<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
Amendment No. 1 to Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report December 14, 1999
(Date of earliest event reported) (September 30, 1999)
ENGINEERED SUPPORT SYSTEMS, INC.
MISSOURI 0-13880 43-1313242
(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
1270 North Price Road, St. Louis, Missouri 63132
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (314) 993-5880
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Engineered Support Systems, Inc. hereby amends the following items,
financial statements, exhibits or other portions of its Current Report,
dated September 30, 1999, on Form 8-K:
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
(1) Audited Financial Statements of Systems & Electronics Inc.
for the three year period ended September 30, 1999
(b) Pro Forma Financial Information
(1) Pro Forma Combined Statements of Income (Unaudited) for the
year ended October 31, 1999
(2) Condensed Consolidated Balance Sheet (Unaudited) as of
October 31, 1999
(3) Notes to Condensed Pro Forma Financial Statements (Unaudited)
for the year ended October 31, 1999
(c) Exhibits
(1) Form 8-K, dated as of December 13, 1999, regarding the
operating results and financial condition of Engineered
Support Systems, Inc. for the year ended October 31, 1999
(2) Credit Agreement Dated as of September 30, 1999 among
Engineered Support Systems, Inc., Bank of America, National
Association, as Agent and as Swing Line Lender, and the Other
Financial Institutions Party Hereto
<PAGE>
<PAGE>
Item 7 (a) (1) - Audited Financial Statements of Systems & Electronics
Inc. for the three year period ended September 30, 1999
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[KPMG Logo]
SYSTEMS & ELECTRONICS INC.
Financial Statements
September 30, 1999 and 1998
(With Independent Auditors' Report Thereon)
<PAGE>
<PAGE>
[Letterhead of KPMG]
10 South Broadway
Suite 900
St. Louis, MO 63102-1761
INDEPENDENT AUDITORS' REPORT
The Board of Directors
ESCO Electronics Corporation:
We have audited the accompanying balance sheets of Systems & Electronics
Inc., an indirect wholly-owned subsidiary of ESCO Electronics
Corporation, as of September 30, 1999 and 1998, and the related
statements of operations, shareholder's equity, and cash flows for each
of the years in the three-year period ended September 30, 1999. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
As discussed in note 1, the accompanying financial statements were
prepared for the purpose of complying with the Stock Purchase Agreement
by and between Engineered Systems and Electronics, Inc., Defense Holding
Corp., and ESCO Electronics Corporation.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Systems &
Electronics Inc. as of September 30, 1999 and 1998, and the results of
its operations and its cash flows for each of the years in the three-
year period ended September 30, 1999, in conformity with generally
accepted accounting principles.
As discussed in note 1, the Company adopted Statement of Position 98-5,
Reporting on the Costs of Start-Up Activities, in fiscal 1999.
/s/ KPMG LLP
October 26, 1999
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<TABLE>
SYSTEMS & ELECTRONICS INC.
Balance Sheets
September 30, 1999 and 1998
(In thousands)
<CAPTION>
ASSETS 1999 1998
------- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ -- --
Accounts receivable 7,711 11,173
Costs and estimated earnings on long-term contracts,
less progress billings of $25,166 and $41,895
in 1999 and 1998, respectively 10,085 20,901
Inventories 12,744 31,286
Other current assets 619 546
------- -------
Total current assets 31,159 63,906
------- -------
Property, plant, and equipment:
Land and land improvements 2,374 3,174
Buildings and leasehold improvements 19,021 18,865
Machinery and equipment 20,204 19,505
Construction in progress 689 870
------- -------
42,288 42,414
Less accumulated depreciation and amortization 24,354 21,708
------- -------
Net property, plant, and equipment 17,934 20,706
Deferred tax assets 19,899 18,613
Other assets 1,495 1,360
------- -------
$70,487 104,585
======= =======
See accompanying notes to financial statements.
</TABLE>
2
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<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDER'S EQUITY 1999 1998
-------- -------
<S> <C> <C>
Current liabilities:
Accounts payable $ 14,303 16,284
Advance payments on long-term contracts, less costs
incurred of $281 and $828 in 1999
and 1998, respectively 3,939 8,846
Accrued expenses 8,750 10,432
-------- -------
Total current liabilities 26,992 35,562
Other liabilities 16,160 17,060
-------- -------
Total liabilities 43,152 52,622
-------- -------
Commitments and contingencies
Shareholder's equity:
Common stock, par value $1 per share, issued and
outstanding 1,000 shares in 1999 and 1998, respectively 1 1
Additional paid-in capital 114,443 124,679
Accumulated deficit since elimination of deficit
at September 30, 1993 (87,109) (72,717)
-------- -------
Total shareholder's equity 27,335 51,963
-------- -------
$ 70,487 104,585
======== =======
</TABLE>
3
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<TABLE>
SYSTEMS & ELECTRONICS INC.
Statements of Operations
Years ended September 30, 1999, 1998, and 1997
(In thousands)
<CAPTION>
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Net sales $177,008 145,872 193,588
Costs and expenses:
Cost of sales 143,300 114,678 163,610
Selling, general, and administrative expenses 21,808 23,058 23,672
Interest expense 551 777 705
Other, net 321 322 53
-------- ------- -------
Total costs and expenses 165,980 138,835 188,040
-------- ------- -------
Earnings before income tax expense 11,028 7,037 5,548
Income tax expense 7,908 2,508 2,018
-------- ------- -------
Net earnings before accounting change 3,120 4,529 3,530
Cumulative effect of accounting
change, net of tax of $9,429 (17,512) -- --
-------- ------- -------
Net earnings (loss) $(14,392) 4,529 3,530
======== ======= =======
See accompanying notes to financial statements.
</TABLE>
4
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<TABLE>
SYSTEMS & ELECTRONICS INC.
Statements of Shareholder's Equity
Years ended September 30, 1999, 1998, and 1997
(In thousands, except share data)
<CAPTION>
ADDITIONAL
PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ---------- ----------- -------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1996 1,000 $ 1 142,693 (80,776) 61,918
Net earnings -- -- -- 3,530 3,530
Transactions with affiliates -- -- (9,362) -- (9,362)
----- ------ ------- ------- -------
Balance at September 30, 1997 1,000 1 133,331 (77,246) 56,086
Net earnings -- -- -- 4,529 4,529
Transactions with affiliates -- -- (8,652) -- (8,652)
----- ------ ------- ------- -------
Balance at September 30, 1998 1,000 1 124,679 (72,717) 51,963
Net loss -- -- -- (14,392) (14,392)
Transactions with affiliates -- -- (10,236) -- (10,236)
----- ------ ------- ------- -------
Balance at September 30, 1999 1,000 $ 1 114,443 (87,109) 27,335
===== ====== ======= ======= =======
See accompanying notes to financial statements.
</TABLE>
5
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<TABLE>
SYSTEMS & ELECTRONICS INC.
Statements of Cash Flows
Years ended September 30, 1999, 1998, and 1997
(In thousands)
<CAPTION>
1999 1998 1997
-------- ------ ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $(14,392) 4,529 3,530
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization 2,999 3,601 4,113
Changes in operating working capital 6,665 867 2,845
Write-off of assets related to accounting change 17,512
Effect of deferred taxes on tax provision (1,286) 2,508 2,018
(Increase) decrease in other assets (135) (441) 575
Decrease in other liabilities (900) (1,000) (1,400)
Other 855 33 82
-------- ------ ------
Net cash provided by operating activities 11,318 10,097 11,763
Cash flows from investing activities --
capital expenditures (1,082) (1,445) (2,401)
Cash flows from financing activities --
equity transactions with Parent/affiliates (10,236) (8,652) (9,362)
-------- ------ ------
Net change in cash and cash equivalents -- -- --
Cash and cash equivalents at beginning of year -- -- --
-------- ------ ------
Cash and cash equivalents at end of year $ -- -- --
======== ====== ======
Changes in operating working capital:
Accounts receivable, net $ 3,462 546 1,126
Costs and estimated earnings on long-term contracts, net 10,816 4,778 15,659
Inventories (net of impact of accounting change) 1,030 621 (5,177)
Other current assets (73) 360 718
Accounts payable (1,981) (638) (1,452)
Advance payments on long-term contracts, net (4,907) 4,775 (4,165)
Accrued expenses (1,682) (9,575) (3,864)
-------- ------ ------
$ 6,665 867 2,845
======== ====== ======
Supplemental cash flow information:
Interest paid $ -- -- --
Income taxes paid -- -- --
======== ====== ======
See accompanying notes to financial statements.
</TABLE>
6
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SYSTEMS & ELECTRONICS INC.
Notes to Financial Statements
September 30, 1999 and 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
Systems & Electronics Inc. (SEI or the Company) is an
indirect wholly-owned subsidiary of ESCO Electronics
Corporation (ESCO). ESCO and Engineered Systems and
Electronics, Inc. have entered into a Stock Purchase
Agreement dated August 23, 1999 (the Purchase Agreement) for
the purchase of SEI. The sale of SEI closed on September 30,
1999. These financial statements reflect the "carve-out"
historical results of SEI, and accordingly, give no effect
to the acquisition of the Company. The assets, liabilities,
and results of operations of SEI's subsidiary, ESCO
Electronica de Mexico, S.A. de C.V., and its Comtrak
Division have been excluded from the accompanying financial
statements.
Effective September 30, 1990, Emerson Electric Co. (Emerson)
transferred the stock of certain of its subsidiaries,
primarily related to its government and defense business, to
ESCO and distributed all of the issued and outstanding ESCO
common stock to Emerson shareholders (the spin-off).
Effective September 30, 1993, ESCO, and accordingly SEI,
implemented an accounting readjustment in accordance with
the accounting provisions applicable to a "quasi-reorganization"
which restated assets and liabilities to fair values and
eliminated the deficit in retained earnings.
(B) NATURE OF OPERATIONS
The Company is primarily engaged in the research,
development, manufacture, sale, and support of a wide
variety of defense systems and products. Defense items
principally are supplied to the U.S. Government under prime
contracts from the Army, Navy, and Air Force and under
subcontracts with their prime contractors, and are also sold
to foreign customers.
(C) USE OF ESTIMATES AND BUSINESS RISKS
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions, including estimates of
anticipated contract costs and revenues utilized in the
earnings process, that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Sales to the U.S. Government may be affected by changes in
procurement policies, budget considerations, changing
concepts of national defense, and other factors.
Fluctuations and changes in any of these areas could
materially impact the Company's financial statements in
future years.
7 (Continued)
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<PAGE>
SYSTEMS & ELECTRONICS INC.
Notes to Financial Statements
September 30, 1999 and 1998
(D) ACCOUNTING CHANGE
During the first quarter of 1999, the Company adopted
Statement of Position (SOP) 98-5, Reporting on the Costs of
Start-Up Activities. Pre-contract costs were incurred and
capitalized under the previous guidance provided by
SOP 81-1, Accounting for Performance of Construction-type
Contracts. As a result of SOP 98-5, the Company expensed
these costs and accounted for this as a change in accounting
principle.
(E) REVENUE RECOGNITION
Revenue on production contracts is recorded when specific
contract terms are fulfilled, usually by delivery or
acceptance (the units of production or delivery methods).
The costs attributed to units delivered are based on the
estimated average costs of all units expected to be produced
in a contract or group of contracts. Revenue under long-term
contracts for which units of production or delivery are
inappropriate measures of performance is recognized on the
percentage-of-completion method based upon incurred costs
compared to total estimated costs under the contract, or are
based upon equivalent units produced.
Revenues from cost reimbursement contracts are recorded as
costs are incurred, plus fees earned. Estimated amounts for
contract changes and claims are included in contract
revenues only when realization is probable. Revisions to
assumptions and estimates, primarily in contract value and
estimated costs used for recording sales and earnings, are
reflected in the accounting period in which the facts become
known. Losses recognized on certain contracts include a
provision for the future selling, general, and
administrative costs applicable to the respective contracts.
(F) CASH AND CASH EQUIVALENTS
The Company does not maintain cash or cash equivalents;
rather, it maintains an intercompany account with ESCO which
varies depending on the timing and amounts of the sources
and uses of cash. At September 30 of each year, the
intercompany balance is eliminated with an offsetting
adjustment to additional paid-in capital.
(G) COSTS AND ESTIMATED EARNINGS ON LONG-TERM CONTRACTS
Costs and estimated earnings on long-term contracts
represent unbilled revenues, including accrued profits on
long-term contracts accounted for under the percentage-of-
completion method, net of progress billings.
(H) INVENTORIES
Inventories under long-term contracts reflect accumulated
direct production costs, overhead allocations, and other
related costs less the portion of such costs charged to cost
of sales and any advance and/or progress payments received.
In accordance with industry practice, costs incurred on
contracts in progress include amounts relating to programs
having production cycles longer than one year, and a portion
thereof will not be realized within one year.
8 (Continued)
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SYSTEMS & ELECTRONICS INC.
Notes to Financial Statements
September 30, 1999 and 1998
Other inventories are carried at the lower of cost (first-in,
first-out) or market.
(I) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are recorded at cost.
Depreciation and amortization are computed on accelerated
methods over the estimated useful lives of the assets:
buildings, 10-40 years; machinery and equipment, 5-10 years;
and office furniture and equipment, 5-10 years. Leasehold
improvements are amortized over the remaining term of the
applicable lease or their estimated useful lives, whichever
is shorter.
(J) INCOME TAXES
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets are reduced by
a valuation allowance if it is more likely than not that
some portion or all of the deferred tax assets will not be
realized. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the
period that includes the enactment date.
(K) RESEARCH AND DEVELOPMENT COSTS
Company-sponsored research and development costs include
research and development and bid and proposal efforts
related to U.S. Government and commercial products and
services. Company-sponsored product development costs are
charged to expense when incurred. Customer-sponsored
research and development costs incurred pursuant to
contracts are accounted for similar to other program costs.
(2) ACCOUNTS RECEIVABLE
Accounts receivable consist of the following at September 30, 1999
and 1998:
<TABLE>
<CAPTION>
1999 1998
------ ------
(IN THOUSANDS)
<S> <C> <C>
U.S. Government and prime contractors $5,845 6,557
Commercial 381 1,487
Other 1,485 3,129
------ ------
Total $7,711 11,173
====== ======
</TABLE>
9 (Continued)
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SYSTEMS & ELECTRONICS INC.
Notes to Financial Statements
September 30, 1999 and 1998
(3) INVENTORIES
Inventories consist of the following at September 30, 1999 and
1998:
<TABLE>
<CAPTION>
1999 1998
------- ------
(IN THOUSANDS)
<S> <C> <C>
Work in process, including long-term contracts $10,839 28,731
Raw materials 1,905 2,555
------- ------
Total $12,744 31,286
======= ======
</TABLE>
Under the contractual arrangements by which progress payments are
received, the U.S. Government has a security interest in the
inventories associated with specific contracts. Inventories are
net of advance or progress payment receipts of approximately $19.6
million and $13.8 million at September 30, 1999 and 1998,
respectively.
Work in process included $24.7 million at September 30, 1998 of
Tunner inventory relating to specific future contract awards.
These precontract costs were incurred based on the U.S. Air
Force's identified future loader requirements. As a result of
first quarter adoption of SOP 98-5, the Company expensed these
costs.
(4) PROPERTY, PLANT, AND EQUIPMENT
Depreciation and amortization of property, plant, and equipment
for the years ended September 30, 1999, 1998, and 1997 were
approximately $3.0 million, $3.6 million, and $4.1 million,
respectively.
The Company leases certain real property, equipment, and machinery
under noncancelable operating leases. Rental expense under these
operating leases for the years ended September 30, 1999, 1998, and
1997 amounted to approximately $1.9 million, $1.8 million, and
$1.2 million, respectively. Future aggregate minimum lease
payments under operating leases that have initial or remaining
noncancelable lease terms in excess of one year as of September
30, 1999 are:
<TABLE>
<CAPTION>
AMOUNTS
YEAR ENDING SEPTEMBER 30: -------
(IN THOUSANDS)
<S> <C>
2000 $1,481
2001 1,010
2002 603
2003 355
2004 and thereafter 104
------
Total $3,553
======
</TABLE>
10 (Continued)
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SYSTEMS & ELECTRONICS INC.
Notes to Financial Statements
September 30, 1999 and 1998
(5) INCOME TAX EXPENSE
SEI's operations have been included in the consolidated U.S.
Federal and certain state unitary income tax returns of ESCO.
These income tax provisions have been prepared for SEI as if SEI
had filed separate income tax returns. In determining the level of
valuation reserve, no consideration has been given to SEI's
inclusion in the tax returns of ESCO. Additionally, the net
operating loss carryforwards of SEI as disclosed may not be
available to a buyer of the Company. The principal components of
income tax expense for the years ended September 30, 1999, 1998,
and 1997 consist of:
<TABLE>
<CAPTION>
1999 1998 1997
------ ----- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Federal:
Current $ (81) -- --
Deferred 7,989 2,508 2,018
------ ----- -----
Total $7,908 2,508 2,018
====== ===== =====
</TABLE>
The actual income tax expense for the years ended September 30,
1999, 1998, and 1997 differs from the expected tax expense for
those years (computed by applying the U.S. Federal statutory rate)
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Federal corporate statutory rate 35.0% 35.0% 35.0%
Change in valuation allowance 36.6 -- --
Other, net .1 .6 1.4
---- ---- ----
Effective income tax rate 71.7% 35.6% 36.4%
==== ==== ====
</TABLE>
11 (Continued)
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SYSTEMS & ELECTRONICS INC.
Notes to Financial Statements
September 30, 1999 and 1998
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities at
September 30, 1999 and 1998 are presented below:
<TABLE>
<CAPTION>
1999 1998
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Inventories, long-term contract accounting, contract cost
reserves, and other $ 5,557 3,534
Pension and other postretirement benefits 6,676 6,580
Net operating loss carryforwards 53,026 50,094
Other compensation - related costs and other cost accruals 599 695
Plant and equipment, depreciation methods, and acquisition
asset allocations 580 210
-------- -------
Total deferred tax assets 66,438 61,113
Deferred tax liabilities - plant and equipment, depreciation
methods, and acquisition asset allocations -- --
-------- -------
Net deferred tax asset before valuation allowance 66,438 61,113
Less valuation allowance (46,539) (42,500)
-------- -------
Net deferred tax asset $ 19,899 18,613
======== =======
</TABLE>
Management believes it is more likely than not, with its
projections of future taxable income and tax planning strategies,
the Company will generate sufficient taxable income to realize the
benefits of the net deferred tax assets, after consideration of
the valuation allowance, existing at September 30, 1999. In order
to realize the separate company net deferred tax assets existing
at September 30, 1999, SEI would need to generate future taxable
income of approximately $57 million. In order to fully realize the
separate company deferred tax assets before the valuation
allowance, SEI would need to generate future taxable income of
approximately $190 million.
A valuation allowance of $46.5 million is being maintained against
the deferred tax assets associated with the net operating loss
which may not be realized.
The net operating loss carryforward amounts for 1999 and 1998
included in the deferred tax assets above represent the tax
benefit of the SEI cumulative net operating loss carryforwards as
if SEI had filed separate company income tax returns. For the
above-mentioned years, SEI actually filed consolidated income tax
returns with its parent, ESCO. The net operating losses above were
partially utilized by ESCO and its subsidiaries to offset the
taxable income of the other members of the group. Immediately
after the sale of SEI, SEI will be deemed to liquidate; therefore,
all tax attributes, including the net operating loss carryforwards,
were transferred to its parent, ESCO.
12 (Continued)
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SYSTEMS & ELECTRONICS INC.
Notes to Financial Statements
September 30, 1999 and 1998
(6) TRANSACTIONS WITH ESCO
CASH MANAGEMENT AND ADVANCES
ESCO manages the cash necessary for current operating requirements
of certain of its subsidiaries, including SEI. Cash needed for
current operations is advanced by ESCO at an interest rate of 7.0%
per annum in both 1999 and 1998. At fiscal year-end, all advances
from ESCO are capitalized as equity. Interest expense on such
advances is included in interest expense in the statements of
earnings.
