voluntary Termination or Reduction of Commitments.................... 26
2.6 Optional Prepayments................................................. 27
2.7 Mandatory Prepayments of Loans....................................... 27
2.8 Repayment............................................................ 27
2.9 Interest............................................................. 27
2.10 Fees................................................................. 28
(a) Arrangement, Agency Fees........................................ 28
(b) Commitment Fees................................................. 28
2.11 Computation of Fees and Interest..................................... 29
2.12 Payments by the Company.............................................. 29
2.13 Payments by the Banks to the Agent................................... 30
2.14 Sharing of Payments, Etc............................................. 31
ARTICLE III
THE LETTERS OF CREDIT
3.1 The Letter of Credit Subfacility..................................... 31
3.2 Issuance, Amendment and Renewal of Letters of Credit................. 33
3.3 Existing BofA Letters of Credit; Risk Participations, Drawings and
Reimbursements..................................................... 35
3.4 Repayment of Participations.......................................... 37
3.5 Role of the Issuing Bank............................................. 38
-i-
<PAGE>
Section Page
3.6 Obligations Absolute................................................. 39
3.7 Cash Collateral Pledge............................................... 40
3.8 Letter of Credit Fees................................................ 40
3.9 Uniform Customs and Practice......................................... 41
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.1 Taxes................................................................ 41
4.2 Illegality........................................................... 43
4.3 Increased Costs and Reduction of Return.............................. 44
4.4 Funding Losses....................................................... 44
4.5 Inability to Determine Rates......................................... 45
4.6 Certificates of Banks................................................ 46
4.7 Survival............................................................. 46
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions of Initial Credit Extensions.............................. 46
(a) Credit Agreement, Notes and Guaranties.......................... 46
(b) Resolutions; Incumbency......................................... 46
(c) Organization Documents; Good Standing........................... 46
(d) Legal Opinions.................................................. 47
(e) Payment of Fees................................................. 47
(f) Certificate..................................................... 47
(g) Environmental Survey............................................ 48
(h) Existing Credit Facilities...................................... 48
(i) Other Documents................................................. 48
5.2 Conditions to All Credit Extensions.................................. 48
(a) Notice, Application............................................. 48
(b) Continuation of Representations and Warranties.................. 48
(c) No Existing Default............................................. 48
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Corporate Existence and Power........................................ 49
6.2 Corporate Authorization; No Contravention............................ 49
-ii-
<PAGE>
Section Page
6.3 Governmental Authorization........................................... 50
6.4 Binding Effect....................................................... 50
6.5 Litigation........................................................... 50
6.6 No Default........................................................... 50
6.7 ERISA Compliance..................................................... 51
6.8 Use of Proceeds; Margin Regulations.................................. 51
6.9 Title to Properties.................................................. 51
6.10 Taxes................................................................ 52
6.11 Financial Condition.................................................. 52
6.12 Environmental Matters................................................ 52
6.13 Regulated Entities................................................... 52
6.14 No Burdensome Restrictions........................................... 53
6.15 Reserved............................................................. 53
6.16 Subsidiaries......................................................... 53
6.17 Insurance............................................................ 53
6.18 Swap Obligations..................................................... 53
6.19 Full Disclosure...................................................... 53
6.20 Colorstrip Acquisition............................................... 53
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<PAGE>
Section Page
ARTICLE VII
AFFIRMATIVE COVENANTS
7.1 Financial Statements................................................. 54
7.2 Certificates; Other Information...................................... 55
7.3 Notices.............................................................. 56
7.4 Preservation of Corporate Existence, Etc............................. 57
7.5 Maintenance of Property.............................................. 57
7.6 Insurance............................................................ 57
7.7 Payment of Obligations............................................... 58
7.8 Compliance with Laws................................................. 58
7.9 Compliance with ERISA................................................ 58
7.10 Inspection of Property and Books and Records......................... 58
7.11 Environmental Laws................................................... 59
7.12 Use of Proceeds...................................................... 59
7.13 Subsidiary Guaranties................................................ 59
7.14 Year 2000 Compatibility.............................................. 59
7.15 Colorstrip Acquisition............................................... 59
ARTICLE VIII
NEGATIVE COVENANTS
8.1 Limitation on Liens.................................................. 60
8.2 Disposition of Assets................................................ 62
8.3 Consolidations and Mergers........................................... 63
8.4 Loans and Investments................................................ 63
8.5 Limitation on Indebtedness........................................... 65
8.6 Transactions with Affiliates......................................... 66
8.7 Use of Proceeds...................................................... 66
8.8 Contingent Obligations............................................... 66
8.9 Joint Ventures....................................................... 66
8.10 Lease Obligations.................................................... 66
8.11 Restricted Payments.................................................. 67
8.12 ERISA................................................................ 68
8.13 Change in Business................................................... 68
8.14 Accounting Changes................................................... 68
8.15 Immaterial Subsidiaries.............................................. 68
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<PAGE>
Section Page
ARTICLE VII
AFFIRMATIVE COVENANTS
9.1 Minimum Net Worth 69
9.2 Total Debt to Cash Flow 69
9.3 Fixed Charge Coverage Ratio 69
9.4 Private Placement Covenants 70
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<PAGE>
Section Page
ARTICLE X
EVENTS OF DEFAULT
10.1 Event of Default..................................................... 70
(a) Non-Payment..................................................... 70
(b) Representation or Warranty...................................... 70
(c) Specific Defaults............................................... 70
(d) Other Defaults.................................................. 70
(e) Cross-Default................................................... 70
(f) Insolvency; Voluntary Proceedings............................... 71
(g) Involuntary Proceedings......................................... 71
(h) ERISA........................................................... 71
(i) Monetary Judgments.............................................. 72
(j) Non-Monetary Judgments.......................................... 72
(k) Change of Control............................................... 72
(l) Guarantor Defaults.............................................. 72
10.2 Remedies............................................................. 72
10.3 Rights Not Exclusive................................................. 73
10.4 Certain Financial Covenant Defaults.................................. 73
ARTICLE XI
THE AGENT
11.1 Appointment and Authorization; "Agent"............................... 74
11.2 Delegation of Duties................................................. 74
11.3 Liability of Agent................................................... 75
11.4 Reliance by Agent.................................................... 75
11.5 Notice of Default.................................................... 76
11.6 Credit Decision...................................................... 76
11.7 Indemnification of Agent............................................. 77
11.8 Agent in Individual Capacity......................................... 77
11.9 Successor Agent...................................................... 77
11.10 Withholding Tax...................................................... 78
ARTICLE XII
MISCELLANEOUS
12.1 Amendments and Waivers............................................... 80
12.2 Notices.............................................................. 81
12.3 No Waiver; Cumulative Remedies....................................... 82
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<PAGE>
Section Page
12.4 Costs and Expenses................................................... 82
12.5 Company Indemnification.............................................. 83
12.6 Payments Set Aside................................................... 83
12.7 Successors and Assigns............................................... 83
12.8 Assignments, Participations, etc..................................... 84
12.9 Confidentiality...................................................... 85
12.10 Set-off.............................................................. 86
12.11 Automatic Debits of Fees............................................. 86
12.12 Notification of Addresses, Lending Offices, Etc...................... 87
12.13 Counterparts......................................................... 87
12.14 Severability......................................................... 87
12.15 No Third Parties Benefited........................................... 87
12.16 Governing Law and Jurisdiction....................................... 87
12.17 Waiver of Jury Trial................................................. 88
12.18 Entire Agreement..................................................... 88
-vii-
<PAGE>
SCHEDULES
Schedule 1.1A Acquisition Adjustments
Schedule 3.3 Existing BofA Letters of Credit
Schedule 6.5 Litigation
Schedule 6.7 ERISA
Schedule 6.11 Permitted Liabilities
Schedule 6.12 Environmental Matters
Schedule 6.16 Subsidiaries and Minority Interests
Schedule 6.17 Insurance Matters
Schedule 8.1 Permitted Liens
Schedule 8.5 Permitted Indebtedness
Schedule 8.8 Contingent Obligations
Schedule 8.9 Joint Ventures
Schedule 12.2 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Legal Opinion of Company's Counsel
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Promissory Note
Exhibit G Form of Guaranty
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<PAGE>
CREDIT AGREEMENT
----------------
This CREDIT AGREEMENT is entered into as of December 12, 1997, among
Material Sciences Corporation, a Delaware corporation (the "Company"), the
several financial institutions from time to time party to this Agreement
(collectively, the "Banks"; individually, a "Bank"), and Bank of America
National Trust and Savings Association, as letter of credit issuing bank and as
agent for the Banks.
WHEREAS, the Banks have agreed to make available to the Company a revolving
credit facility with letter of credit facility upon the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
-----------
1.1 Certain Defined Terms. The following terms have the following
meanings:
"Acquisition" means any transaction or series of related transactions for
the purpose of or resulting, directly or indirectly, in (a) the acquisition of
all or substantially all of the assets of a Person, or of any business or
division of a Person, (b) the acquisition of in excess of 50% of the capital
stock, partnership interests, membership interests or equity of any Person, or
otherwise causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other combination with another Person (other than a Person
that is a Subsidiary) provided that the Company or the Subsidiary is the
surviving entity.
"Acquisition Adjustments" means those certain adjustments to consolidated
net income of the Company and its Subsidiaries described on Schedule 1.1A
hereto.
<PAGE>
"Acquisition Costs" shall mean the purchase price and reasonably related
closing and transaction costs associated with an Acquisition, including, without
limitation, one time capital expenditures relating to an Acquisition.
"Acquisition Agreement" means that certain Asset Purchase Agreement dated
as November 14, 1997, by and between the Company, MSC Pinole Point Steel Inc., a
Delaware corporation, and Colorstrip, as amended or otherwise modified prior to
the Closing Date.
"Adjusted EBITDA" shall mean, as of the last day of any fiscal quarter for
the four consecutive fiscal quarter period then ended, Adjusted Net Income for
such period, plus (i) Adjusted Interest Charges for such period, plus (ii) the
aggregate amount deducted in determining such Adjusted Net Income in respect of
income taxes, depreciation, amortization and other similar non-cash charges for
such period.
"Adjusted EBITDAR" shall mean, as of the last day of any fiscal quarter for
the four consecutive fiscal quarter period then ended, Adjusted Net Income for
such period, plus (i) Adjusted Fixed Charges for such period, plus (ii) the
aggregate amount deducted in determining such Adjusted Net Income in respect of
income taxes, depreciation, amortization and other similar non-cash charges for
such period.
"Adjusted Fixed Charges" shall mean, for any period, the aggregate amount
of operating lease payments plus interest expense net of interest income of the
Company and its Subsidiaries which would have been paid or otherwise accrued
during such period if all operating leases and Indebtedness which existed
immediately after the consummation of any Acquisitions during such period were
in existence on the first day of such period; for purposes hereof, interest
expense shall include, without limitation, (i) the portion of any obligation
under capital leases allocable to interest expense in accordance with GAAP, and
(ii) the portion of any debt discount that shall be amortized in such period.
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<PAGE>
"Adjusted Interest Charges" shall mean, for any period, the aggregate
amount of interest expense net of interest income of the Company and its
Subsidiaries which would have accrued during such period if all Indebtedness
which existed immediately after the consummation of any Acquisitions during such
period was in existence on the first day of such period; for purposes hereof,
interest expense shall include, without limitation, (i) the portion of any
obligation under capital leases allocable to interest expense in accordance with
GAAP, and (ii) the portion of any debt discount that shall be amortized in such
period.
"Adjusted Net Income" shall mean, for any period, the consolidated net
income (or loss) of the Company and its Subsidiaries for such period, plus,
without duplication, the consolidated net income (or loss) for such period
attributable to the assets or capital stock of any Person which was the subject
of an Acquisition by the Company and its Subsidiaries during such period, after
Acquisition Adjustments, less (a) any extraordinary or non-recurring items of
gain under GAAP, plus (b) any extraordinary or non-recurring items of loss under
GAAP.
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, by contract,
or otherwise.
"Agent" means BofA in its capacity as agent for the Banks hereunder, and
any successor agent arising under Section 11.9.
"Agent-Related Persons" means BofA and any successor agent arising under
Section 11.9 and any successor letter of credit issuing bank hereunder, together
with their respective Affiliates (including, in the case of BofA, the Arranger),
and the officers, directors, employees and attorneys-in-fact of such Persons and
Affiliates.
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<PAGE>
"Agent's Payment Office" means the address for payments set forth on
Schedule 12.2 or such other address in the United States as the Agent may from
time to time specify.
"Agreement" means this Credit Agreement.
"Applicable Margin" as to any Offshore Rate Loan, Base Rate Loan or
Commitment Fee, means a margin based on the Company's Ratio of Total
Consolidated Indebtedness to Adjusted EBITDA, as follows:
<TABLE>
<CAPTION>
Consolidated Margin for Margin for Margin for
Indebtedness/ Offshore Rate Base Rate Loan Commitment Fee
Adjusted Loan
EBITDA (X)
===================================================================
<S> <C> <C> <C>
3.5:1. X 1.250% 0.0% .375%
- -------------------------------------------------------------------
3.0:1. X 1.000% 0.0% .325%
3.5:1
- -------------------------------------------------------------------
2.50:1. X .875% 0.0% .300%
3.0:1
- -------------------------------------------------------------------
2.00:1. X .750% 0.0% .275%
2.50:1
- -------------------------------------------------------------------
1.50:1. X .625% 0.0% .250%
2.00:1
- -------------------------------------------------------------------
X 1.50:1 .450% 0.0% .200%
===================================================================
</TABLE>
For purposes of the foregoing table, "X" or "Consolidated
Indebtedness/Adjusted EBITDA" means the ratio of Consolidated Indebtedness
to Adjusted EBITDA.
The Applicable Margin will be adjusted, based on the Ratio of Consolidated
Indebtedness to Adjusted EBITDA as of the last day of each fiscal quarter,
as reflected in the Compliance Certificate furnished pursuant to subsection
7.2(b), such adjustment to occur on the first day of the calendar month
immediately
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<PAGE>
succeeding the calendar month in which the Compliance Certificate is
received; provided, that if the Company fails to deliver a Compliance
Certificate by the date required pursuant to subsection 7.2(b), the margin
in the top row shall apply until such Compliance Certificate is delivered.
As of the Closing Date, the initial Applicable Margin for Offshore Rate
Loans is 1.000%, the Applicable Margin for Base Rate Loans is 0.0% and the
Applicable Margin for Commitment Fee is 0.325%.
"Arranger" means BancAmerica Robertson Stephens, a Delaware corporation.
"Assignee" has the meaning specified in subsection 12.8(a).
"Attorney Costs" means and includes all reasonable fees and disbursements
of any law firm or other external counsel, the reasonable allocated cost of
internal legal services and all reasonable disbursements of internal counsel.
"Bank" has the meaning specified in the introductory clause hereto.
References to the "Banks" shall include BofA, including in its capacity as
Issuing Bank; for purposes of clarification only, to the extent that BofA may
have any rights or obligations in addition to those of the Banks due to its
status as Issuing Bank, its status as such will be specifically referenced.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. (S)101, et seq.).
"Base Rate" means, for any day, the higher of: (a) 0.50% per annum above
the latest Federal Funds Rate; and (b) the rate of interest in effect for such
day as publicly announced from time to time by BofA in San Francisco,
California, as its "reference rate." (The "reference rate" is a rate set by
BofA based upon various factors including BofA's costs and desired return,
general economic conditions and other factors, and is used as a reference point
for
-5-
<PAGE>
pricing some loans, which may be priced at, above, or below such announced
rate.)
Any change in the reference rate announced by BofA shall take effect
at the opening of business on the day specified in the public announcement of
such change.
"Base Rate Loan" means a Revolving Loan, or an L/C Advance, that bears
interest based on the Base Rate.
"BofA" means Bank of America National Trust and Savings Association, a
national banking association.
"Borrowing" means a borrowing hereunder consisting of Revolving Loans of
the same Type made to the Company on the same day by the Banks under Article II,
and, other than in the case of Base Rate Loans, having the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs under Section
2.3.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in Chicago, Illinois and in San Francisco, California are
authorized or required by law to close and, if the applicable Business Day
relates to any Offshore Rate Loan, means such a day on which dealings are
carried on in the applicable offshore dollar interbank market.
"Capital Adequacy Regulation" means any guideline, request or directive of
any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Cash Collateralize" means to pledge and deposit with or deliver to the
Agent, for the benefit of the Agent, the Issuing Bank and the Banks, as
collateral for the L/C Obligations, cash or deposit account balances pursuant to
documentation in form and substance satisfactory to the Agent and the Issuing
Bank (which documents are hereby
-6-
<PAGE>
consented to by the Banks). Derivatives of such term shall have corresponding
meaning. The Company hereby grants the Agent, for the benefit of the Agent, the
Issuing Bank and the Banks, a security interest in all such cash and deposit
account balances. Cash collateral shall be maintained in blocked, non-interest
bearing deposit accounts at BofA.
"Change of Control" means the occurrence, after the date of this Agreement,
of any of the following: (a) any Person or two or more Persons acting in concert
acquiring beneficial ownership (within the meaning of Rule 13d-3 of the SEC
under the Exchange Act), directly or indirectly, of securities of the Borrower
(or other Securities convertible into such securities) representing 30% or more
of the combined voting power of all securities of the Borrower entitled to vote
in the election of directors; or (b) during any period of up to 12 consecutive
months, commencing after the Closing Date, individuals who at the beginning of
such 12-month period were directors of the Borrower ceasing for any reason to
constitute a majority of the Board of Directors unless the Persons replacing
such individuals were nominated by the Board of Directors of the Borrower;
"Closing Date" means the date on which all conditions precedent set forth
in Section 5.1 are satisfied or waived by all Banks (or, in the case of
subsection 5.1(e), waived by the Person entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and regulations promulgated
thereunder.
"Colorstrip" means Colorstrip, Inc., a California corporation.
"Colorstrip Acquisition" means the acquisition of the assets of Colorstrip
pursuant to the Acquisition Agreement.
"Combined Commitment" means, at any time and as such amount may be reduced
under Sections 2.5 or 2.7 from time to time, the then Current Commitment minus,
from and after the date on which the Company first incurs Private Placement
Indebtedness after the Closing Date, the lesser of (i) $40,000,000 and (ii) the
net proceeds received by the
-7-
<PAGE>
Company from such Private Placement Indebtedness. For purposes of this
definition, the term "Current Commitment" means during the periods set forth
below, the amount set forth opposite such period:
<TABLE>
<CAPTION>
Period Current Commitment
------ ------------------
<S> <C>
From Closing Date $140,000,000
through December 30, 1998
From December 31, 1998 $130,000,000
through December 30, 1999
From December 30, 1999 $120,000,000
through December 30, 2000
From December 30, 2000 $110,000,000
through December 30, 2001
From December 30, 2001 $100,000,000
through December 20, 2002
</TABLE>
"Commitment" means, with respect to (i) The Northern Trust Company,
$25,000,000 (the "TNT Commitment") and (ii) BofA, the Combined Commitment minus
the TNT Commitment, in each case as the same may be reduced pursuant to Section
2.5 or as a result of one or more assignments under Section 12.8.
"Commitment Fee" has the meaning specified in subsection 2.10(b).
"Company" is defined in the preamble.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit C.
"Consolidated Capital Expenditures" shall mean, as of the last day of any
fiscal quarter for the four consecutive fiscal quarter period then ended, the
capital expenditures of the Company and its Subsidiaries for such period, as the
same are (or would in accordance with GAAP be) set forth in the consolidated
statement of changes in financial position of the Company and its Subsidiaries
for such period; provided, that Consolidated Capital Expenditures shall not
-8-
<PAGE>
include (i) capital expenditures which constitute Acquisition Costs (other than
Acquisition Costs associated with recurring capital expenditures or replacing
existing capital assets) or (ii) capital expenditures of MSC Walbridge Coatings,
Inc. in Walbridge Coatings.
"Consolidated Debt" means, at any time, Indebtedness of the Company and its
Subsidiaries on a consolidated basis excluding any Contingent Obligations of MSC
Walbridge Coatings, Inc. in existence on the Closing Date with respect to
Indebtedness of Walbridge Coatings.
"Contingent Obligation" means, as to any Person, any direct or indirect
liability of that Person, whether or not contingent, with or without recourse,
(a) with respect to any Indebtedness, lease, dividend, letter of credit or other
obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of that Person (i) to purchase, repurchase
or otherwise acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such primary
obligation, or to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv) otherwise to assure or hold
harmless the holder of any such primary obligation against loss in respect
thereof (each, a "Guaranty Obligation"); (b) with respect to any Surety
Instrument (other than any Letter of Credit) issued for the account of that
Person or as to which that Person is otherwise liable for reimbursement of
drawings or payments; (c) to purchase any materials, supplies or other property
from, or to obtain the services of, another Person if the relevant contract or
other related document or obligation requires that payment for such materials,
supplies or other property, or for such services, shall be made regardless of
whether delivery of such materials, supplies or other property is ever made or
tendered, or such services are ever performed or tendered, or (d) in respect of
any Swap
-9-
<PAGE>
Contract; provided, that liabilities of a Person arising solely from such
Person's status as a general partner of a partnership shall not constitute
"Contingent Obligations". The amount of any Contingent Obligation shall, in the
case of Guaranty Obligations, be deemed equal to the stated or determinable
amount of the primary obligation in respect of which such Guaranty Obligation is
made or, if not stated or if indeterminable, the maximum reasonably anticipated
liability in respect thereof, and in the case of other Contingent Obligations
other than in respect of Swap Contracts, shall be equal to the maximum
reasonably anticipated liability in respect thereof and, in the case of
Contingent Obligations in respect of Swap Contracts, shall be equal to the Swap
Termination Value.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which, under Section 2.4,
the Company (a) converts Loans of one Type to another Type, or (b) continues as
Loans of the same Type, but with a new Interest Period, Loans having Interest
Periods expiring on such date.
"Credit Extension" means and includes (a) the making of any Revolving Loans
hereunder, and (b) the Issuance of any Letters of Credit hereunder (including
the Existing BofA Letters of Credit).
"Debt to Cash Flow Ratio" has the meaning specified in Section 9.2.
"Default" means any event or circumstance which, with the giving of notice,
the lapse of time, or both, would (if not cured or otherwise remedied during
such time) constitute an Event of Default.
"Dollars", "dollars" and "$" each mean lawful money of the United States.
-10-
<PAGE>
"Effective Amount" means (i) with respect to any Revolving Loans on any
date, the aggregate outstanding principal amount thereof after giving effect to
any Borrowings and prepayments or repayments of Revolving Loans occurring on
such date; and (ii) with respect to any outstanding L/C Obligations on any date,
the amount of such L/C Obligations on such date after giving effect to any
Issuances of Letters of Credit occurring on such date and any other changes in
the aggregate amount of the L/C Obligations as of such date, including as a
result of any reimbursements of outstanding unpaid drawings under any Letters of
Credit or of outstanding unpaid draws on Time Drafts or any reductions in the
maximum amount available for drawing under Letters of Credit taking effect on
such date.
"Eligible Assignee" means (a) a commercial bank organized under the laws of
the United States, or any state thereof, and having a combined capital and
surplus of at least $100,000,000; (b) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having a combined capital and surplus of at least $100,000,000,
provided that such bank is acting through a branch or agency located in the
United States; and (c) a Person that is primarily engaged in the business of
commercial banking and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary of
a Person of which a Bank is a Subsidiary, or (iii) a Person of which a Bank is a
Subsidiary.
"Environmental Claims" means all claims, however asserted, by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment.
"Environmental Laws" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any Governmental
-11-
<PAGE>
Authorities, in each case relating to environmental, health, safety and land use
matters.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
under common control with the Company within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension Plan;
(b) a withdrawal by the Company or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations which is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by the Company or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan or
Multiemployer Plan; or (f) the imposition of any liability under Title IV of
ERISA, other than PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon the Company or any ERISA Affiliate.
"Eurodollar Reserve Percentage" has the meaning specified in the definition
of "Offshore Rate".
"Event of Default" means any of the events or circumstances specified in
Section 10.1.
"Exchange Act" means the Securities Exchange Act of 1934, and regulations
promulgated thereunder.
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<PAGE>
"Existing BofA Letters of Credit" means the letters of credit described in
Schedule 3.3 (including any Time Drafts which are accepted thereunder).
"FDIC" means the Federal Deposit Insurance Corporation, and any
Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor,
"H.15(519)") on the preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so published on any
such preceding Business Day, the rate for such day will be the arithmetic mean
as determined by the Agent of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by
each of three leading brokers of Federal funds transactions in New York City
selected by the Agent.
"Fee Letter" has the meaning specified in subsection 2.10(a).
"FRB" means the Board of Governors of the Federal Reserve System, and any
Governmental Authority succeeding to any of its principal functions.
"Further Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar charges
(including, without limitation, net income taxes and franchise taxes), and all
liabilities with respect thereto, imposed by any jurisdiction on account of
amounts payable or paid pursuant to Section 4.1.
"GAAP" means generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of
-13-
<PAGE>
comparable stature and authority within the U.S. accounting profession), which
are applicable to the circumstances as of the date of determination.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guarantor" means any Person which executes and delivers a Guaranty.
"Guarant(ies)" means a guaranty substantially in the form of Exhibit G
hereto.
"Guaranty Obligation" has the meaning specified in the definition of
"Contingent Obligation."
"Honor Date" has the meaning specified in subsection 3.3(c).
"Immaterial Subsidiary" means, at any time, any Subsidiary (i) the total
net book of whose assets constitute less than 5% of the net book value of total
consolidated assets of the Company and its Subsidiaries as of the last day of
the most recent fiscal quarter of the Company and (ii) which has not been
designated in writing by the Company to the Agent as a "Material Subsidiary."
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
or account payables entered into in the ordinary course of business on normal
trade terms and wages, benefits, deferred compensation and other accrued
benefits); (c) all non-contingent reimbursement or payment obligations with
respect to Surety Instruments; (d) all obligations
-14-
<PAGE>
evidenced by notes, bonds, debentures or similar instruments, including
obligations so evidenced incurred in connection with the acquisition of
property, assets or businesses; (e) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to property acquired by the Person (even
though the rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such property); (f) all
obligations with respect to capital leases; (g) all indebtedness referred to in
clauses (a) through (f) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property (including accounts and contracts rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness; and (h) all Guaranty Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (a)
through (g) above.
"Indemnified Liabilities" has the meaning specified in Section 12.5.
"Indemnified Person" has the meaning specified in Section 12.5.
"Independent Auditor" has the meaning specified in subsection 7.1(a).
"Insolvency Proceeding" means, with respect to any Person, (a) any case,
action or proceeding with respect to such Person before any court or other
Governmental Authority relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding-up or relief of debtors, or (b)
any general assignment for the benefit of creditors, composition, marshalling of
assets for creditors, or other, similar arrangement in respect of its creditors
generally or any substantial portion of its creditors; undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code.
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"Interest Payment Date" means, as to any Offshore Rate Loan, the last day
of each Interest Period applicable to such Loan and, as to any Base Rate Loan,
the last Business Day of each calendar month and each date such Loan is
converted into another Type of Loan, provided, however, that if any Interest
Period for an Offshore Rate Loan exceeds three months, the date that falls three
months (as the case may be) after the beginning of such Interest Period and
after each Interest Payment Date thereafter is also an Interest Payment Date.
"Interest Period" means as to any Offshore Rate Loan, the period commencing
on the Borrowing Date of such Loan or on the Conversion/Continuation Date on
which the Loan is converted into or continued as an Offshore Rate Loan, and
ending on the date one, two, three or six months thereafter (and any other
period that is 12 months or less and is consented to by the Majority Banks in
the given instance) as selected by the Company in its Notice of Borrowing or
Notice of Conversion/Continuation;
provided that:
(i) if any Interest Period would otherwise end on a day that is not
a Business Day, that Interest Period shall be extended to the following
Business Day unless, in the case of an Offshore Rate Loan, the result of
such extension would be to carry such Interest Period into another calendar
month, in which event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period pertaining to an Offshore Rate Loan that
begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of the calendar
month at the end of such Interest Period; and
(iii) no Interest Period for any Loan shall extend beyond the date
set forth in clause (a) of the definition of Revolving Termination Date;
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"IRS" means the Internal Revenue Service, and any Governmental Authority
succeeding to any of its principal functions under the Code.
"Issuance Date" has the meaning specified in subsection 3.1(a).
"Issue" means, with respect to any Letter of Credit, to incorporate the
Existing BofA Letters of Credit into this Agreement, or to issue or to extend
the expiry of, or to renew or increase the amount of, such Letter of Credit; and
the terms "Issued," "Issuing" and "Issuance" have corresponding meanings.
"Issuing Bank" means BofA in its capacity as issuer of one or more Letters
of Credit hereunder, together with any replacement letter of credit issuer
arising under subsection 11.1(b) or Section 11.9.
"Joint Venture" means a single-purpose corporation, partnership, limited
liability company, joint venture or other legal arrangement (whether created by
contract or conducted through a separate legal entity) now or hereafter formed
by the Company or any of its Subsidiaries with another Person in order to
conduct a common venture or enterprise with such Person.
"L/C Advance" means each Bank's participation in any L/C Borrowing in
accordance with its Pro Rata Share.
"L/C Amendment Application" means an application form for amendment of
outstanding standby or commercial documentary letters of credit as shall at any
time be in use at the Issuing Bank, as the Issuing Bank shall request.
"L/C Application" means an application form for issuances of standby or
commercial documentary letters of credit as shall at any time be in use at the
Issuing Bank, as the Issuing Bank shall request.
"L/C Borrowing" means an extension of credit resulting from a drawing under
any Letter of Credit (including under any Time Draft which have been accepted)
which shall not
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have been reimbursed on the date when made nor converted into a Borrowing of
Revolving Loans under subsection 3.3(c).
"L/C Commitment" means the commitment of the Issuing Bank to Issue, and the
commitment of the Banks severally to participate in, Letters of Credit
(including any Time Drafts which have been accepted) from time to time Issued or
outstanding under Article III, in an aggregate amount not to exceed on any date
occurring after May 1, 1998 the amount of $20,000,000, as the same shall be
reduced as a result of a reduction in the L/C Commitment pursuant to Section
2.5; provided that the L/C Commitment is a part of the Combined Commitment,
rather than a separate, independent commitment.
"L/C Obligations" means at any time the sum of (a) the aggregate undrawn
amount of all Letters of Credit (including any Time Drafts which have been
accepted) then outstanding, plus (b) the amount of all unreimbursed drawings
under all Letters of Credit (including any Time Drafts which have been
accepted), including all outstanding L/C Borrowings.
"L/C-Related Documents" means the Letters of Credit, the L/C Applications,
the L/C Amendment Applications, any Time Draft and any other document relating
to any Letter of Credit, including any of the Issuing Bank's standard form
documents for letter of credit issuances.
"Lending Office" means, as to any Bank, the office or offices of such Bank
specified as its "Lending Office" or "Domestic Lending Office" or "Offshore
Lending Office", as the case may be, on Schedule 12.2, or such other office or
offices as such Bank may from time to time notify the Company and the Agent.
"Letters of Credit" means the Existing BofA Letters of Credit and any
letters of credit (whether standby letters of credit or commercial documentary
letters of credit) Issued by the Issuing Bank pursuant to Article III.
"Lien" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential arrangement of any kind or nature
whatsoever in
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respect of any property (including those created by, arising under or evidenced
by any conditional sale or other title retention agreement, the interest of a
lessor under a capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any financing
statement naming the owner of the asset to which such lien relates as debtor,
under the Uniform Commercial Code or any comparable law) and any contingent or
other agreement to provide any of the foregoing, but not including the interest
of a lessor under an operating lease.
"Loan" means an extension of credit by a Bank to the Company under Article
II or Article III in the form of a Revolving Loan or L/C Advance.
"Loan Documents" means this Agreement, any Notes, the Fee Letters, the L/C-
Related Documents, the Guaranties, and all other documents delivered to the
Agent or any Bank in connection herewith.
"Majority Banks" means at any time at least two Banks then holding in
excess of 50% of the then aggregate unpaid principal amount of the Loans, or, if
no such principal amount is then outstanding, at least two Banks then having in
excess of 50% of the Combined Commitment.
"Margin Stock" means "margin stock" as such term is defined in Regulation
G, T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties or financial
condition of the Company and its Subsidiaries taken as a whole; (b) a material
impairment of the ability of the Company or any Subsidiary to perform under any
Loan Document and to avoid any Event of Default; or (c) a material adverse
effect upon the legality, validity, binding effect or enforceability against the
Company or any Subsidiary of any Loan Document.
"Material Subsidiary" means any of the following Subsidiaries of the
Company: (i) MSC Pre Finish Metals Inc., MSC Pre Finish Metals (PP) Inc., MSC
Pre Finish Metals (EGV) Inc., MSC Pre Finish Metals (MV) Inc., MSC Pre Finish
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Metals (MT) Inc., MSC Laminates and Composites Inc., MSC Laminates and
Composites (EGV) Inc., MSC Walbridge Coatings Inc., MSC Specialty Films, Inc.,
MSC Pinole Point Steel Inc., and Solar-Gard International, Inc., (ii) any other
Subsidiary which is not an Immaterial Subsidiary.
"Multiemployer Plan" means a "multiemployer plan", within the meaning of
Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes,
is making, or is obligated to make contributions or, during the preceding three
calendar years, has made, or been obligated to make, contributions.
"Note" means a promissory note executed by the Company in favor of a Bank
pursuant to subsection 2.2(b), in substantially the form of Exhibit F.
"Notice of Borrowing" means a notice in substantially the form of Exhibit
A.
"Notice of Conversion/Continuation" means a notice in substantially the
form of Exhibit B.
"Obligations" means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document owing by the Company to any
Bank, the Agent, or any Indemnified Person, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising.
"Offshore Rate" means, for any Interest Period, with respect to Offshore
Rate Loans comprising part of the same Borrowing, the rate of interest per annum
(rounded upward to the next 1/16th of 1%) determined by the Agent as follows:
Offshore Rate = IBOR
-------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any Interest Period
the maximum reserve percentage (expressed as a decimal, rounded upward to
the next
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1/100th of 1%) in effect on such day (whether or not applicable to any
Bank) under regulations issued from time to time by the FRB for determining
the maximum reserve requirement (including any emergency, supplemental or
other marginal reserve requirement) with respect to Eurocurrency funding
(currently referred to as "Eurocurrency liabilities"); and
"IBOR" means the rate of interest per annum determined by the Agent as
the rate at which dollar deposits in the approximate amount of the
requested Offshore Rate Loan for such Interest Period would be offered by
BofA's Grand Cayman Branch, Grand Cayman B.W.I. (or such other office as
may be designated for such purpose by BofA), to major banks in the offshore
dollar interbank market at their request at approximately 11:00 a.m.
(Chicago time) two Business Days prior to the commencement of such Interest
Period.
The Offshore Rate shall be adjusted automatically as to all Offshore Rate Loans
then outstanding as of the effective date of any change in the Eurodollar
Reserve Percentage.
"Offshore Rate Loan" means a Loan that bears interest based on the Offshore
Rate.
"Organization Documents" means, for any corporation, the certificate or
articles of incorporation, the bylaws, any certificate of determination or
instrument relating to the rights of preferred shareholders of such corporation,
any shareholder rights agreement, and all applicable resolutions of the board of
directors (or any committee thereof) of such corporation.
"Other Taxes" means any present or future stamp, court or documentary taxes
or any other excise or property taxes, charges or similar levies which arise
from any payment made hereunder or from the execution, delivery, performance,
enforcement or registration of, or otherwise with respect to, this Agreement or
any other Loan Documents.
"Participant" has the meaning specified in subsection 12.8(d).
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<PAGE>
"PBGC" means the Pension Benefit Guaranty Corporation, or any Governmental
Authority succeeding to any of its principal functions under ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA which the Company sponsors, maintains, or to which
it makes, is making, or is obligated to make contributions, or in the case of a
multiple employer plan (as described in Section 4064(a) of ERISA) has made
contributions at any time during the immediately preceding five (5) plan years.
"Permitted Liens" has the meaning specified in Section 8.1.
"Permitted Swap Obligations" means all obligations (contingent or
otherwise) of the Company or any Subsidiary existing or arising under Swap
Contracts; provided, that each of the following criteria is satisfied: (a) such
obligations are (or were) entered into by such Person in the ordinary course of
business for the purpose of directly mitigating risks associated with
liabilities, commitments or assets held or reasonably anticipated by such
Person, or changes in the value of securities issued by such Person in
conjunction with a securities repurchase program not otherwise prohibited
hereunder, and not for purposes of speculation or taking a "market view;" (b)
such Swap Contracts do not contain any provision ("walk-away" provision)
exonerating the non-defaulting party from its obligation to make payments on
outstanding transactions to the defaulting party, it being understood that any
obligations (contingent or otherwise) of the Company or any Subsidiary existing
or arising under any Swap Contract which provides for payment on early
termination based on the 1992 International Swap Dealers Association, Inc.
Master Agreement form providing for "second method and market quotation" shall
satisfy the requirements of this definition.
"Person" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture or Governmental Authority.
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<PAGE>
"Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA)
which the Company sponsors or maintains or to which the Company makes, is
making, or is obligated to make contributions and includes any Pension Plan.
"Private Placement Indebtedness" means, collectively, (i) the Company's
7.05% Senior Notes due May 31, 2007 and (ii) any private placement of unsecured
Indebtedness of the Company which accrues interest at a fixed rate and which has
a maturity date occurring after the Revolving Termination Date.
"Pro Rata Share" means, as to any Bank at any time, the percentage
equivalent (expressed as a decimal, rounded to the ninth decimal place) at such
time of such Bank's Commitment divided by the Combined Commitments.
"Replacement Bank" has the meaning specified in Section 4.8.
"Reportable Event" means, any of the events set forth in Section 4043(c) of
ERISA or the regulations thereunder, other than any such event for which the 30-
day notice requirement under ERISA has been waived in regulations issued by the
PBGC.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
"Responsible Officer" means the chief executive officer, the president, the
chief financial officer or the controller of the Company, or any other officer
having substantially the same authority and responsibility; or, with respect to
compliance with financial covenants, the chief financial officer or the
treasurer of the Company, or any other officer having substantially the same
authority and responsibility.
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<PAGE>
"Revolving Loan" has the meaning specified in Section 2.1, and may be a
Base Rate Loan or an Offshore Rate Loan (each, a "Type" of Revolving Loan).
"Revolving Termination Date" means the earlier to occur of: (a) December
20, 2002 and (b) the date on which the Combined Commitment terminates in
accordance with the provisions of this Agreement.
"SEC" means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.
"Subsidiary" of a Person means any corporation, association, partnership,
limited liability company, Joint Venture or other business entity of which more
than 50% of the voting stock, membership interests or other equity interests (in
the case of Persons other than corporations), is owned or controlled directly or
indirectly by the Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires, references
herein to a "Subsidiary" refer to a Subsidiary of the Company. The Agent and
the Banks acknowledge that Walbridge Coatings does not constitute a Subsidiary
of the Company as of the Closing Date.
"Surety Instruments" means all letters of credit (including standby and
commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds
and similar instruments.
"Swap Contract" means any agreement, whether or not in writing, relating to
any transaction that is a rate swap, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap or option, bond,
note or bill option, interest rate option, forward foreign exchange transaction,
cap, collar or floor transaction, currency swap, cross-currency rate swap,
swaption, currency option or any other, similar transaction (including any
option to enter into any of the foregoing) or any combination of the foregoing,
and, unless the context otherwise clearly requires, any master agreement
relating to or governing any or all of the foregoing.
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"Swap Termination Value" means, in respect of any one or more Swap
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a) the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined by the Agent
based upon one or more mid-market or other readily available quotations provided
by any recognized dealer in such Swap Contracts (which may include any Bank).
"Taxes" means any and all present or future taxes, levies, assessments,
imposts, duties, deductions, fees, withholdings or similar charges, and all
liabilities with respect thereto, excluding, in the case of each Bank and the
Agent, respectively, taxes imposed on or measured by its net income by the
jurisdiction (or any political subdivision thereof) under the laws of which such
Bank or the Agent, as the case may be, is organized or maintains a lending
office.
"Time Draft" means a draft drawn on the Issuing Bank pursuant to a
commercial Letter of Credit, which draft is payable at a specified time in the
future.
"Type" has the meaning specified in the definition of "Revolving Loan."
"Unfunded Pension Liability" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.
"United States" and "U.S." each means the United States of America.
"Walbridge Coatings" means Walbridge Coatings, an Illinois general
partnership.
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<PAGE>
"Wholly-Owned Subsidiary" means any Subsidiary in which (other than
directors' qualifying shares required by law or shares required to be held by
foreign nationals) 100% of the capital stock of each class having ordinary
voting power or other equity interests, and 100% of the capital stock or other
equity interests of every other class, in each case, at the time as of which any
determination is being made, is owned, beneficially and of record, by the
Company, or by one or more of the other Wholly-Owned Subsidiaries, or both.
1.2 Other Interpretive Provisions. (a) The meanings of defined terms
are equally applicable to the singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar words refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other writings,
however evidenced.
(ii) The term "including" is not limiting and means "including
without limitation."
(iii) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and including"; the
words "to" and "until" each mean "to but excluding", and the word "through"
means "to and including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Loan Document, and (ii) references to any statute or regulation
are to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the statute or
regulation.
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<PAGE>
(e) The captions and headings of this Agreement are for convenience
of reference only and shall not affect the interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms. Unless otherwise expressly provided,
any reference to any action of the Agent or the Banks by way of consent,
approval or waiver shall be deemed modified by the phrase "in its/their sole
discretion."
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the Company
and the other parties, and are the products of all parties. Accordingly, they
shall not be construed against the Banks or the Agent merely because of the
Agent's or Banks' involvement in their preparation.
1.3 Accounting Principles. (a) Unless the context otherwise clearly
requires, all accounting terms not expressly defined herein shall be construed,
and all financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter" refer to
such fiscal periods of the Company.
ARTICLE II
THE CREDITS
-----------
2.1 Amounts and Terms of Commitments. Each Bank severally agrees, on the
terms and conditions set forth herein, to make loans to the Company (each such
loan, a "Revolving Loan") from time to time on any Business Day during the
period from the Closing Date to the Revolving Termination Date, in an aggregate
amount not to exceed at any time outstanding such Bank's Commitment; provided,
however, that, after giving effect to any Borrowing of Revolving Loans, the
Effective Amount of all Revolving Loans plus the Effective Amount of all L/C
Obligations,
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shall not at any time exceed the Combined Commitment of all Banks; provided
further, that the Effective Amount of the Revolving Loans of any Bank plus the
participation of such Bank in the Effective Amount of all L/C Obligations shall
not at any time exceed such Bank's Commitment. Within the limits of each Bank's
Commitment, and subject to the other terms and conditions hereof, the Company
may borrow under this Section 2.1, prepay under Section 2.6 and reborrow under
this Section 2.1.
2.2 Loan Accounts. (a) The Loans made by each Bank and the Letters of
Credit Issued by the Issuing Bank shall be evidenced by one or more accounts or
records maintained by such Bank or Issuing Bank, as the case may be, in the
ordinary course of business. The accounts or records maintained by the Agent,
the Issuing Bank and each Bank shall be rebuttable presumptive evidence of the
amount of the Loans made by the Banks to the Company and the Letters of Credit
Issued for the account of the Company, and the interest and payments thereon.
Any failure so to record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Company hereunder to pay any amount owing
with respect to the Loans or any Letter of Credit.
(b) Upon the request of any Bank made through the Agent, the Loans
made by such Bank may be evidenced by one or more Notes, instead of or in
addition to loan accounts. Each such Bank shall endorse on the schedules
annexed to its Note(s) the date, amount and maturity of each Loan made by it and
the amount of each payment of principal made by the Company with respect
thereto. Each such Bank is irrevocably authorized by the Company to endorse its
Note(s) and each Bank's record shall be conclusive absent manifest error;
provided, however, that the failure of a Bank to make, or an error in making, a
notation thereon with respect to any Loan shall not limit or otherwise affect
the obligations of the Company hereunder or under any such Note to such Bank.