ESCO CHARGES
ESCO allocates portions of its corporate office general and
administrative expenses to its subsidiaries. SEI's share of such
costs amounted to approximately $3.7 million, $3.7 million, and
$4.2 million in 1999, 1998, and 1997, respectively. Such charges
represent an allocation of ESCO's estimated total corporate
expenses and are charged to SEI based on a formula tied to
compensation expenses. In addition to corporate office general and
administrative expenses, ESCO allocates certain domestic and
international marketing expenses. Marketing expenses allocated to
SEI amounted to approximately $2.4 million, $2.5 million, and $3.1
million in fiscal 1999, 1998, and 1997, respectively. The
marketing expenses consist primarily of sales offices and
consultants specializing in the defense industry. ESCO considers
the methods used to allocate these corporate costs to be a
reasonable basis for allocation.
OTHER TRANSACTIONS WITH ESCO
Included in accounts payable and accounts receivable are amounts
due to and due from certain ESCO subsidiaries. These balances
included in accounts payable and accounts receivable in fiscal
1999 amounted to approximately $340,000 and $1,000, respectively.
In 1998, these balances included in accounts payable and accounts
receivable amounted to approximately $215,000 and $479,000,
respectively.
Sales to certain ESCO subsidiaries for the years ended September
30, 1999, 1998, and 1997 amounted to approximately $4.2 million,
$6.0 million, and $7.6 million, respectively. These amounts are
included in net sales in the statements of earnings.
13 (Continued)
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SYSTEMS & ELECTRONICS INC.
Notes to Financial Statements
September 30, 1999 and 1998
(7) RETIREMENT AND OTHER BENEFIT PLANS
Substantially all employees are covered by defined benefit or
defined contribution pension plans maintained by the Company for
the benefit of its employees. Benefits are provided to employees
under defined benefit pay-related and flat-dollar plans which are
primarily noncontributory. Annual contributions to retirement
plans equal or exceed the minimum funding requirements of the
Employee Retirement Income Security Act or other applicable
regulations. Net periodic benefit cost for the years ended
September 30, 1999, 1998, and 1997 is comprised of the following:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Defined benefit plans:
Service cost (benefits earned during the year) $ 2,300 2,000 1,900
Interest cost 4,700 4,300 3,800
Actual return on plan assets (5,400) (4,800) (4,200)
Net amortization and deferral 800 300 100
------- ------ ------
Net periodic benefit cost $ 2,400 1,800 1,600
======= ====== ======
</TABLE>
The projected benefit obligation, accumulated benefit obligation,
and fair value of plan assets for defined benefit pension plans
with accumulated benefit obligations in excess of plan assets were
$4.8 million, $4.8 million, and $2.8 million, respectively, as of
September 30, 1999, and $21.9 million, $21.9 million, and $18.2
million, respectively, as of September 30, 1998.
The net benefit obligation of the Company's defined benefit
pension plans at September 30, 1999 and 1998 is shown below:
<TABLE>
<CAPTION>
1999 1998
------- ------
(IN THOUSANDS)
<S> <C> <C>
Net benefit obligation at beginning of year $67,300 54,800
Service cost (benefits earned during the year) 2,300 2,000
Interest cost 4,700 4,300
Plan amendments 900 --
Actuarial (gain) loss (8,300) 8,600
Gross benefits paid (2,600) (2,400)
------- ------
Net benefit obligation at end of year $64,300 67,300
======= ======
</TABLE>
14 (Continued)
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<PAGE>
SYSTEMS & ELECTRONICS INC.
Notes to Financial Statements
September 30, 1999 and 1998
The plan assets of the Company's defined benefit pension plans at
September 30, 1999 and 1998 are shown below:
<TABLE>
<CAPTION>
1999 1998
------- ------
(IN THOUSANDS)
<S> <C> <C>
Fair value of plan assets at beginning of year $54,600 55,500
Actual return on plan assets 11,300 (600)
Employer contributions 2,700 2,100
Gross benefits paid (2,600) (2,400)
------- ------
Fair value of plan assets at end of year $66,000 54,600
======= ======
</TABLE>
The Company's defined benefit pension plans recognized the
following net amounts at September 30, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------- -------
(IN THOUSANDS)
<S> <C> <C>
Funded status at end of year $ 1,700 (12,700)
Unrecognized prior service cost 2,500 1,800
Unrecognized net actuarial (gain) loss (9,600) 5,200
------- -------
Accrued benefit costs $(5,400) (5,700)
======= =======
Amounts recognized in the balance sheet consist of -
accrued benefit liability $(5,400) (5,700)
======= =======
</TABLE>
Pension plan assets consist principally of marketable securities
including common stocks, bonds, and interest-bearing deposits.
The benefit obligations of the defined benefit plans as of
September 30, 1999 and 1998 were based on discount rates of 7.75%
and 6.75%, respectively, and an assumed rate of increase in
compensation levels of 4%. The 1999 and 1998 pension expense for
the defined benefit plans was based on a 6.75% and 7.50% discount
rate, respectively, a 4% increase in compensation levels, and a
10% expected long-term rate of return on plan assets.
In addition to providing retirement income benefits, the Company
provides unfunded postretirement health and life insurance
benefits to certain retirees. To qualify, an employee must retire
at age 55 or later and the employee's age plus service must equal
or exceed 75. Retiree contributions are defined as a percentage of
medical premiums. Consequently, retiree contributions increase
with increases in the medical premiums. The life insurance plans
are noncontributory and provide coverage of a flat dollar amount
for qualifying retired employees.
15 (Continued)
<PAGE>
<PAGE>
SYSTEMS & ELECTRONICS INC.
Notes to Financial Statements
September 30, 1999 and 1998
Net periodic postretirement benefit cost is comprised of the
following:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost $ 200 200 200
Interest cost 600 900 1,000
Actuarial gain (200) -- --
----- ----- -----
Net periodic postretirement benefit cost $ 600 1,100 1,200
===== ===== =====
</TABLE>
The net benefit obligation for postretirement benefits at
September 30, 1999 and 1998 is shown below:
<TABLE>
<CAPTION>
1999 1998
------- ------
(IN THOUSANDS)
<S> <C> <C>
Net benefit obligation at beginning of year $14,400 13,700
Service cost 200 200
Interest cost 600 900
Actuarial (gain) loss (5,200) 1,400
Gross benefits paid (1,300) (1,800)
------- ------
Net benefit obligation at end of year $ 8,700 14,400
======= ======
</TABLE>
The plan assets for postretirement benefits at September 30, 1999
and 1998 are shown below:
<TABLE>
<CAPTION>
1999 1998
------- ------
(IN THOUSANDS)
<S> <C> <C>
Fair value of plan assets at beginning of year $ -- --
Employer contributions 1,300 1,800
Gross benefits paid (1,300) (1,800)
------- ------
Fair value of plan assets at end of year $ -- --
======= ======
</TABLE>
16 (Continued)
<PAGE>
<PAGE>
SYSTEMS & ELECTRONICS INC.
Notes to Financial Statements
September 30, 1999 and 1998
The Company recognized the following net amounts for
postretirement benefits at September 30, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Funded status at end of year $ (8,700) (14,400)
Unrecognized prior service cost (100) (100)
Unrecognized net actuarial (gain) loss (3,600) 1,400
-------- -------
Accrued benefit costs $(12,400) (13,100)
======== =======
Amounts recognized in the balance sheet consist of -
accrued benefit liability $(12,400) (13,100)
======== =======
</TABLE>
The net benefit obligation of the plans as of September 30, 1999
and 1998 were based on discount rates of 7.75% and 6.75%,
respectively. The September 30, 1998 net benefit obligation was
based on a health care cost trend of 7.0% for fiscal 1999,
gradually grading down to an ultimate rate of 5.5% by 2002. The
September 30, 1999 net benefit obligation was based on a health
care cost trend of 6.5% for fiscal 2000, gradually grading down to
an ultimate rate of 5.5% by 2002. A 1% increase in the health care
cost trend rate for each year would increase the September 30,
1999 net benefit obligation by approximately $200,000, while a 1%
decrease in the health care cost trend rate for each year would
decrease the September 30, 1999 net benefit obligation by
approximately $250,000.
The fiscal 1999 and 1998 net periodic benefit costs were based on
discount rates of 6.75% and 7.5%, respectively. The net periodic
benefit cost was based on an assumed health care cost trend of
7.0% and 7.5% for 1999 and 1998, respectively, gradually grading
down to 5.5% by fiscal year 2002. A 1% increase in the health care
cost trend rate for each year would increase the aggregate of the
service cost and interest cost components of the fiscal 1999 net
periodic benefit cost by approximately $20,000, while a 1%
decrease in the health care cost trend rate for each year would
decrease the aggregate of the service cost and interest cost
components of the fiscal 1999 net periodic benefit cost by
approximately $20,000.
(8) EMERSON CONTRACT GUARANTEES
Emerson has directly or indirectly guaranteed or is otherwise
liable for the performance of most of the Company's contracts with
its customers which existed at September 30, 1990 (the Guaranteed
Contracts). The Guaranteed Contracts include certain U.S.
Government contracts entered into by the Company prior to
September 30, 1990. As of September 30, 1999, the aggregate
backlog of all firm orders received by the Company included
Guaranteed Contracts of $151,000. At September 30, 1999, there
were open letters of credit with an aggregate value of $2.4
million related to foreign advance payments in support of various
contracts that are directly or indirectly guaranteed by Emerson.
17 (Continued)
<PAGE>
<PAGE>
SYSTEMS & ELECTRONICS INC.
Notes to Financial Statements
September 30, 1999 and 1998
(9) COMMITMENTS AND CONTINGENCIES
At September 30, 1999, the Company had $2.7 million in letters of
credit outstanding as guarantees of contract performance.
As a normal incidence of the businesses in which the Company is
engaged, various claims, charges, and litigation are asserted or
commenced against the Company. In the opinion of management, final
judgments, if any, which might be rendered against the Company in
current litigation are adequately reserved, covered by insurance,
or would not have a material adverse effect on its financial
statements.
(10) CLAIMS
At September 30, 1997, the Company had recorded a claim for $10
million related to the original M1000 tank transporter program
which is included in cost and estimated earnings on long-term
contracts at September 30, 1997. During the fourth quarter of
fiscal 1998, the claim was settled for $7.5 million, which
resulted in a loss of $2.5 million. The loss is included as an
adjustment of 1998 sales.
18
<PAGE>
<PAGE>
Item 7 (b)(1) - Pro Forma Combined Statement of Income (Unaudited) for the
year ended October 31, 1999
<PAGE>
<PAGE>
<TABLE>
Engineered Support Systems, Inc.
Pro Forma Combined Statement of Income (Unaudited)
For the Year Ended October 31, 1999
(In thousands, except per share amounts)
<CAPTION>
Eliminate
ESSI for Year<F1> SEI for Month SEI for Year Pro Forma ESSI for Year
Ended 10/31/99 Ended 10/31/99 Ended 9/30/99 Adjustments Ended 10/31/99
----------------- -------------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Net revenues $165,256 $(18,185) $177,008 $15,531 $339,610
Cost of revenues 133,377 (14,771) 143,300 16,540 278,446
----------------- -------------- ------------- ----------- --------------
Gross profit 31,879 (3,414) 33,708 (1,009) 61,164
Selling, general and
administrative expense 17,099 (1,951) 22,129 (822) 36,455
----------------- -------------- ------------- ----------- --------------
Income from operations 14,780 (1,463) 11,579 (187) 24,709
Net interest expense 2,600 (612) 551 6,777 9,316
----------------- -------------- ------------- ----------- --------------
Income before income taxes 12,180 (851) 11,028 (6,964) 15,393
Income tax provision 4,871 (340) 7,908 (6,282) 6,157
----------------- -------------- ------------- ----------- --------------
Net income $ 7,309 $ (511) $ 3,120 $ (682) $ 9,236
================= ============== ============= =========== ==============
Earnings per share:
Basic $1.23 $1.56
================= ==============
Diluted $1.20 $1.52
================= ==============
Average shares outstanding:
Basic 5,926 5,926
================= ==============
Diluted 6,082 6,082
================= ==============
<FN>
See notes to condensed pro forma financial statements.
<F1> Includes the operating results of SEI for the month ended 10/31/99.
</TABLE>
<PAGE>
<PAGE>
Item 7 (b)(2) - Condensed Consolidated Balance Sheet (Unaudited) as of
October 31, 1999
<PAGE>
<PAGE>
<TABLE>
Engineered Support Systems, Inc.
Condensed Consolidated Balance Sheet (Unaudited)
October 31, 1999
(In thousands, except per share amounts)
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 310
Accounts receivable 23,577
Contracts in process and inventories 68,351
Deferred income taxes 3,516
Other current assets 4,397
--------
Total current assets 100,151
Property, plant and equipment, net 60,015
Goodwill, net 74,354
Deferred income taxes 386
Other assets 4,092
--------
Total Assets $238,998
========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 23,900
Current maturities of long-term debt 10,038
Accounts payable 27,478
Other current liabilities 24,430
--------
Total current liabilities 85,846
Long-term debt 80,075
Other liabilities 9,077
ESOP guaranteed bank loan 578
Shareholders' Equity
Common stock 75
Additional paid-in capital 37,032
Retained earnings 30,781
--------
67,888
Less ESOP guaranteed bank loan 578
Less treasury stock at cost 3,888
--------
63,422
--------
Total Liabilities and Shareholders' Equity $238,998
========
See notes to condensed pro forma financial statements.
</TABLE>
<PAGE>
<PAGE>
Item 7 (b)(3) - Notes to Condensed Pro Forma Financial Statements
(Unaudited) for the year ended October 31, 1999
<PAGE>
<PAGE>
ENGINEERED SUPPORT SYSTEMS, INC.
Notes to Condensed Pro Forma Financial Statements
(In thousands)
(Unaudited)
Note A - Basis of Presentation
On September 30, 1999, Engineered Support Systems, Inc. (the Company),
through its wholly-owned subsidiary Engineered Systems and Electronics,
Inc. (ESE), acquired the outstanding stock of Systems & Electronics Inc.
(SEI), a designer and manufacturer of military support equipment. The
purchase price including acquisition costs, net of $4.2 million of cash
acquired, of $81.7 million was financed with a bank term loan as
provided for under the terms of a new Credit Agreement included at Item
7(c)(2) of this Form 8-K/A.
The unaudited pro forma financial statements present a combination of
the historical financial statements for the Company and SEI as adjusted
to reflect purchase transactions in accordance with the purchase method
of accounting and to reflect an income tax provision for SEI as if it
were filing on a consolidated basis with the Company under the
provisions of the Internal Revenue Code for the period presented. A pro
forma income statement is presented for the year ended October 31, 1999
as if the acquisition had occurred as of November 1, 1998.
The Pro Forma Combined Statement of Income for the year ended October
31, 1999 includes the Company's results of operations for the year ended
October 31, 1999 and SEI's audited results of operations for the year
ended September 30, 1999. A condensed consolidated balance sheet is
presented as of October 31, 1999, which includes the SEI balance sheet
as of that date.
The unaudited pro forma results are not necessarily indicative of the
combined results that would have occurred had the acquisition actually
taken place on November 1, 1998, nor are they necessarily indicative of
the results that may occur in the future. The pro forma financial
statements should be read in conjunction with the related historical
financial statements.
<PAGE>
<PAGE>
Note B - Income Taxes
Pro forma adjustments to the Statement of Income include an income tax
provision as if SEI had filed on a consolidated basis with the Company
for the period presented using the Company's historical effective tax
rate of 40%.
Note C - Pro Forma Adjustments
The purchase price, including acquisition costs, was $85,953. However,
the Company will receive $4,224 in cash acquired, which is reflected on
the October 31, 1999 condensed consolidated balance sheet in Other
Current Assets.
The purchase price for SEI was allocated as follows:
Book value of SEI assets acquired $70,487
Book value of SEI liabilities assumed 43,152
-------
Net book value of SEI assets 27,335
Adjustment of net assets acquired to fair market value 7,932
Cost in excess of net assets acquired 50,686
-------
85,953
Cash acquired 4,224
-------
Purchase price, net of cash acquired $81,729
=======
The tax basis of the acquired assets and liabilities equals the
financial statement values as a result of the Company's tax election to
treat the stock purchase as an asset purchase.
Pro forma adjustments to the condensed pro forma income statement for
the year ended October 31, 1999 relate to the following items. The
$15,531 increase in net revenues relates to a change in SEI's accounting
method for revenue recognition such that long-term production contracts
are accounted for on the percentage of completion method, consistent
with the Company's past practice. The increase in cost of revenues
reflects $1,099 of additional depreciation expense related to the write-
up of property, plant and equipment to fair market value, in addition to
a $15,441 adjustment related to the change in SEI's accounting method
for revenue recognition.
Selling, general and administrative expense has been increased by $2,027
for the amortization of goodwill (over a 25-year period) and by $270 for
the amortization of loan fees (over a 5-year period). The historical
SEI income statement for the year ended September 30, 1999 included
$4,500 of corporate charges from ESCO Electronics Corp. The Company
estimates that it will incur additional corporate charges of $1,381 as a
result of the SEI acquisition. Therefore, selling, general and
administrative expense has also been decreased on a pro forma basis by
this $3,119 difference.
Concurrent with the acquisition, the Company entered into a new credit
agreement with various financial institutions. This agreement provided
for a $90,000 term loan and a $55,000 revolving credit facility. The
agreement also provided for borrowing rates in excess of those required
under the Company's previously existing credit agreement. Therefore,
net interest expense has been adjusted for the year ended October 31,
1999 as follows:
<PAGE>
<PAGE>
Interest expense on acquisition debt
of $81.7 million at 7.7657% $6,347
Additional interest expense related to
higher borrowing rates in connection
with the acquisition loan 430
------
$6,777
======
The income tax provision has been adjusted to reflect the estimated
income tax effects of pro forma adjustments and the effect of reflecting
income tax for SEI as described in Note B. These adjustments to the pro
forma income statements were computed assuming the transaction was
consummated at the beginning of the period presented.
<PAGE>
<PAGE>
Note D - Purchase Accounting Adjustments
Included in the October 31, 1999 condensed consolidated balance sheet
are the following purchase accounting adjustments:
Increase in property, plant
and equipment to fair market
value $15,336
Decrease in deferred tax assets,
primarily related to net operating
losses not available to the Company (14,607)
Increase in contracts in process and
inventories due to changing SEI's
method of revenue recognition to
percentage of completion 3,459
Decrease in employee benefit accruals 3,863
Other (119)
-------
Adjustment of acquired assets to
fair market value 7,932
Cost in excess of net assets acquired 50,686
-------
Total $58,618
=======
<PAGE>
<PAGE>
Item 7(c) (1) - Form 8-K, dated as of December 13, 1999,
regarding the operating results and financial
condition of Engineered Support Systems, Inc.
for the year ended October 31, 1999
<PAGE>
<PAGE>
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 13, 1999
ENGINEERED SUPPORT SYSTEMS, INC.
MISSOURI 0-13880 43-1313242
(State or Other Jurisdiction (Commission File No.) (IRS Employer
of Incorporation) Identification No.)
1270 North Price Road, St. Louis, Missouri 63132
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (314)993-5880
<PAGE>
<PAGE>
Item 5. Other Events.
On December 13, 1999, Engineered Support Systems, Inc.
reported its operating results for the quarter and year
ended October 31, 1999 and its financial condition as of
October 31, 1999
Item 7. Financial Statements and Exhibits.
Engineered Support Systems, Inc. earnings release for the
year ended October 31, 1999
<PAGE>
<PAGE>
NASDAQ - EASI GARY C. GERHARDT
FOR IMMEDIATE RELEASE (314) 993-5880
ENGINEERED SUPPORT REPORTS RECORD REVENUES AND EARNINGS
FOR FOURTH QUARTER AND FISCAL 1999
HIGHLIGHTS:
* REPORTED REVENUES (UP 78%), OPERATING INCOME (UP 37%) AND
NET INCOME (UP 8%) REPRESENT FOURTH QUARTER RECORDS
* FOURTH QUARTER DILUTED EPS OF $.32 IN 1999 ON 7 MILLION
SHARES VS. $.42 (INCLUDING $.09 GAIN ON ASSET SALE) IN
1998 ON 5 MILLION SHARES
* FUNDED BACKLOG OF DEFENSE ORDERS UP 243% TO $277 MILLION,
BUSINESS POTENTIAL OF $1.1 BILLION INCLUDING OPTIONS
ST. LOUIS, MISSOURI - DECEMBER 13, 1999 - Engineered Support
Systems, Inc. (NASDAQ: EASI) today reported net income of $2.3 million,
or $0.32 per diluted common share, on net revenues of $58.4 million for
the fourth quarter of 1999. This compares with net income of $2.1
million, or $0.42 per diluted common share, on net revenues of $32.8
million for the fourth quarter of 1998. For the year ended October 31,
1999, the Company reported net income of $7.3 million, or $1.20 per
diluted common share, on net revenues of $165.3 million. This compares
with net income of $5.8 million, or $1.16 per diluted common share, on
net revenues of $97.0 million for 1998. Net income for the comparable
periods in 1998 included an after-tax gain of $0.4 million, or $0.09 per
diluted common share, on the sale of a facility previously leased to an
unrelated third party. Per share amounts for 1999 include an additional
2 million shares of common stock the Company issued through a public
offering in April 1999. Outstanding shares of common stock totaled 6.9
million and 4.9 million at October 31, 1999 and 1998, respectively.
The Company's funded backlog of defense orders at October 31, 1999
grew to $277.2 million, or 243%, from $80.8 million in the prior year.
In addition, options on existing defense contracts totaled $850.5
million at October 31, 1999 as compared to $319.6 million in the prior
year. Commenting on the record results, Michael F. Shanahan, Sr.,
Chairman and CEO, said, "We made significant strides in broadening our
base of defense business this year through the Systems & Electronics
acquisition. Our business plan of combining the strength of our existing
operations with strategic acquisitions is proving sound."
<PAGE>
<PAGE>
Reported results for the quarter and year ended October 31, 1999
include the impact of the Company's five most recent acquisitions. In
1999, the Company acquired substantially all of the net assets of the
Fermont Division of Dynamics Corporation of America (effective February
22, 1999), the inventory, fixed assets and existing operations of the
Bossier City Division of Engineered Products, Inc. (effective July 1,
1999) and all of the outstanding stock of the Systems & Electronics Inc.
(SEI) defense subsidiary of ESCO Electronics Corporation (effective
September 30, 1999). In the prior year, the Company acquired
substantially all of the net assets of Nuclear Cooling, Inc., d/b/a
Marlo Coil (effective February 1, 1998) and all of the outstanding stock
of Keco Industries, Inc. (effective June 24, 1998). All five
transactions have been accounted for as purchases and the results of
operations for each subsidiary have been included since their respective
acquisition dates.
Net revenues for the fourth quarter and year ended October 31,
1999 increased $25.6 million, or 78.1%, and $68.3 million, or 70.4%,
respectively, over the same periods in the prior year. The increase for
the fourth quarter was primarily a result of the Fermont and SEI
acquisitions occurring during 1999 with the annual increase also
favorably impacted by a full year's operations for Marlo Coil and Keco.
Current annualized revenues project to more than $350 million for fiscal
2000.
Overall gross margins decreased to 17.7% and 19.3% for the fourth
quarter and year ended October 31, 1999, respectively, as compared to
23.8% and 23.3% for the corresponding periods in the prior year. The
expected decline is due to lower gross margins at Fermont as compared to
the Company's historical defense business operations and a volume-driven
decrease in gross margins at the Company's injection molded plastics
operation. Fourth quarter 1999 gross margins compare to 19.2% for the
third quarter of the year.
Operating income for the fourth quarter and year ended October 31,
1999 grew by $1.3 million, or 36.7%, and by $4.4 million, or 43.1%,
respectively, over the same periods in 1998. The increase for the
fourth quarter reflects the acquisition of SEI during the current
quarter coupled with improved results at the Company's existing defense
operations partially offset by decreased operating income at the
Company's plastics operation as compared to the fourth quarter of 1998.
The increase for the year ended October 31, 1999 is primarily due to the
SEI acquisition, year-over-year improvement in the results of the
Company's defense business and the inclusion of a full year's operations
for Marlo Coil and Keco partially offset by decreased operating income
at the Company's plastics operation in 1999.
"Clearly, our increased revenue base and continuing earnings
improvement will deliver significant value to our shareholders,
customers and employees," said Shanahan. "We are very pleased with our
prospects."
Through its various defense-operating units, Engineered Support
Systems, Inc. specializes in the engineering, fabrication and assembly
of military support and electronics equipment for various branches of
the U.S. military and other commercial customers. The Company's
military support products include aircraft load management equipment,
heaters and air conditioners, military trailers, water purification
units, chemical and biological defense systems, coils and air handling
units, bridging systems and other multipurpose military support
equipment. Electronics equipment manufactured by the Company includes
airborne radar systems, automatic test equipment, fire support/control
systems, and generator sets. For commercial and industrial markets, the
Company also
<PAGE>
<PAGE>
engineers and manufactures air handling and heat transfer equipment,
material handling equipment, custom molded plastics products and a
proprietary line of plastic faucets.
Statements contained herein, which are not historical facts, are
forward looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
and Exchange Act of 1934, as amended, which are intended to be covered
by the safe harbors created thereby. Important factors which could
cause the Company's actual results to differ materially from those
projected in, or inferred by, forward looking statements include, but
are not limited to, the following: the decision of any of the Company's
key customers, including the U.S. government, to reduce or terminate
orders with the Company; cutbacks in defense spending by the U.S.
government; increased competition in the Company's markets; the
Company's ability to achieve and integrate acquisitions; and other risks
discussed in the Company's reports filed with the Securities and
Exchange Commission from time to time.
<TABLE>
- --------------------------------------------------------------------------------
ENGINEERED SUPPORT SYSTEMS, INC.
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
OCTOBER 31 OCTOBER 31
-------------------- --------------------
1999 1998 1999 1998
------- ------- -------- -------
<S> <C> <C> <C> <C>
Net Revenues $58,422 $32,796 $165,256 $96,973
======= ======= ======== =======
Operating Income $ 4,791 $ 3,504 $ 14,656 $10,242
======= ======= ======== =======
Net Income $ 2,261 $ 2,099 $ 7,309 $ 5,789
======= ======= ======== =======
Earnings per Share:
Basic $0.33 $0.43 $1.23 $1.21
======= ======= ======== =======
Diluted $0.32 $0.42 $1.20 $1.16
======= ======= ======== =======
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Funded Backlog of Defense
Orders at October 31 $ 277,156 $ 80,801
Options on Existing Defense
Contracts at October 31 850,479 319,575
---------- --------
$1,127,635 $400,376
========== ========
</TABLE>
<PAGE>
<PAGE>
<TABLE>
ENGINEERED SUPPORT SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXPECT PER SHARE AMOUNTS)
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
OCTOBER 31 OCTOBER 31
---------------------- -----------------------
1999 1998 1999 1998
------- ------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues $58,422 $32,796 $165,256 $96,973
Cost of revenues 48,100 24,998 133,377 74,343
------- ------- -------- -------
Gross profit 10,322 7,798 31,879 22,630
Selling, general and administrative
expense 5,531 4,294 17,223 12,388
------- ------- -------- -------
Income from operations 4,791 3,504 14,656 10,242
Interest income (expense) (1,022) (731) (2,600) (1,474)
Gain on sale of assets 5 728 124 879
------- ------- -------- -------
Income before income taxes 3,774 3,501 12,180 9,647
Income tax provision 1,513 1,402 4,871 3,858
------- ------- -------- -------
Net income $2,261 $2,099 $7,309 $5,789
======= ======= ======== =======
Earnings per share: <F1><F2>
Basic $.33 $.43 $1.23 $1.21
======= ======= ======== =======
Diluted $.32 $.42 $1.20 $1.16
======= ======= ======== =======
Average common shares outstanding: <F1><F2>
Basic 6,889 4,840 5,926 4,785
======= ======= ======== =======
Diluted 7,035 5,008 6,082 4,991
======= ======= ======== =======
- ------------------------------------------------------------------------------------------------------
<FN>
<F1>All share and per share amounts reflect a 3-for-2 stock split
effected June 26, 1998.
<F2>All 1999 share and per share amounts reflect the issuance on April
23, 1999 of an additional 2 million shares of common stock through a
public offering.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
ENGINEERED SUPPORT SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
OCTOBER 31, OCTOBER 31,
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 310 $ 5,774
Accounts receivable 23,577 14,036
Contracts in process and inventories 68,351 18,687
Deferred income taxes 3,516 113
Other current assets 4,397 1,429
-------- -------
Total current assets 100,151 40,039
Property, plant and equipment, net 60,015 25,065
Goodwill, net 74,354 25,836
Deferred income taxes 386 -
Other assets 4,092 1,220
-------- -------
Total Assets $238,998 $92,160
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 23,900 $ -
Current maturities of long-term debt 10,038 7,204
Accounts payable 27,478 7,285
Other current liabilities 24,430 7,341
-------- -------
Total current liabilities 85,846 21,830
Long-term debt 80,075 36,779
Other liabilities 9,077 -
Deferred income taxes - 2,660
ESOP guaranteed bank loan 578 725
Shareholders' Equity
Common stock, par value $.01 per share; 10,000
shares authorized; 7,504 and 5,491 shares issued 75 55
Additional paid-in capital 37,032 11,082
Retained earnings 30,781 23,683
-------- -------
67,888 34,820
Less ESOP guaranteed bank loan 578 725
Less treasury stock at cost, 615 and 639 shares 3,888 3,929
-------- -------
63,422 30,166
-------- -------
Total Liabilities and Shareholders' Equity $238,998 $92,160
======== =======
</TABLE>
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
ENGINEERED SUPPORT SYSTEMS, INC.
Date: December 13, 1999 BY: Gary C. Gerhardt
---------------------- ---------------------------------
Gary C. Gerhardt
Vice Chairman-Administration and
Chief Financial Officer
<PAGE>
<PAGE>
Item 7(c) (2) - Credit Agreement Dated as of September 30, 1999
among Engineered Support Systems, Inc., Bank
of America, National Association, As Agent and
as Swing Line Lender, and The Other Financial
Institutions Party Hereto.
<PAGE>
<PAGE>
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 30, 1999
AMONG
ENGINEERED SUPPORT SYSTEMS, INC.,
BANK OF AMERICA, NATIONAL ASSOCIATION,
AS AGENT
AND
AS SWING LINE LENDER,
BANK ONE, NA (MAIN OFFICE CHICAGO)
AND
MERCANTILE BANK NATIONAL ASSOCIATION,
CO-DOCUMENTATION AGENTS,
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
ARRANGED BY
BANC OF AMERICA SECURITIES LLC
<PAGE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS 1
Section 1.01 Certain Defined Terms 1
Section 1.02 Other Interpretive Provisions 29
Section 1.03 Accounting Principles 30
ARTICLE II THE CREDITS 30
Section 2.01 Amounts and Terms of Commitments 30
Section 2.02 Loan Accounts 31
Section 2.03 Procedure for Borrowing 31
Section 2.04 Conversion and Continuation Elections 32
Section 2.05 The Swing Line Loans 34
Section 2.06 Procedure for Swing Line Loans 34
Section 2.07 Voluntary Termination or Reduction of Revolving Loan Commitments 36
Section 2.08 Optional Prepayments 36
Section 2.09 Mandatory Prepayments of Loans 37
Section 2.10 Repayment 38
Section 2.11 Interest 39
Section 2.12 Fees 39
Section 2.13 Computation of Fees and Interest 40
Section 2.14 Payments by the Company 40
Section 2.15 Payments by the Lenders to the Agent 41
Section 2.16 Sharing of Payments, Etc 41
Section 2.17 Security and Subsidiary Guaranty 42
ARTICLE III THE LETTERS OF CREDIT 42
Section 3.01 The Letter of Credit Subfacility 42
Section 3.02 Issuance, Amendment and Renewal of Letters of Credit 43
Section 3.03 Risk Participations, Drawings and Reimbursements 45
Section 3.04 Repayment of Participations 47
Section 3.05 Role of the Issuer 47
Section 3.06 Obligations Absolute 48
Section 3.07 Cash Collateral Pledge 49
Section 3.08 Letter of Credit Fees 49
Section 3.09 Uniform Customs and Practice 50
ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY 50
Section 4.01 Taxes 50
Section 4.02 Illegality 51
Section 4.03 Increased Costs and Reduction of Return 52
Section 4.04 Funding Losses 52
Section 4.05 Inability to Determine Rates 53
Section 4.06 Certificates of Lenders 53
Section 4.07 Substitution of Banks 53
Section 4.08 Survival 53
i
<PAGE>
<PAGE>
ARTICLE V CONDITIONS PRECEDENT 54
Section 5.01 Conditions of Initial Credit Extensions 54
Section 5.02 Conditions to All Credit Extensions 59
ARTICLE VI REPRESENTATIONS AND WARRANTIES 59
Section 6.01 Corporate Existence and Power 59
Section 6.02 Corporate Authorization; No Contravention 60
Section 6.03 Governmental Authorization 60
Section 6.04 Binding Effect 60
Section 6.05 Litigation 60
Section 6.06 No Default 61
Section 6.07 ERISA Compliance 61
Section 6.08 Use of Proceeds; Margin Regulations 62
Section 6.09 Title to Properties 62
Section 6.10 Taxes 62
Section 6.11 Financial Condition 62
Section 6.12 Environmental Matters 63
Section 6.13 Collateral Documents 64
Section 6.14 Regulated Entities 64
Section 6.15 No Burdensome Restrictions 64
Section 6.16 Copyrights, Patents, Trademarks and Licenses, etc 64
Section 6.17 Capitalization; Subsidiaries 65
Section 6.18 Insurance 65
Section 6.19 Swap Obligations 65
Section 6.20 Acquisition Documents 65
Section 6.21 Solvency 65
Section 6.22 ESOP Subordination Provisions 65
Section 6.23 Year 2000 Compliance 65
Section 6.24 Full Disclosure 66
ARTICLE VII AFFIRMATIVE COVENANTS 66
Section 7.01 Financial Statements 66
Section 7.02 Certificates; Other Information 67
Section 7.03 Notices 67
Section 7.04 Preservation of Corporate Existence, Etc 69
Section 7.05 Maintenance of Property 69
Section 7.06 Insurance 69
Section 7.07 Payment of Obligations 70
Section 7.08 Compliance with Laws 70
Section 7.09 Compliance with ERISA 70
Section 7.10 Inspection of Property and Books and Records 70
Section 7.11 Environmental Laws 71
ii
<PAGE>
<PAGE>
Section 7.12 Use of Proceeds 71
Section 7.13 Further Assurances 71
Section 7.14 Additional Guaranties and Personal Property Pledge 72
Section 7.15 Additional Real Property 72
Section 7.16 Additional Pledge 72
Section 7.17 Year 2000 Compliance 72
Section 7.18 Government Contracts 73
Section 7.19 SEI Financial Statements 73
Section 7.20 Interest Rate Protection 73
ARTICLE VIII NEGATIVE COVENANTS 73
Section 8.01 Limitation on Liens 73
Section 8.02 Disposition of Assets 74
Section 8.03 Consolidations and Mergers 75
Section 8.04 Loans and Investments 76
Section 8.05 Limitation on Indebtedness 77
Section 8.06 Transactions with Affiliates 77
Section 8.07 Use of Proceeds 78
Section 8.08 Contingent Obligations 78
Section 8.09 Intentionally Omitted. 78
Section 8.10 Lease Obligations 78
Section 8.11 Restricted Payments 79
Section 8.12 ERISA 79
Section 8.13 Change in Business 80
Section 8.14 Accounting Changes 80
Section 8.15 Amendments to Charter and Agreements; Subordinated Indebtedness 80
Section 8.16 Net Worth 80
Section 8.17 Leverage Ratio 80
Section 8.18 Fixed Charge Coverage Ratio 80
Section 8.19 Capital Expenditures 81
Section 8.20 Restrictive Agreements 81
ARTICLE IX EVENTS OF DEFAULT 81
Section 9.01 Event of Default 81
Section 9.02 Remedies 84
Section 9.03 Rights Not Exclusive 85
ARTICLE X THE AGENT 85
Section 10.01 Appointment and Authorization; "Agent" 85
Section 10.02 Delegation of Duties 86
Section 10.03 Liability of Agent 86
Section 10.04 Reliance by Agent 86
Section 10.05 Notice of Default 87
Section 10.06 Credit Decision 87
iii
<PAGE>
<PAGE>
Section 10.07 Indemnification of Agent 88
Section 10.08 Agent in Individual Capacity 88
Section 10.09 Successor Agent 88
Section 10.10 Withholding Tax 89
Section 10.11 Collateral Matters 90
ARTICLE XI MISCELLANEOUS 91
Section 11.01 Amendments and Waivers 91
Section 11.02 Notices 92
Section 11.03 No Waiver; Cumulative Remedies 93
Section 11.04 Costs and Expenses 93
Section 11.05 Company Indemnification 93
Section 11.06 Marshalling; Payments Set Aside 95
Section 11.07 Successors and Assigns 95
Section 11.08 Assignments, Participations, etc 95
Section 11.09 Confidentiality 97
Section 11.10 Set-off 98
Section 11.11 Automatic Debits of Fees 98
Section 11.12 Notification of Addresses, Lending Offices, Etc 98
Section 11.13 Counterparts 98
Section 11.14 Severability 98
Section 11.15 No Third Parties Benefited 99
Section 11.16 Governing Law and Jurisdiction 99
Section 11.17 WAIVER OF JURY TRIAL 99
Section 11.18 Entire Agreement 100
Section 11.19 Collateral Protection Coverage 100
</TABLE>
iv
<PAGE>
<PAGE>
SCHEDULES
Schedule 1.01 Existing Letters of Credit
Schedule 2.01 Commitments and Pro Rata Shares
Schedule 6.05 Litigation
Schedule 6.07 ERISA
Schedule 6.11 Pro Forma
Schedule 6.12 Environmental Matters
Schedule 6.16 Copyrights, Patents, Trademarks
Schedule 6.17 Capitalization; Subsidiaries and Minority Interests
Schedule 6.18 Insurance Matters
Schedule 7.18 Government Contracts
Schedule 8.01 Permitted Liens
Schedule 8.04 Investments
Schedule 8.05 Permitted Indebtedness
Schedule 8.08 Contingent Obligations
Schedule 11.02 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 Assignment and Acceptance
Exhibit E-1 Form of Revolving Loan Note
Exhibit E-2 Form of Term Loan Note
Exhibit F Form of Swing Line Note
Exhibit G Form of Opinion of Company Counsel
Exhibit H Form of Borrowing Base Certificate
v
<PAGE>
<PAGE>
CREDIT AGREEMENT
----------------
This CREDIT AGREEMENT is entered into as of September , 1999,
---
among Engineered Support Systems, Inc., a Missouri corporation (the
"Company"), the several financial institutions from time to time party
-------
to this Agreement (collectively, the "Lenders"; individually, a
-------
"Lender"), and Bank of America, National Association, as Swing Line
------
Lender and as agent for the Lenders.
WHEREAS, the Lenders have agreed to make available to the Company
secured term loans and a secured revolving credit facility with a letter
of credit subfacility and a swing line subfacility 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
-----------
Section 1.01 Certain Defined Terms. The following terms have
---------------------
the following meanings:
"Account Debtor" means the party who is obligated on or
--------------
under an Account.