2.3 Procedure for Borrowing. (a) Each Borrowing of Revolving Loans
shall be made upon the Company's irrevocable written notice delivered to the
Agent in the form of a Notice of Borrowing (or telephonic notice promptly
confirmed in writing in the form of a Notice of Borrowing), which notice must be
received by the Agent prior to 10:30 a.m. (Chicago time) (i) two Business
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Days prior to the requested Borrowing Date, in the case of Offshore Rate Loans,
or (ii) on the requested Borrowing Date, in case of Base Rate Loans, in each
case specifying:
(A) the amount of the Borrowing, which in the case of Offshore Rate
Loans, shall be in an aggregate minimum amount of $1,000,000 or any
multiple of $100,000 in excess thereof, and in the case of Base Rate Loans,
shall be an aggregate minimum amount of $500,000 or any multiple of
$100,000 in excess thereof;
(B) the requested Borrowing Date, which shall be a Business Day;
(C) the Type of Loans comprising the Borrowing; and
(D) the duration of the Interest Period applicable to such Loans
included in such notice. If the Notice of Borrowing fails to specify the
duration of the Interest Period for any Borrowing comprised of Offshore
Rate Loans, such Interest Period shall be three months.
provided, however, that with respect to the Borrowing to be made on the Closing
Date, the Notice of Borrowing shall be delivered to the Agent not later than
10:30 a.m. (Chicago time) one Business Day before the Closing Date and such
Borrowing will consist of Base Rate Loans only.
(b) The Agent will promptly notify each Bank of its receipt of any
Notice of Borrowing and of the amount of such Bank's Pro Rata Share of that
Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share of each
Borrowing available to the Agent for the account of the Company at the Agent's
Payment Office by 11:00 a.m. (Chicago time) on the Borrowing Date requested by
the Company in funds immediately available to the Agent. The proceeds of all
such Loans will then be made available to the Company by the Agent at such
office by crediting the account of the Company on the books of BofA with the
aggregate of the amounts made available to the Agent by the Banks.
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(d) After giving effect to any Borrowing, unless the Agent shall
otherwise consent, there may not be more than seven different Interest Periods
in effect.
2.4 Conversion and Continuation Elections. (a) The Company may, upon
irrevocable written notice to the Agent in accordance with subsection 2.4(b):
(i) elect, as of any Business Day, in the case of Base Rate
Loans, or as of the last day of the applicable Interest Period, in the case
of Offshore Rate Loans, to convert any such Loans (or any part thereof in
an amount not less than $1,000,000, or that is in an integral multiple of
$100,000 in excess thereof) into Loans of any other Type; or
(ii) elect, as of the last day of the applicable Interest
Period, to continue any Revolving Loans having Interest Periods expiring on
such day (or any part thereof in an amount not less than $1,000,000, or
that is in an integral multiple of $100,000 in excess thereof);
provided, that if at any time the aggregate amount of Offshore Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $1,000,000, such Offshore Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the right
of the Company to continue such Loans as, and convert such Loans into, Offshore
Rate Loans shall terminate.
(b) The Company shall deliver a Notice of Conversion/Continuation to
be received by the Agent not later than 10:30 a.m. (Chicago time) at least (i)
two Business Days in advance of the Conversion/ Continuation Date, if the Loans
are to be converted into or continued as Offshore Rate Loans, and (ii) on the
Business Day in advance of the Conversion/Continuation Date, if the Loans are to
be converted into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or continued;
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<PAGE>
(C) the Type of Loans resulting from the proposed
conversion or continuation; and
(D) other than in the case of conversions into Base Rate
Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to
Offshore Rate Loans, the Company has failed to select timely a new Interest
Period to be applicable to such Offshore Rate Loans or if any Default or Event
of Default then exists, the Company shall be deemed to have elected to convert
such Offshore Rate Loans into Base Rate Loans effective as of the expiration
date of such Interest Period.
(d) The Agent will promptly notify each Bank of its receipt of a
Notice of Conversion/Continuation, or, if no timely notice is provided by the
Company, the Agent will promptly notify each Bank of the details of any
automatic conversion. All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the Loans with
respect to which the notice was given held by each Bank.
(e) Unless the Majority Banks otherwise consent, during the existence
of a Default or Event of Default, the Company may not elect to have a Loan
converted into or continued as an Offshore Rate Loan.
(f) After giving effect to any conversion or continuation of Loans,
unless the Agent shall otherwise consent, there may not be more than seven
different Interest Periods in effect.
2.5 Voluntary Termination or Reduction of Commitments. The Company may,
upon not less than five Business Days' prior notice to the Agent, terminate the
Combined Commitment, or permanently reduce the Combined Commitment by an
aggregate minimum amount of $5,000,000 or any multiple of $500,000 in excess
thereof; unless, after giving effect thereto and to any prepayments of Loans
made on the effective date thereof, (a) the Effective Amount of all Revolving
Loans, and L/C Obligations together would exceed the amount of the Combined
Commitment then in effect, or (b) the Effective Amount of all L/C Obligations
then
Asset Purchase Agreement -31-
<PAGE>
outstanding would exceed the L/C Commitment. Once reduced in accordance with
this Section, the Combined Commitments may not be increased. Any reduction of
the Combined Commitment shall be applied to each Bank according to its Pro Rata
Share; provided, that until such time as the aggregate Commitment of BofA and
its Assignees shall be less than or equal to $75,000,000, any such reduction
shall be applied pro rata against the Commitment of BofA and its Assignees. If
and to the extent specified by the Company in the notice to the Agent, some or
all of the reduction in the Combined Commitment shall be applied to reduce the
L/C Commitment. All accrued Commitment Fees and letter of credit fees to, but
not including, the effective date of any reduction or termination of Combined
Commitment, shall be paid on the effective date of such reduction or
termination.
2.6 Optional Prepayments. Subject to Section 4.4, the Company may, at any
time or from time to time, ratably prepay Loans in whole or in part, in minimum
amounts of $1,000,000 or any multiple of $500,000 in excess thereof. Such
notice of prepayment shall specify the date and amount of such prepayment and
the Type(s) of Loans to be prepaid. The Agent will promptly notify each Bank of
its receipt of any such notice, and of such Bank's Pro Rata Share of such
prepayment. If such notice is given by the Company, the Company shall make such
prepayment and the payment amount specified in such notice shall be due and
payable on the date specified therein, together with, in the case of Offshore
Rate Loans, accrued interest to each such date on the amount prepaid and any
amounts required pursuant to Section 4.4.
2.7 Mandatory Prepayments of Loans. If on any date the Effective Amount
of L/C Obligations exceeds the L/C Commitment, the Company shall Cash
Collateralize on such date the outstanding Letters of Credit in an amount equal
to the excess of the maximum amount then available to be drawn under the Letters
of Credit over the Aggregate L/C Commitment. Subject to Section 4.4, if on any
date after giving effect to any Cash Collateralization made on such date
pursuant to the preceding sentence, the Effective Amount of all Revolving Loans
then outstanding plus the Effective Amount of all L/C Obligations exceeds the
Combined Commitment, the Company shall immediately, and without notice or
demand, prepay the outstanding principal
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amount of the Revolving Loans and L/C Advances by an amount equal to the
applicable excess.
2.8 Repayment. The Company shall repay to the Banks on the Revolving
Termination Date the aggregate principal amount of Revolving Loans outstanding
on such date.
2.9 Interest. (a) Each Revolving Loan shall bear interest on the
outstanding principal amount thereof from the applicable Borrowing Date at a
rate per annum equal to the applicable Offshore Rate or the Base Rate, as the
case may be (and subject to the Company's right to convert to other Types of
Loans under Section 2.4), plus the Applicable Margin.
(b) Interest on each Revolving Loan shall be paid in arrears on each
Interest Payment Date. Interest shall also be paid, in the case of Offshore Rate
Loans, on the date of any prepayment of such Loans under Section 2.6 or 2.7 for
the portion of the Loans so prepaid and upon payment (including prepayment) in
full thereof and, during the existence of any Event of Default, interest shall
be paid on demand of the Agent at the request or with the consent of the
Majority Banks.
(c) Notwithstanding subsection (a) of this Section, while any Event
of Default exists or after acceleration, the Company shall pay interest (after
as well as before entry of judgment thereon to the extent permitted by law) on
the principal amount of all outstanding Obligations, at a rate per annum which
is determined by adding 2% per annum to the Applicable Margin then in effect for
such Loans and, in the case of Obligations not subject to an Applicable Margin,
at a rate per annum equal to the Base Rate plus 2%; provided, however, that, on
and after the expiration of any Interest Period applicable to any Offshore Rate
Loan outstanding on the date of occurrence of such Event of Default or
acceleration, the principal amount of such Loan shall, during the continuation
of such Event of Default or after acceleration, bear interest at a rate per
annum equal to the Base Rate plus 2%.
(d) Anything herein to the contrary notwithstanding, the obligations
of the Company to any Bank hereunder shall be subject to the limitation that
payments of interest shall not be required for any period for which interest is
computed
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hereunder, to the extent (but only to the extent) that contracting for or
receiving such payment by such Bank would be contrary to the provisions of any
law applicable to such Bank limiting the highest rate of interest that may be
lawfully contracted for, charged or received by such Bank, and in such event the
Company shall pay such Bank interest at the highest rate permitted by applicable
law.
2.10 Fees. In addition to certain fees described in Section 3.8:
(a) Arrangement, Agency Fees. The Company shall pay an arrangement
fee to the Arranger for the Arranger's own account, and shall pay an agency fee
to the Agent for the Agent's own account, as required by the letter agreement
("Fee Letter") between the Company and the Arranger and Agent dated December 10,
1997.
(b) Commitment Fees. The Company shall pay to the Agent for the
account of each Bank a commitment fee (the "Commitment Fee") on the average
daily unused portion of such Bank's Commitment, computed on a quarterly basis in
arrears on the last Business Day of each calendar quarter based upon the daily
utilization for that quarter as calculated by the Agent, equal to the Applicable
Margin for Commitment Fee from time to time in effect. For purposes of
calculating utilization under this subsection, the Combined Commitment shall be
deemed used to the extent of the Effective Amount of Revolving Loans then
outstanding, plus the Effective Amount of L/C Obligations then outstanding. Such
Commitment Fee shall accrue from the Closing Date to the Revolving Termination
Date and shall be due and payable quarterly in arrears on the last Business Day
of each calendar quarter, commencing on the first such quarterly date to occur
after the Closing Date, through the Revolving Termination Date, with the final
payment to be made on the Revolving Termination Date; provided that, in
connection with any reduction or termination of Combined Commitment under
Section 2.5 or Section 2.7, the accrued Commitment Fee calculated for the period
ending on such date shall also be paid on the date of such reduction or
termination, with the following quarterly payment being calculated on the basis
of the period from such reduction or termination date to such quarterly payment
date. The Commitment Fees provided in this subsection shall accrue at
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all times during the above-mentioned period, including at any time during which
one or more conditions in Article V are not met.
2.11 Computation of Fees and Interest. (a) All computations of interest
for Base Rate Loans when the Base Rate is determined by BofA's "reference rate"
shall be made on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed. All other computations of fees and interest shall be made
on the basis of a 360-day year and actual days elapsed (which results in more
interest being paid than if computed on the basis of a 365-day year). Interest
and fees shall accrue during each period during which interest or such fees are
computed from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall be
conclusive and binding on the Company and the Banks in the absence of manifest
error. The Agent will, at the request of the Company or any Bank, deliver to the
Company or the Bank, as the case may be, a statement showing the quotations used
by the Agent in determining any interest rate and the resulting interest rate.
2.12 Payments by the Company. (a) All payments to be made by the Company
shall be made without set-off, recoupment or counterclaim. Except as otherwise
expressly provided herein, all payments by the Company shall be made to the
Agent for the account of the Banks at the Agent's Payment Office, and shall be
made in dollars and in immediately available funds, no later than 12:00 p.m.
(Chicago time) on the date specified herein. The Agent will promptly distribute
to each Bank its Pro Rata Share (or other applicable share as expressly provided
herein) of such payment in like funds as received. Any payment received by the
Agent later than 12:00 p.m. (Chicago time) shall be deemed to have been received
on the following Business Day and any applicable interest or fee shall continue
to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time
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shall in such case be included in the computation of interest or fees, as the
case may be.
(c) Unless the Agent receives notice from the Company prior to the
date on which any payment is due to the Banks that the Company will not make
such payment in full as and when required, the Agent may assume that the Company
has made such payment in full to the Agent on such date in immediately available
funds and the Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent the Company has not made such
payment in full to the Agent, each Bank shall repay to the Agent on demand such
amount distributed to such Bank, together with interest thereon at the Federal
Funds Rate for each day from the date such amount is distributed to such Bank
until the date repaid.
2.13 Payments by the Banks to the Agent. (a) Unless the Agent receives
notice from a Bank on or prior to the Closing Date or, with respect to any
Borrowing after the Closing Date, on the date of such Borrowing, that such Bank
will not make available as and when required hereunder to the Agent for the
account of the Company the amount of that Bank's Pro Rata Share of the
Borrowing, the Agent may assume that each Bank has made such amount available to
the Agent in immediately available funds on the Borrowing Date and the Agent may
(but shall not be so required), in reliance upon such assumption, make available
to the Company on such date a corresponding amount. If and to the extent any
Bank shall not have made its full amount available to the Agent in immediately
available funds and the Agent in such circumstances has made available to the
Company such amount, that Bank shall on the Business Day following such
Borrowing Date make such amount available to the Agent, together with interest
at the Federal Funds Rate for each day during such period. A notice of the
Agent submitted to any Bank with respect to amounts owing under this subsection
(a) shall be conclusive, absent manifest error. If such amount is so made
available, such payment to the Agent shall constitute such Bank's Loan on the
date of Borrowing for all purposes of this Agreement. If such amount is not
made available to the Agent on the Business Day following the Borrowing Date,
the Agent will notify the Company of such failure to fund and, upon demand by
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the Agent, the Company shall pay such amount to the Agent for the Agent's
account, together with interest thereon for each day elapsed since the date of
such Borrowing, at a rate per annum equal to the interest rate applicable at the
time to the Loans comprising such Borrowing.
(b) The failure of any Bank to make any Loan on any Borrowing Date
shall not relieve any other Bank of any obligation hereunder to make a Loan on
such Borrowing Date, but no Bank shall be responsible for the failure of any
other Bank to make the Loan to be made by such other Bank on any Borrowing Date.
2.14 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its ratable share (or other share
contemplated hereunder), such Bank shall immediately (a) notify the Agent of
such fact, and (b) purchase from the other Banks such participations in the
Loans and L/C Obligations held by them as shall be necessary to cause such
purchasing Bank to share the excess payment pro rata with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from the purchasing Bank, such purchase shall to that
extent be rescinded and each other Bank shall repay to the purchasing Bank the
purchase price paid therefor, together with an amount equal to such paying
Bank's ratable share (according to the proportion of (i) the amount of such
paying Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Company agrees
that any Bank so purchasing a participation from another Bank may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off, but subject to Section 12.10) with respect to such
participation as fully as if such Bank were the direct creditor of the Company
in the amount of such participation. The Agent will keep records (which shall
be conclusive and binding in the absence of manifest error) of participations
purchased under this Section and will in each case notify the Banks following
any such purchases or repayments.
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ARTICLE III
THE LETTERS OF CREDIT
---------------------
3.1 The Letter of Credit Subfacility. (a) On the terms and conditions
set forth herein (i) the Issuing Bank agrees, (A) from time to time on any
Business Day during the period from the Closing Date to the Revolving
Termination Date to issue Letters of Credit for the account of the Company, and
to amend or renew Letters of Credit previously issued by it, in accordance with
subsections 3.2(c) and 3.2(d), and (B) to honor drafts under the Letters of
Credit and Time Drafts; and (ii) the Banks severally agree to participate in
Letters of Credit Issued for the account of the Company (including any Time
Drafts which have been accepted); provided, that the Issuing Bank shall not be
obligated to Issue, and no Bank shall be obligated to participate in, any Letter
of Credit if as of the date of Issuance of such Letter of Credit (the "Issuance
Date") and after taking into account all repayment of Revolving Loans received
on such date (1) the Effective Amount of all L/C Obligations plus the Effective
Amount of all Revolving Loans exceeds the Combined Commitment, (2) the
participation of any Bank in the Effective Amount of all L/C Obligations plus
the Effective Amount of the Revolving Loans of such Bank exceeds such Bank's
Commitment, or (3) the Effective Amount of L/C Obligations exceeds the L/C
Commitment. Within the foregoing limits, and subject to the other terms and
conditions hereof, the Company's ability to obtain Letters of Credit shall be
fully revolving, and, accordingly, the Company may, during the foregoing period,
obtain Letters of Credit to replace Letters of Credit which have expired, been
terminated or which have been drawn upon and reimbursed.
(b) The Issuing Bank is under no obligation to Issue any Letter of
Credit if:
(i) any order, judgment or decree of any Governmental Authority
or arbitrator shall by its terms purport to enjoin or restrain the Issuing
Bank from Issuing such Letter of Credit, or any Requirement of Law
applicable to the Issuing Bank or any request or directive (whether or not
having the force of law) from any Governmental Authority
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with jurisdiction over the Issuing Bank shall prohibit, or request that the
Issuing Bank refrain from, the Issuance of letters of credit generally or
such Letter of Credit in particular or shall impose upon the Issuing Bank
with respect to such Letter of Credit any restriction, reserve or capital
requirement (for which the Issuing Bank is not otherwise compensated
hereunder) not in effect on the Closing Date, or shall impose upon the
Issuing Bank any unreimbursed loss, cost or expense which was not
applicable on the Closing Date and which the Issuing Bank in good faith
deems material to it;
(ii) the Issuing Bank has received written notice from any Bank, the
Agent or the Company, on or prior to the Business Day prior to the
requested date of Issuance of such Letter of Credit, that one or more of
the applicable conditions contained in Article V is not then satisfied;
(iii) the expiry date of any requested Letter of Credit (including
any Time Draft which has been accepted) is (A) more than 360 days after the
date of Issuance, unless the Majority Banks have approved such expiry date
in writing, or (B) after the Revolving Termination Date, unless all of the
Banks have approved such expiry date in writing or the Company has
theretofore agreed in writing in a form reasonably acceptable to the Agent
and the Issuing Bank to provide on or before the Revolving Termination Date
Cash Collateral or a letter of credit in form and substance and issued by a
financial institution reasonably acceptable to the Agent and the Issuing
Bank.
(iv) the expiry date of any requested Letter of Credit is prior to
the maturity date of any financial obligation to be supported by the
requested Letter of Credit;
(v) any requested Letter of Credit does not provide for drafts, or is
not otherwise in form and substance acceptable to the Issuing Bank, or the
Issuance of a Letter of Credit shall violate any applicable policies of the
Issuing Bank; or
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(vi) any standby Letter of Credit is for the purpose of
supporting the issuance of any letter of credit by any other Person.
3.2 Issuance, Amendment and Renewal of Letters of Credit. (a) Each Letter
of Credit shall be issued upon the irrevocable written request of the Company
received by the Issuing Bank (with a copy sent by the Company to the Agent) at
least three Business Days (or such shorter time as the Issuing Bank may agree in
a particular instance in its sole discretion) prior to the proposed date of
issuance. Each such request for issuance of a Letter of Credit shall be by
facsimile, confirmed immediately in an original writing, in the form of an L/C
Application, and shall specify in form and detail satisfactory to the Issuing
Bank: (i) the proposed date of issuance of the Letter of Credit (which shall be
a Business Day); (ii) the face amount of the Letter of Credit; (iii) the expiry
date of the Letter of Credit; (iv) the name and address of the beneficiary
thereof; (v) the documents to be presented by the beneficiary of the Letter of
Credit in case of any drawing thereunder; (vi) the full text of any certificate
to be presented by the beneficiary in case of any drawing thereunder; (vii)
whether the beneficiary of such Letter of Credit shall be entitled to present
Time Drafts; and (viii) such other matters as the Issuing Bank may require.
(b) At least two Business Days prior to the Issuance of any Letter of
Credit, the Issuing Bank will confirm with the Agent (by telephone or in
writing) that the Agent has received a copy of the L/C Application or L/C
Amendment Application from the Company and, if not, the Issuing Bank will
provide the Agent with a copy thereof. Unless the Issuing Bank has received
notice on or before the Business Day immediately preceding the date the Issuing
Bank is to issue a requested Letter of Credit from the Agent (A) directing the
Issuing Bank not to issue such Letter of Credit because such issuance is not
then permitted under subsection 3.1(a) as a result of the limitations set forth
in clauses (1) through (3) thereof; or (B) that one or more conditions specified
in Article V are not then satisfied; then, subject to the terms and conditions
hereof, the Issuing Bank shall, on the requested date, issue a Letter of Credit
for the account of the Company in accordance with the Issuing Bank's usual and
customary business practices.
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(c) From time to time while a Letter of Credit is outstanding and
prior to the Revolving Termination Date, the Issuing Bank will, upon the written
request of the Company received by the Issuing Bank (with a copy sent by the
Company to the Agent) at least five days (or such shorter time as the Issuing
Bank may agree in a particular instance in its sole discretion) prior to the
proposed date of amendment, amend any Letter of Credit issued by it. Each such
request for amendment of a Letter of Credit shall be made by facsimile,
confirmed immediately in an original writing, made in the form of an L/C
Amendment Application and shall specify in form and detail satisfactory to the
Issuing Bank: (i) the Letter of Credit to be amended; (ii) the proposed date of
amendment of the Letter of Credit (which shall be a Business Day); (iii) the
nature of the proposed amendment; and (iv) such other matters as the Issuing
Bank may require. The Issuing Bank shall be under no obligation to amend any
Letter of Credit if: (A) the Issuing Bank would have no obligation at such time
to issue such Letter of Credit in its amended form under the terms of this
Agreement; or (B) the beneficiary of any such letter of Credit does not accept
the proposed amendment to the Letter of Credit. The Agent will promptly notify
the Banks of the receipt by it of any L/C Application or L/C Amendment
Application.