"Accounts" means all present and future rights of the
--------
Company or any Subsidiary to payment for goods sold or leased or
for services rendered, which are not evidenced by instruments or
chattel paper, and whether or not they have been earned by
performance.
"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 Documents" means the Stock Purchase Agreement
---------------------
and the other documents, certificates and agreements delivered in
connection with the SEI Acquisition.
"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.
<PAGE>
<PAGE>
"Agent" means BofA in its capacity as agent for the Lenders
-----
hereunder, and any successor agent arising under Section 10.09.
-------------
"Agent-Related Persons" means BofA and any successor agent
---------------------
arising under Section 10.09 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, agents and attorneys-in-fact of such Persons
and Affiliates.
"Agent's Payment Office" means the address for payments set
----------------------
forth on Schedule 11.02 or such other address as the Agent may
--------------
from time to time specify.
"Aggregate Commitment" means the sum of (a) the Aggregate
--------------------
Revolving Loan Commitment and (b) the Aggregate Term Loan
Commitment.
"Aggregate Revolving Loan Commitment" means the aggregate
-----------------------------------
Revolving Loan Commitments of the Lenders, equal to Fifty-Five
Million Dollars ($55,000,000).
"Aggregate Term Loan Commitment" means the aggregate Term
------------------------------
Loan Commitments of the Lenders, equal to Ninety Million Dollars
($90,000,000).
"Agreement" means this Credit Agreement.
---------
"Applicable Base Rate Margin" means, subject to the last
---------------------------
sentence of this definition, for any period, the applicable of the
following percentages in effect with respect to such period as the
Leverage Ratio of the Company shall fall within the indicated
ranges:
<TABLE>
<CAPTION>
APPLICABLE BASE RATE MARGIN
LEVERAGE RATIO (IN BASIS POINTS)
-------------- ---------------
Greater Than
Less Than or Equal to Revolving Loan Term Loan
--------- ----------- -------------- ---------
<S> <C> <C> <C> <C>
1. 1.5:1.0 -- 0 0
2. 2.0:1.0 1.5:1.0 0 0
3. 2.5:1.0 2.0:1.0 25 25
4. 3.0:1.0 2.5:1.0 50 50
5. 3.5:1.0 3.0:1.0 75 75
6. -- 3.5:1.0 100 100
</TABLE>
The Leverage Ratio shall be calculated by the Company as of the
end of each fiscal quarter, commencing with the fiscal quarter
ending October 31, 1999, and shall be reported to the Agent
pursuant to a Compliance Certificate executed by a Responsible
Officer of the Company and delivered pursuant to subsection 7.02(b)
------------------
hereof. The Applicable Base Rate Margin shall be adjusted, if
necessary, on the third Business Day after the delivery of such
certificate; provided, that if such certificate, together with
--------
the financial statements to which such certificate relates, is not
delivered to the Agent by the
2
<PAGE>
<PAGE>
fifth Business Day after the date on which the related financial
statements are due to be delivered to the Agent pursuant to
subsection 7.01(a) or (b), then, from such fifth Business Day
------------------ ---
until the third Business Day after delivery of such certificate,
the Applicable Base Rate Margin shall be equal to 100 basis points
for Revolving Loans and Term Loans. From the Closing Date until
adjusted as described above, the Applicable Base Rate Margin shall
be equal to 75 basis points for Revolving Loans and Term Loans.
"Applicable Commitment Fee Percentage" means, subject to the
------------------------------------
last sentence of this definition, for any period, the applicable
of the following percentages in effect with respect to such period
as the Leverage Ratio of the Company shall fall within the
indicated ranges:
<TABLE>
<CAPTION>
APPLICABLE COMMITMENT FEE
LEVERAGE RATIO PERCENTAGE (IN BASIS POINTS)
-------------- ----------------------------
Greater Than
Less Than or Equal to
--------- -----------
<S> <C> <C> <C>
1. 1.5:1.0 -- 30
2. 2.0:1.0 1.5:1.0 35
3. 2.5:1.0 2.0:1.0 40
4. 3.0:1.0 2.5:1.0 45
5. 3.5:1.0 3.0:1.0 50
6. -- 3.5:1.0 50
</TABLE>
The Leverage Ratio shall be calculated by the Company as of the
end of each fiscal quarter, commencing with the fiscal quarter
ending October 31, 1999, and shall be reported to the Agent
pursuant to a Compliance Certificate executed by a Responsible
Officer of the Company and delivered pursuant to subsection 7.02(b)
------------------
hereof. The Applicable Commitment Fee Percentage shall be
adjusted, if necessary, on the third Business Day after the
delivery of such certificate; provided, that if such certificate,
--------
together with the financial statements to which such certificate
relates, is not delivered to the Agent by thefifth Business Day
after the date on which the related financial statements are due
to be delivered to the Agent pursuant to subsection 7.01(a) or (b),
------------------ ---
then, from such fifth Business Day until the third Business Day after
delivery of such certificate, the Applicable Commitment Fee Percentage
shall be equal to 50 basis points. From the Closing Date until
adjusted as described above, the Applicable Commitment Fee Percentage
shall be equal to 50 basis points.
"Applicable Excess Cash Flow Percentage" means, for any
--------------------------------------
period, the applicable of the following percentages in effect with
respect to such period as the Leverage Ratio of the Company shall
fall within the indicated ranges:
3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
APPLICABLE EXCESS
LEVERAGE RATIO CASH FLOW PERCENTAGE
-------------- --------------------
Greater Than
Less Than or Equal to
--------- -----------
<S> <C> <C> <C>
1. 2.0:1.0 -- 0%
2. 2.75:1.0 2.0:1.0 50%
3. -- 2.75:1.0 75%
</TABLE>
The Leverage Ratio shall be calculated by the Company as of the
end of each fiscal quarter, commencing with the fiscal quarter
ending October 31, 1999, and shall be reported to the Agent
pursuant to a Compliance Certificate executed by a Responsible
Officer of the Company and delivered pursuant to subsection 7.02(b)
------------------
hereof. The Applicable Excess Cash Flow Prepayment Percentage shall
be adjusted, if necessary, on the third Business Day after the delivery
of such certificate.
"Applicable Offshore Rate Margin" means, subject to the last
-------------------------------
sentence of this definition, for any period, the applicable of the
following percentages in effect with respect to such period as the
Leverage Ratio of the Company shall fall within the indicated
ranges:
<TABLE>
<CAPTION>
APPLICABLE OFFSHORE RATE MARGIN
LEVERAGE RATIO (IN BASIS POINTS)
-------------- ---------------
Greater Than
Less Than or Equal to Revolving Loan Term Loan
--------- ----------- -------------- ---------
<S> <C> <C> <C> <C>
1. 1.5:1.0 -- 100 100
2. 2.0:1.0 1.5:1.0 125 125
3. 2.5:1.0 2.0:1.0 150 150
4. 3.0:1.0 2.5:1.0 175 175
5. 3.5:1.0 3.0:1.0 200 200
6. -- 3.5:1.0 225 225
</TABLE>
The Leverage Ratio shall be calculated by the Company as of
the end of each fiscal quarter, commencing with the fiscal quarter
ending October 31, 1999, and shall be reported to the Agent
pursuant to a Compliance Certificate executed by a Responsible
Officer of the Company and delivered pursuant to subsection 7.02(b)
------------------
hereof. The Applicable Offshore Rate Margin shall be adjusted, if
necessary, on the third Business Day after the delivery of such
certificate, with such adjustment to apply to all Interest Periods
then outstanding and beginning thereafter until the next adjustment
date; provided, that if such certificate, together with the financial
--------
statements to which such certificate relates, is not delivered to the
Agent by the fifth Business Day after the date on which the related
financial statements are due to be delivered to the Agent pursuant to
subsection 7.01(a) or (b), then, from such fifth Business Day until the
------------------ ---
third Business Day after delivery of such certificate, the Applicable
Offshore Rate Margin shall be equal to 225 basis points for Revolving
Loans and Term Loans. From the Closing Date until
4
<PAGE>
<PAGE>
adjusted as described above, the Applicable Offshore Rate Margin
shall be equal to 200 basis points for Revolving Loans and Term
Loans.
"Approved Fund" means, with respect to any Lender that is a
-------------
fund that invests in bank loans, any other fund that invests in
bank loans and is advised or managed by the same investment
advisor as such Lender or by an Affiliate of such investment
advisor.
"Arranger" means Banc of America Securities LLC, a Delaware
--------
limited liability company.
"Asset Disposition" has the meaning specified in Section 8.02.
----------------- ------------
"Assignee" has the meaning specified in subsection 11.08(a).
-------- -------------------
"Attorney Costs" means and includes all reasonable fees and
--------------
disbursements of any law firm or other external counsel.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of
---------------
1978 (11 U.S.C. Section 101, et seq.).
-------
"Base Rate" means, for any day, the higher of: (a) 0.50%
---------
per annum above the latest Federal Funds Rate; and (b) the rate of
interest in effect for such day as publicly announced from time to
time by BofA in San Francisco, California, as its "prime rate."
(The "prime rate" is a rate set by BofA based upon various factors
including BofA's costs and desired return, general economic
conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above, or below such
announced rate.) Any change in the reference rate announced by
BofA shall take effect at the opening of business on the day
specified in the public announcement of such change.
"Base Rate Loan" means a Loan or an L/C Advance that bears
--------------
interest based on the Base Rate.
"basis point" means one one-hundredth of one percent.
-----------
"BofA" means Bank of America, National Association, a
----
national banking association.
"Borrowing" means a borrowing hereunder consisting of
---------
Revolving Loans or Term Loans of the same Type made to the Company
on the same day by the Lenders under Article II, and, in the
----------
case of Offshore Rate Loans, having the same Interest Period. The
making of a Swing Line Loan shall not constitute a Borrowing.
"Borrowing Base" shall mean at any time an amount equal to
--------------
the sum at such time of (i) Receivables Availability and (ii)
Inventory Availability.
5
<PAGE>
<PAGE>
"Borrowing Date" means any date on which a Borrowing
--------------
occurs under Section 2.03.
------------
"Business Day" means any day other than a Saturday, Sunday
------------
or other day on which commercial banks in New York City, Chicago,
St. Louis or San Francisco 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.
"Capital Expenditures" means, for any period and with
--------------------
respect to any Person, the aggregate of all expenditures by such
Person and its Subsidiaries for the acquisition or leasing of
fixed or capital assets or additions to equipment (including
replacements, capitalized repairs and improvements during such
period) which should be capitalized under GAAP on a consolidated
balance sheet of such Person and its Subsidiaries.
"Capital Stock" means (a) in the case of a corporation,
-------------
corporate stock, (b) in the case of an association or business
entity, any and all shares, interests, participations, rights or
other equivalents (however designated) of corporate stock, (c) in
the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited)
and (d) any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Collateralize" means to pledge and deposit with or
------------------
deliver to the Agent, for the benefit of the Agent, the Issuers
and the Lenders, as additional collateral for the L/C Obligations,
cash or deposit account balances pursuant to documentation in form
and substance reasonably satisfactory to the Agent and the Issuers
(which documents are hereby consented to by the Lenders).
Derivatives of such term shall have corresponding meanings. The
Company hereby grants the Agent, for the benefit of the Agent, the
Issuers and the Lenders, 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.
"CERCLA" has the meaning specified in the definition of
------
"Environmental Laws."
"Change of Control" means the occurrence of any of the
-----------------
following: (a) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one
or a series of related transactions, of all or substantially all
of the assets of the Company and its Subsidiaries taken as a whole
to any "person" (as such term is used in Section 13(d)(3) of the
Exchange Act); (b) the adoption of a plan relating to the
6
<PAGE>
<PAGE>
liquidation or dissolution of the Company; (c) the consummation of
any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as
defined above) becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act,
except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition),
directly or indirectly of more than 25% of the Voting Stock of the
Company (measured by voting power rather than number of shares);
(d) the Company consolidates with, or merges with or into, any
Person, or any Person consolidates with, or merges with or into,
the Company in any such event pursuant to a transaction in which
any of the outstanding Voting Stock of the Company is converted
into or exchanged for cash, securities or other property, other
than any such transaction where the Voting Stock of the Company
outstanding immediately prior to such transaction is converted
into or exchanged for Voting Stock of the surviving or transferee
Person constituting a majority of the outstanding shares of such
Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance); or (e) during any period of
25 consecutive calendar months, commencing on the date of this
Agreement, the ceasing of those individuals (the "Continuing
----------
Directors") who (i) were directors of the Company on the first
---------
day of each such period or (ii) subsequently became directors of
the Company and whose actual election or initial nomination for
election subsequent to that date was approved by a majority of
the Continuing Directors then on the board of directors of the
Company, to constitute a majority of the board of directors of
the Company.
"Closing Date" means the date on which all conditions
------------
precedent set forth in Section 5.01 are satisfied or waived by
------------
all Lenders (or, in the case of subsection 5.01(e), waived by
------------------
the Person entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and
----
regulations promulgated thereunder.
"Collateral" means all property and interests in property
----------
and proceeds thereof now owned or hereafter acquired by the
Company or any Guarantor and their respective Subsidiaries in or
upon which a Lien now or hereafter exists in favor of the Lenders,
or the Agent on behalf of the Lenders, whether under this
Agreement, under the Collateral Documents or under any other
documents executed by any such Person and delivered to the Agent
or the Lenders.
"Collateral Documents" means, collectively, (a) the Security
--------------------
Agreement, the Mortgages, the Pledge Agreement and all other
security agreements, mortgages, deeds of trust, patent and
trademark assignments, lease assignments, guarantees and other
similar agreements between the Company or any Subsidiary or any
Guarantor and the Lenders or the Agent for the benefit of the
Lenders now or hereafter delivered to the Lenders or the Agent
pursuant to or in connection with the transactions contemplated
hereby, and all financing statements (or comparable documents now
or hereafter filed in accordance with
7
<PAGE>
<PAGE>
the Uniform Commercial Code or comparable law) against the Company
or any Subsidiary or any Guarantor as debtor in favor of the
Lenders or the Agent for the benefit of the Lenders as secured
party, and (b) any amendments, supplements, modifications,
renewals, replacements, consolidations, substitutions and
extensions of any of the foregoing.
"Commitment", as to each Lender, means (a) such Lender's
----------
Term Commitment, plus (b) such Lender's Revolving Loan Commitment.
"Company" has the meaning specified in the introductory
-------
clause hereto.
"Compliance Certificate" means a certificate substantially
----------------------
in the form of Exhibit C.
---------
"Computation Date" has the meaning specified in subsection 3.10.
---------------- ---------------
"Contingent Obligation" means, as to any Person, any direct
---------------------
or indirect liability of that Person, whether or not contingent,
with or without recourse, (a) with respect to any Indebtedness,
lease, dividend, letter of credit or other obligation (the
"primary obligations") of another Person (the "primary obligor"),
------------------- ---------------
including any obligation of that Person (i) to purchase, repurchase or
otherwise acquire such primary obligations or any security therefor,
(ii) to advance or provide funds for the payment or discharge of any
such primary obligation, or to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or solvency
or any balance sheet item, level of income or financial condition of the
primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (iv) otherwise to assure or
hold harmless the holder of any such primary obligation against
loss in respect thereof (each, a "Guaranty Obligation"); (b)
-------------------
with respect to any Surety Instrument issued for the account of
that Person or as to which that Person is otherwise liable for
reimbursement of drawings or payments; (c) to purchase any
materials, supplies or other property from, or to obtain the
services of, another Person if the relevant contract or other
related document or obligation requires that payment for such
materials, supplies or other property, or for such services, shall
be made regardless of whether delivery of such materials, supplies
or other property is ever made or tendered, or such services are
ever performed or tendered; or (d) in respect of any Swap
Contract. The amount of any Contingent Obligation, (w) in the
case of Guaranty Obligations, shall be deemed equal to the lesser
of (i) 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 (ii) the stated amount of the
guaranty, (x) in the case of Contingent Obligations in respect of
Swap Contracts, shall be deemed equal to the aggregate Swap
Termination Value of such Swap Contracts, (y) in the case of
Contingent Obligations in respect of Surety Instruments other than
Non-Surety L/C's, shall be deemed equal to the
8
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<PAGE>
probable amount of the expected liability thereunder, and (z) in
the case of Contingent Obligations in respect of Non-Surety L/C's,
shall be deemed equal to (i) the face amount of outstanding
Non-Surety L/C's which are not Letters of Credit and (ii) the
outstanding amount of L/C Obligations in respect of Non-Surety
L/C's which are Letters of Credit.
"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 2.04, 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
----------------
Loans hereunder, and (b) the Issuance of any Letters of Credit
hereunder.
"Current Assets" means all assets of the Company, on a
--------------
consolidated basis, which should, in accordance with GAAP, be
classified as current assets.
"Current Liabilities" means all liabilities of the Company,
-------------------
on a consolidated basis, which should, in accordance with GAAP, be
classified as current liabilities, other than current maturities
in respect of the Loans.
"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.
"Domestic Subsidiary" means a Subsidiary organized under the
-------------------
laws of the United States or any political subdivision or any
agency, department or instrumentality thereof.
"EBITDA" means, for any period, for the Company and its
------
Subsidiaries on a consolidated basis, determined in accordance
with GAAP, the sum of (a) the net income (or net loss) for such
period, plus (b) all amounts treated as expenses for
----
depreciation and interest and the amortization of intangibles of
any kind to the extent included in the determination of such net
income (or loss), plus (c) all accrued taxes on or measured by
----
income to the extent included in the determination of such net
income (or net loss), provided, however, that net income (or
-------- -------
net loss) shall be computed without giving effect to extraordinary
losses or extraordinary gains or gains or losses arising from the
sale of discontinued operations provided, further, that for
-------- -------
any measurement which relates back to a period prior to the date
hereof, EBITDA shall be determined by adding (x) the EBITDA
9
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<PAGE>
of the Company and its Subsidiaries for such period plus (y) the
----
EBITDA of SEI and its Subsidiaries for such period, plus (d) an
----
amount equal to $3,500,000 divided by 12 multiplied by the
---------- -------------
number of months of EBITDA of SEI and its Subsidiaries included in
the measurement of pre-closing EBITDA.
"Effective Amount" means (a) with respect to any Revolving
----------------
Loans, Swing Line Loans and Term Loans on any date, the aggregate
outstanding principal amount thereof after giving effect to any
Borrowings and prepayments or repayments of Revolving Loans, Swing
Line Loans and Term Loans occurring on such date; and (b) 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 any
reductions in the maximum amount available for drawing under
Letters of Credit taking effect on such date. For purposes of
subsection 2.07(a) the Effective Amount shall be determined
------------------
without giving effect to any mandatory prepayments to be made
under subsection 2.07(b).
------------------
"Eligible Accounts" means all Accounts of the Company and
-----------------
its Subsidiaries, provided that the following Accounts are not
Eligible Accounts: (i) Accounts which remain unpaid ninety (90)
days after the original date of the applicable invoice; (ii) all
Accounts owing by a single Account Debtor, including a currently
scheduled Account, if twenty-five percent (25%) or more of the
balance owing by such Account Debtor to the Company or any
Subsidiary remains unpaid ninety (90) days after the original date
of the applicable invoice or invoices; (iii) Accounts with respect
to which the Account Debtor is a director, officer, employee,
Subsidiary or Affiliate of the Company or any Subsidiary; (iv)
Accounts with respect to which the Account Debtor is the United
States of America or any department, agency or instrumentality
thereof unless such Account has been assigned to the Agent in
accordance with the terms and conditions of the Assignment of
Claims Act and the Collateral Documents, but only to the extent
that a Notice of Assignment with respect to such Account has been
executed by each government officer and other Person required
under the Assignment of Claims Act and such a copy of Notice of
Assignment has been delivered to Agent provided, however, that
-------- -------
no Account existing on or created within the 30 days following the
Closing Date shall be deemed ineligible pursuant to this
subsection (iv) unless the provisions of this subsection (iv) have
not been met with respect to such Account on or before the 90th
day following the Closing Date; (v) Accounts with respect to which
the Account Debtor is not a resident of the United States or
Canada, unless the Account Debtor has supplied the Company or
applicable Subsidiary with an irrevocable letter of credit, issued
by a financial institution satisfactory to Agent, sufficient to
cover such Account in form and substance satisfactory to Agent;
(vi) Accounts to the extent to which the Account Debtor has
asserted a counterclaim or has a right of setoff; (vii) Accounts
for which the prospect of payment or performance by the Account
Debtor is or will be impaired as determined by Agent in the
exercise of its reasonable discretion and in accordance with
Agent's customary business
10
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<PAGE>
practices; (viii) Accounts with respect to which Agent does not
have a first and valid fully perfected security interest; (ix)
Accounts with respect to which the Account Debtor is the subject
of bankruptcy or a similar insolvency proceeding or has made an
assignment for the benefit of creditors or whose assets have been
conveyed to a receiver or trustee; (x) Accounts with respect to
which the Account Debtor's obligation to pay the Account is
conditional upon the Account Debtor's approval or is otherwise
subject to any repurchase obligation or return right, as with
sales made on a bill-and-hold, guaranteed sale, sale-and-return,
sale on approval (except with respect to Accounts in connection
with which Account Debtors are entitled to return Inventory on the
basis of the quality of such Inventory) or consignment basis; (xi)
Accounts to the extent that the Account Debtor's indebtedness to
the Company or applicable Subsidiary exceeds a credit limit
determined by Agent in the exercise of reasonable discretion and
in accordance with Agent's customary business practices; and (xii)
Accounts with respect to which the Account Debtor is located in
any State requiring qualification to do business or the filing of
a Notice of Business Activities Report or similar report in order
to permit the Company or applicable Subsidiary to seek judicial
enforcement in such State of payment of any such Account, unless
the Company or applicable Subsidiary has duly qualified to do
business as a foreign corporation in such State or filed a Notice
of Business Activities Report with the appropriate office in such
State for the then current year.
"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;
(c) a Person that is primarily engaged in the business of
commercial banking and that is (i) a Subsidiary of a Lender, (ii)
a Subsidiary of a Person of which a Lender is a Subsidiary, or
(iii) a Person of which a Lender is a Subsidiary; (d) as to the
Term Loans, (i) an "accredited investor", as such term is defined
in Rule 501(a) of Regulation D under the Securities Act of 1933,
as amended (other than the Company or an Affiliate of the Company)
or (ii) a finance company, insurance company or other financial
institution or fund (whether a corporation, partnership, trust or
other entity) that is primarily engaged in the business of making,
purchasing or otherwise investing in commercial loans; and (e) any
other entity approved by the Company and the Agent.
"Eligible Inventory" means Inventory of the Company and its
------------------
Subsidiaries held for sale in the ordinary course of business (but
not including packaging or shipping materials or maintenance
supplies) which is deemed by the Agent in the exercise of its
reasonable discretion to be eligible for inclusion in the
calculation of the Borrowing Base, provided that the following
Inventory is not Eligible Inventory: (i) Inventory which is
obsolete, not in good condition, or not currently usable or
currently salable in the ordinary course of the Company's or a
Subsidiary's business; (ii) Inventory consisting of
11
<PAGE>
<PAGE>
supplies; (iii) Inventory which is not located in the United
States on premises owned or leased by the Company or any
Subsidiary; (iv) Inventory located on premises leased by the
Company or any Subsidiary to the extent that the lessor of such
premises has not executed a landlord waiver and consent in form
and substance satisfactory to Agent; and (v) Inventory with
respect to which Agent does not have a first priority, valid and
perfected security interest. The Company may assume that any
Inventory not disqualified under any of clauses (i) through (v) is
Eligible Inventory unless notified to the contrary by Agent.
"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 or threat to
public health, personal injury (including sickness, disease or
death), property damage, natural resources damage, or otherwise
alleging liability or responsibility for damages (punitive or
otherwise), investigation, cleanup, removal, remedial or response
costs, restitution, civil or criminal penalties, injunctive
relief, or other type of relief, resulting from or based upon the
presence, placements, discharge, emission or release (including
intentional and unintentional, negligent and non-negligent, sudden
or non-sudden, accidental or non-accidental, placements, spills,
leaks, discharges, emissions or releases) of any Hazardous
Material at, in, or from any property, whether or not owned by the
Company or any Subsidiary or taken as collateral, or in connection
with any operations of the Company.
"Environmental Laws" means all federal, state or local laws,
------------------
statutes, common law duties, rules, regulations, ordinances and
codes, together with all administrative orders, directed duties,
requests, licenses, authorizations and permits of, and agreements
with, any Governmental Authorities, in each case relating to
environmental, health, safety and land use matters, including
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), the Clean Air
------
Act, the Federal Water Pollution Control Act of 1972, the Solid
Waste Disposal Act, the Federal Resource Conservation and Recovery
Act, the Toxic Substances Control Act, and the Emergency Planning
and Community Right-to-Know Act.
"Environmental Permits" has the meaning specified in
---------------------
subsection 6.12(b).
------------------
"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
12
<PAGE>
<PAGE>
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.
"ESOP Documents" means the ESOP Loan Agreement, any notes,
--------------
collateral documents, subordination or intercreditor documents
and all other documents delivered to the ESOP Lender in connection
with the ESOP Loan Agreement.
"ESOP Lender" means the financial institution from time to
-----------
time acting as lender under the ESOP Loan Agreement.
"ESOP Loan" means the ESOP Loan as defined in the ESOP Loan
---------
Agreement.
"ESOP Loan Agreement" means the Loan Agreement dated August
-------------------
20, 1993 among the Company, certain Subsidiaries of the Company,
The Boatmen's National Bank of St. Louis, and Capital Bank and
Trust Company, trustee of the Engineered Air Systems, Inc.
Employee Stock Ownership Trust, as amended thereafter from time to
time.
"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 9.01.
------------
"Event of Loss" means, with respect to any property, any of
-------------
the following: (a) any loss, destruction or damage of such
property; (b) any institution of any proceedings for the
condemnation or seizure of such property or for the exercise of
any right of eminent domain; or (c) any actual condemnation,
seizure or taking, by exercise of the power of eminent domain or
otherwise, of such property, or confiscation of such property or
the requisition of the use of such property.
"Excess Cash Flow" means for any fiscal year (a) EBITDA of
----------------
the Company and its Subsidiaries for such fiscal year, less (b)
----
the sum of (i) Capital Expenditures actually made by the Company
and its Subsidiaries in such fiscal year, but only to the extent
permitted by Section 8.19, plus (ii) scheduled principal
------------ ----
payments to the Lenders in such
13
<PAGE>
<PAGE>
fiscal year in respect of the Term Loan and in respect of the
Revolving Loan on the Revolving Termination Date, plus (iii)
----
cash interest paid in such fiscal year by the Company or any
Subsidiary, plus (iv) cash income taxes paid in such fiscal year
----
by the Company or any Subsidiary, plus (v) dividends paid by the
----
Company in such fiscal year in accordance with the terms of this
Agreement, plus (vi) voluntary principal payments to the Lenders
----
in such fiscal year in respect of the Term Loan.
"Exchange Act" means the Securities Exchange Act of 1934 and
------------
the regulations promulgated 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. (Central time) on that day by each of three
leading brokers of Federal funds transactions in Chicago selected
by the Agent.
"Fee Letter" has the meaning specified in subsection 2.10(a).
---------- ------------------
"Fixed Charge Coverage Ratio" means, as of any date of
---------------------------
determination, the ratio of (a) EBITDA for the period of four
fiscal quarters ending on such date to (b) Fixed Charges for the
period of four fiscal quarters ending on such date.
"Fixed Charges" means, with respect to the Company and its
-------------
Subsidiaries on a consolidated basis, as of any date of
determination, (a) interest expenses paid or accrued on
outstanding Indebtedness for the period of four fiscal quarters
ending on the date of determination, plus (b) principal payments
on Indebtedness required to be made in such period, provided,
--------
that for the purposes of all measurements through September 30,
2000, the amount determined by reference to clauses (a) through
(b) shall be calculated by aggregating interest expenses and
required principal payments for the period from September 30, 1999
through the date of determination, dividing such amount by the
number of months in such period and multiplying such result by 12.
"FRB" means the Board of Governors of the Federal Reserve
---
System, and any Governmental Authority succeeding to any of its
principal functions.
"Funded Indebtedness" of any Person means, without
-------------------
duplication, (a) all Indebtedness of such Person other than
Indebtedness of the types referred to in clauses (c), (f), (h) and
(i) of the definition of "Indebtedness", (b) all Contingent
Obligations of
14
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such Person with respect to Indebtedness of the type referred to
in clause (a) above of another Person and (c) Indebtedness of the
type referred to in clause (a) above of any partnership or
unincorporated joint venture for which such Person is legally
obligated or has a reasonable expectation of being liable.
"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 4.01.
------------
"GAAP" means generally accepted accounting principles set forth
----
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting profession),
which are applicable to the circumstances as of the date of
determination.
"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.
"Government Contract" means a contract with any United
-------------------
States Governmental Authority and pursuant to which the Company or
any of its Subsidiaries will be supplying services or goods which
are included in Inventory or Accounts of the Company or any of its
Subsidiaries.
"Government Subcontract" means each contract of the Company
----------------------
Company or any of its Subsidiaries with a Person (other than the Company
or any of its Subsidiaries) for the supply of goods or services to
such Person pursuant to a Government Contract between such Person
and a United States Governmental Authority.
"Guarantors" means each of the Subsidiaries of the Company
----------
from time to time party to the Subsidiary Guaranty.
"Guaranty Obligation" has the meaning specified in the
-------------------
definition of "Contingent Obligation."
"Hazardous Materials" means all those substances that are
-------------------
regulated by, or which may form the basis of liability or a
standard of conduct under, any Environmental Law, including any
substance identified under any Environmental Law as a pollutant,
contaminant, hazardous waste, hazardous constituent, special
waste, hazardous substance,
15
<PAGE>
<PAGE>
hazardous material, or toxic substance, or petroleum or petroleum-
derived substance or waste.
"Honor Date" has the meaning specified in subsection 3.03(b).
---------- ------------------
"Indebtedness" of any Person means, without duplication, (a)
------------
all indebtedness for borrowed money; (b) all obligations issued,
undertaken or assumed as the deferred purchase price of property
or services (other than trade payables entered into in the
ordinary course of business on ordinary terms); (c) all Contingent
Obligations with respect to Surety Instruments; (d) all
obligations evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses;
(e) all indebtedness created or arising under any conditional sale
or other title retention agreement, or incurred as financing, in
either case with respect to property acquired by the Person (even
though the rights and remedies of the seller or bank under such
agreement in the event of default are limited to repossession or
sale of such property); (f) all obligations with respect to
capital leases; (g) all indebtedness referred to in clauses (a)
through (f) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including accounts and
contract rights) owned by such Person, even though such Person has
not assumed or become liable for the payment of such Indebtedness;
(h) all preferred Capital Stock issued by such Person and required
by the terms thereof to be redeemed, or for which mandatory
sinking fund payments are due, by a fixed date; and (i) all
Guaranty Obligations in respect of indebtedness or obligations of
others of the kinds referred to in clauses (a) through (h) above.
For all purposes of this Agreement, the Indebtedness of any Person
shall include all recourse Indebtedness of any partnership or
joint venture in which such Person is a general partner or a joint
venturer.
"Indemnified Liabilities" has the meaning specified in
-----------------------
Section 11.05.
-------------
"Indemnified Person" has the meaning specified in Section 11.05.
------------------ -------------
"Independent Auditor" has the meaning specified in
-------------------
subsection 7.01(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; in each case, undertaken under U.S. Federal, state or
foreign law, including the Bankruptcy Code.
"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
quarter; provided, however, that if any Interest Period for an
-------- -------
16
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<PAGE>
Offshore Rate Loan exceeds three months, the date that falls three
months after the beginning of such Interest Period and after each
Interest Payment Date thereafter is also an Interest Payment Date.
"Interest Period" means, as to any Offshore Rate Loan, the
---------------
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into
or continued as an Offshore Rate Loan, and ending on the date one,
two, three or six months thereafter as selected by the Company in
its Notice of Borrowing or Notice of Conversion/Continuation;
provided that:
--------
(a) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall
be extended to the following Business Day unless the result
of such extension would be to carry such Interest Period
into another calendar month, in which event such Interest
Period shall end on the preceding Business Day;
(b) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the
last Business Day of the calendar month at the end of such
Interest Period;
(c) no Interest Period for the Term Loan shall extend
beyond the maturity date of the Term Loan and no Interest
Period for any Revolving Loan shall extend beyond the date
set forth in clause (a) of the definition of Revolving
Termination Date; and
(d) no Interest Period applicable to a Term Loan or
portion thereof shall extend beyond any date upon which is
due any scheduled principal payment in respect of the Term
Loans unless the aggregate principal amount of Term Loans
represented by Base Rate Loans, or by Offshore Rate Loans
having Interest Periods that will expire on or before such
date, equals or exceeds the amount of such principal
payment.
"Inventory Availability" shall mean, at any time, an amount
----------------------
equal to fifty percent (50%) of the difference between (i) the
Company's and each Subsidiary's Eligible Inventory valued at the
lower of cost determined on a FIFO basis or market value, less
such reserves as Agent in its sole but reasonable discretion
elects to establish and (ii) the amount of unapplied progress
payments received from the U.S. Government for goods sold to the
U.S. government. Agent will notify the Company in writing of any
reserves it elects to establish from time to time.
"Investments" has the meaning specified in Section 8.04.
----------- ------------
17
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<PAGE>
"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 3.01(a).
------------- ------------------
"Issue" means, with respect to any Letter of Credit, 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.
------- --------
"Issuer" means, in respect of each Letter of Credit, BofA or
------
such other Revolving Lender selected by the Company which has
agreed to act as issuer of such Letter of Credit hereunder.
"Joint Venture" means a single-purpose corporation,
-------------
partnership, limited liability company, joint venture or other
similar legal arrangement (whether created by contract or
conducted through a separate legal entity) now or hereafter formed
by the Company or any of its Subsidiaries with another Person in
order to conduct a common venture or enterprise with such Person.
"L/C Advance" means each Revolving Lender'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 applicable Issuer,
as such Issuer 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 applicable Issuer, as such Issuer shall
request.
"L/C Borrowing" means an extension of credit resulting from
-------------
a drawing under any Letter of Credit which shall not have been
reimbursed on the date when made nor converted into a Borrowing of
Revolving Loans under subsection 3.03(c).
------------------
"L/C Commitment" means the commitment of the Issuers to
--------------
Issue, and the commitment of the Revolving Lenders severally to
participate in, Letters of Credit from time to time Issued or
outstanding under Article III, in an aggregate amount not to
-----------
exceed on any date the amount of $7,500,000, as the same may be
reduced as a result of a reduction in the L/C Commitment pursuant
to Section 2.07; provided that the L/C Commitment is a part of
------------ --------
the Aggregate Revolving Credit 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 then
outstanding, plus (b) the amount of all unreimbursed drawings
under all Letters of Credit, including all outstanding L/C
Borrowings.
18
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<PAGE>
"L/C-Related Documents" means the Letters of Credit, the L/C
---------------------
Applications, the L/C Amendment Applications and any other
document relating to any Letter of Credit, including any standard
form documents used by any Issuer for letter of credit issuances.
"Lender" has the meaning specified in the introductory
------
clause hereto. References to the "Lenders" shall include BofA,
including in its capacity as an Issuer and as Swing Line Lender;
for purposes of clarification only, to the extent that BofA may
have any rights or obligations in addition to those of the Lenders
due to its status as an Issuer or as Swing Line Lender, its status
as such will be specifically referenced.
"Lending Office" means, as to any Lender, the office or
--------------
offices of such Lender specified as its "Lending Office" or
"Domestic Lending Office" or "Offshore Lending Office", as the
case may be, on Schedule 11.02, or such other office or offices
--------------
as such Lender may from time to time notify the Company and the
Agent.
"Letters of Credit" means any letters of credit (whether
-----------------
standby letters of credit or commercial documentary letters of
credit) Issued by the Issuers pursuant to Article III, including
-----------
without limitation the existing letters of credit set forth on
Schedule 1.01 hereto.
-------------
"Leverage Ratio" means, as of any date of determination, the
--------------
ratio of (a) all Funded Indebtedness of the Company and its
Subsidiaries determined on a consolidated basis as of such date,
to (b) EBITDA for the period of four fiscal quarters ending on
such date.
"Lien" means any security interest, mortgage, deed of trust,
----
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or similar interest of any
kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional
sale or other title retention agreement, the interest of a lessor
under a capital lease, any financing lease having substantially
the same economic effect as any of the foregoing, or the filing of
any financing statement naming the owner of the asset to which
such lien relates as debtor, under the Uniform Commercial Code or
any comparable law) and any contingent or other agreement to
provide any of the foregoing, but not including the interest of a
lessor under an operating lease.
"Loan" means an extension of credit by a Lender to the
----
Company under Article II or Article III in the form of a
---------- -----------
Revolving Loan, Term Loan, Swing Line Loan or L/C Advance.
"Loan Documents" means this Agreement, any Notes, the Fee
--------------
Letters, the L/C-Related Documents, the Collateral Documents, the
Rate Swap Documents and all other documents delivered to the Agent
or any Lender in connection herewith.
19
<PAGE>
<PAGE>
"Margin Stock" means "margin stock" as such term is defined
------------
in Regulation T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse
-----------------------
change in, or a material adverse effect upon, the operations,
business, properties, condition (financial or otherwise) or
prospects of the Company or 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, at any time, any Subsidiary
-------------------
having at such time total assets in excess of $1,000,000, based to
the extent applicable, upon the Company's most recent annual or
quarterly financial statements delivered to the Agent pursuant to
Section 7.01.
------------
"Mortgage" means any deed of trust, mortgage, leasehold
--------
mortgage, assignment of rents or other document creating a Lien on
real property or any interest in real property.
"Mortgaged Property" means all property subject to a Lien
------------------
pursuant to a Mortgage.
"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.
"Net Borrowing Availability" means (a) the lesser of (i) the
--------------------------
Aggregate Revolving Loan Commitment or (ii) the Borrowing Base
less (b) the outstanding principal amount of all Revolving Loans
plus Swing Line Loans outstanding plus the Effective Amount of all
L/C Obligations.
"Net Proceeds" means (a) with respect to any Asset
------------
Disposition, the sum of cash or readily marketable cash
equivalents received (including by way of a cash generating sale
or discounting of a note or receivable, but excluding any other
consideration received in the form of assumption by the acquiring
Person of debt or other obligations relating to the properties or
assets so disposed of or received in any other non-cash form)
therefrom, whether at the time of such disposition or subsequent
thereto, or (b) with respect to any sale or issuance of any debt
or equity securities of the Company or any Subsidiary, cash or
readily marketable cash equivalents received (but excluding any
other non-cash form) therefrom, whether at the time of such
disposition, sale or issuance or subsequent thereto, net, in
either case, of all legal, title and recording tax expenses,
commissions and other fees and all costs and expenses incurred and
all federal, state, local and other taxes required to be paid or
accrued as a liability as a consequence of such transactions and,
in
20
<PAGE>
<PAGE>
the case of an Asset Disposition, net of all payments made by the
Company or any of its Subsidiaries on any Indebtedness which is
secured by such assets pursuant to a Permitted Lien upon or with
respect to such assets or which must by the terms of such Lien, or
in order to obtain a necessary consent to such Asset Disposition,
or by applicable law be repaid out of the proceeds from such Asset
Disposition and net of all costs and expenses in readying for sale
the disposal of assets or properties.
"Net Worth" means the shareholders' equity or net worth of
---------
the Company and its Subsidiaries as determined in accordance with
GAAP.
"Non-Surety L/C's" means letters of credit which are not
----------------
Surety L/C's.