(d) The Issuing Bank and the Banks agree that, while a Letter of
Credit is outstanding and prior to the Revolving Termination Date, at the option
of the Company and upon the written request of the Company received by the
Issuing Bank (with a copy sent by the Company to the Agent) at least five days
(or such shorter time as the Issuing Bank may agree in a particular instance in
its sole discretion) prior to the proposed date of notification of renewal, the
Issuing Bank shall be entitled to authorize the automatic renewal of any Letter
of Credit issued by it. Each such request for renewal of a Letter of Credit
shall be made by facsimile, confirmed immediately in an original writing, in the
form of an L/C Amendment Application, and shall specify in form and detail
satisfactory to the Issuing Bank: (i) the Letter of Credit to be renewed; (ii)
the proposed date of notification of renewal of the Letter of Credit (which
shall be a Business Day); (iii) the revised expiry date of the Letter of Credit;
and (iv) such other matters as the Issuing Bank may require. The Issuing Bank
shall be under no obligation so to renew any Letter of Credit if: (A) the
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Issuing Bank would have no obligation at such time to issue or amend such Letter
of Credit in its renewed form under the terms of this Agreement; or (B) the
beneficiary of any such Letter of Credit does not accept the proposed renewal of
the Letter of Credit. If any outstanding Letter of Credit shall provide that it
shall be automatically renewed unless the beneficiary thereof receives notice
from the Issuing Bank that such Letter of Credit shall not be renewed, and if at
the time of renewal the Issuing Bank would be entitled to authorize the
automatic renewal of such Letter of Credit in accordance with this subsection
3.2(d) upon the request of the Company but the Issuing Bank shall not have
received any L/C Amendment Application from the Company with respect to such
renewal or other written direction by the Company with respect thereto, the
Issuing Bank shall nonetheless be permitted to allow such Letter of Credit to
renew, and the Company and the Banks hereby authorize such renewal, and,
accordingly, the Issuing Bank shall be deemed to have received an L/C Amendment
Application from the Company requesting such renewal.
(e) Subject to the provisions of subsection 3.1(b)(iii), the Issuing
Bank may, at its election (or as required by the Agent at the direction of the
Majority Banks), deliver any notices of termination or other communications to
any Letter of Credit beneficiary or transferee, and take any other action as
necessary or appropriate, at any time and from time to time, in order to cause
the expiry date of such Letter of Credit to be a date not later than the
Revolving Termination Date.
(f) This Agreement shall control in the event of any conflict with
any L/C-Related Document (other than any Letter of Credit).
(g) The Issuing Bank will also deliver to the Agent, concurrently or
promptly following its delivery of a Letter of Credit, or amendment to or
renewal of a Letter of Credit, to an advising bank or a beneficiary, a true and
complete copy of each such Letter of Credit or amendment to or renewal of a
Letter of Credit.
3.3 Existing BofA Letters of Credit; Risk Participations, Drawings and
Reimbursements. (a) On and after the Closing
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Date, the Existing BofA Letters of Credit shall be deemed for all purposes,
including for purposes of the fees to be collected pursuant to subsections
3.8(a) and 3.8(c), and reimbursement of costs and expenses to the extent
provided herein, Letters of Credit outstanding under this Agreement and entitled
to the benefits of this Agreement and the other Loan Documents, and shall be
governed by the applications and agreements pertaining thereto and by this
Agreement. Each Bank shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the Issuing Bank on the Closing Date a
participation in each such Letter of Credit and each drawing thereunder in an
amount equal to the product of (i) such Bank's Pro Rata Share times (ii) the
maximum amount available to be drawn under such Letter of Credit and the amount
of such drawing, respectively. For purposes of subsection 2.1(b) and subsection
2.10(b), the Existing BofA Letters of Credit shall be deemed to utilize pro rata
the Commitment of each Bank.
(b) Immediately upon the Issuance of each Letter of Credit in
addition to those described in subsection 3.3(a), each Bank shall be deemed to,
and hereby irrevocably and unconditionally agrees to, purchase from the Issuing
Bank a participation in such Letter of Credit and each drawing thereunder
(including any Time Drafts which have been accepted thereunder) in an amount
equal to the product of (i) the Pro Rata Share of such Bank, times (ii) the
maximum amount available to be drawn under such Letter of Credit or Time Draft
and the amount of such drawing, respectively. For purposes of subsection 2.1,
each Issuance of a Letter of Credit shall be deemed to utilize the Commitment of
each Bank by an amount equal to the amount of such participation.
(c) In the event of any request for a drawing under a Letter of
Credit or Time Draft by the beneficiary or transferee thereof, the Issuing Bank
will promptly notify the Company. The Company shall reimburse the Issuing Bank
prior to 10:30 a.m. (Chicago time), on each date that any amount is paid by the
Issuing Bank under any Letter of Credit or Time Draft (each such date, an "Honor
Date"), in an amount equal to the amount so paid by the Issuing Bank. In the
event the Company fails to reimburse the Issuing Bank for the full amount of any
drawing under any Letter of Credit by 10:30 a.m. (Chicago time) on the Honor
Date, the Issuing Bank will promptly notify the Agent and
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the Agent will promptly notify each Bank thereof, and the Company shall be
deemed to have requested that Base Rate Loans be made by the Banks to be
disbursed on the Honor Date under such Letter of Credit or Time Draft, subject
to the Effective Amount of the unutilized portion of the Combined Commitment and
subject to the conditions set forth in Section 5.2. Any notice given by the
Issuing Bank or the Agent pursuant to this subsection 3.3(c) may be oral if
immediately confirmed in writing (including by facsimile); provided that the
lack of such an immediate confirmation shall not affect the conclusiveness or
binding effect of such notice.
(d) Each Bank shall upon any notice pursuant to subsection 3.3(c)
make available to the Agent for the account of the Issuing Bank an amount in
Dollars and in immediately available funds equal to its Pro Rata Share of the
amount of the drawing, whereupon the participating Banks shall (subject to
subsection 3.3(e)) each be deemed to have made a Revolving Loan consisting of a
Base Rate Loan to the Company in that amount. If any Bank so notified fails to
make available to the Agent for the account of the Issuing Bank the amount of
such Bank's Pro Rata Share of the amount of the drawing by no later than 12:00
noon (Chicago time) on the Honor Date, then interest shall accrue on such Bank's
obligation to make such payment, from the Honor Date to the date such Bank makes
such payment, at a rate per annum equal to the Federal Funds Rate in effect from
time to time during such period. The Agent will promptly give notice of the
occurrence of the Honor Date, but failure of the Agent to give any such notice
on the Honor Date or in sufficient time to enable any Bank to effect such
payment on such date shall not relieve such Bank from its obligations under this
Section 3.3.
(e) With respect to any unreimbursed drawing that is not converted
into Revolving Loans consisting of Base Rate Loans to the Company in whole or in
part, because of the Company's failure to satisfy the conditions set forth in
Section 5.2 or for any other reason, the Company shall be deemed to have
incurred from the Issuing Bank an L/C Borrowing in the amount of such drawing,
which L/C Borrowing shall be due and payable on demand (together with interest)
and shall bear interest at a rate per annum equal to the Base Rate plus 2% per
annum, and each Bank's payment to the Issuing Bank pursuant to subsection 3.3(d)
shall be deemed payment in respect of its participation
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in such L/C Borrowing and shall constitute an L/C Advance from such Bank in
satisfaction of its participation obligation under this Section 3.3.
(f) Each Bank's obligation in accordance with this Agreement to make
the Revolving Loans or L/C Advances, as contemplated by this Section 3.3, as a
result of a drawing under a Letter of Credit or Time Draft, shall be absolute
and unconditional and without recourse to the Issuing Bank and shall not be
affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Bank may have against the Issuing
Bank, the Company or any other Person for any reason whatsoever; (ii) the
occurrence or continuance of a Default, an Event of Default or a Material
Adverse Effect; or (iii) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing; provided, however, that each
Bank's obligation to make Revolving Loans under this Section 3.3 is subject to
the conditions set forth in Section 5.2.
3.4 Repayment of Participations. (a) Upon (and only upon) receipt by the
Agent for the account of the Issuing Bank of immediately available funds from
the Company (i) in reimbursement of any payment made by the Issuing Bank under
the Letter of Credit or Time Draft with respect to which any Bank has paid the
Agent for the account of the Issuing Bank for such Bank's participation therein
pursuant to Section 3.3 or (ii) in payment of interest thereon, the Agent will
pay to each Bank, in the same funds as those received by the Agent for the
account of the Issuing Bank, the amount of such Bank's Pro Rata Share of such
funds, and the Issuing Bank shall receive the amount of the Pro Rata Share of
such funds of any Bank that did not so pay the Agent for the account of the
Issuing Bank.
(b) If the Agent or the Issuing Bank is required at any time to
return to the Company, or to a trustee, receiver, liquidator, custodian, or any
official in any Insolvency Proceeding, any portion of the payments made by the
Company to the Agent for the account of the Issuing Bank pursuant to subsection
3.4(a) in reimbursement of a payment made under the Letter of Credit or Time
Draft or interest or fee thereon, each Bank shall, on demand of the Agent,
forthwith return to the Agent or the Issuing Bank the amount of its Pro Rata
Share of
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any amounts so returned by the Agent or the Issuing Bank plus interest thereon
from the date such demand is made to the date such amounts are returned by such
Bank to the Agent or the Issuing Bank, at a rate per annum equal to the Federal
Funds Rate in effect from time to time.
3.5 Role of the Issuing Bank. (a) Each Bank and the Company agree that, in
paying any drawing under a Letter of Credit or Time Draft, the Issuing Bank
shall not have any responsibility to obtain any document (other than any sight
draft, document and certificates expressly required by the Letter of Credit) or
to ascertain or inquire as to the validity or accuracy (other than conformity
with the draw requirements of such Letter of Credit) of any such document or the
authority of the Person executing or delivering any such document.
(b) No Agent-Related Person nor any of the respective correspondents,
participants or assignees of the Issuing Bank shall be liable to any Bank for:
(i) any action taken or omitted in connection herewith at the request or with
the approval of the Banks (including the Majority Banks, as applicable); (ii)
any action taken or omitted in the absence of gross negligence or willful
misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any L/C-Related Document.
(c) The Company hereby assumes all risks of the acts or omissions of
any beneficiary or transferee with respect to its use of any Letter of Credit or
Time Draft; provided, however, that this assumption is not intended to, and
shall not, preclude the Company's pursuing such rights and remedies as it may
have against the beneficiary or transferee at law or under any other agreement.
No Agent-Related Person, nor any of the respective correspondents, participants
or assignees of the Issuing Bank, shall be liable or responsible for any of the
matters described in clauses (i) through (vii) of Section 3.6; provided,
however, anything in such clauses to the contrary notwithstanding, that the
Company may have a claim against the Issuing Bank, and the Issuing Bank may be
liable to the Company, to the extent, but only to the extent, of any direct, as
opposed to consequential or exemplary, damages suffered by the Company which
were caused by the Issuing Bank's willful misconduct or gross negligence (which
shall include payment against non-
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conforming draw request documentation) or the Issuing Bank's willful failure to
pay under any Letter of Credit after the presentation to it by the beneficiary
of a sight draft, documents and certificate(s) strictly complying with the terms
and conditions of a Letter of Credit or Time Draft. In furtherance and not in
limitation of the foregoing: (i) the Issuing Bank may accept documents that
appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary; and (ii)
the Issuing Bank shall not be responsible for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign a
Letter of Credit or Time Draft or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or ineffective for
any reason.
3.6 Obligations Absolute. The obligations of the Company under this
Agreement and any L/C-Related Document to reimburse the Issuing Bank for a
drawing under a Letter of Credit or Time Draft, and to repay any L/C Borrowing
and any drawing under a Letter of Credit or Time Draft converted into Revolving
Loans, shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement and each such other L/C-Related
Document under all circumstances, including the following:
(i) any lack of validity or enforceability of this Agreement or any
L/C-Related Document;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the obligations of the Company in respect of
any Letter of Credit or any other amendment or waiver of or any consent to
departure from all or any of the L/C-Related Documents;
(iii) the existence of any claim, set-off, defense or other right that
the Company may have at any time against any beneficiary or any transferee
of any Letter of Credit (or any Person for whom any such beneficiary or any
such transferee may be acting), the Issuing Bank or any other Person,
whether in connection with this Agreement, the transactions contemplated
hereby or by the L/C-Related Documents or any unrelated transaction;
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(iv) any draft, demand, certificate or 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; or any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any Letter of Credit or any time
Draft;
(v) any payment made by the Issuing Bank under any Letter of Credit
or any Time Draft to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or any
transferee of any Letter of Credit or any Time Draft, including any arising in
connection with any Insolvency Proceeding;
(vi) any exchange, release or non-perfection of any collateral, or
any release or amendment or waiver of or consent to departure from any other
guarantee, for all or any of the obligations of the Company in respect of any
Letter of Credit or Time Draft; or
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other circumstance that might
otherwise constitute a defense available to, or a discharge of, the Company or a
guarantor (other than the gross negligence or wilful misconduct of the Issuing
Bank, which shall include payment against non-conforming draw request
documentation).
3.7 Cash Collateral Pledge. Upon (i) the request of the Agent, (A) if the
Issuing Bank has honored any full or partial drawing request on any Letter of
Credit or Time Draft and such drawing has resulted in an L/C Borrowing
hereunder, or (B) if, as of the date which is 30 Business Days prior to the
Revolving Termination Date, any Letters of Credit or Time Draft may for any
reason remain outstanding and partially or wholly undrawn, or (ii) the
occurrence of the circumstances described in Section 2.7 requiring the Company
to Cash Collateralize Letters of Credit or Time Drafts, then, the Company shall
immediately Cash Collateralize the L/C Obligations in the amount required by
Section 2.7.
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3.8 Letter of Credit Fees. (a) The Company shall pay to the Agent for
the ratable account of each of the Banks a letter of credit fee with respect to
the Letters of Credit (including any Time Drafts which are accepted thereunder),
such fee to be equal to (i) in the case of each standby Letter of Credit, the
Applicable Margin for Offshore Rate Loans per annum on the average daily maximum
amount available to be drawn on the outstanding standby Letters of Credit,
provided, that in the case of each standby Letter of Credit Issued as a
condition precedent to the Colorstrip Acquisition such fee shall equal 1.0% per
annum on the average daily maximum amount available to be drawn on such Letter
of Credit, and (ii) in the case of each commercial Letter of Credit, .25% per
annum on the average daily maximum amount available to be drawn on the
outstanding commercial Letters of Credit or Time Draft, as the case may be. Such
fees shall be computed on a quarterly basis in arrears on the last Business Day
of each calendar quarter based upon Letters of Credit outstanding for that
quarter, as calculated by the Agent. Such letter of credit fees shall be due
and payable quarterly in arrears on the last Business Day of each calendar
quarter during which Letters of Credit are outstanding, commencing on the first
such quarterly date to occur after the Closing Date, through the Revolving
Termination Date (or such later date upon which the outstanding Letters of
Credit shall expire), with the final payment to be made on the Revolving
Termination Date (or such later expiration date).
(b) The Company shall pay to the Issuing Bank a letter of credit
fronting fee for each Letter of Credit Issued by the Issuing Bank after the
Closing Date, such fee to be in an amount equal to .05% of the face amount of
such Letter of Credit; provided, that no fronting fee shall be due with respect
to the initial Letter of Credit Issued on or after the Closing Date as a
condition precedent to the Colorstrip Acquisition. Such Letter of Credit
fronting fee shall be due and payable on each date of Issuance of a Letter of
Credit.
(c) The Company shall pay to the Issuing Bank from time to time on
demand the normal issuance, presentation, amendment and other processing fees,
and other standard costs and charges, of the Issuing Bank relating to letters of
credit as from time to time in effect.
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3.9 Uniform Customs and Practice. The Uniform Customs and Practice for
Documentary Credits as published by the International Chamber of Commerce most
recently at the time of issuance of any Letter of Credit shall (unless otherwise
expressly provided in the Letters of Credit) apply to the Letters of Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
4.1 Taxes. (a) Any and all payments by the Company to each Bank or the
Agent under this Agreement and any other Loan Document shall be made free and
clear of, and without deduction or withholding for, any Taxes. In addition, the
Company shall pay all Other Taxes.
(b) If the Company shall be required by law to deduct or withhold any
Taxes, Other Taxes or Further Taxes from or in respect of any sum payable
hereunder to any Bank or the Agent, then:
(i) the sum payable shall be increased as necessary so that, after
making all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this Section),
such Bank or the Agent, as the case may be, receives and retains an amount
equal to the sum it would have received and retained had no such deductions
or withholdings been made;
(ii) the Company shall make such deductions and withholdings;
(iii) the Company shall pay the full amount deducted or withheld to
the relevant taxing authority or other authority in accordance with
applicable law; and
(iv) the Company shall also pay to each Bank or the Agent for the
account of such Bank, at the time interest is paid, Further Taxes in the
amount that the respective Bank specifies in good faith as necessary to
preserve the
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after-tax yield the Bank would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed.
(c) The Company agrees to indemnify and hold harmless each Bank and
the Agent for the full amount of i) Taxes, ii) Other Taxes, and iii) Further
Taxes in the amount that the respective Bank specifies in good faith as
necessary to preserve the after-tax yield the Bank would have received if such
Taxes, Other Taxes or Further Taxes had not been imposed, and any liability
(including penalties, interest, additions to tax and expenses) arising therefrom
or with respect thereto, whether or not such Taxes, Other Taxes or Further Taxes
were correctly or legally asserted. Payment under this indemnification shall be
made within 30 days after the date the Bank or the Agent makes written demand
therefor. Any refund or rebate actually received by a Bank or the Agent of
Taxes, Other Taxes or Further Taxes for which such Bank or the Agent, as the
case may be, has received indemnification from the Company shall be credited to
the Company's account with such Bank or the Agent to be applied against
Obligation then existing or thereafter arising.
(d) Within 30 days after the date of any payment by the Company of
Taxes, Other Taxes or Further Taxes, the Company shall furnish to each Bank or
the Agent the original or a certified copy of a receipt evidencing payment
thereof, or other evidence of payment satisfactory to such Bank or the Agent.
(e) If the Company is required to pay any amount to any Bank or the
Agent pursuant to subsection (b) or (c) of this Section, then such Bank shall
use reasonable efforts (consistent with legal and regulatory restrictions) to
change the jurisdiction of its Lending Office so as to eliminate any such
additional payment by the Company which may thereafter accrue, if such change in
the sole judgment of such Bank is not otherwise disadvantageous to such Bank.
4.2 Illegality. (a) If any Bank determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, in each case after
the Closing Date has made it unlawful, or that any central bank or other
Governmental Authority has asserted after the Closing Date that it is unlawful,
for any Bank or its applicable Lending Office to
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make Offshore Rate Loans, then, on notice thereof by the Bank to the Company
through the Agent, any obligation of that Bank to make Offshore Rate Loans shall
be suspended until the Bank notifies the Agent and the Company that the
circumstances giving rise to such determination no longer exist.
(b) If a Bank determines that it is unlawful to maintain any Offshore
Rate Loan, the Company shall, upon its receipt of notice of such fact and demand
from such Bank (with a copy to the Agent), prepay in full such Offshore Rate
Loans of that Bank then outstanding, together with interest accrued thereon and
amounts required under Section 4.4, either on the last day of the Interest
Period thereof, if the Bank may lawfully continue to maintain such Offshore Rate
Loans to such day, or immediately, if the Bank may not lawfully continue to
maintain such Offshore Rate Loan. If the Company is required to so prepay any
Offshore Rate Loan, then concurrently with such prepayment, the Company shall
borrow from the affected Bank, and the affected Bank shall lend in the amount of
such repayment, a Base Rate Loan.
(c) If the obligation of any Bank to make or maintain Offshore Rate
Loans has been so terminated or suspended, the Company may elect, by giving
notice to the Bank through the Agent that all Loans which would otherwise be
made by the Bank as Offshore Rate Loans shall be instead Base Rate Loans.
(d) Before giving any notice to the Agent under this Section, the
affected Bank shall designate a different Lending Office with respect to its
Offshore Rate Loans if such designation will avoid the need for giving such
notice or making such demand and will not, in the judgment of the Bank, be
illegal or otherwise disadvantageous to the Bank.
4.3 Increased Costs and Reduction of Return. (a) If any Bank determines
that, due to either (i) the introduction of or any change (other than any change
by way of imposition of or increase in reserve requirements included in the
calculation of the Offshore Rate or in respect of the assessment rate payable by
any Bank to the FDIC for insuring U.S. deposits) in or in the interpretation of
any law or regulation after the Closing Date or (ii) the compliance by that Bank
with any guideline or request from any central bank or other Governmental
Authority
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(whether or not having the force of law) adopted or made after the Closing Date,
there shall be any increase in the cost to such Bank of agreeing to make or
making, funding or maintaining any Offshore Rate Loans or participating in
Letters of Credit, or, in the case of the Issuing Bank, any increase in the cost
to the Issuing Bank of agreeing to issue, issuing or maintaining any Letter of
Credit or of agreeing to make or making, funding or maintaining any unpaid
drawing under any Letter of Credit, then the Company shall be liable for, and
shall from time to time, upon demand (with a copy of such demand to be sent to
the Agent), pay to the Agent for the account of such Bank, additional amounts as
are sufficient to compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the introduction after
the Closing Date of any Capital Adequacy Regulation, (ii) any change after the
Closing Date in any Capital Adequacy Regulation, (iii) any change after the
Closing Date in the interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority charged with the
interpretation or administration thereof, or (iv) compliance by the Bank (or its
Lending Office) or any corporation controlling the Bank with any Capital
Adequacy Regulation adopted after the Closing Date, affects or would affect the
amount of capital required or expected to be maintained by the Bank or any
corporation controlling the Bank and (taking into consideration such Bank's or
such corporation's policies with respect to capital adequacy and such Bank's
desired return on capital) determines that the amount of such capital is
increased as a consequence of its Commitment, loans, credits or obligations
under this Agreement, then, upon demand of such Bank to the Company through the
Agent, the Company shall pay to the Bank, from time to time as specified by the
Bank, additional amounts sufficient to compensate the Bank for such increase.
4.4 Funding Losses. The Company shall reimburse each Bank and hold each
Bank harmless from any loss or expense which the Bank may sustain or incur as a
consequence of:
(a) the failure of the Company to make on a timely basis any payment
of principal of any Offshore Rate Loan;
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(b) the failure of the Company to borrow, continue or convert an
Offshore Rate Loan after the Company has given (or is deemed to have given) a
Notice of Borrowing or a Notice of Conversion/Continuation;
(c) the failure of the Company to make any prepayment of an Offshore
Rate Loan in accordance with any notice delivered under Section 2.6;
(d) the prepayment (including pursuant to Section 2.7) or other
payment (including after acceleration thereof) of an Offshore Rate Loan on a day
that is not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.4 of any Offshore Rate
Loan to a Base Rate Loan on a day that is not the last day of the relevant
Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees payable
to terminate the deposits from which such funds were obtained. For purposes of
calculating amounts payable by the Company to the Banks under this Section and
under subsection 4.3(a), each Offshore Rate Loan made by a Bank (and each
related reserve, special deposit or similar requirement) shall be conclusively
deemed to have been funded at the IBOR used in determining the Offshore Rate for
such Offshore Rate Loan by a matching deposit or other borrowing in the
interbank eurodollar market for a comparable amount and for a comparable period,
whether or not such Offshore Rate Loan is in fact so funded.
4.5 Inability to Determine Rates. If any Bank or the Agent determines
that for any reason adequate and reasonable means do not exist for determining
the Offshore Rate for any requested Interest Period with respect to a proposed
Offshore Rate Loan or that the Offshore Rate applicable for any requested
Interest Period with respect to a proposed Offshore Rate Loan does not
adequately and fairly reflect the cost to such Banks of funding such Loan, the
Agent will promptly so notify the Company and each Bank. Thereafter, the
obligation of the Banks to make or maintain Offshore Rate Loans hereunder shall
be suspended until the Agent upon the instruction of the Majority Banks revokes
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such notice in writing. Upon receipt of such notice, the Company may revoke any
Notice of Borrowing or Notice of Conversion/Continuation then submitted by it.
If the Company does not revoke such Notice, the Banks shall make, convert or
continue the Loans, as proposed by the Company, in the amount specified in the
applicable notice submitted by the Company, but such Loans shall be made,
converted or continued as Base Rate Loans instead of Offshore Rate Loans.
4.6 Certificates of Banks. Any Bank claiming reimbursement or
compensation under this Article IV shall deliver to the Company (with a copy to
the Agent) within six months of the date on which such Bank becomes entitled to
claim such reimbursement or compensation a certificate setting forth in
reasonable detail the amount payable to the Bank hereunder and such certificate
shall be conclusive and binding on the Company in the absence of manifest error.
4.7 Survival. The agreements and obligations of the Company in this
Article IV shall survive the payment of all other Obligations.
ARTICLE V
CONDITIONS PRECEDENT
--------------------
5.1 Conditions of Initial Credit Extensions. The obligation of each Bank
to make its initial Credit Extension hereunder is subject to the condition that
the Agent shall have received on or before the Closing Date an aggregate upfront
fee in an amount equal to $210,000.00 for the account of each Bank according to
its Pro Rata Share, together with all of the following, in form and substance
satisfactory to the Agent and each Bank, and in sufficient copies for each Bank:
(a) Credit Agreement, Notes and Guaranties. (i) This Agreement and
the Notes (if any) executed by the Company and (ii) the Guaranties executed by
each Material Subsidiary;
(b) Resolutions; Incumbency.
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(i) Copies of the resolutions of the board of directors of the
Company and each Material Subsidiary authorizing the transactions
contemplated hereby, certified as of the Closing Date by the Secretary or
an Assistant Secretary of such Person; and
(ii) A certificate of the Secretary or Assistant Secretary of the
Company and each Material Subsidiary certifying the names and true
signatures of the officers of the Company or such Subsidiary authorized to
execute, deliver and perform, as applicable, this Agreement and all other
Loan Documents to be delivered by it hereunder;
(c) Organization Documents; Good Standing. Each of the following
documents:
(i) the articles or certificate of incorporation and the bylaws
of the Company and each Material Subsidiary, as in effect on the Closing
Date, certified by the Secretary or Assistant Secretary of the Company or
such Subsidiary as of the Closing Date; and
(ii) a good standing and, where applicable, tax good standing
certificate for the Company and each Material Subsidiary from the Secretary
of State (or similar, applicable Governmental Authority) of its state of
incorporation as of a recent date;
(d) Legal Opinions. An opinion of Kirkland & Ellis, counsel to the
Company and addressed to the Agent and the Banks, substantially in the form of
Exhibit D;
(e) Payment of Fees. Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses to the extent then due and payable
hereunder on the Closing Date, together with Attorney Costs of BofA to the
extent invoiced prior to or on the Closing Date, plus such additional amounts of
Attorney Costs as shall constitute BofA's reasonable estimate of Attorney Costs
incurred or to be incurred by it through the closing proceedings (provided that
such estimate shall not thereafter preclude final settling of accounts between
the Company and BofA); including any such costs, fees and expenses arising under
or referenced in Sections 2.10 and 12.4;
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(f) Certificate. A certificate signed by a Responsible Officer,
dated as of the Closing Date, stating that:
(i) the representations and warranties contained in Article VI
are true and correct in all material respects on and as of such date, as
though made on and as of such date (except to the extent such
representations and warranties expressly refer to an earlier date, in which
case they shall be true and correct in all material respects as of such
earlier date);
(ii) no Default or Event of Default exists or would result from
the Credit Extension; and
(iii) there has occurred since February 28, 1997, no event or
circumstance that has resulted or could reasonably be expected to result in
a Material Adverse Effect (it being understood that the accounting
irregularities announced by the Company in April, 1997 shall not be deemed
a Material Adverse Effect);
(iv) attached thereto is a true and correct copy of the
Acquisition Agreement; and
(v) attached thereto are true and correct calculations of the
ratio of Consolidated Debt to Adjusted EBITDA as of August 31, 1997.
(g) Environmental Survey. All environmental survey test results
received by the Company with respect to real property owned by Colorstrip and
located in Richmond, California, which shall be in form and substance
satisfactory to the Lenders;
(h) Existing Credit Facilities. Evidence that certain Credit
Agreement, dated as of September 1, 1994, by and between the Company and Bank of
America Illinois, as the Lender, has been terminated; and
(i) Other Documents. Such other approvals, opinions, documents or
materials as the Agent or any Bank may request.
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5.2 Conditions to All Credit Extensions. The obligation of each Bank to
make any Revolving Loan to be made by it (including its initial Revolving Loan)
or to continue or convert any Revolving Loan under Section 2.4 and the
obligation of the Issuing Bank to Issue any Letter of Credit (including the
initial Letter of Credit) is subject to the satisfaction of the following
conditions precedent on the relevant Borrowing Date, Conversion/Continuation
Date or Issuance Date:
(a) Notice, Application. The Agent shall have received (with, in the
case of the initial Revolving Loan only, a copy for each Bank) a Notice of
Borrowing or a Notice of Conversion/Continuation, as applicable or in the case
of any Issuance of any Letter of Credit, the Issuing Bank and the Agent shall
have received an L/C Application or L/C Amendment Application, as required under
Section 3.2;
(b) Continuation of Representations and Warranties. The
representations and warranties in Article VI shall be true and correct in all
material respects on and as of such Borrowing Date or Conversion/Continuation
Date or Issuance Date with the same effect as if made on and as of such
Borrowing Date or Conversion/Continuation Date or Issuance Date (except to the
extent such representations and warranties expressly refer to an earlier date,
in which case they shall be true and correct in all material respects as of such
earlier date); and
(c) No Existing Default. No Default or Event of Default shall exist
or shall result from such Borrowing or continuation or conversion or Issuance.
Each Notice of Borrowing, Notice of Conversion/Continuation and L/C Application
or L/C Amendment Application submitted by the Company hereunder shall constitute
a representation and warranty by the Company hereunder, as of the date of each
such notice and as of each Borrowing Date, Conversion/Continuation Date, or
Issuance Date, as applicable, that the conditions in this Section 5.2 are
satisfied.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company represents and warrants to the Agent and each Bank that:
6.1 Corporate Existence and Power. The Company and each of its
Subsidiaries:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its business
and to execute, deliver, and perform its obligations under the Loan Documents;
(c) is duly qualified as a foreign corporation and is licensed and in
good standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
or license; and
(d) is in compliance with all Requirements of Law; except, in each
case referred to in clause b, clause (c) or clause (d), to the extent that the
failure to do so could not reasonably be expected to have a Material Adverse
Effect.
6.2 Corporate Authorization; No Contravention. The execution, delivery
and performance by the Company and its Subsidiaries of this Agreement and each
other Loan Document to which such Person is party, have been duly authorized by
all necessary corporate action, and do not and will not:
(a) contravene the terms of any of that Person's Organization
Documents;
(b) conflict with or result in any breach or contravention of, or the
creation of any Lien under, any document evidencing any material Contractual
Obligation to which such Person is a party or any order, injunction, writ or
decree
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of any Governmental Authority to which such Person or its property is subject;
or
(c) violate any Requirement of Law.
6.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company or
any of its Subsidiaries of the Agreement or any other Loan Document to which
each is a party.
6.4 Binding Effect. This Agreement and each other Loan Document to which
the Company or any of its Subsidiaries is a party constitute the legal, valid
and binding obligations of the Company and any of its Subsidiaries to the extent
it is a party thereto, enforceable against such Person in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
6.5 Litigation. Except as specifically disclosed in Schedule 6.5, there
are no actions, suits, proceedings, claims or disputes pending, or to the best
knowledge of the Company, threatened, at law, in equity, in arbitration or
before any Governmental Authority, against the Company, or its Subsidiaries or
any of their respective properties which:
(a) purport to affect to this Agreement or any other Loan Document,
or any of the transactions contemplated hereby or thereby; or
(b) would reasonably be expected to have a Material Adverse Effect.
No injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin or
restrain the execution, delivery or performance of this Agreement or any other
Loan Document, or directing that the transactions provided for herein or therein
not be consummated as herein or therein provided.
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6.6 No Default. As of the date of incurrence of any Obligations by the
Company, no Default or Event of Default exists or would result from such
incurrence. As of the Closing Date, neither the Company nor any Subsidiary is
in default under or with respect to any Contractual Obligation in any respect
which, individually or together with all such defaults, could reasonably be
expected to have a Material Adverse Effect, or that would, if such default had
occurred after the Closing Date, create an Event of Default under subsection
10.1(e).
6.7 ERISA Compliance. Except as specifically disclosed in Schedule 6.7:
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the IRS and to the best knowledge of the
Company, nothing has occurred which would cause the loss of such qualification.
The Company and each ERISA Affiliate has made all required contributions to any
Plan subject to Section 412 of the Code, and no application for a funding waiver
or an extension of any amortization period pursuant to Section 412 of the Code
has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction
or violation of the fiduciary responsibility rules with respect to any Plan
which has resulted or could reasonably be expected to result in a Material
Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) the aggregate Unfunded Pension Liability for all Pension Plans is
less than $5,000,000; (iii) neither the Company nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability in excess of $500,000
under Title IV of ERISA with respect to any Pension Plan (other than premiums
due and not delinquent under Section 4007 of ERISA); (iv) neither the Company
nor any ERISA Affiliate has incurred,
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or reasonably expects to incur, any liability in excess of $500,000 (and no
event has occurred which, with the giving of notice under Section 4219 of ERISA,
would result in such liability) under Section 4201 or 4243 of ERISA with respect
to a Multiemployer Plan; and (v) neither the Company nor any ERISA Affiliate has
engaged in a transaction that reasonably could be subject to Section 4069 or
4212(c) of ERISA.
6.8 Use of Proceeds; Margin Regulations. The proceeds of the Loans are to
be used solely for the purposes set forth in and permitted by Section 7.12 and
Section 8.7. Neither the Company nor any Subsidiary is generally engaged in the
business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock.
6.9 Title to Properties. The Company and each Subsidiary have good record
and marketable title in fee simple to, or valid leasehold interests in, all real
property necessary or used in the ordinary conduct of their respective
businesses, except for such defects in title as could not reasonably,
individually or in the aggregate, have a Material Adverse Effect. As of the
Closing Date, the property of the Company and its Subsidiaries is subject to no
Liens, other than Permitted Liens.
6.10 Taxes. The Company and its Subsidiaries have filed all Federal and
other material tax returns and reports required by law to be filed, and have
paid all Federal and other material taxes, assessments, fees and other
governmental charges thereby shown to be owing except those which are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been provided in accordance with GAAP. There is no proposed tax
assessment against the Company or any Subsidiary that would, if made, have a
Material Adverse Effect.
6.11 Financial Condition. (a) The audited consolidated financial
statements of the Company and its Subsidiaries dated February 28, 1997, the
unaudited consolidated financial statements of the Company and its Subsidiaries
dated August 31, 1997 and the related consolidated statements of income or
operations, shareholders' equity and cash flows for the fiscal year or quarter,
as the case may be, ended on that date:
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(i) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein and, in the case of the unaudited financial statements, subject to
ordinary, good faith year end audit adjustments and the absence of complete
footnotes;
(ii) fairly present the financial condition of the Company and its
Subsidiaries as of the respective dates thereof and results of operations
for the period covered thereby;
(b) Since February 28, 1997, there has been no Material Adverse
Effect (it being understood that the accounting irregularities announced by the
Company in April, 1997 shall not be deemed a Material Adverse Effect).
6.12 Environmental Matters. The Company conducts in the ordinary course
of business a review of the effect of existing Environmental Laws and existing
Environmental Claims on its business, operations and properties, and as a result
thereof the Company has reasonably concluded that, except as specifically
disclosed in Schedule 6.12, such Environmental Laws and Environmental Claims
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
6.13 Regulated Entities. None of the Company, any Person controlling the
Company, or any Subsidiary, is an "Investment Company" within the meaning of the
Investment Company Act of 1940. The Company is not subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code, or any other similar
Federal or state statute or regulation limiting its ability to incur
Indebtedness.
6.14 No Burdensome Restrictions. Neither the Company nor any Subsidiary
is a party to or bound by any Contractual Obligation, or subject to any
restriction in any Organization Document, or any Requirement of Law, which could
reasonably be expected to have a Material Adverse Effect.
6.15 Reserved
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6.16 Subsidiaries. As of the Closing Date, the Company has no Subsidiaries
other than those specifically disclosed in part (a) of Schedule 6.16 hereto and
has no equity investments in any other corporation or entity other than those
specifically disclosed in part (b) of Schedule 6.16.
6.17 Insurance. Except as specifically disclosed in Schedule 6.17, the
properties of the Company and its Subsidiaries are insured with financially
sound and reputable insurance companies not Affiliates of the Company, in such
amounts, with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning similar properties
in localities where the Company or such Subsidiary operates.
6.18 Swap Obligations. Neither the Company nor any of its Subsidiaries
has any outstanding obligations under any Swap Contracts, other than Permitted
Swap Obligations. The Company has undertaken its own independent assessment of
its consolidated assets, liabilities and commitments and has considered
appropriate means of mitigating and managing risks associated with such matters.
6.19 Full Disclosure. None of the representations or warranties made by
the Company or any Subsidiary in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Company or any Subsidiary under the Loan Documents,
contains any untrue statement of a material fact or omits any material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they are made, not misleading as of
the time when made or delivered.
6.20 Colorstrip Acquisition. The Company has furnished to each Bank a true
and correct copy of the Acquisition Agreement. To the best of the Company's
knowledge (which shall be deemed to be, for such purpose, the actual knowledge
of the Company's President and Chief Financial Officer), all representations
made by Colorstrip in the Acquisition Agreement are true and correct as
qualified by the schedules attached to the Acquisition Agreement as of the
Closing Date in all material respects.
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ARTICLE VII
AFFIRMATIVE COVENANTS
---------------------
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
(including any Time Draft which has been accepted) shall remain outstanding,
unless the Majority Banks waive compliance in writing:
7.1 Financial Statements. The Company shall deliver to the Agent, in form
and detail reasonably satisfactory to the Agent, with sufficient copies for each
Bank:
(a) as soon as available, but not later than 90 days after the end of
each fiscal year (commencing with the fiscal year ended February 28, 1998), a
copy of the audited consolidated balance sheet of the Company and its
Subsidiaries as at the end of such year and the related consolidated statements
of income or operations, shareholders' equity and cash flows for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, and accompanied by the opinion of Arthur Andersen L.L.P. or another
nationally-recognized independent public accounting firm ("Independent Auditor")
which report shall state that such consolidated financial statements present
fairly the financial position for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years. Such opinion shall not be
qualified or limited because of a restricted or limited examination by the
Independent Auditor of any material portion of the Company's or any Subsidiary's
records; provided, that if the Company's Annual Report on Form 10-K provides the
foregoing information with respect to the Company and its Subsidiaries as a
group, the delivery within the time period specified above of the Company's
Annual Report on Form 10-K for such fiscal year (together with the Company's
annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the
Exchange Act) prepared in accordance with the requirement therefor and filed
with the Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 7.1(b);
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(b) as soon as available, but not later than 45 days after the end of
each of the first three fiscal quarters of each fiscal year (commencing with the
fiscal quarter ended November 30, 1997), a copy of the unaudited consolidated
balance sheet of the Company and its Subsidiaries as of the end of such quarter
and the related consolidated statements of income, shareholders' equity and cash
flows for the period commencing on the first day and ending on the last day of
such quarter, and certified by a Responsible Officer as fairly presenting, in
accordance with GAAP (subject to ordinary, good faith year-end audit adjustments
and the absence of complete footnotes), the financial position and the results
of operations of the Company and the Subsidiaries; provided, that if the
Company's Quarterly Report on Form 10-Q provides the foregoing information with
respect to the Company and its Subsidiaries as a group, delivery within the time
period specified above of copies of the Company's Quarterly Report on Form 10-Q
prepared in compliance with the requirements therefor and filed with the
Securities and Exchange Commission shall be deemed to satisfy the requirements
of this Section 7.1(a); and
(c) as soon as available, but not later than 90 days after the end of
each fiscal year (commencing with the fiscal year ended February 28, 1998), a
copy of an unaudited consolidating balance sheet of the Company and its
Subsidiaries as at the end of such year and the related consolidating statement
of income, shareholders' equity and cash flows for such year, certified by a
Responsible Officer as having been developed and used in connection with the
preparation of the financial statements referred to in subsection 7.1(a).
7.2 Certificates; Other Information. The Company shall furnish to the
Agent, with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.1(a), a certificate of the Independent Auditor
stating that in making the examination necessary therefor no knowledge was
obtained of any Default or Event of Default, except as specified in such
certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and (b), a Compliance Certificate executed by
a Responsible Officer;
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(c) promptly, copies of all financial statements and reports that the
Company sends to its shareholders generally, and copies of all financial
statements and regular, periodical or special reports (including Forms 10K, 10Q
and 8K) that the Company or any Subsidiary may make to, or file with, the SEC;
(d) promptly, such additional information regarding the business,
financial or corporate affairs of the Company or any Subsidiary as the Agent, at
the request of any Bank, may from time to time reasonably request; and
(e) as soon as available, but not later than 90 days after the
commencement of each fiscal year, an annual budget for the Company and its
Subsidiaries on a consolidated basis by quarter for such fiscal year.
7.3 Notices. The Company shall promptly notify the Agent:
(a) of the occurrence of any Default or Event of Default;
(b) of any matter that has resulted or reasonably may result in a
Material Adverse Effect, including (i) breach or non-performance of, or any
default under, a Contractual Obligation of the Company or any Subsidiary; (ii)
any dispute, litigation, investigation, proceeding or suspension between the
Company or any Subsidiary and any Governmental Authority; or (iii) the
commencement of, or any material development in, any litigation or proceeding
affecting the Company or any Subsidiary; including pursuant to any applicable
Environmental Laws;
(c) of the occurrence of any of the following events affecting the
Company or any ERISA Affiliate (but in no event more than 10 days after such
event becomes known to the Company), and deliver to the Agent and each Bank a
copy of any notice with respect to such event that is filed with a Governmental
Authority and any notice delivered by a Governmental Authority to the Company or
any ERISA Affiliate with respect to such event:
(i) an ERISA Event;
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(ii) a material increase in the Unfunded Pension Liability of any
Pension Plan;
(iii) the adoption of, or the commencement of contributions to, any
Plan subject to Section 412 of the Code by the Company or any ERISA
Affiliate; or
(iv) the adoption of any amendment to a Plan subject to Section 412
of the Code, if such amendment results in a material increase in
contributions or Unfunded Pension Liability.
(d) of any material change in accounting policies or financial
reporting practices by the Company or any of its consolidated Subsidiaries; and
(e) upon the request from time to time of the Agent, the Swap
Termination Values, together with a description of the method by which such
values were determined, relating to any then-outstanding Swap Contracts to which
the Company or any of its Subsidiaries is party.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the Company or any affected
Subsidiary proposes to take with respect thereto and at what time. Each notice
under subsection 7.3(a) shall describe with particularity any and all clauses or
provisions of this Agreement or other Loan Document that have been (or
foreseeably will be) breached or violated.
7.4 Preservation of Corporate Existence, Etc. The Company shall, and
shall cause each Material Subsidiary to:
(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or jurisdiction of
incorporation except in connection with transactions permitted by Section 8.3;
(b) preserve and maintain in full force and effect all governmental
rights, privileges, qualifications, permits, licenses and franchises necessary
or desirable in the normal conduct of its business except in connection with
transactions
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permitted by Section 8.3 and sales of assets permitted by Section 8.2;
(c) preserve or renew all of its registered patents, trademarks,
trade names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.
7.5 Maintenance of Property. The Company shall maintain, and shall cause
each Material Subsidiary to maintain, and preserve all its property which is
used or useful in its business in good repair and working order and condition,
ordinary wear and tear excepted and make necessary repairs thereto and renewals
and replacements thereof so that its business carried on in connection therewith
may be properly conducted, unless the Company determines in good faith that the
continued maintenance of any specific property is no longer economically
desirable.
7.6 Insurance. The Company shall maintain, and shall cause each Material
Subsidiary to maintain, with financially sound and reputable independent
insurers, insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by Persons engaged in the same
or similar business, of such types and in such amounts as are customarily
carried under similar circumstances by such other Persons.
7.7 Payment of Obligations. The Company shall, and shall cause each
Material Subsidiary to, pay and discharge as the same shall become due and
payable, all their respective obligations and liabilities, including:
(a) all material tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by the Company or such Subsidiary;
(b) all material lawful claims which, if unpaid, would by law become
a Lien (other than a Permitted Lien) upon its property, unless the same are
being contested in good faith by
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appropriate proceedings and adequate reserves in accordance with GAAP are being
maintained by the Company or such Subsidiary; and
(c) all indebtedness, as and when due and payable, but subject to any
subordination provisions contained in any instrument or agreement evidencing
such Indebtedness.
7.8 Compliance with Laws. The Company shall comply, and shall cause each
Subsidiary to comply, with all Requirements of Law of any Governmental Authority
having jurisdiction over it or its business (including the Federal Fair Labor
Standards Act), except such as may be contested in good faith or as to which a
bona fide dispute may exist or if noncompliance could not reasonably be expected
to have a Material Adverse Effect.
7.9 Compliance with ERISA. The Company shall, and shall cause each of its
ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; and (c) make all required contributions to
any Plan subject to Section 412 of the Code.