"Note" means a promissory note executed by the Company in
----
favor of a Lender pursuant to subsection 2.02(b), in
------------------
substantially the form of Exhibit E.
---------
"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 Lender, 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 = LIBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for
-----------------------------
any Interest Period the maximum reserve percentage
(expressed as a decimal, rounded upward to the next 1/100th
of 1%) in effect on such day (whether or not applicable to
any Lender) 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
"LIBOR" means the rate of interest per annum
-----
determined by the Agent to be the rate of interest at which
dollar deposits in the approximate amount of the
21
<PAGE>
<PAGE>
amount of the Loan to be made or continued as, or converted
into, an Offshore Rate Loan by BofA and having a maturity
comparable to such Interest Period are offered based on
information presented to the Telerate Screen as of 11:00
a.m. (London time) two (2) Business Days prior to the
commencement of such Interest Period; provided that if at
--------
least two such offered rates appear on the Telerate Screen
(page 3750 or any successor screen) in respect of such
Interest Period, the arithmetic mean of all such rates (as
determined by the Agent) will be the rate used; provided
--------
further, that if the Telerate System ceases to provide
-------
LIBOR quotations, such rate shall be 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 to major banks in the London interbank market at
their request at approximately 11:00 a.m. (London 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 11.08(d).
----------- -------------------
"PBGC" means the Pension Benefit Guaranty Corporation, or
----
any Governmental Authority succeeding to any of its principal
functions under ERISA.
"Pension Plan" means a pension plan (as defined in Section
------------
3(2) of ERISA) subject to Title IV of ERISA which the Company or
any ERISA Affiliate sponsors, maintains, or to which it makes, is
making, or is obligated to make contributions, or otherwise has
any liability, 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.
22
<PAGE>
<PAGE>
"Permitted Liens" has the meaning specified in Section 8.01.
--------------- ------------
"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"; and (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.
"Person" means an individual, partnership, corporation,
------
limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture or Governmental
Authority.
"Plan" means an employee benefit plan (as defined in Section
----
3(3) of ERISA) which the Company or any ERISA Affiliate sponsors
or maintains or to which the Company or any ERISA Affiliate makes,
is making, or is obligated to make contributions or otherwise has
any liability and includes any Pension Plan.
"Pledge Agreement" means that certain Pledge Agreement dated
----------------
as of the date hereof between the Company and the Agent.
"Pledged Collateral" has the meaning specified in the Pledge
------------------
Agreement.
"Pro Forma Financial Statements" means (i) the unaudited pro
------------------------------
forma balance sheet for the Company and its Subsidiaries as at
July 31, 1999 and after giving effect to the SEI Acquisition and
the transactions contemplated hereby and reflecting estimated
purchase price accounting adjustments, prepared and provided by
the Company, (ii) quarterly working capital details for the
Company and SEI for the trailing four quarters and the first
projected year, prepared by the Company and (iii) quarterly pro
forma projections for the first projected year and annual pro
forma projections for the next four projected years supported by
contract-related documentation, prepared by the Company, in each
case in form and substance acceptable to the Agent.
"Pro Rata Revolving Share" means, as to any Revolving
------------------------
Lender, (a) at any time at which the Aggregate Revolving Loan
Commitment remains outstanding, the percentage equivalent
(expressed as a decimal rounded to the ninth decimal place) at
such time of such Lender's Revolving Loan Commitment divided by
the Aggregate Revolving Loan Commitment, and (b) after the
termination of the Aggregate Revolving Loan Commitment, the
percentage equivalent (expressed as a decimal, rounded to the
ninth decimal place) at such time of the principal amount of such
Lender's outstanding Revolving Loans (other than Swing Line Loans)
divided by the aggregate principal
23
<PAGE>
<PAGE>
amount of the outstanding Revolving Loans (other than Swing Line
Loans) of all the Lenders.
"Pro Rata Share" means, as to any Lender, (a) in respect of
--------------
a particular Loan and/or Commitment, (i) at any time at which the
Commitments in respect of such Loan remain outstanding, the
percentage equivalent (expressed as a decimal, rounded to the
ninth decimal place) at such time of such Lender's Commitment in
respect of such Loan divided by the combined Commitments in
respect of such Loan, and (ii) after the termination of the
Commitments in respect of such Loan, the percentage equivalent
(expressed as a decimal, rounded to the ninth decimal place) at
such time of the principal amount outstanding of such Loans held
by such Lender divided by the aggregate principal amount
outstanding of such Loans held by all Lenders, and (b) in respect
of all Loans and/or Commitments, (i) at any time at which the
Aggregate Commitment (or any portion thereof) remains outstanding,
the percentage equivalent (expressed as a decimal, rounded to the
ninth decimal place) at such time of such Lender's Commitments in
respect of all Loans (and if any Term Loans are outstanding, with
the Term Loan Commitment deemed to be outstanding to the extent of
the principal amount of the related Term Loan which is then
outstanding) divided by the Aggregate Commitment, and (b) after
the termination of the Aggregate Commitment, the percentage
equivalent (expressed as a decimal, rounded to the ninth decimal
place) at such time of the principal amount of such Lender's
outstanding Loans (including such Lender's ratable share of
outstanding Swing Line Loans and L/C Obligations) divided by the
aggregate principal amount of the outstanding Loans and L/C
Obligations of all of the Lenders.
"Rate Swap Documents" means, collectively, all Swap
-------------------
Contracts entered into between the Company and any Lender or any
Affiliate thereof in respect of any portion of the Obligations.
"Receivables Availability" means at any time an amount equal
------------------------
to eighty percent (80%) of the face amount (less maximum
discounts, credits and allowances which may be taken by or granted
to Account Debtors in connection therewith) outstanding at such
time under existing Eligible Accounts, less such reserves as Agent
in its reasonable discretion elects to establish less applied
progress payments received from the U.S. Government with respect
to such Eligible Accounts for goods sold to the U.S. Government.
Agent shall notify the Company of any reserves it chooses to
establish from time to time.
"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.
"Required Lenders" means at any time Lenders then holding at
----------------
least 51% of the sum of (a) the then aggregate unpaid principal
amount of the Term Loans, plus (b) the amount of the Aggregate
----
Revolving Loan Commitment (or if the Revolving Loan
24
<PAGE>
<PAGE>
Commitment has been terminated, then the aggregate principal
amount outstanding of Revolving Loans and Swing Line Loans, plus
the outstanding amount of L/C Obligations); provided, that, if
--------
no principal amount of any Loan is then outstanding, then
"Required Lenders" shall mean Lenders then having at least of the
51% Aggregate Revolving Loan Commitment.
"Required Revolving Lenders" means at any time Revolving
--------------------------
Lenders then holding at least 51% of the then aggregate unpaid
principal amount of the Revolving Loans (other than Swing Line
Loans), or, if no such principal amount is then outstanding,
Revolving Lenders then having at least 51% of the Aggregate
Revolving Loan Commitment.
"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 treasurer of the
Company, or any other officer having substantially the same
authority and responsibility.
"Revolving Lender" means any Lender having a Revolving Loan
----------------
Commitment.
"Revolving Loan" has the meaning specified in subsection 2.01(b).
-------------- ------------------
"Revolving Loan Commitment", as to each Revolving Lender,
-------------------------
has the meaning specified in subsection 2.01(b).
------------------
"Revolving Termination Date" means the earlier to occur of:
--------------------------
(a) September 30, 2004; and
(b) the date on which the Aggregate Revolving Loan
Commitment terminates in accordance with the provisions of
this Agreement.
"Same Day Funds" means (a) with respect to disbursements and
--------------
payments in Dollars, immediately available funds, and (b) with
respect to disbursements and payments in an Offshore Currency,
same day or other funds as may be determined by the Agent to be
customary in the place of disbursement or payment for the
settlement of international banking transactions in the relevant
Offshore Currency.
"SEC" means the Securities and Exchange Commission, or any
---
Governmental Authority succeeding to any of its principal
functions.
"SEI" means Systems & Electronics Inc., a Delaware
---
corporation.
25
<PAGE>
<PAGE>
"SEI Acquisition" means the acquisition by a Wholly-Owned
---------------
Subsidiary of the Company of all of the issued and outstanding
capital stock of SEI, pursuant to the terms and conditions of the
Stock Purchase Agreement.
"Security Agreement" means that certain Security Agreement
------------------
dated as of the date hereof between the Company and the Agent.
"Solvent" means, as to any Person at any time, that (a) the
-------
fair value of the property of such Person is greater than the
amount of such Person's liabilities (including disputed,
contingent and unliquidated liabilities) as such value is
established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Code; (b) the present fair saleable
value of the property of such Person is not less than the amount
that will be required to pay the probable liability of such Person
on its debts as they become absolute and matured; (c) such Person
is able to realize upon its property and pay its debts and other
liabilities (including disputed, contingent and unliquidated
liabilities, but applying the reasonably anticipated liability,
after giving effect to payments under insurance policies and
indemnity agreements which such Person reasonably expects to
receive) as they mature in the normal course of business; (d) such
Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as
such debts and liabilities mature; and (e) such Person is not
engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's property
would constitute unreasonably small capital.
"Stated Amount" means the stated or face amount of a Letter
-------------
of Credit to the extent available at the time for drawing (subject
to presentment of all requested documents), as the same may be
increased or decreased from time to time in accordance with the
terms of such Letter of Credit.
"Stock Purchase Agreement" means that certain Stock Purchase
------------------------
Agreement dated as of August 23, 1999 and amended as of September
__, 1999 by and between Engineered Systems and Electronics, Inc.
and Defense Holding Corp. and ESCO Electronics Corporation
relating to the sale of the outstanding shares of SEI.
"Subsidiary" of a Person means any corporation, association,
----------
partnership, limited liability company, joint venture or other
business entity of which more than 50% of the voting stock,
membership interests or other equity interests (in the case of
Persons other than corporations), is owned or controlled directly
or indirectly by the Person, or one or more of the Subsidiaries of
the Person, or a combination thereof. Unless the context
otherwise clearly requires, references herein to a "Subsidiary"
refer to a Subsidiary of the Company.
"Subsidiary Guaranty" means that certain Subsidiary Guaranty
-------------------
dated as of the date hereof by certain of the Subsidiaries in
favor of the Agent and the Lenders.
26
<PAGE>
<PAGE>
"Subsidiary Security Agreement" means that certain
-----------------------------
Subsidiary Security Agreement dated as of the date hereof between
certain of the Subsidiaries and the Agent.
"Surety Bonds" means all bonds issued for the account of
------------
the Company or any Subsidiary to assure the performance thereby
(or to the extent issued in the ordinary course of business, any
other Person) under any contract entered into in the ordinary
course of business.
"Surety Instruments" means all letters of credit (including
------------------
standby and commercial), banker's acceptances, bank guaranties,
shipside bonds, performance bonds, Surety Bonds and similar
instruments.
"Surety L/C's" means letters of credit which are issued for
------------
the account of the Company or any Subsidiary to provide credit
support, in the ordinary course of business, for (a) a contract
bid by any such Person, (b) the performance by any such Person
under any contract, (c) any warranty extended by any such Person
and (d) the repayment of advance payments made to any such Person.
"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.
"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 Company 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 Lender).
"Swing Line Commitment" means at any time, the obligation of
---------------------
the Swing Line Lender to make Swing Line Loans pursuant to
Section 2.05.
------------
"Swing Line Lender" means BofA, in its capacity as provider
-----------------
of the Swing Line Loans.
"Swing Line Loan" means a Loan made by the Swing Line
---------------
Lender.
27
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<PAGE>
"Swing Line Note" means a promissory note in substantially
---------------
the form of Exhibit F.
---------
"Swing Line Rate" means, at any time, for each Swing Line
---------------
Loan, (a) the Base Rate in effect as of the Business Day of the
making of a Swing Line Loan plus (b) the Applicable Base Rate
----
Margin in respect of Revolving Loans then in effect.
"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 Lender 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 Lender or the Agent, as the case may be, is organized or
maintains a lending office.
"Term Loan" has the meaning specified in subsection
---------
2.01(a).
"Term Loan Commitment" means, as to each Lender, such
---------------------
Lender's Term Loan Commitment, as specified on Schedule 2.01.
-------------
"Transaction Documents" means the Loan Documents and the
---------------------
Acquisition Documents.
A "Type" of Loan means its status as either a Base Rate Loan
----
or an Offshore Rate Loan.
"UCC" means the Uniform Commercial Code as in effect in the
---
State of Missouri.
"Unfunded Pension Liability" means the excess of a Plan's
--------------------------
benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Plan's assets, determined in accordance with
the assumptions used for funding the Pension Plan pursuant to
Section 412 of the Code for the applicable plan year.
"United States" and "U.S." each means the United States of
------------- ----
America.
"Voting Stock" of any Person as of any date means the
------------
Capital Stock of such Person that is entitled to vote in the
election of the board of directors (or other governing body) of
such Person.
"Wholly-Owned Subsidiary" means any corporation in which
-----------------------
(other than directors' qualifying shares required by law) 100% of
the capital stock of each class having ordinary voting power, and
100% of the capital stock of every other class, in each case (or,
in the case of Persons other than corporations, membership
interests or other equity interests), 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.
28
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<PAGE>
"Working Capital" means (a) Current Assets, less (b) Current
--------------- ----
Liabilities.
"Year 2000 Problem" means any significant risk that computer
-----------------
hardware, software or equipment containing embedded microchips
essential to the business or operations of the Company or any of
its Subsidiaries will not, in the case of dates or time periods
occurring after December 31, 1999, function at least as
efficiently and reliably as in the case of times or time periods
occurring before January 1, 2000, including the making of accurate
leap year calculations.
Section 1.02 Other Interpretive Provisions. (a) The meanings
-----------------------------
of defined terms are equally applicable to the singular and plural forms
of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar
words refer to this Agreement as a whole and not to any particular
provision of this Agreement; and subsection, Section, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(c) (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."
(iv) The term "property" includes any kind of property or
asset, real, personal or mixed, tangible or intangible.
(d) Unless otherwise expressly provided herein, (i)
references to agreements (including this Agreement) and other
contractual instruments shall be deemed to include all subsequent
amendments and other modifications thereto, but only to the extent such
amendments and other modifications are not prohibited by the terms of
any Loan Document, and (ii) references to any statute or regulation are
to be construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the
statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of
this Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are
cumulative and shall each be performed in accordance with their terms.
29
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<PAGE>
(g) Unless otherwise expressly provided, any reference to
any action of the Agent or the Lenders by way of consent, approval or
waiver shall be deemed modified by the phrase "in its/their sole
discretion."
(h) 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 Lenders
or the Agent merely because of the Agent's or Lenders' involvement in
their preparation.
Section 1.03 Accounting Principles. (a) Unless the context
---------------------
otherwise clearly requires, all accounting terms not expressly defined
herein shall be construed, and all financial computations required under
this Agreement shall be made, in accordance with GAAP, consistently
applied.
(b) References herein to "fiscal year" and "fiscal quarter"
refer to such fiscal periods of the Company.
(c) In the event that any changes in GAAP occur after the
date of this Agreement and such changes result in a material variation
in the method of calculation of financial covenants or other terms of
this Agreement, then the Company, the Agent and the Lenders agree to
amend such provisions of this Agreement so as to equitably reflect such
changes so that the criteria for evaluating the Company's financial
condition will be the same after such changes as if such changes had not
occurred.
ARTICLE II
THE CREDITS
-----------
Section 2.01 Amounts and Terms of Commitments. (a) Term
-------------------------------- ----
Loan. Each Lender severally agrees, on the terms and conditions set
- ----
forth herein, to make a single loan to the Company (each such loan, a
"Term Loan") on the Closing Date in an amount not to exceed such
---------
Lender's Term Loan Commitment as set forth on Schedule 2.01. Amounts
-------------
borrowed as a Term Loan which are repaid or prepaid by the Company may
not be reborrowed.
(b) The Revolving Credit. Each Revolving Lender
--------------------
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 the amount set forth on Schedule 2.01 (such amount,
-------------
as the same may be reduced under Section 2.07 or as a result of one or
------------
more assignments under Section 11.08, the Revolving Lender's
-------------
"Revolving Loan Commitment"); provided, however, that, after
------------------------- -------- -------
giving effect to any Borrowing of Revolving Loans, the Effective Amount
of all outstanding Revolving Loans, together with Swing Line Loans
outstanding at such time and the Effective Amount of all L/C
Obligations, shall not at any time exceed the lesser of (i) the
Aggregate Revolving Loan Commitment and (ii) the Borrowing Base; and
---
provided further, that the Effective Amount of the
- -------- -------
30
<PAGE>
<PAGE>
Revolving Loans of any Revolving Lender plus the participation of such
Revolving Lender in the Effective Amount of all L/C Obligations plus
such Revolving Lender's Pro Rata Revolving Share of any outstanding
Swing Line Loans shall not at any time exceed such Revolving Lender's
Revolving Loan Commitment. Within the limits of each Revolving Lender's
Commitment, and subject to the other terms and conditions hereof, the
Company may borrow under this subsection 2.01(b), prepay under
------------------
Section 2.08 and reborrow under this subsection 2.01(b).
- ------------ ------------------
Section 2.02 Loan Accounts. (a) The Loans made by each Lender
-------------
and the Letters of Credit Issued by the Issuers shall be evidenced by
one or more accounts or records maintained by such Lender or Issuers, as
the case may be, in the ordinary course of business. The accounts or
records maintained by the Agent, the Issuers and each Lender shall be
conclusive absent manifest error of the amount of the Loans made by the
Lenders 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) The Company shall issue to each Lender notes in the
form of Exhibit E-1 in the case of Revolving Loans and/or Exhibit E-2
----------- -----------
in the case of Term Loans (each, a "Note" and collectively, the
----
"Notes") to evidence such Lender's Loans (or, in the case of Swing
-----
Line Loans, in the form of Exhibit F). Each Lender may, instead of or
---------
in addition to maintaining a loan account, endorse on the schedule
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 Lender is irrevocably authorized by the
Company to endorse its Note(s) or Swing Line Note, as applicable, and
each Lender's record shall be conclusive absent manifest error;
provided, however, that the failure of a Lender 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 or Swing Line Note to such Lender.
Section 2.03 Procedure for Borrowing. (a) Each Borrowing shall
-----------------------
be made upon the Company's irrevocable notice delivered to the Agent in
the form of a Notice of Borrowing (which notice must be received by the
Agent prior to 10:00 a.m. (Central time) (i) three Business Days prior
to the requested Borrowing Date, in the case of Offshore Rate Loans; and
(ii) one Business Day prior to the requested Borrowing Date (or in the
case of the initial Credit Extension, at the option of the Agent, on the
requested Borrowing Date), in the case of Base Rate Loans, specifying:
(A) the amount of the Borrowing, which shall be in
an aggregate minimum amount of $2,000,000 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
31
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<PAGE>
(D) with respect to Offshore Rate Loans, 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, such Borrowing will consist of Base Rate Loans only.
(b) The Agent will promptly notify each applicable Lender
of its receipt of any Notice of Borrowing and, in respect of Borrowings
of Revolving Loans, of the amount of such Revolving Lender's Pro Rata
Revolving Share of that Borrowing.
(c) Each Lender 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 12:00 noon. (Central 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 Lenders and in like funds as
received by the Agent.
(d) After giving effect to any Borrowing, unless the Agent
shall otherwise consent, there may not be more than six different
Interest Periods in effect.
(e) The Company hereby authorizes the Lenders and the
Agent to accept Notices of Borrowing based on telephonic notices made by
any person or persons the Agent or any Lender in good faith believes to
be acting on behalf of the Company. The Company agrees to deliver
promptly to the Agent a written confirmation of each telephonic notice,
signed by a Responsible Officer or an authorized designee. If the
written confirmation differs in any material respect from the action
taken by the Agent and the Lenders, the records of the Agent and the
Lenders shall govern absent manifest error.