7.10 Inspection of Property and Books and Records. The Company shall
maintain and shall cause each Subsidiary to maintain proper books of record and
account, in which full, true and correct entries in conformity with GAAP
consistently applied shall be made of all financial transactions and matters
involving the assets and business of the Company and such Subsidiary. The
Company shall permit, and shall cause each Subsidiary to permit, representatives
and independent contractors of the Agent or any Bank to visit and inspect any of
their respective properties, to examine their respective corporate, financial
and operating records, and make copies thereof or abstracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective
directors, officers, and independent public accountants, all at the expense of
the Company and at such reasonable times during normal business hours and as
often as may be reasonably desired, upon reasonable advance notice to the
Company; provided, however, when an Event of Default exists the Agent or any
Bank may do any
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of the foregoing at the expense of the Company at any time during normal
business hours and without advance notice.
7.11 Environmental Laws. The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
compliance with all Environmental Laws, except to the extent any failure to do
so could not reasonably be expected to have a Material Adverse Effect.
7.12 Use of Proceeds. The Company shall use the proceeds of the Loans (i)
to refinance existing Indebtedness, (ii) to finance the Colorstrip Acquisition,
and (iii) for working capital and other general corporate purposes (including,
without limitation, the payment of dividends and the redemption or other
acquisition of the Company's common stock).
7.13 Subsidiary Guaranties. Cause each Material Subsidiary within 60 days
of the Acquisition or creation of such Material Subsidiary or the qualification
or designation of a Subsidiary as a Material Subsidiary (as contemplated by the
definition of "Immaterial Subsidiary") to (i) execute and deliver to the Agent a
Guaranty, accompanied by such supporting documentation, including resolutions,
an incumbency certificate, and an opinion of counsel, as Agent may require, and
(ii) keep such Guaranty in full force and effect; provided, that in no event
shall a Material Subsidiary which is organized under the laws of a jurisdiction
other than the United States or any state thereof be required to so execute a
Guaranty or keep a Guaranty in full force and effect.
7.14 Year 2000 Compatibility. The Company shall take all reasonable
action necessary to ensure that the Company's computer based systems are able in
all material respects to operate and effectively process data, including dates,
on and after January 1, 2000. At the request of the Agent, the Company shall
provide the Agent and the Banks opportunities to discuss the actions being taken
to ensure year 2000 compatibility.
7.15 Colorstrip Acquisition. On or before December 31, 1997, the Company
shall have consummated the Colorstrip Acquisition on the terms and conditions in
all material respects as set forth in the Acquisition Agreement.
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ARTICLE VIII
NEGATIVE COVENANTS
------------------
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
(including any Time Draft which has been accepted) shall remain outstanding,
unless the Majority Banks waive compliance in writing:
8.1 Limitation on Liens. The Company shall not, and shall not suffer or
permit any Subsidiary to, directly or indirectly, make, create, incur, assume or
suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following ("Permitted
Liens"):
(a) any Lien existing on property of the Company or any Subsidiary on
the Closing Date and set forth in Schedule 8.1;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or to the extent
that non-payment thereof is permitted by Section 7.7;
(d) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other similar Liens arising in the ordinary course of business
which are not delinquent or remain payable without penalty or which are being
contested in good faith and by appropriate proceedings, which proceedings have
the effect of preventing the forfeiture or sale of the property subject thereto;
(e) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other social security
legislation;
(f) Liens on the property of the Company or any Subsidiary securing
(i) the non-delinquent performance of bids,
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trade contracts (other than for borrowed money), leases, statutory obligations,
(ii) contingent obligations on surety and appeal bonds, and (iii) other non-
delinquent obligations of a like nature; in each case (other than (ii) above),
incurred in the ordinary course of business, provided all such Liens in the
aggregate would not (even if enforced) cause a Material Adverse Effect;
(g) Liens consisting of judgment or judicial attachment liens,
provided that such Liens have been in existence less than 30 days or the
enforcement of such Liens is effectively stayed and all such liens in the
aggregate at any time outstanding for the Company and its Subsidiaries to the
extent not covered by insurance do not exceed $1,000,000;
(h) Liens on assets which are the subject of Acquisitions after the
date of this Agreement or Liens on assets of Persons which become Subsidiaries
after the Closing Date; provided, that (i) such Liens existed at the time of
such Acquisition or at the time the respective Persons became Subsidiaries, were
not created in anticipation thereof and attach only to property or assets so
acquired or of such Subsidiary, as the case may be, and (ii) if such Acquisition
had occurred or such Person had become a Subsidiary, as the case may be, on the
last day of the most recent fiscal period for which the Agent has received
financial statements pursuant to subsections 7.1(a) or (b), as the case may be,
no Default or Event of Default would have occurred or resulted therefrom;
(i) purchase money security interests on any property acquired or
held by the Company or its Subsidiaries in the ordinary course of business,
securing Indebtedness incurred or assumed for the purpose of financing all or
any part of the cost of acquiring such property; provided, that (i) any such
Lien attaches to such property concurrently with or within 90 days after the
acquisition thereof, (ii) such Lien attaches solely to the property so acquired
in such transaction, (iii) the principal amount of the debt secured thereby does
not exceed 100% of the cost of such property, and (iv) the principal amount of
the Indebtedness secured by any and all such purchase money security interests
shall not at any time exceed, together with Indebtedness permitted under
subsection 8.5(d), $5,000,000;
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(j) Liens securing obligations in respect of capital leases on assets
subject to such leases, provided that such capital leases are otherwise
permitted hereunder;
(k) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided, that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated by
the FRB, and (ii) such deposit account is not intended by the Company or any
Subsidiary to provide collateral to the depository institution;
(l) Liens consisting of pledges of cash collateral or government
securities to secure on a mark-to-market basis Permitted Swap Obligations only,
provided that (i) the counterparty to any Swap Contract relating to such
Permitted Swap Obligation is under a similar requirement to deliver similar
collateral from time to time to the Company or the Subsidiary party thereto on a
mark-to-market basis; and (ii) the aggregate value of such collateral so pledged
by the Company and the Subsidiaries together in favor of any counterparty does
not at any time exceed $5,000,000;
(m) Liens consisting of leases or subleases granted to third Persons
not interfering in any material respect with the business of the Company and its
Subsidiaries or any interest or title of a lessor or sublessor under any lease
permitted by this Agreement.
(n) Liens arising from UCC financing statements regarding leases
permitted by this Agreement or from precautionary UCC financing statements with
respect to the Company or any of its Subsidiaries as lessee, bailee or in a
similar capacity;
(o) with respect to real property (A) those liens, encumbrances and
other matters affecting title to any property listed in any applicable title
insurance policies in respect thereof but not securing any obligation for
borrowed money, (B) easements, encroachments, covenants, rights of way,
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restrictions, minor defects, irregularities and encumbrances on title and other
similar charges and encumbrances that do not, individually or in the aggregate,
interfere in any material respect with the ordinary conduct of the business of
the Company and its Subsidiaries, and (C) municipal and zoning ordinances that
are not violated by the existing improvements and the present and proposed uses
by the Company and its Subsidiaries;
(p) "nettings rights" and setoff rights of counterparties under Swap
Contracts or similar hedging agreements; and
(q) Liens of banks arising under Article 4 of the Uniform Commercial
Code on items in collection and accompanying documents and proceeds.
8.2 Disposition of Assets. The Company shall not, and shall not suffer or
permit any Subsidiary to, directly or indirectly, sell, assign, lease, convey,
transfer or otherwise dispose of (whether in one or a series of transactions)
any property (including accounts and notes receivable, with or without recourse)
or enter into any agreement to do any of the foregoing, except:
(a) dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment;
(c) dispositions of property by the Company or a Wholly-Owned
Subsidiary to a Wholly-Owned Subsidiary or by a Subsidiary to the Company or a
Wholly-Owned Subsidiary;
(d) dispositions of property in connection with transactions
permitted by Section 8.3 and subsection 8.10(d);
(e) transfers of equipment and licenses of patents, technology and
know-how associated therewith to Joint Ventures permitted by Section 8.9;
provided, that the fair market value
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of such equipment shall not exceed $5,000,000 during the term of this Agreement;
and
(f) other dispositions but in any event not involving the sale or
transfer of domestic accounts receivable which are made for fair market value;
provided, that (i) at the time of any disposition, no Event of Default shall
exist or shall result from such disposition, (ii) the aggregate sales price from
such disposition shall be paid in cash, and (iii) the aggregate value of all
assets so sold by the Company and its Subsidiaries, together, shall not exceed
in any fiscal year $2,000,000.
8.3 Consolidations and Mergers. The Company shall not, and shall not
suffer or permit any Subsidiary to, merge, consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to or in favor of any Person, except:
(a) any Subsidiary may merge with the Company, provided that the
Company shall be the continuing or surviving corporation, or with any one or
more other Subsidiaries, provided that if any transaction shall be between a
Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be
the continuing or surviving corporation; and
(b) any Subsidiary may sell all or substantially all of its assets
(upon voluntary liquidation or otherwise), to the Company or another Wholly-
Owned Subsidiary.
8.4 Loans and Investments. The Company shall not purchase or acquire, or
suffer or permit any Subsidiary to purchase or acquire, or make any commitment
therefor, any capital stock, equity interest, or any obligations or other
securities of, or any interest in, any Person, or make or commit to make any
Acquisitions, or make or commit to make any advance, loan, extension of credit
(including Contingent Obligations) or capital contribution to or any other
investment in, any Person including any Affiliate of the Company (together,
"Investments"), except for:
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(a) Investments held by the Company or Subsidiary in the form of cash
equivalents or short term marketable securities;
(b) extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods or services in the
ordinary course of business;
(c) extensions of credit by the Company to any of its Wholly-Owned
Subsidiaries or by any of its Wholly-Owned Subsidiaries to the Company or to
another of its Wholly-Owned Subsidiaries;
(d) Investments incurred in order to consummate Acquisitions
otherwise permitted herein; provided, that (i) the book value (as to the
purchaser) of any such Acquisition, together with such value of all prior
Acquisitions undertaken by the Company and its Subsidiaries after the Closing
Date, shall not exceed at the time $35,000,000, (ii) such Acquisitions are
undertaken in accordance in all material respects with all applicable
Requirements of Law; (iii) the prior written consent or approval to such
Acquisition of the board of directors or equivalent governing body of the
acquiree is obtained; and (iv) if such Acquisition occurred on the last day of
the most recent fiscal period for which the Agent has received financial
statements pursuant to subsections 7.1(a) or (b), as the case may be, no Default
or Event of Default would have occurred or resulted therefrom;
(e) Investments in Walbridge Coatings; provided, that the aggregate
amount of such Investments shall not exceed at any time $25,000,000;
(f) Investments constituting Permitted Swap Obligations or payments
or advances under Swap Contracts relating to Permitted Swap Obligations;
(g) Investments in the ordinary course of business, by the Company in
any of its Subsidiaries, or by any such Subsidiary in the Company or any of its
other Subsidiaries;
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(h) Investments by any Subsidiary outstanding at the time it becomes
a Subsidiary insofar as no Default shall occur as a result hereof;
(i) guarantees and other obligations of MSC Walbridge Coatings, Inc.
arising solely as a result of its status as a general partner of Walbridge
Coatings;
(j) short term loans to officers and employees of the Company and its
Subsidiaries not to exceed $750,000 in the aggregate at any time outstanding and
travel and other advances to employees in ordinary course of business; and
(k) without duplication, Investments (i) constituting Indebtedness
(including Contingent Obligations) permitted hereunder, (ii) in connection with
a Joint Venture permitted hereunder or (iii) consisting of purchases, redemption
or other acquisitions of the Company's common stock permitted by subsection
8.11(c).
8.5 Limitation on Indebtedness. The Company shall not, and shall not
suffer or permit any Subsidiary to, create, incur, assume, suffer to exist, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the other
Loan Documents;
(b) Indebtedness consisting of Contingent Obligations permitted
pursuant to Section 8.8;
(c) Indebtedness existing on the Closing Date and set forth in
Schedule 8.5;
(d) Indebtedness of any Subsidiaries and other Indebtedness secured
by Liens permitted by subsection 8.1(i), (j) and (m); provided, that the
aggregate amount of all such Indebtedness shall not exceed at any time
$7,500,000;
(e) Indebtedness incurred in connection with leases permitted
pursuant to Section 8.10;
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(f) any Private Placement Indebtedness and any guarantees thereof;
provided, that the aggregate principal amount of all such Indebtedness shall not
exceed at any time $130,000,000;
(g) Indebtedness of the Company's Subsidiaries constituting
Investments permitted pursuant to subsection 8.4(c); and
(h) refinancing of Indebtedness permitted under clause (c) above so
long as the Indebtedness shall not be increased and the terms thereof shall be
not materially less favorable to the Company and its Subsidiaries;
8.6 Transactions with Affiliates. The Company shall not, and shall not
suffer or permit any Subsidiary to, enter into any transaction with any
Affiliate of the Company, except upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than would be obtained in a
comparable arm's-length transaction with a Person not an Affiliate of the
Company or such Subsidiary.
8.7 Use of Proceeds. The Company shall not, and shall not suffer or
permit any Subsidiary to, use any portion of the Loan proceeds or any Letter of
Credit, directly or indirectly, (i) in violation of Regulations G, T, U or X of
the FRB, or (ii) to acquire any security of any Person other than the Company in
any transaction that is subject to Section 13 or 14 of the Exchange Act.
8.8 Contingent Obligations. The Company shall not, and shall not suffer
or permit any Subsidiary to, create, incur, assume or suffer to exist any
Contingent Obligations except:
(a) Contingent Obligations incurred pursuant to this Agreement;
(b) endorsements for collection or deposit in the ordinary course of
business;
(c) Permitted Swap Obligations;
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(d) Contingent Obligations of the Company and its Subsidiaries
existing as of the Closing Date and listed in Schedule 8.8;
(e) Contingent Obligations with respect to Surety Instruments
incurred in the ordinary course of business and not exceeding at any time
$100,000 in the aggregate in respect of the Company and its Subsidiaries
together.
(f) Contingent Obligations constituting Investments permitted by
subsections 8.4(i) [discuss Joint Ventures]; and
(g) Contingent Obligations with respect to Indebtedness permitted by
subsections 8.5(d) or (f).
8.9 Joint Ventures. The Company shall not, and shall not suffer or permit
any Subsidiary to enter into any Joint Venture, except (a) Joint Ventures
entered into in the ordinary course of business; (b) Joint Ventures existing as
of the Closing Date and described on Schedule 8.9; and (c) other Joint Ventures
arising after the Closing Date which are described on Schedule 8.9.
8.10 Lease Obligations. The Company shall not, and shall not suffer or
permit any Subsidiary to, create or suffer to exist any obligations for the
payment of rent for any property under lease or agreement to lease, except for:
(a) leases of the Company and of Subsidiaries in existence on the
Closing Date and any renewal, extension or refinancing thereof;
(b) operating leases entered into by the Company or any Subsidiary
after the Closing Date in the ordinary course of business; provided, that the
aggregate amount of rental obligations accruing during any fiscal year under all
such operating leases shall not exceed at any time $10,000,000 (excluding
escalations resulting from a rise in the consumer price or other index and
excluding amounts for maintenance and repairs, insurance taxes, assessments and
similar charges);
(c) leases which are assumed in connection with Acquisitions
occurring after the Closing Date or to which a
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Person is a party at the time such Person becomes a Subsidiary after the Closing
Date;
(d) subject to the limitations set forth in clause (b) above, leases
arising from sale/lease-back transactions entered into by the Company relating
to real property and fixtures; and
(e) capital leases other than those permitted under clauses (a) and
(c) of this Section, entered into by the Company or any Subsidiary after the
Closing Date to finance the acquisition of equipment.
8.11 Restricted Payments. The Company shall not declare or make any
dividend payment or other distribution of assets, properties, cash, rights,
obligations or securities on account of any shares of any class of its capital
stock, or purchase, redeem or otherwise acquire for value any shares of its
capital stock or any warrants, rights or options to acquire such shares, now or
hereafter outstanding; except that the Company may:
(a) declare and make dividend payments or other distributions payable
solely in its common stock;
(b) declare and make cash dividend payments or other cash
distributions in any fiscal year of the Company at any time following delivery
to the Agent of the Company's financial statements pursuant to subsection 7.1(a)
for the immediately preceding fiscal year; provided, that in no event shall the
aggregated amount of all such cash dividends and distributions during any fiscal
year exceed 60% of the consolidated net income of the Company and its
Subsidiaries for such immediately preceding fiscal year; and
(c) purchase, redeem or otherwise acquire shares of its common stock
or warrants or options to acquire any such shares: (i) with the proceeds
received from the substantially concurrent issue of new shares of its common
stock; or (ii) with cash or other funds, provided, that (A) during the period
commencing on the Closing Date and ending on December 31, 1998, the aggregate
amount of all such purchases, redemptions and other acquisitions pursuant to
this clause (ii) shall in no event exceed $1,000,000 and (B) thereafter, no such
purchase, redemption or other acquisition may be made unless, assuming
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such purchase, redemption or other acquisition had been made as of the last day
of the most recent fiscal period for which the Agent has received financial
statements pursuant to subsection 7.1(a) or (b), as the case may be, the Debt to
Cash Flow Ratio as of such day would be less than 3.0:1.
provided, that in each case (x) both before and after giving effect to such
dividend, distribution purchases, redemptions or other acquisition no Default or
Event of Default shall have occurred and be continuing and (y) if such dividend,
distribution, purchase, redemptions or other acquisition were made on the last
day of the most recent fiscal period for which the Agent has received financial
statements pursuant to subsection 7.1(a) or (b), as the case may be, no Default
or Event of Default would have occurred.
8.12 ERISA. The Company shall not, and shall not suffer or permit any of
its ERISA Affiliates to: (a) engage in a prohibited transaction or violation of
the fiduciary responsibility rules with respect to any Plan which has resulted
or could reasonably expected to result in liability of the Company in an
aggregate amount in excess of $1,000,000; or (b) engage in a transaction that
could reasonably be subject to Section 4069 or 4212(c) of ERISA.
8.13 Change in Business. The Company shall not, and shall not suffer or
permit any Subsidiary to, engage in any material line of business substantially
different from those lines of business carried on by the Company and its
Subsidiaries on the date hereof.
8.14 Accounting Changes. The Company shall not, and shall not suffer or
permit any Subsidiary to, make any significant change in accounting treatment or
reporting practices, except as required by GAAP, or change the fiscal year of
the Company or of any Subsidiary.
8.15 Immaterial Subsidiaries. The Company shall not permit the aggregate
net book value of all assets of all Immaterial Subsidiaries to exceed at any
time 7-1/2% of the net book value of total consolidated assets of the Company
and its Subsidiaries.
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ARTICLE IX
FINANCIAL COVENANTS
-------------------
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
(including any Time Draft which has been accepted) shall remain outstanding,
unless the Majority Banks waive compliance in writing:
9.1 Minimum Net Worth. The Company shall not permit at any time the
consolidated net worth of the Company and its Subsidiaries to be less than the
sum of (i) $117,000,000 plus (ii) 40% of cumulative consolidated net earnings
(but without giving effect to any consolidated net losses) of the Company and
its Subsidiaries accruing after August 31, 1997.
9.2 Total Debt to Cash Flow. The Company shall not permit at any time the
ratio (the "Debt to Cash Flow Ratio") of (i) Consolidated Debt to (ii) Adjusted
EBITDA as of the last day of the most recent fiscal quarter for which the Agent
shall have received a Compliance Certificate pursuant to subsection 7.2(b) to be
greater than the ratio set forth below opposite the period during which such
fiscal quarter occurs:
<TABLE>
<CAPTION>
=========================================================================
Ratio Period
- -------------------------------------------------------------------------
<C> <S>
3.75:1 from August 31, 1997
through February 27, 1999
- -------------------------------------------------------------------------
3.50:1 from February 28, 1999
through February 27, 2000
- -------------------------------------------------------------------------
3.25:1 from February 28, 2000
through February 27, 2001
- -------------------------------------------------------------------------
3.00:1 from February 28, 2001 and
thereafter
=========================================================================
</TABLE>
9.3 Fixed Charge Coverage Ratio. The Company shall not permit as of the
last day of each fiscal quarter of the Company, the ratio of (i) Adjusted
EBITDAR minus Consolidated Capital Expenditures to (ii) Adjusted Fixed Charges
for the four
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consecutive fiscal quarter period then ended minus the aggregate principal
amount of Indebtedness of the Company and its Subsidiaries which is scheduled by
its terms to mature during the four consecutive fiscal quarter period
immediately succeeding such fiscal quarter (such ratio being referred to herein
as the "Fixed Charge Coverage Ratio") to be less than 1.5:1.
9.4 Private Placement Covenants. The Company shall comply at all times
with any financial tests and ratios set forth from time to time in any
instrument or agreement which evidences or sets forth the terms of any Private
Placement Indebtedness.
ARTICLE X
EVENTS OF DEFAULT
-----------------
10.1 Event of Default. Any of the following shall constitute an "Event of
Default":
(a) Non-Payment. The Company fails to pay, (i) when and as required
to be paid herein, any amount of principal of any Loan, (ii) within one Business
Day after the same becomes due, any L/C Obligation, or (iii) within 5 Business
Days after the same becomes due, any interest, fee or any other amount payable
hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or warranty by
the Company or any Subsidiary made or deemed made herein, in any other Loan
Document, or which is contained in any certificate, document or financial or
other statement by the Company, any Subsidiary, or any Responsible Officer,
furnished at any time under this Agreement, or in or under any other Loan
Document, is incorrect in any material respect on or as of the date made or
deemed made; or
(c) Specific Defaults. The Company fails to perform or observe any
term, covenant or agreement contained in any of Section 7.1, 7.2, 7.3, 7.9 or
7.13 or in Articles VIII or IX; or
(d) Other Defaults. The Company or any Subsidiary party thereto
fails to perform or observe any other term or covenant contained in this
Agreement or any other Loan Document,
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and such default shall continue unremedied for a period of 30 days after the
earlier of (i) the date upon which a Responsible Officer knew or reasonably
should have known of such failure or (ii) the date upon which written notice
thereof is given to the Company by the Agent or any Bank; or
(e) Cross-Default. (i) The Company or any Subsidiary (A) fails to
make any payment in respect of any Indebtedness or Contingent Obligation (other
than in respect of Swap Contracts), in an aggregate principal amount of more
than $5,000,000 when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) and such failure continues after the
applicable grace or notice period, if any, specified in the relevant document on
the date of such failure; or (B) fails to perform or observe any other condition
or covenant, or any other event shall occur or condition exist, under any
agreement or instrument relating to any such Indebtedness or Contingent
Obligation, and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such failure
if the effect of such failure, event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness to be declared to be
due and payable prior to its stated maturity, or such Contingent Obligation to
become payable or cash collateral in respect thereof to be demanded; or
(f) Insolvency; Voluntary Proceedings. The Company or any Material
Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise; (ii)
voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any Material Subsidiary,
or any writ, judgment, warrant of attachment, execution or similar process, is
issued or levied
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against a substantial part of the Company's or any Material Subsidiary's
properties, and any such proceeding or petition shall not be dismissed, or such
writ, judgment, warrant of attachment, execution or similar process shall not be
released, vacated or fully bonded within 60 days after commencement, filing or
levy; (ii) the Company or any Material Subsidiary admits the material
allegations of a petition against it in any Insolvency Proceeding, or an order
for relief (or similar order under non-U.S. law) is ordered in any Insolvency
Proceeding; or (iii) the Company or any Material Subsidiary acquiesces in the
appointment of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefor), or other similar Person for itself
or a substantial portion of its property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect to a Pension
Plan or Multiemployer Plan which has resulted or could reasonably be expected to
result in liability of the Company under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess of $1,000,000;
the aggregate amount of Unfunded Pension Liability among all Pension Plans at
any time exceeds $1,000,000; or (iii) the Company or any ERISA Affiliate shall
fail to pay when due, after the expiration of any applicable grace period, any
installment payment with respect to its withdrawal liability under Section 4201
of ERISA under a Multiemployer Plan in an aggregate amount in excess of
$1,000,000; or
(i) Monetary Judgments. One or more non-interlocutory judgments,
non-interlocutory orders, decrees or arbitration awards is entered against the
Company or any Subsidiary involving in the aggregate a liability (to the extent
not covered by independent third-party insurance as to which the insurer does
not dispute coverage) as to any single or related series of transactions,
incidents or conditions, of $1,000,000 or more, and the same shall remain
unsatisfied, unvacated and unstayed pending appeal for a period of 30 days after
the entry thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment, order or
decree is entered against the Company or any Subsidiary which does or would
reasonably be expected to have a
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Material Adverse Effect, and there shall be any period of 30 consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or
(k) Change of Control. There occurs any Change of Control; or
(l) Guarantor Defaults. Any Guarantor fails in any material respect
to perform or observe any term, covenant or agreement in the Guaranty; or the
Guaranty is for any reason partially (including with respect to future advances)
or wholly revoked or invalidated, or otherwise ceases to be in full force and
effect, or any Guarantor or any other Person contests in any manner the validity
or enforceability thereof or denies that it has any further liability or
obligation thereunder; or any event described at subsections (f) or (g) of this
Section occurs with respect to any Guarantor; or
10.2 Remedies. If any Event of Default occurs, the Agent shall, at
the request of, or may, with the consent of, the Majority Banks,
(a) declare the commitment of each Bank to make Loans and any
obligation of the Issuing Bank to Issue Letters of Credit to be terminated,
whereupon such commitments and obligation shall be terminated;
(b) declare an amount equal to the maximum aggregate amount that is
or at any time thereafter may become available for drawing under any outstanding
Letters of Credit (whether or not any beneficiary shall have presented, or shall
be entitled at such time to present, the drafts or other documents required to
draw under such Letters of Credit) and under any outstanding Time Drafts to be
immediately due and payable, and declare the unpaid principal amount of all
outstanding Loans, all interest accrued and unpaid thereon, and all other
amounts owing or payable hereunder or under any other Loan Document to be
immediately due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Company; and
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(c) exercise on behalf of itself and the Banks all rights and
remedies available to it and the Banks under the Loan Documents or applicable
law;
provided, however, that upon the occurrence of any event specified in subsection
(f) or (g) of Section 10.1 (in the case of clause (i) of subsection (g) upon the
expiration of the 60-day period mentioned therein), the obligation of each Bank
to make Loans and any obligation of the Issuing Bank to Issue Letters of Credit
shall automatically terminate and the unpaid principal amount of all outstanding
Loans and all interest and other amounts as aforesaid shall automatically become
due and payable without further act of the Agent, the Issuing Bank or any Bank.
10.3 Rights Not Exclusive. The rights provided for in this Agreement and
the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
10.4 Certain Financial Covenant Defaults. In the event that, after taking
into account any extraordinary charge to earnings taken or to be taken as of the
end of any fiscal period of the Company (a "Charge"), and if solely by virtue of
such Charge, there would exist an Event of Default due to the breach of any
provision of Article IX as of such fiscal period end date, such Event of Default
shall be deemed to arise upon the earlier of (a) the date after such fiscal
period end date on which the Company announces publicly it will take, is taking
or has taken such Charge (including an announcement in the form of a statement
in a report filed with the SEC) or, if such announcement is made prior to such
fiscal period end date, the date that is such fiscal period end date, and (b)
the date the Company delivers to the Agent its audited annual or unaudited
quarterly financial statements in respect of such fiscal period reflecting such
Charge as taken.
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ARTICLE XI
THE AGENT
---------
11.1 Appointment and Authorization; "Agent". (a) Each Bank hereby
irrevocably (subject to Section 11.9) appoints, designates and authorizes the
Agent to take such action on its behalf under the provisions of this Agreement
and each other Loan Document and to exercise such powers and perform such duties
as are expressly delegated to it by the terms of this Agreement or any other
Loan Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the Agent
have or be deemed to have any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with reference
to the Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
(b) The Issuing Bank shall act on behalf of the Banks with respect to
any Letters of Credit Issued by it and the documents associated therewith until
such time and except for so long as the Agent may agree at the request of the
Majority Banks to act for such Issuing Bank with respect thereto; provided,
however, that the Issuing Bank shall have all of the benefits and immunities (i)
provided to the Agent in this Article XI with respect to any acts taken or
omissions suffered by the Issuing Bank in connection with Letters of Credit
Issued by it or proposed to be Issued by it and the application and agreements
for letters of credit pertaining to the Letters of Credit as fully as if the
term "Agent", as used in this Article XI, included the Issuing Bank with respect
to such acts or omissions, and (ii) as additionally provided in this Agreement
with respect to the Issuing Bank.
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11.2 Delegation of Duties. The Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
11.3 Liability of Agent. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Company or any Subsidiary or
Affiliate of the Company, or any officer thereof, contained in this Agreement or
in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of the Company or any other party to
any Loan Document to perform its obligations hereunder or thereunder. No Agent-
Related Person shall be under any obligation to any Bank to ascertain or to
inquire as to the observance or performance of any of the agreements contained
in, or conditions of, this Agreement or any other Loan Document, or to inspect
the properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
11.4 Reliance by Agent. (a) The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation reasonably believed by it
to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to the Company), independent accountants and other experts selected by
the Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the
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Majority Banks as it deems appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Agent shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or consent of the Majority Banks and such request and
any action taken or failure to act pursuant thereto shall be binding upon all of
the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 5.1, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Bank.
11.5 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default, except with
respect to defaults in the payment of principal, interest and fees required to
be paid to the Agent for the account of the Banks, unless the Agent shall have
received written notice from a Bank or the Company referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". The Agent will notify the Banks of its receipt of any such
notice. The Agent shall take such action with respect to such Default or Event
of Default as may be requested by the Majority Banks in accordance with Article
IX; provided, however, that unless and until the Agent has received any such
request, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interest of the Banks.
11.6 Credit Decision. Each Bank acknowledges that none of the Agent-
Related Persons has made any representation or warranty to it, and that no act
by the Agent hereinafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank
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represents to the Agent that it has, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Company and its Subsidiaries, and all applicable bank
regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to the Company
hereunder. Each Bank also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the Company.
Except for notices, reports and other documents expressly herein required to be
furnished to the Banks by the Agent, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Company which may come into the possession
of any of the Agent-Related Persons.
11.7 Indemnification of Agent. Whether or not the transactions
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Company and without limiting the obligation of the Company to do so), Pro Rata,
from and against any and all Indemnified Liabilities; provided, however, that no
Bank shall be liable for the payment to the Agent-Related Persons of any portion
of such Indemnified Liabilities resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each Bank
shall reimburse the Agent upon demand for its ratable share of any costs or out-
of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document,
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or any document contemplated by or referred to herein, to the extent that the
Agent is not reimbursed for such expenses by or on behalf of the Company. The
undertaking in this Section shall survive the payment of all Obligations
hereunder and the resignation or replacement of the Agent.
11.8 Agent in Individual Capacity. BofA and its Affiliates may make loans
to, issue letters of credit for the account of, accept deposits from, acquire
equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent or the Issuing
Bank hereunder and without notice to or consent of the Banks. The Banks
acknowledge that, pursuant to such activities, BofA or its Affiliates may
receive information regarding the Company or its Affiliates (including
information that may be subject to confidentiality obligations in favor of the
Company or such Subsidiary) and acknowledge that the Agent shall be under no
obligation to provide such information to them. With respect to its Loans, BofA
shall have the same rights and powers under this Agreement as any other Bank and
may exercise the same as though it were not the Agent or the Issuing Bank.
11.9 Successor Agent. The Agent may, and at the request of the Majority
Banks shall, resign as Agent upon 30 days' notice to the Banks. If the Agent
resigns under this Agreement, the Majority Banks shall appoint from among the
Banks a successor agent for the Banks which successor agent shall be subject to
the approval of the Company which approval shall not be unreasonably withheld or
delayed. If no successor agent is appointed prior to the effective date of the
resignation of the Agent, the Agent may appoint, after consulting with the Banks
and the Company, a successor agent from among the Banks. Upon the acceptance of
its appointment as successor agent hereunder, such successor agent shall succeed
to all the rights, powers and duties of the retiring Agent and the term "Agent"
shall mean such successor agent and the retiring Agent's appointment, powers and
duties as Agent shall be terminated. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article XI and Sections 12.4 and 12.5
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement. If no successor agent
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has accepted appointment as Agent by the date which is 30 days following a
retiring Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Banks shall perform all of the
duties of the Agent hereunder until such time, if any, as the Majority Banks
appoint a successor agent as provided for above. Notwithstanding the foregoing,
however, BofA may not be removed as the Agent at the request of the Banks unless
BofA shall also simultaneously be replaced as "Issuing Bank" hereunder pursuant
to documentation in form and substance reasonably satisfactory to BofA.
11.10 Withholding Tax. (a) If any Bank is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Bank claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the Code, such Bank agrees with and in favor of the Agent, to deliver to
the Agent:
(i) if such Bank claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, two properly completed and
executed copies of IRS Form 1001 before the payment of any interest in the first
calendar year and before the payment of any interest in each third succeeding
calendar year during which interest may be paid under this Agreement;
(ii) if such Bank claims that interest paid under this Agreement is
exempt from United States withholding tax because it is effectively connected
with a United States trade or business of such Bank, two properly completed and
executed copies of IRS Form 4224 before the payment of any interest is due in
the first taxable year of such Bank and in each succeeding taxable year of such
Bank during which interest may be paid under this Agreement; and
(iii) such other form or forms as may be required under the Code or
other laws of the United States as a condition to exemption from, or reduction
of, United States withholding tax.
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<PAGE>
Such Bank agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form 1001 and such Bank
sells, assigns, grants a participation in, or otherwise transfers all or part of
the Obligations of the Company to such Bank, such Bank agrees to notify the
Agent of the percentage amount in which it is no longer the beneficial owner of
Obligations of the Company to such Bank. To the extent of such percentage
amount, the Agent will treat such Bank's IRS Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States withholding tax
by filing IRS Form 4224 with the Agent sells, assigns, grants a participation
in, or otherwise transfers all or part of the Obligations of the Company to such
Bank, such Bank agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Bank
an amount equivalent to the applicable withholding tax after taking into account
such reduction. However, if the forms or other documentation required by
subsection (a) of this Section are not delivered to the Agent, then the Agent
may withhold from any interest payment to such Bank not providing such forms or
other documentation an amount equivalent to the applicable withholding tax
imposed by Sections 1441 and 1442 of the Code, without reduction.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Bank (because the
appropriate form was not delivered or was not properly executed, or because such
Bank failed to notify the Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Bank shall indemnify the Agent fully for all amounts paid, directly
or indirectly, by the Agent as tax or otherwise, including penalties and
interest,
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and including any taxes imposed by any jurisdiction on the amounts payable to
the Agent under this Section, together with all costs and expenses (including
Attorney Costs). The obligation of the Banks under this subsection shall survive
the payment of all Obligations and the resignation or replacement of the Agent.
ARTICLE XII
MISCELLANEOUS
-------------
12.1 Amendments and Waivers. (a) No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company or any applicable Subsidiary therefrom, shall be
effective unless the same shall be in writing and signed by the Majority Banks
(or by the Agent at the written request of the Majority Banks) and the Company
and acknowledged by the Agent, and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no such waiver, amendment, or consent shall,
unless in writing and signed by all the Banks and the Company and acknowledged
by the Agent, do any of the following:
(i) increase or extend the Commitment of any Bank (or reinstate any
Commitment terminated pursuant to Section 10.2);
(ii) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, fees or other amounts due
to the Banks (or any of them) hereunder or under any other Loan Document;
(iii) reduce the principal of, or the rate of interest specified
herein on any Loan, or (subject to clause (iii) below) any fees or other amounts
payable hereunder or under any other Loan Document;
(iv) change the Pro Rata percentage of the aggregate unpaid
principal amount of the Loans which is required for the Banks or any of them to
take any action hereunder;
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(v) amend this Section, or Section 2.14, or any provision herein
providing for consent or other action by all Banks; or
(vi) release any Guarantor from its obligations under the Guaranties
unless in accordance with this Agreement such Guarantor is no longer a
Subsidiary in which event the Agent shall execute and deliver a release of the
respective Guaranty in form reasonably acceptable to the Company;
and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Issuing Bank in addition to the Majority Banks or all
the Banks, as the case may be, affect the rights or duties of the Issuing Bank
under this Agreement or any L/C-Related Document relating to any Letter of
Credit Issued or to be Issued by it, (ii) no amendment, waiver or consent shall,
unless in writing and signed by the Agent in addition to the Majority Banks or
all the Banks, as the case may be, affect the rights or duties of the Agent
under this Agreement or any other Loan Document, and (iii) the Fee Letter may be
amended, or rights or privileges thereunder waived, in a writing executed by the
parties thereto.
(b) Upon the receipt by the Company from any Bank of a claim for
compensation under Section 4.1, 4.2 or 4.3 or in the event any Bank shall fail
to consent to any amendment or waiver of the provisions of this Agreement
otherwise consented to by the Majority Banks (such Bank being referred to herein
as an "Affected Bank"), the Company may: (i) request the Affected Bank to use
its best efforts to obtain a replacement bank or financial institution
satisfactory to the Company and to the Agent (a "Replacement Bank") to acquire
and assume all or a ratable part of all of such Affected Bank's Loans and
Commitment; (ii) request one more of the other Banks to acquire and assume all
or part of such Affected Bank's Loans and Commitment (it being understood that
any such acquisition or assumption will be voluntary on the part of the other
Banks); or (iii) designate a Replacement Bank. Any such designation of a
Replacement Bank under clause (i) or (iii) shall be subject to the prior written
consent of the Agent (which consent shall not be unreasonably withheld).
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12.2 Notices. (a) All notices, requests, consents, approvals, waivers
and other communications shall be in writing and mailed, faxed or delivered
(including, unless the context expressly otherwise provides, by facsimile
transmission, provided that any matter transmitted by the Company by facsimile
(i) shall be immediately confirmed by a telephone call to the recipient at the
number specified on Schedule 12.2, and (ii) shall be followed promptly by
delivery of a hard copy original thereof) to the address or facsimile number
specified for notices on Schedule 12.2; or, as directed to the Company or the
Agent, to such other address as shall be designated by such party in a written
notice to the other parties, and as directed to any other party, at such other
address as shall be designated by such party in a written notice to the Company
and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II, III or X to the Agent shall not be effective
until actually received by the Agent, and notices pursuant to Article III to the
Issuing Bank shall not be effective until actually received by the Issuing Bank
at the address specified for the "Issuing Bank" on the applicable signature page
hereof.
(c) Any agreement of the Agent and the Banks herein to receive
certain notices by telephone or facsimile is solely for the convenience and at
the request of the Company. The Agent and the Banks shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the Company
to give such notice and the Agent and the Banks shall not have any liability to
the Company or other Person on account of any action taken or not taken by the
Agent or the Banks in reliance upon such telephonic or facsimile notice. The
obligation of the Company to repay the Loans and L/C Obligations shall not be
affected in any way or to any extent by any failure by the Agent and the Banks
to receive written confirmation of any telephonic or facsimile notice or the
receipt by the Agent and the Banks of a confirmation which is at variance with
the terms understood by
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the Agent and the Banks to be contained in the telephonic or facsimile notice.
12.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Agent or any Bank, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.
12.4 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Agent and
Issuing Bank) within five Business Days after demand (subject to subsection
5.1(e)) for all reasonably costs and expenses incurred by BofA (including in its
capacity as Agent and Issuing Bank) in connection with the development,
preparation, delivery, administration and execution of, and any amendment,
supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any Loan Document and any other documents prepared
in connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including reasonable Attorney Costs incurred by
BofA (including in its capacity as Agent and Issuing Bank) with respect thereto;
and
(b) pay or reimburse the Agent, the Arranger and each Bank within
five Business Days after demand (subject to subsection 5.1(e)) for all
reasonably costs and expenses (including Attorney Costs) incurred by them in
connection with the enforcement, attempted enforcement, or preservation of any
rights or remedies under this Agreement or any other Loan Document during the
existence of an Event of Default or after acceleration of the Loans (including
in connection with any "workout" or restructuring regarding the Loans, and
including in any Insolvency Proceeding or appellate proceeding).
12.5 Company Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Company shall indemnify, defend and
hold the Agent-Related Persons, and each Bank and each of its respective
officers, directors,
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employees, and attorneys-in-fact (each, an "Indemnified Person") harmless from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses and disbursements (including
reasonable Attorney Costs) of any kind or nature whatsoever which may at any
time (including at any time following repayment of the Loans, the termination of
the Letters of Credit and the termination, resignation or replacement of the
Agent or replacement of any Bank) be imposed on, incurred by or asserted against
any such Person in any way relating to or arising out of this Agreement or any
Loan Document, or the transactions contemplated hereby, or any action taken or
omitted by any such Person under or in connection with any of the foregoing,
including with respect to any investigation, litigation or proceeding (including
any Insolvency Proceeding or appellate proceeding) related to or arising out of
this Agreement or the Loans or Letters of Credit or the use of the proceeds
thereof, whether or not any Indemnified Person is a party thereto (all the
foregoing, collectively, the "Indemnified Liabilities"); provided, that the
Company shall have no obligation hereunder to any Indemnified Person with
respect to Indemnified Liabilities to the extent resulting solely from the gross
negligence or willful misconduct of such Indemnified Person. The agreements in
this Section shall survive payment of all other Obligations.
12.6 Payments Set Aside. To the extent that the Company makes a payment
to the Agent or the Banks, or the Agent or the Banks exercise their right of
set-off, and such payment or the proceeds of such set-off or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered into by the
Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any Insolvency Proceeding or otherwise, then (a)
to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such set-off had not occurred, and (b)
each Bank severally agrees to pay to the Agent upon demand its Pro Rata Share of
any amount so recovered from or repaid by the Agent.
12.7 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the
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<PAGE>
parties hereto and their respective successors and assigns, except that the
Company may not assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of the Agent and each Bank.
12.8 Assignments, Participations, etc. (a) Any Bank may, with the
written consent of the Company at all times other than during the existence of
an Event of Default and the Agent and the Issuing Bank, which consent of the
Company shall not be unreasonably withheld, at any time assign and delegate to
one or more Eligible Assignees (provided that no written consent of the Company,
the Agent or the Issuing Bank shall be required in connection with any
assignment and delegation by a Bank to an Eligible Assignee that is an Affiliate
of such Bank) (each an "Assignee") all, or any ratable part of all, of the
Loans, the Commitments, the L/C Obligations and the other rights and obligations
of such Bank hereunder, in a minimum amount of $5,000,000; provided, however,
that the Company and the Agent may continue to deal solely and directly with
such Bank in connection with the interest so assigned to an Assignee until (i)
written notice of such assignment, together with payment instructions, addresses
and related information with respect to the Assignee, shall have been given to
the Company and the Agent by such Bank and the Assignee; (ii) such Bank and its
Assignee shall have delivered to the Company and the Agent an Assignment and
Acceptance in the form of Exhibit E ("Assignment and Acceptance") together with
any Note or Notes subject to such assignment; (iii) the assignor Bank or
Assignee has paid to the Agent a processing fee in the amount of $4,000 and (iv)
the Agent and, if applicable, the Company shall have consented thereto.
(b) From and after the date that the Agent notifies the assignor Bank
that it has received (and provided its consent with respect to) an executed
Assignment and Acceptance and payment of the above-referenced processing fee,
(i) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a Bank under
the Loan Documents, and (ii) the assignor Bank shall, to the extent that rights
and obligations hereunder and under the other Loan Documents have been assigned
by it and assumed by the Assignees pursuant to
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<PAGE>
such Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Loan Documents.
(c) Within five Business Days after its receipt of notice by the
Agent that it has received an executed Assignment and Acceptance and payment of
the processing fee, (and provided that it consents to such assignment in
accordance with subsection 12.8(a)), the Company shall execute and deliver to
the Agent, new Notes evidencing such Assignee's assigned Loans and Commitment
and, if the assignor Bank has retained a portion of its Loans and its
Commitment, replacement Notes in the principal amount of the Revolving Loans
retained by the assignor Bank (such Notes to be in exchange for, but not in
payment of, the Notes held by such Bank). Following receipt by the Agent of all
consents to such assignment required hereby and of the Agent's processing fee
payment under the Assignment and Acceptance, this Agreement shall be deemed to
be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Bank pro tanto.