Section 2.04 Conversion and Continuation Elections. (a) The
-------------------------------------
Company may, upon irrevocable notice to the Agent in accordance with
subsection 2.04(b):
- ------------------
(i) elect, as of any Business Day, in the case of
Base Rate Loans, or as of the last day of the applicable Interest
Period, in the case of any other Type of Revolving Loans or Term
Loans, to convert any such Loans (or any part thereof in an amount
not less than $2,000,000 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 or Term Loans
having Interest Periods expiring on such day (or any part thereof
in an amount not less than $2,000,000, or that is in an integral
multiple of $100,000 in excess thereof);
32
<PAGE>
<PAGE>
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 $2,000,000 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 10:00 a.m.
(Central time) at least (i) three 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) at least one 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;
(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, as the case may be, 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 applicable Lender
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
applicable Lender 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 Lender.
(e) Unless the Required Lenders 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 six (6) different Interest Periods in effect.
33
<PAGE>
<PAGE>
(g) The Company hereby authorizes the Lenders and the
Agent to accept Notices of Conversion/Continuation based on telephonic
notices made by any person or persons the Agent or any Lender in good
faith believes to be acting on behalf of the Company. The Company
agrees to deliver promptly to the Agent a written confirmation of each
telephonic notice, signed by a Responsible Officer. If the written
confirmation differs in any material respect from the action taken by
the Agent and the Lenders, the records of the Agent and the Lenders
shall govern absent manifest error.
Section 2.05 The Swing Line Loans. Subject to the terms and
--------------------
conditions hereof, the Swing Line Lender agrees to make Swing Line Loans
to the Company from time to time prior to the Revolving Termination Date
in an aggregate principal amount at any one time outstanding not to
exceed $5,000,000; provided, that after giving effect to any such
--------
Swing Line Loan, the Effective Amount of all Revolving Loans, Swing Line
Loans and L/C Obligations at such time would not exceed the lesser of
(i) the Aggregate Revolving Loan Commitment and (ii) the Borrowing Base
at such time. Prior to the Revolving Termination Date, the Company may
use the Swing Line Commitment by borrowing, prepaying the Swing Line
Loans in whole or in part, and reborrowing, all in accordance with the
terms and conditions hereof. All Swing Line Loans shall bear interest
at the Swing Line Rate and shall not be entitled to be converted into
Loans that bear interest at any other rate.
Section 2.06 Procedure for Swing Line Loans. (a) The Company
------------------------------
may borrow under the Swing Line Commitment on any Business Day until the
Revolving Termination Date; provided, that the Company shall give the
--------
Swing Line Lender irrevocable written notice signed by a Responsible
Officer or an authorized designee (which notice must be received by the
Swing Line Lender prior to 11:00 a.m. (Central time)) with a copy to the
Agent specifying the amount of the requested Swing Line Loan, which
shall be in a minimum amount of $100,000 or a whole multiple of $100,000
in excess thereof. The proceeds of the Swing Line Loan will be made
available by the Swing Line Lender to the Company in immediately
available funds at the office of the Swing Line Lender by 1:00 p.m.
(Central time) on the date of such notice. The Company may at any time
and from time to time, prepay the Swing Line Loans, in whole or in part,
without premium or penalty, by notifying the Swing Line Lender prior to
11:00 a.m. (Central time) on any Business Day of the date and amount of
prepayment with a copy to the Agent. If any such notice is given, the
amount specified in such notice shall be due and payable on the date
specified therein. Partial prepayments shall be in an aggregate
principal amount of $100,000 or a whole multiple of $100,000 in excess
thereof.
(b) The Swing Line Lender may in its sole discretion (or
will at the direction of the Company) on any Business Day, on behalf of
the Company (which hereby irrevocably directs the Swing Line Lender to
act on its behalf) request the Agent to notify each Revolving Lender to
make a Base Rate Loan in an amount equal to such Revolving Lender's Pro
Rata Revolving Share of the aggregate principal amount of the Swing Line
Loans outstanding on the date such notice is given. Unless any of the
events described in subsection 9.01(f) or (g) shall have occurred with
-------------------------
respect to the Company (in which event the procedures of paragraph (d)
of this Section 2.06 shall apply) each Revolving Lender shall make the
------------
proceeds of its Revolving Loan available to the Agent for the account of
the Swing Line Lender at the Agent's Payment
34
<PAGE>
<PAGE>
Office in funds immediately available prior to 1:00 p.m. (Central time)
on the Business Day next succeeding the date such notice is given. The
proceeds of such Revolving Loans shall be immediately applied to repay
the outstanding Swing Line Loans. Effective on the day such Revolving
Loans are made, the portion of the Swing Line Loans so paid shall no
longer be outstanding as Swing Line Loans and shall no longer be due
under the Swing Line Note. The Company shall pay to the Swing Line
Lender, promptly following the Swing Line Lender's demand, the amount of
its outstanding Swing Line Loans to the extent amounts received from the
Revolving Lenders are not sufficient to repay in full such outstanding
Swing Line Loans.
(c) Notwithstanding anything herein to the contrary, the
Swing Line Lender (i) shall not be obligated to make any Swing Line Loan
if the conditions set forth in Article V have not been satisfied and
---------
(ii) shall not make any requested Swing Line Loan if, prior to 11:00
a.m. (Central time) on the date of such requested Swing Line Loan, it
has received a written notice from the Agent or any Revolving Lender
directing it not to make further Swing Line Loans because one or more of
the conditions specified in Article V are not then satisfied.
---------
(d) If prior to the making of a Revolving Loan required to
be made by subsection 2.06(b) an Event of Default described in
------------------
subsection 9.01(f) or 9.01(g) shall have occurred and be continuing
- -----------------------------
with respect to the Company, each Revolving Lender will, on the date
such Revolving Loan was to have been made pursuant to the notice
described in subsection 2.06(b), purchase an undivided participating
------------------
interest in the outstanding Swing Line Loans in an amount equal to its
Pro Rata Revolving Share of the aggregate principal amount of Swing Line
Loans then outstanding. Each Revolving Lender will immediately transfer
to the Agent for the benefit of the Swing Line Lender, in immediately
available funds, the amount of its participation.
(e) Whenever, at any time after a Revolving Lender has
purchased a participating interest in a Swing Line Loan, the Swing Line
Lender receives any payment on account thereof, the Swing Line Lender
will distribute to the Agent for delivery to each Revolving Lender its
participating interest in such amount (appropriately adjusted, in the
case of interest payments, to reflect the period of time during which
such Revolving Lender's participating interest was outstanding and
funded); provided, however, that in the event that such payment
-------- -------
received by the Swing Line Lender is required to be returned, such
Revolving Lender will return to the Agent for delivery to the Swing Line
Lender any portion thereof previously distributed by the Swing Line
Lender to it.
(f) Each Lender's obligation to make the Revolving Loans
referred to in subsection 2.06(b) and to purchase participating
------------------
interests pursuant to subsection 2.06(d) shall be absolute and
------------------
unconditional and shall not be affected by any circumstance, including,
without limitation, (i) any set-off, counterclaim, recoupment, defense
or other right which such Revolving Lender or the Company may have
against the Swing Line Lender, the Company or any other Person for any
reason whatsoever, (ii) the occurrence or continuance of a Default or an
Event of Default, (iii) any adverse change in the condition (financial
or otherwise) of the Company, (iv) any breach of this Agreement or any
other Loan Document by the Company, any
35
<PAGE>
<PAGE>
Subsidiary or any other Lender, or (v) any other circumstance, happening
or event whatsoever, whether or not similar to any of the foregoing.
Section 2.07 Voluntary Termination or Reduction of Revolving
-----------------------------------------------
Loan Commitments. (a) The Company may, upon not less than five
- ----------------
Business Days' prior notice to the Agent, terminate the Revolving Loan
Commitments, or permanently reduce the Revolving Loan Commitments by an
aggregate minimum amount of $5,000,000 or any multiple of $1,000,000 in
excess thereof; unless, after giving effect thereto and to any
------
prepayments of Loans made on the effective date thereof, (a) the
Effective Amount of all Revolving Loans, Swing Line Loans and L/C
Obligations together would exceed the amount of the Aggregate Revolving
Loan Commitment then in effect, or (b) the Effective Amount of all L/C
Obligations then outstanding would exceed the L/C Commitment. Once
reduced in accordance with this Section, the Revolving Loan Commitments
may not be increased. Any reduction of the Revolving Loan Commitments
shall be applied to each Revolving Lender according to its Pro Rata
Revolving Share. If and to the extent specified by the Company in the
notice to the Agent, some or all of the reduction in the Revolving Loan
Commitments shall be applied to reduce the L/C Commitment. All accrued
commitment and letter of credit fees to, but not including, the
effective date of any reduction or termination of Revolving Loan
Commitments, shall be paid on the effective date of such reduction or
termination.
(b) At no time shall the Swing Line Commitment exceed the
Aggregate Revolving Loan Commitment, and any reduction of the Aggregate
Revolving Loan Commitment which reduces the Aggregate Revolving Loan
Commitment below the then-current amount of the Swing Line Commitment
shall result in an automatic corresponding reduction of the Swing Line
Commitment to the amount of the Aggregate Revolving Loan Commitment, as
so reduced, without any action on the part of the Swing Line Lender. At
no time shall the Swing Line Commitment exceed the Revolving Loan
Commitment of the Swing Line Lender, and any reduction of the Aggregate
Revolving Loan Commitment which reduces the Revolving Loan Commitment of
the Swing Line Lender below the then-current amount of the Swing Line
Commitment shall result in an automatic corresponding reduction of the
Swing Line Commitment to the amount of the Revolving Loan Commitment of
the Swing Line Lender, as so reduced, without any action on the part of
the Swing Line Lender.
Section 2.08 Optional Prepayments. Subject to Section 4.04,
-------------------- ------------
the Company may, at any time or from time to time, upon not less than
two (2) Business Days' irrevocable notice to the Agent, in respect of
Offshore Rate Loans, and in respect of Base Rate Loans, by not later
than 10:00 a.m. (Central time) on the prepayment date, prepay Loans in
whole or in part, in minimum amounts of $2,500,000 or any multiple of
$500,000 in excess thereof. Such notice of prepayment shall specify the
date and amount of such prepayment, which Loans are to be prepaid and
the Type(s) of such Loans to be prepaid. The Agent will promptly notify
each Lender of its receipt of any such notice, and of such Lender'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, in the case of Offshore Rate Loans, with accrued interest to
each such date on
36
<PAGE>
<PAGE>
the amount prepaid and any amounts required pursuant to Section 4.04.
------------
Optional prepayments of any Term Loans shall be applied in the inverse
order of maturity.
Section 2.09 Mandatory Prepayments of Loans. (a) 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 4.04, 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, Swing Line Loans and Term Loans then outstanding plus
the Effective Amount of all L/C Obligations exceeds the Aggregate
Commitment, the Company shall immediately, and without notice or demand,
prepay the outstanding principal amount of the Revolving Loans and L/C
Advances by an amount equal to the applicable excess.
(b) Within five (5) Business Days after the end of each
fiscal quarter, the Company shall prepay the Loans in an amount equal to
100% of the sum of (a) the Net Proceeds realized upon all Asset
Dispositions made by the Company or any Subsidiary in such fiscal
quarter, (b) the insurance proceeds received by the Company or any
Subsidiary in such fiscal quarter following a casualty involving such
Person's property and (c) the payments received by the Company or any
Subsidiary in such fiscal quarter from a condemnation of such Person's
property, aggregating in excess of $500,000, to the extent any of the
foregoing Net Proceeds are not applied (or committed to be applied)
within 180 days after the consummation or receipt thereof, as
applicable, to the purchase of similar assets that are not classified as
current assets under GAAP and are used or useful in the business of the
Company and its Subsidiaries or to the repair or restoration of such
Person's property. The amount of such prepayment shall be applied first
to the then outstanding principal balance of the Term Loans in inverse
order of maturity and then to the then outstanding Revolving Loans. The
Revolving Loan Commitment of each Lender shall automatically be reduced
by an amount equal to such Lender's Pro Rata Revolving share of the
amount of the prepayment pursuant to this subsection 2.09(b), if any,
------------------
applied to the Revolving Loans. All accrued commitment fees to, but not
including the effective date of any reduction or termination of the
Revolving Loan Commitments, shall be paid on the effective date of such
reduction or termination.
(c) On each January 15, beginning January 15, 2001, the
Company shall prepay the Term Loans in an amount equal to the Applicable
Excess Cash Flow Percentage of the Excess Cash Flow, if any, generated
by the Company and its Subsidiaries during the immediately preceding
fiscal year of the Company.
(d) If the Company or any Subsidiary shall incur any
Indebtedness (other than Indebtedness permitted to be incurred by
subsection 8.05), the Company shall promptly notify the Agent of the
- ---------------
estimated Net Proceeds of such issuance to be received by the Company or
such Subsidiary in respect thereof. Promptly upon, and in no event
later than three (3) days after, receipt by the Company or such
Subsidiary of Net Proceeds of such incurrence, the Company shall prepay
the Obligations in an amount equal to 100% of such Net Proceeds.
37
<PAGE>
<PAGE>
(e) If the Company or any Subsidiary shall issue new
common or preferred equity, the Company shall promptly notify the Agent
of the estimated Net Proceeds of such issuance to be received by the
Company or such Subsidiary in respect thereof. Promptly upon, and in no
event later than three (3) days after, receipt by the Company or such
Subsidiary of Net Proceeds of such issuance, the Company shall prepay
the Obligations in an amount equal to 50% of such Net Proceeds.
(f) Any prepayments pursuant to subsections 2.09(c)-(e)
-----------------------
shall be applied first to the outstanding principal balance of the Term
Loans pro rata against all remaining scheduled principal installments,
and then to the outstanding principal balance of the Revolving Loans
(without any reduction in the Revolving Loan Commitment of any Lender).
Subject to the foregoing and the second sentence of subsection
-----------
2.09(b), any prepayments pursuant to this subsections 2.09(b)-(e)
- ------- -----------------------
shall be applied first to any Base Rate Loans then outstanding and then
to Offshore Rate Loans with the shortest Interest Periods remaining.
The Borrower shall pay, together with each prepayment under this
Section 2.09, accrued interest on the amount prepaid and any amounts
- ------------
required pursuant to Section 4.03.
------------
Section 2.10 Repayment. (a) Term Loans. The Company shall
---------
repay the Term Loans on each date set forth below as follows (each a
"Principal Payment Date"):
----------------------
Date Term Loan Payment
-------- -----------------
12/31/99 $2,500,000
3/31/00 $2,500,000
6/30/00 $2,500,000
9/30/00 $2,500,000
12/31/00 $4,250,000
3/31/01 $4,250,000
6/30/01 $4,250,000
9/30/01 $4,250,000
12/31/01 $5,250,000
3/31/02 $5,250,000
6/30/02 $5,250,000
9/30/02 $5,250,000
12/31/02 $5,250,000
3/31/03 $5,250,000
6/30/03 $5,250,000
9/30/03 $5,250,000
12/31/03 $5,250,000
3/31/04 $5,250,000
6/30/04 $5,250,000
9/30/04 $5,250,000
or such other amount
as shall then be
outstanding
Total $90,000,000
38
<PAGE>
<PAGE>
(b) The Revolving Credit. The Company shall repay to
--------------------
the Lenders on the Revolving Termination Date the aggregate principal
amount of Revolving Loans outstanding on such date.
Section 2.11 Interest. (a) Each Revolving Loan and Term Loan
--------
shall bear interest on the outstanding principal amount thereof from the
applicable Borrowing Date at a rate per annum equal to the Offshore Rate
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 2.04), plus the
------------ ----
Applicable Offshore Rate Margin or the Applicable Base Rate Margin, as
applicable.
(b) Interest on each Revolving Loan and Term Loan shall be
paid in arrears on each Interest Payment Date. Interest on Base Rate
Loans shall also be paid on the date of any payment (including
prepayment) in full thereof. Interest on Offshore Rate Loans shall also
be paid on the date of any prepayment of Loans under Section 2.08 or
------------
2.09 for the portion of the Loans so prepaid and upon payment
- ----
(including prepayment) in full thereof. During the existence of any
Event of Default, interest on all Loans shall be paid on demand of the
Agent at the request or with the consent of the Required Lenders.
(c) Notwithstanding subsection (a) of this Section, if any
amount of principal of or interest on any Loan, or any other amount
payable hereunder or under any other Loan Document is not paid in full
when due (whether at stated maturity, by acceleration, demand or
otherwise), the Company agrees to pay interest on such unpaid principal
or other amount, from the date such amount becomes due until the date
such amount is paid in full, and after as well as before any entry of
judgment thereon to the extent permitted by law, payable on demand, at a
fluctuating rate per annum equal to the Base Rate, plus the Applicable
Base Rate Margin, plus two percent (2.0%).
(d) Anything herein to the contrary notwithstanding, the
obligations of the Company to any Lender hereunder shall be subject to
the limitation that payments of interest shall not be required for any
period for which interest is computed hereunder, to the extent (but only
to the extent) that contracting for or receiving such payment by such
Lender would be contrary to the provisions of any law applicable to such
Lender limiting the highest rate of interest that may be lawfully
contracted for, charged or received by such Lender, and in such event
the Company shall pay such Lender interest at the highest rate permitted
by applicable law.
Section 2.12 Fees. In addition to certain fees described in
----
Section 3.08:
- ------------
(a) Arrangement, Agency Fees. The Company shall pay
------------------------
such fees to the Agent and the Arranger as are required by the letter
agreement ("Fee Letter") between the Company and the Arranger and
----------
Agent dated July 21, 1999.
(b) Commitment Fees. The Company shall pay to the Agent
---------------
for the account of each Revolving Lender a commitment fee on the average
daily unused portion of such
39
<PAGE>
<PAGE>
Revolving Lender's Loan 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 Commitment Fee Percentage. For purposes of calculating
utilization under this subsection, the Revolving Loan Commitments shall
be deemed used to the extent of the Effective Amount of Revolving Loans
then outstanding (excluding any outstanding Swing Line Loans), plus the
Effective Amount of L/C Obligations then outstanding. Such commitment
fee shall accrue from the date hereof 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 December 31, 1999 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 Revolving Loan Commitments under Section
-------
2.05 or Section 2.07, the accrued commitment fee calculated for the
- ---- ------------
period ending on such date shall also be paid on the date of such
reduction or termination, with the following quarterly payment being
calculated on the basis of the period from such reduction or termination
date to such quarterly payment date. The commitment fees provided in
this subsection shall accrue at all times after the above-mentioned
commencement date, including at any time during which one or more
conditions in Article V are not met.
---------
Section 2.13 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 Lenders in the
absence of manifest error.
Section 2.14 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 Lenders at the Agent's Payment Office, and shall be made in dollars
and in immediately available funds, no later than 11:00 a.m. (Central
time) on the date specified herein. The Agent will promptly distribute
to each Lender its applicable share of such payment in like funds as
received which, except as otherwise expressly provided herein, shall be
based upon such Lender's Pro Rata Share of the Loans in respect of which
such prepayment has been made. Any payment received by the Agent later
than 1:00 p.m. (Central time) shall be deemed to have been received on
the following Business Day and any applicable interest or fee shall
continue to accrue.
(b) Subject to the provisions set forth in the definition
of "Interest Period" herein, whenever any payment is due on a day other
than a Business Day, such payment shall be made on the following
Business Day, and such extension of time shall in such case be included
in the computation of interest or fees, as the case may be.
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(c) Unless the Agent receives notice from the Company
prior to the date on which any payment is due to the Lenders 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 Lender on such due date an amount equal to the amount then due
such Lender. If and to the extent the Company has not made such payment
in full to the Agent, each Lender shall repay to the Agent on demand
such amount distributed to such Lender, together with interest thereon
at the Federal Funds Rate for each day from the date such amount is
distributed to such Lender until the date repaid.
Section 2.15 Payments by the Lenders to the Agent. (a) Unless
------------------------------------
the Agent receives notice from a Lender on or prior to the Closing Date
or, with respect to any Borrowing after the Closing Date, at least one
Business Day prior to the date of such Borrowing, that such Lender will
not make available as and when required hereunder to the Agent for the
account of the Company the amount of that Lender's Pro Rata Share of the
Borrowing, the Agent may assume that each Lender 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 Lender 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 Lender 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 Lender 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 Lender'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 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. The
Company may, subject to the provisions of Section 2.05 and 2.06, utilize
the proceeds of a Swing Line Loan to make such payment to the Agent.
(b) The failure of any Lender to make any Loan on any
Borrowing Date shall not relieve any other Lender of any obligation
hereunder to make a Loan on such Borrowing Date, but no Lender shall be
responsible for the failure of any other Lender to make the Loan to be
made by such other Lender on any Borrowing Date.
Section 2.16 Sharing of Payments, Etc. If, other than as
-------------------------
expressly provided elsewhere herein, any Lender 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 Lender
shall immediately (a) notify the Agent of such fact, and (b) purchase
from the other Lenders such participations in the Loans made by them as
shall be necessary to cause such purchasing Lender to share the excess
payment pro rata with each of them; provided, however, that if all
-------- -------
or any portion of such excess payment
41
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is thereafter recovered from the purchasing Lender, such purchase shall
to that extent be rescinded and each other Lender shall repay to the
purchasing Lender the purchase price paid therefor, together with an
amount equal to such paying Lender's ratable share (according to the
proportion of (i) the amount of such paying Lender's required repayment
to (ii) the total amount so recovered from the purchasing Lender) of any
interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Company agrees that any
Lender so purchasing a participation from another Lender may, to the
fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to Section 11.10) with
-------------
respect to such participation as fully as if such Lender 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 Lenders following any such purchases or
repayments.
Section 2.17 Security and Subsidiary Guaranty. (a) All
--------------------------------
obligations of the Company and the Guarantors under this Agreement, the
Notes and all other Loan Documents shall be secured in accordance with
the Collateral Documents.
(b) All obligations of the Company under this Agreement,
each of the Notes and all other Loan Documents shall be unconditionally
guaranteed by the Guarantors pursuant to the Subsidiary Guaranty.
ARTICLE III
THE LETTERS OF CREDIT
---------------------
Section 3.01 The Letter of Credit Subfacility. (a) On the
--------------------------------
terms and conditions set forth herein (i) the Issuer agrees, (A) from
time to time on any Business Day, during the period from the Closing
Date to the day which is five days prior to the Revolving Termination
Date, to issue Letters of Credit for the account of the Company in an
aggregate Stated Amount at any one time that, together with the
aggregate Stated Amount of all other outstanding Letters of Credit
issued pursuant hereto, does not exceed the L/C Commitment, and to amend
or renew Letters of Credit previously issued by it, in accordance with
subsections 3.02(c) and 3.02(d), and (B) to honor drafts under the
- ------------------- -------
Letters of Credit; and (ii) the Lenders severally agree to participate
in Letters of Credit Issued for the account of the Company; provided,
--------
that the Issuer shall not be obligated to Issue, and no Revolving Lender
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") (1)
-------------
the Effective Amount of all L/C Obligations plus the Effective Amount of
all Revolving Loans and of all Swing Line Loans exceeds the lesser of
(i) Aggregate Revolving Loan Commitment and (ii) the Borrowing Base at
such time, (2) the participation of any Lender in the Effective Amount
of all L/C Obligations plus the Effective Amount of the Revolving Loans
of such Lender and such Revolving Lender's Pro Rata Revolving Share of
any outstanding Swing Line Loans exceeds such Lender'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,
42
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during the foregoing period, obtain Letters of Credit to replace Letters
of Credit which have expired or which have been drawn upon and
reimbursed.
(b) The Issuer is under no obligation to, and shall not,
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 Issuer from Issuing such Letter of Credit,
or any Requirement of Law applicable to the Issuer or any request
or directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Issuer shall
prohibit, or request that the Issuer refrain from, the Issuance of
letters of credit generally or such Letter of Credit in particular
or shall impose upon the Issuer with respect to such Letter of
Credit any restriction, reserve or capital requirement (for which
the Issuer is not otherwise compensated hereunder) not in effect
on the Closing Date, or shall impose upon the Issuer any
unreimbursed loss, cost or expense which was not applicable on the
Closing Date and which the Issuer in good faith deems material to
it;
(ii) the Issuer has received written notice from any
Revolving Lender, 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 is (A) more than 365 days after the date of Issuance,
unless the Required Revolving Lenders have approved such expiry
date in writing, or (B) after the date which is five days prior to
the Revolving Termination Date, unless all of the Revolving
Lenders have approved such expiry date in writing;
(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 Issuer, or the Issuance of a Letter of Credit shall violate
any applicable policies of the Issuer; or
(vi) such Letter of Credit is to be denominated in a
currency other than Dollars.
Section 3.02 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 Issuer (with a copy sent
by the Company to the Agent) at least four days (or such shorter time as
the Issuer 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
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immediately in an original writing, in the form of an L/C Application
(or such other form as shall be acceptable to the Issuer), and shall
specify in form and detail satisfactory to the Issuer: (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; and (vii) such other matters as the
Issuer may require.
(b) At least two Business Days prior to the Issuance of
any Letter of Credit (or such shorter time as the Agent may agree in a
particular instance in its sole discretion), the Issuer 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 Issuer will provide the Agent with a copy
thereof. Unless the Issuer has received notice on or before the
Business Day immediately preceding the date the Issuer is to issue a
requested Letter of Credit from the Agent (A) directing the Issuer not
to issue such Letter of Credit because such issuance is not then
permitted under subsection 3.01(a) as a result of the limitations set
------------------
forth in clauses (1) through (3) thereof or subsection 3.01(b)(ii); or
----------------------
(B) that one or more conditions specified in Article V are not then
---------
satisfied; then, subject to the terms and conditions hereof, the Issuer
shall, on the requested date, issue a Letter of Credit for the account
of the Company in accordance with the Issuer's usual and customary
business practices.
(c) From time to time while a Letter of Credit is
outstanding and prior to the Revolving Termination Date, the Issuer
will, upon the written request of the Company received by the Issuer
(with a copy sent by the Company to the Agent) at least three days (or
such shorter time as the Issuer 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 Issuer: (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 Issuer may
require. The Issuer shall be under no obligation to amend any Letter of
Credit if: (A) the Issuer 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 Revolving Lenders of the receipt by it of any L/C
Application or L/C Amendment Application.
(d) The Issuer and the Lenders 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 Issuer (with a copy sent by the Company to the Agent) at
least five days (or such shorter time as the Issuer may agree in a
particular instance in its sole discretion) prior to the proposed date
of notification of renewal, the Issuer 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
44
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original writing, in the form of an L/C Amendment Application, and shall
specify in form and detail satisfactory to the Issuer: (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 Issuer may require. The Issuer shall be under no obligation so
to renew any Letter of Credit if: (A) the Issuer 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 Issuer that such Letter of Credit shall not be
renewed, and if at the time of renewal the Issuer would be entitled to
authorize the automatic renewal of such Letter of Credit in accordance
with this subsection 3.02(e) upon the request of the Company but the
------------------
Issuer 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 Issuer shall nonetheless be permitted
to allow such Letter of Credit to renew, and the Company and the Lenders
hereby authorize such renewal, and, accordingly, the Issuer shall be
deemed to have received an L/C Amendment Application from the Company
requesting such renewal.
(e) The Issuer may, at its election (or as required by the
Agent at the direction of the Required Revolving Lenders) and upon
reasonable prior written notice to the Company and subject to the terms
of the applicable Letter of Credit, 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 date which is five
days prior to 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 Issuer 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.
Section 3.03 Risk Participations, Drawings and Reimbursements.
------------------------------------------------
(a) Immediately upon the Issuance of each Letter of Credit, each
Revolving Lender shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the Issuer a participation in
such Letter of Credit and each drawing thereunder in an amount equal to
the product of (i) the Pro Rata Revolving Share of such Revolving
Lender, 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 2.01(d), each Issuance of a Letter of Credit
------------------
shall be deemed to utilize the Revolving Loan Commitment of each
Revolving Lender by an amount equal to the amount of such participation.
45
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(b) In the event of any request for a drawing under a
Letter of Credit by the beneficiary or transferee thereof, the Issuer
will promptly notify the Company. The Company shall reimburse the
Issuer prior to 11:00 a.m. (Central time), on each date that any amount
is paid by the Issuer under any Letter of Credit (each such date, an
"Honor Date"), in an amount in Dollars equal to the amount so paid by
----------
the Issuer. In the event the Company fails to reimburse the Issuer the
full amount of any drawing under any Letter of Credit by 11:00 a.m.
(Central time) on the Honor Date, the Issuer will promptly notify the
Agent and the Agent will promptly notify each Lender thereof, and the
Company shall be deemed to have requested that Base Rate Loans in an
amount equal to such unreimbursed amount be made by the Revolving
Lenders to be disbursed on the Honor Date under such Letter of Credit,
subject to the amount of the unutilized portion of the Aggregate
Revolving Loan Commitment and subject to the conditions set forth in
Section 5.02. Any notice given by the Issuer or the Agent pursuant to
- ------------
this subsection 3.03(b) 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.
(c) Each Revolving Lender shall upon any notice pursuant
to subsection 3.03(b) make available to the Agent for the account of
------------------
the relevant Issuer an amount in Dollars and in immediately available
funds equal to its Pro Rata Revolving Share of the Dollar Equivalent of
the amount of the drawing, whereupon the participating Revolving Lenders
shall (subject to subsection 3.03(d)) each be deemed to have made a
-------------------
Revolving Loan consisting of a Base Rate Loan to the Company in that
amount. If any Revolving Lender so notified fails to make available to
the Agent for the account of the Issuer the amount of such Revolving
Lender's Pro Rata Share of the Dollar Equivalent of the amount of the
drawing by no later than 12:00 noon (Central time) on the Honor Date,
then interest shall accrue on such Revolving Lender's obligation to make
such payment, from the Honor Date to the date such Revolving Lender
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 Revolving Lender to effect such payment on such date shall
not relieve such Revolving Lender from its obligations under this
Section 3.03.
- ------------
(d) 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 5.02 or for any other reason, the
------------
Company shall be deemed to have incurred from the Issuer an L/C
Borrowing in the Dollar Equivalent of 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 the Applicable Base Rate Margin, plus 2.0% per annum, and
each Revolving Lender's payment to the Issuer pursuant to subsection
-----------
3.03(c) shall be deemed payment in respect of its participation in such
- -------
L/C Borrowing and shall constitute an L/C Advance from such Revolving
Lender in satisfaction of its participation obligation under this
Section 3.03.
- ------------
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(e) Each Revolving Lender's obligation in accordance with
this Agreement to make the Revolving Loans or L/C Advances, as
contemplated by this Section 3.03, as a result of a drawing under a
------------
Letter of Credit, shall be absolute and unconditional and without
recourse to the Issuer and shall not be affected by any circumstance,
including (i) any set-off, counterclaim, recoupment, defense or other
right which such Revolving Lender may have against the Issuer, 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 Revolving Lender's obligation to make
- --------
Revolving Loans under this Section 3.03 is subject to the conditions
------------
set forth in Section 5.02.
------------
Section 3.04 Repayment of Participations. (a) Upon (and only
---------------------------
upon) receipt by the Agent for the account of the Issuer of immediately
available funds in Dollars from the Company (i) in reimbursement of any
payment made by the Issuer under the Letter of Credit with respect to
which any Revolving Lender has paid the Agent for the account of the
Issuer for such Revolving Lender's participation in the Letter of Credit
pursuant to Section 3.03 or (ii) in payment of interest thereon, the
------------
Agent will promptly pay to each Revolving Lender, in the same funds as
those received by the Agent for the account of the Issuer, the amount of
such Revolving Lender's Pro Rata Revolving Share of such funds, and the
Issuer shall receive the amount of the Pro Rata Revolving Share of such
funds of any Revolving Lender that did not so pay the Agent for the
account of the Issuer.
(b) If the Agent or the Issuer 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 Issuer
pursuant to subsection 3.04(a) in reimbursement of a payment made
------------------
under the Letter of Credit or interest or fee thereon, each Revolving
Lender shall, on demand of the Agent, forthwith return to the Agent or
the Issuer the amount of its Pro Rata Revolving Share of any amounts so
returned by the Agent or the Issuer plus interest thereon from the date
such demand is made to the date such amounts are returned by such
Revolving Lender to the Agent or the Issuer, at a rate per annum equal
to the Federal Funds Rate in effect from time to time.
Section 3.05 Role of the Issuer. (a) Each Lender and the
------------------
Company agree that, in paying any drawing under a Letter of Credit, the
Issuer shall not have any responsibility to obtain any document (other
than any sight draft and certificates expressly required by the Letter
of Credit) or to ascertain or inquire as to the validity or accuracy 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 Issuer shall be liable
to any Lender for: (i) any action taken or omitted in connection
herewith at the request or with the approval of the Lenders (including
the Required Lenders or Required Revolving Lenders, 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.
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(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; 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 Issuer,
shall be liable or responsible for any of the matters described in
clauses (i) through (vii) of Section 3.06; provided, however,
------------ --------
anything in such clauses to the contrary notwithstanding, that the
Company may have a claim against the Issuer, and the Issuer 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 the Company proves were caused by the Issuer's willful
misconduct or gross negligence or the Issuer's willful failure to pay
under any Letter of Credit after the presentation to it by the
beneficiary of a sight draft and certificate(s) strictly complying with
the terms and conditions of a Letter of Credit. In furtherance and not
in limitation of the foregoing: (i) the Issuer 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 Issuer 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 the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason.
Section 3.06 Obligations Absolute. The obligations of the
--------------------
Company under this Agreement and any L/C-Related Document to reimburse
the Issuer for a drawing under a Letter of Credit, and to repay any L/C
Borrowing and any drawing under a Letter of Credit 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 Issuer 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;
(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
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the transmission or otherwise of any document required in order to
make a drawing under any Letter of Credit;
(v) any payment by the Issuer under any Letter of
Credit against presentation of a draft or certificate that does
not strictly comply with the terms of any Letter of Credit; or any
payment made by the Issuer under any Letter of Credit 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, 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
(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.
Section 3.07 Cash Collateral Pledge. Upon (i) the request of
----------------------
the Agent, (A) if the Issuer has honored any full or partial drawing
request on any Letter of Credit and such drawing has resulted in an L/C
Borrowing hereunder, or (B) if, as of the Revolving Termination Date,
any Letters of Credit may for any reason remain outstanding and
partially or wholly undrawn, (ii) the occurrence of the circumstances
described in subsection 2.09(a) requiring the Company to Cash
------------------
Collateralize Letters of Credit, or (iii) the termination of the
Aggregate Commitment, then, the Company shall immediately Cash
Collateralize the L/C Obligations in an amount equal to the L/C
Obligations.
Section 3.08 Letter of Credit Fees. (a) The Company shall pay
---------------------
to the Agent for the account of each of the Revolving Lenders a letter
of credit fee with respect to the Letters of Credit equal to the
Applicable Offshore Rate Margin for Revolving Loans times the average
daily maximum amount available to be drawn of the outstanding Letters of
Credit, 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 Issuer an annual letter
of credit fronting fee for each Letter of Credit in an amount to be
agreed by the Company and the applicable Issuer. Such Letter of Credit
fronting fee shall be due and payable on each date of Issuance of a
Letter of Credit.
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(c) The Company shall pay to the applicable Issuer from
time to time on demand the normal issuance, presentation, amendment and
other processing fees, and other standard costs and charges, of such
Issuer relating to letters of credit as from time to time in effect.
Section 3.09 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
--------------------------------------
Section 4.01 Taxes. (a) Any and all payments by the Company to
-----
each Lender 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 Lender 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 Lender 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 Lender or the
Agent for the account of such Lender, at the time interest is
paid, Further Taxes in the amount that the respective Lender
specifies as necessary to preserve the after-tax yield the Lender
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
Lender and the Agent for the full amount of (i) Taxes, (ii) Other Taxes,
and (iii) Further Taxes in the amount that the respective Lender
reasonably specifies as necessary to preserve the after-tax yield the
Lender 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
50
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legally asserted. Payment under this indemnification shall be made
within 30 days after the date the Lender or the Agent makes written
demand therefor.
(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 Lender or the Agent the original or a certified copy of
a receipt evidencing payment thereof, or other evidence of payment
satisfactory to such Lender or the Agent.
(e) If the Company is required to pay any amount to any
Lender or the Agent pursuant to subsection (b) or (c) of this Section,
then such Lender 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
Lender is not otherwise disadvantageous to such Lender.
Section 4.02 Illegality. (a) If any Lender determines that the
----------
introduction of any Requirement of Law, or any change in any Requirement
of Law, or in the interpretation or administration of any Requirement of
Law, has made it unlawful, or that any central bank or other
Governmental Authority has asserted that it is unlawful, for any Lender
or its applicable Lending Office to make Offshore Rate Loans, then, on
notice thereof by the Lender to the Company through the Agent, any
obligation of that Lender to make Offshore Rate Loans shall be suspended
until the Lender notifies the Agent and the Company that the
circumstances giving rise to such determination no longer exist.
(b) If a Lender 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 Lender (with a copy to the Agent), prepay
in full such Offshore Rate Loans of that Lender then outstanding,
together with interest accrued thereon and amounts required under
Section 4.04, either on the last day of the Interest Period thereof,
- ------------
if the Lender may lawfully continue to maintain such Offshore Rate Loans
to such day, or immediately, if the Lender 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 Lender, in the amount of such
repayment, a Base Rate Loan.
(c) If the obligation of any Lender to make or maintain
Offshore Rate Loans has been so terminated or suspended, the Company may
elect, by giving notice to the Lender through the Agent that all Loans
which would otherwise be made by the Lender as Offshore Rate Loans shall
be instead Base Rate Loans.
(d) Before giving any notice to the Agent under this
Section, the affected Lender 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 Lender, be illegal or otherwise disadvantageous to
the Lender.
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Section 4.03 Increased Costs and Reduction of Return. (a) If
---------------------------------------
any Lender 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)
in or in the interpretation of any law or regulation or (ii) the
compliance by that Lender with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of
law), there shall be any increase in the cost to such Lender 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 Issuer, any
increase in the cost to the Issuer 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 Lender, additional amounts as are
sufficient to compensate such Lender for such increased costs.
(b) If any Lender shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any
Capital Adequacy Regulation, (iii) any change in the interpretation or
administration of any Capital Adequacy Regulation by any central bank or
other Governmental Authority charged with the interpretation or
administration thereof, or (iv) compliance by the Lender (or its Lending
Office) or any corporation controlling the Lender with any Capital
Adequacy Regulation, affects or would affect the amount of capital
required or expected to be maintained by the Lender or any corporation
controlling the Lender and (taking into consideration such Lender's or
such corporation's policies with respect to capital adequacy and such
Lender'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 Lender to
the Company through the Agent, the Company shall pay to the Lender, from
time to time as reasonably specified by the Lender, additional amounts
sufficient to compensate the Lender for such increase.
Section 4.04 Funding Losses. The Company shall reimburse each
--------------
Lender and hold each Lender harmless from any loss or expense which the
Lender 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;
(b) the failure of the Company to borrow, continue or
convert a 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 in
accordance with any notice delivered under Section 2.08;
------------
(d) the prepayment (including pursuant to Section 2.09)
------------
or other payment (including after acceleration thereof) of an Offshore
Rate Loan on a day that is not the last day of the relevant Interest
Period; or
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(e) the automatic conversion under Section 2.04 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 Lenders under this Section and under subsection
-----------
4.03(a), each Offshore Rate Loan made by a Lender (and each related
- -------
reserve, special deposit or similar requirement) shall be conclusively
deemed to have been funded at the LIBOR 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.
Section 4.05 Inability to Determine Rates. If the Agent
----------------------------
determines that for any reason adequate and reasonable means do not
exist for determining the