(d) Any Bank may at any time sell to one or more commercial banks or
other Persons not Affiliates of the Company (a "Participant") participating
interests in any Loans, the Commitment of that Bank and the other interests of
that Bank (the "originating Bank") hereunder and under the other Loan Documents;
provided, however, that (i) the originating Bank's obligations under this
Agreement shall remain unchanged, (ii) the originating Bank shall remain solely
responsible for the performance of such obligations, (iii) the Company, the
Issuing Bank and the Agent shall continue to deal solely and directly with the
originating Bank in connection with the originating Bank's rights and
obligations under this Agreement and the other Loan Documents, and (iv) no Bank
shall transfer or grant any participating interest under which the Participant
has rights to approve any amendment to, or any consent or waiver with respect
to, this Agreement or any other Loan Document, except to the extent such
amendment, consent or waiver would require unanimous consent of the Banks as
described in the first proviso to Section 12.1. In the case of any such
participation, the Participant shall be entitled to the benefit of Sections
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4.1, 4.3 and 12.5 as though it were also a Bank hereunder, and if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Bank under this Agreement.
(e) Notwithstanding any other provision in this Agreement, any Bank
may at any time create a security interest in, or pledge, all or any portion of
its rights under and interest in this Agreement and the Note held by it in favor
of any Federal Reserve Bank in accordance with Regulation A of the FRB or U.S.
Treasury Regulation 31 CFR (S)203.14, and such Federal Reserve Bank may enforce
such pledge or security interest in any manner permitted under applicable law.
12.9 Confidentiality. Each Bank agrees to take and to cause its
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by the Company and provided to it by the Company or any Subsidiary, or
by the Agent on the Company's or such Subsidiary's behalf, under this Agreement
or any other Loan Document, and neither it nor any of its Affiliates shall use
any such information other than in connection with or in enforcement of this
Agreement and the other Loan Documents or in connection with other business now
or hereafter existing or contemplated with the Company or any Subsidiary; except
to the extent such information (i) was or becomes generally available to the
public other than as a result of disclosure by the Bank, or (ii) was or becomes
available on a non-confidential basis from a source other than the Company,
provided that such source is not bound by a confidentiality agreement with the
Company known to the Bank; provided, however, that any Bank may disclose such
information (A) at the request or pursuant to any requirement of any
Governmental Authority to which the Bank is subject or in connection with an
examination of such Bank by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the Agent, any
Bank or their respective
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Affiliates may be party; (E) to the extent reasonably required in connection
with the exercise of any remedy hereunder or under any other Loan Document; (F)
to such Bank's independent auditors and other professional advisors; (G) to any
Participant or Assignee, actual or potential, provided that such Person agrees
in writing to keep such information confidential to the same extent required of
the Banks hereunder; (H) as to any Bank or its Affiliate, as expressly permitted
under the terms of any other document or agreement regarding confidentiality to
which the Company or any Subsidiary is party or is deemed party with such Bank
or such Affiliate; and (I) to its Affiliates.
12.10 Set-off. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists or the Loans have been
accelerated, each Bank is authorized at any time and from time to time, without
prior notice to the Company, any such notice being waived by the Company to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by,
and other indebtedness at any time owing by, such Bank to or for the credit or
the account of the Company against any and all Obligations owing to such Bank,
now or hereafter existing, irrespective of whether or not the Agent or such Bank
shall have made demand under this Agreement or any Loan Document and although
such Obligations may be contingent or unmatured. Each Bank agrees promptly to
notify the Company and the Agent after any such set-off and application made by
such Bank; provided, however, that the failure to give such notice shall not
affect the validity of such set-off and application.
12.11 Automatic Debits of Fees. With respect to any fee, or any other
cost or expense (including Attorney Costs) due and payable to the Agent, the
Issuing Bank, BofA or the Arranger under the Loan Documents, the Company hereby
irrevocably authorizes BofA to debit the deposit account of the Company with
BofA, number 79-36206, in an amount such that the aggregate amount debited from
all such deposit accounts does not exceed such fee or other cost or expense. If
there are insufficient funds in such deposit accounts to cover the amount of the
fee or other cost or expense then due, such debits will be reversed (in whole or
in part, in BofA's sole discretion) and such amount not debited shall be deemed
to be unpaid. No such debit under this Section shall be deemed a set-off.
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12.12 Notification of Addresses, Lending Offices, Etc. Each Bank shall
notify the Agent in writing of any changes in the address to which notices to
the Bank should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably request.
12.13 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
12.14 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
12.15 No Third Parties Benefited. This Agreement is made and entered into
for the sole protection and legal benefit of the Company, the Banks, the Agent
and the Agent-Related Persons, and their permitted successors and assigns, and
no other Person shall be a direct or indirect legal beneficiary of, or have any
direct or indirect cause of action or claim in connection with, this Agreement
or any of the other Loan Documents.
12.16 Governing Law and Jurisdiction. (a) THIS AGREEMENT AND THE NOTES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
ILLINOIS; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING
UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS OR
OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT AND THE BANKS
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT AND THE BANKS
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
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HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE AGENT AND
THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY ILLINOIS LAW.
12.17 Waiver of Jury Trial. THE COMPANY, THE BANKS AND THE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE
BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
12.18 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Company,
the Banks and the Agent, and supersedes all prior agreements and understandings
of such Persons, verbal or written, relating to the subject matter hereof and
thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Chicago, Illinois by their proper and duly
authorized officers as of the day and year first above written.
MATERIAL SCIENCES CORPORATION
By:
-----------------------------------
Title:
--------------------------------
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BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By:
-----------------------------------
Title:
--------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Issuing Bank
By:
-----------------------------------
Title:
--------------------------------
Commitment: $115,000,000 BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a
Bank
By:
-----------------------------------
Title:
--------------------------------
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Commitment: $25,000,000 THE NORTHERN TRUST COMPANY
By:
-----------------------------------
Title:
--------------------------------
Address for notices:
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SCHEDULE 12.2
-------------
OFFSHORE AND DOMESTIC LENDING OFFICES,
--------------------------------------
ADDRESSES FOR NOTICES
---------------------
MATERIAL SCIENCES CORPORATION
- -----------------------------
Material Sciences Corporation
2200 East Pratt Boulevard
Elk Grove Village, IL 60007-5995
Attention: James J. Waclawik
Vice President - CFO
Telephone: (847) 718-8243
Facsimile: (847) 718-8643
BANK OF AMERICA NATIONAL TRUST
- ------------------------------
AND SAVINGS ASSOCIATION,
- -----------------------
as Agent
Bank of America National Trust
and Savings Association
231 South LaSalle Street
8th Floor
Chicago, Illinois 60697
Attention: Jay McKeown
Assistant Vice President
Telephone: (312) 828-7299
Facsimile: (312) 974-9102
AGENT'S PAYMENT OFFICE:
- ----------------------
Bank of America National Trust
and Savings Association
San Francisco, CA
ABA# 121-000-358
Account # 12338-15997
Attention: AMS - Illinois
Ref: Material Science
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BANK OF AMERICA NATIONAL TRUST
- ------------------------------
AND SAVINGS ASSOCIATION,
- -----------------------
as a Bank
Domestic and Offshore Lending Office:
231 South LaSalle Street, 6th FL
Chicago, IL 60697
Attn: Eileen Sachanda
Vice President
Telephone: (312) 828-5967
Facsimile: (312) 974-2108
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
Bank of America National Trust
and Savings Association
231 South LaSalle Street, 6th FL
Chicago, IL 60697
Attn: Eileen Sachanda
Vice President
Telephone: (312) 828-5967
Facsimile: (312) 974-2108
THE NORTHERN TRUST COMPANY
- --------------------------
Domestic and Offshore Lending Office:
50 South LaSalle Street
Chicago, IL 60675
Attn: Brad Farris
Telephone: (312) 444-3562
Facsimile: (312) 444-7028
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
The Northern Trust Company
50 South LaSalle Street
Chicago, IL 60675
Attn: Brad Farris
Telephone: (312) 444-3562
-111-
<PAGE>
Facsimile: (312) 444-7028
BANK OF AMERICA NATIONAL TRUST
- ------------------------------
AND SAVINGS ASSOCIATION,
- -----------------------
as Issuing Bank
Address for Notices:
Bank of America National Trust
and Savings Association
231 South LaSalle Street, 6th FL
Chicago, IL 60697
Attn: Eileen Sachanda
Vice President
Telephone: (312) 828-5967
Facsimile: (312) 974-2108
-112-
<PAGE>
[LETTERHEAD OF MATERIAL SCIENCES CORPORATION]
NEWS RELEASE
Material Sciences Corporation
Names Gerald G. Nadig Chairman;
Evans Remains a Director
ELK GROVE VILLAGE, IL, December 19, 1997 -- The broad of directors of Material
Sciences Corporation (NYSE:MSC), today announced that Gerald G. Nadig, 52,
president and chief executive officer, has been elected chairman of the board
effective January 1, 1998. Nadig succeeds G. Robert Evans, who retired but will
continue to serve as a director. Nadig will retain his current position as
president and chief executive officer.
"Gerry Nadig's election as chairman is well deserved and results from his solid
leadership since joining the company in 1989. Furthermore, the board is
confident that Gerry can successfully guide MSC to a sustained period of growth
and prosperity," said Evans.
Nadig began his career with the company as executive vice president of its MSC
Pre Finish Metals Inc. subsidiary in July 1989, and was appointed president and
chief operating officer in January 1990. In June 1991, Nadig was promoted to
president and chief operating officer of MSC. He was named to MSC's board of
directors in April 1996, and to his current position as president and chief
executive officer in January 1997.
Material Sciences Corporation is a technology-based manufacturer of continuously
processed specialty coated materials and services. The company's four principal
product groups are Laminates and Composites, Specialty Films, Coil Coating, and
Electrogalvanizing. Its materials are sold to a variety of manufacturers and
distributors and used across a broad spectrum of industries and products.
Founded in 1971 and headquartered near Chicago, MSC operates nine manufacturing
plants in the U.S. and sells its products around the world.
For further information on Material Sciences by Fax, dial 1-800-PRO-INFO, ext.
MSC. Information about Material Sciences through the Internet is available at:
http://www.matsci.com/
<PAGE>
[LETTERHEAD OF MATERIAL SCIENCES CORPORATION]
NEWS RELEASE
Material Sciences Corporation
Reports Higher Sales, Lower Earnings
for Third Quarter, Nine Months
Previously Announced Acquistion Completed
ELK GROVE VILLAGE, IL, December 19, 1997 -- Material Sciences Corporation
(NYSE:MSC), today announced higher sales and lower earnings for its third
quarter ended November 30, 1997.
Net sales in the third quarter were $75.1 million, 7.8 percent higher than the
$69.7 million in the same period last year. Net income for the latest quarter
was $2.2 million, or 14 cents per share, compared with last year's quarterly net
income of $4.2 million, or 27 cents per share.
For the nine months ended November 30, 1997, net sales were $218.7 million, up
4.7 percent from last year's $209.0 million. Net income was $6.4 million, or 42
cents per share, compared with last year's nine-month net income of $12.5
million, or 80 cents per share.
Mixed Performance at Operating Groups
Coil Coating sales in the third quarter were $31.8 million, up 5.5 percent from
the $30.2 million reported last year. The major contributor was the continued
adoption by car makers of the company's proprietary high-gloss coating system
for exterior trim parts.
Laminates and Composites sales in the third quarter were $17.3 million compared
with $17.2 million last year, but 17.2 percent above this year's second quarter.
This rebound was led by disc brake noise dampers, which had 22.8 percent higher
sales than the second quarter.
<PAGE>
News Release
December 19, 1997
Page 2
Electrogalvanizing sales in the third quarter were $16.6 million, up 16.2
percent compared with $14.3 million a year ago. Shipments reached 124,300 tons,
7.7 percent higher than the 115,426 tons reported last year.
Specialty Films sales were $9.4 million, up 17.1 percent form the $8.0 million
in the third quarter last year. Major reasons for the increase were strong sales
of industrial film products, such as sputtered films for digital imaging
printing plates, and high-performance solar control window films for the
automotive aftermarket and building applications.
Commenting on the third quarter and outlook, President and Chief Executive
Officer Gerald G. Nadig said, "Although third quarter results showed an
improvement over this year's second quarter, as previously announced, they fell
short of our expectations in some areas. Sales continue to be affected by new
product adoption delays at key prospects in our Laminates and Composites group,
as well as lower shipments and a temporary shift to a lower value product mix in
our Coil Coating group. These factors, plus higher year-to-year depreciation
and financing costs, resulted in our earnings shortfall. Looking at the balance
of fiscal 1998, we expect earnings in the last half of the year to be slightly
below our first six months' performance."
New Coil Coating President
On December 2, 1997, Douglas M. Rose was named president of the MSC Pre Finish
Metals Inc. subsidiary. "Doug's experience and extensive operating background
while at Toyoda Machinery USA Corporation, Bendix Corporation, and Ford Motor
Company, make him an ideal candidate to direct the future growth of our coil
coating business," said Nadig.
Acquisition Completed
MSC also indicated it completed the previously announced acquistion of certain
assets and the assumption of certain liabilities of a west coast hot-dipped
galvanizing and coil coating business. The purchase price was approximately
$127.0 million, which was financed through a new bank line of credit, and a
short term seller note that MSC intends to refinance
<PAGE>
News Release
December 19, 1997
Page 3
by the end of this fiscal year. The operation consists of a 300,000-ton capacity
hot-dipped galvanizing line and a coil coating line capable of producing 150,000
tons of prepainted metal. These two facilities will continue to operate, but as
MSC subsidiaries. This California business serves the building and construction
markets across the western United States. It had annual sales of approximately
$95.0 million in calendar 1997. The transaction is expected to add to earnings
in the next fiscal year, beginning March 1, 1998.
EVA Rollout Underway
"I am pleased to report that the introduction of Economic Value Added (EVA(R))
is well underway at MSC. The EVA reporting system, capital appropriation model
and training manual are all in the final phase of preparation. A comprehensive
employee communication program also is being developed, with rollout scheduled
for early February. An incentive compensation program tied to EVA improvement
will be in place when the program is introduced," Nadig concluded.
Material Sciences Corporation is a technology-based manufacturer of continuously
processed specialty coated materials and services. The company's four principal
product groups are Laminates and Composites, Specialty Films, Coil Coating, and
Electrogalvanizing. Its materials are sold to a variety of manufacturers and
distributors and used across a broad spectrum of industries and products.
Founded in 1971 and headquartered near Chicago, MSC operates nine manufacturing
plants in the U.S. and sells its products around the world.
Forward-looking statements contained in this press release are qualified by the
cautionary language described in Part II, Item 7 of the company's 1997 annual
report on Form 10-K filed with the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934, as amended.
For further information on Material Sciences by Fax, dial 1-800-PRO-INFO, ext.
MSC. Information about Material Sciences through the Internet is available at:
http://www.matsci.com/
<PAGE>
MATERIAL SCIENCES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
<TABLE>
<CAPTION>
Unaudited Unaudited
------------------------------- ------------------------------
Three Months Ended November 30, Nine Months Ended November 30,
------------------------------- ------------------------------
Percent Percent
1997 1996 Change 1997 1996 Change
-------- -------- -------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 75,107 $ 69,658 7.8% $ 218,744 $ 208,962 4.7%
Cost of Sales 57,526 50,920 13.0% 166,788 153,432 8.7%
-------- -------- --------- ---------
Gross Profit $ 17,581 18,738 -6.2% $ 51,956 $ 55,530 -6.4%
Selling, General and Administrative Expenses 12,881 11,629 10.8% 39,020 35,027 11.4%
-------- -------- --------- ---------
Income from Operations $ 4,700 $ 7,109 -33.9% $ 12,936 $ 20,503 -36.9%
-------- -------- --------- ---------
Other (Income) and Expense:
Interest Income $ (30) $ (54) -44.4% $ (105) $ (189) -44.4%
Interest Expense 1,073 178 NM 3,131 320 NM
Equity in Results of Partnership 369 350 5.4% 211 831 -74.6%
Other, Net (249) (265) -6.0% (776) (721) 7.6%
-------- -------- --------- ---------
Total Other Expense, Net $ 1,163 $ 209 NM $ 2,461 $ 241 NM
-------- -------- --------- ---------
Income Before Income Taxes $ 3,537 $ 6,900 -48.7% $ 10,476 $ 20,262 -48.3%
Income Taxes 1,362 2,657 -48.7% 4,034 7,802 -48.3%
-------- -------- --------- ---------
Net Income $ 2,175 $ 4,243 -48.7% $ 6,441 $ 12,460 -48.3%
======== ======== ========= =========
Net Income Per Common and Common Equivalent Share $ 0.14 $ 0.27 -48.1% $ 0.42 $ 0.80 -47.5%
======== ======== ========= =========
Weighted Average Number of Common and Common
Equivalent Shares Outstanding 15,499 15,645 -0.9% 15,471 15,594 -0.8%
======== ======== ========= =========
</TABLE>
NM - Not Meaningful
<PAGE>
MATERIAL SCIENCES CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
November 30, February 28,
1997 1997
Unaudited Audited
------------ ------------
<S> <C> <C>
Assets:
Current Assets:
Cash and Cash Equivalents $ 3,184 $ 2,118
Restricted Cash 5,000 -
Receivables:
Trade, Less Reserves 34,087 35,944
Current Portion of Partnership Note Receivable 780 767
Income Taxes 660 1,249
Prepaid Expenses 4,112 2,791
Inventories 35,622 30,952
Prepaid Taxes 1,186 1,186
--------- ---------
Total Current Assets $ 84,611 $ 75,005
--------- ---------
Gross Property, Plant and Equipment $ 257,494 $ 242,340
Accumulated Depreciation and Amortization (100,922) (87,954)
--------- ---------
Net Property, Plant and Equipment $ 156,572 $ 154,386
--------- ---------
Other Assets:
Investment in Partnership $ 11,166 $ 10,759
Partnership Note Receivable, Less Current
Portion - 374
Intangible Assets, Net 14,043 12,837
Other 482 728
--------- ---------
Total Other Assets $ 25,691 $ 24,698
--------- ---------
Total Assets $ 266,874 $ 254,089
========= =========
Liabilities:
Current Liabilities:
Current Portion of Long-Term Debt $ 3,774 $ 3,750
Accounts Payable 23,325 24,092
Accrued Payroll Related Expenses 8,563 9,838
Accrued Expenses 5,672 6,171
--------- ---------
Total Current Liabilities $ 41,324 $ 43,651
--------- ---------
Long-Term Liabilities:
Deferred Income Taxes $ 11,288 $ 11,392
Long-Term Debt, Less Current Portion 62,968 54,761
Accrued Superfund Liability 3,968 4,071
Other 7,016 6,641
--------- ---------
Total Long-term Liabilities $ 86,240 $ 76,865
--------- ---------
Shareowners' Equity:
Preferred Stock $ - $ -
Common Stock 327 325
Additional Paid-In Capital 51,663 50,142
Treasury Stock at Cost (8,545) (7,518)
Retained Earnings 98,865 90,424
--------- ---------
Total Shareowners' Equity $ 140,310 $ 133,373
--------- ---------
Total Liabilities and Shareowners' Equity $ 266,874 $ 254,089
========= =========
</TABLE>
<PAGE>
MATERIAL SCIENCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Unaudited Unaudited
------------------------------- ------------------------------
Three Months Ended November 30, Nine Months Ended November 30,
------------------------------- ------------------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash Flows From:
Operating Activities:
Net Income $ 2,175 $ 4,243 $ 8,441 $ 12,460
Adjustments to Reconcile Net Income to Net Cash Used in
Operating Activities:
Depreciation and Amortization 4,661 3,642 14,029 11,106
Benefit for Deferred Income Taxes (35) (79) (104) (227)
Compensatory Effect of Stock Plans 98 57 129 337
Other, Net 403 338 243 819
-------- -------- -------- --------
Operating Cash Flow Prior to Changes in Assets
and Liabilities $ 7,302 $ 8,201 $ 20,738 $ 24,495
-------- -------- -------- --------
Changes in Assets and Liabilities:
Receivables $ 981 $ 1,882 $ 761 $ (4,164)
Income Taxes Receivable 463 1,035 689 1,760
Prepaid Expenses (134) 154 (1,280) 60
Inventories (374) 142 (2,976) (1,983)
Accounts Payable 1,025 1,286 (841) (29)
Accrued Expenses (127) 1,490 (1,878) (645)
Other, Net (340) (146) (238) (210)
-------- -------- -------- --------
Cash Flow from Changes in Assets and Liabilities $ 1,494 $ 5,843 $ (5,863) $ (5,211)
-------- -------- -------- --------
Net Cash Provided by Operating Activities $ 3,798 $ 14,044 $ 14,878 $ 19,284
-------- -------- -------- --------
Investing Activities:
Capital Expenditures, Net $ (2,136) $(15,690) $(15,057) $(42,182)
Acquisitions, Net of Cash Acquired (75) - (1,204) (2,489)
Escrow for Acquisition 5,000 - 5,000 -
Investment in Partnership (614) (454) (1,618) (1,331)
Distribution from Partnership - - 1,374 375
Other Long-Term Assets - (117) 197 172
-------- -------- -------- --------
Net Cash Provided by (Used in) Investing Activities $ 2,175 $(16,261) $(11,308) $(45,455)
-------- -------- -------- --------
Financing Activities:
Net Proceeds (Payments) Under Lines of Credit $ (3,300) $ 600 $(14,600) $ 24,300
Proceeds from Senior Notes - - 20,000 -
Payments to Settle Debt (2,094) (748) (3,286) (1,592)
Purchase of Treasury Stock - - (1,027) -
Sale of Common Stock 641 679 1,394 1,355
-------- -------- -------- --------
Net Cash Provided by (Used in) Financing Activities $ (4,753) $ 531 $ 2,481 $ 24,063
-------- -------- -------- --------
Net Increase (Decrease) in Cash $ 6,218 $ (1,686) $ 6,048 $ (2,106)
Cash and Cash Equivalents at Beginning of Period 1,946 2,957 2,116 3,379
-------- -------- -------- --------
Cash and Cash Equivalents at End of Period $ 8,164 $ 1,271 $ 8,164 $ 1,271
======== ======== ======== ========
Supplemental Cash Flow Disclosures:
Subordinated Notes Issued for Acquisitions $ - $ - $ 1,117 $ 1,500
Cash Portion of Acquisitions and Related Costs 75 - 1,204 2,489
-------- -------- -------- --------
Total Consideration Paid for Acquisitions $ 75 $ - $ 2,321 $ 3,989
======== ======== ======== ========
</TABLE>
The Changes in Assets and Liabilities above for the three months and nine
months ended November 30, 1997, are net of assets and liabilities acquired.
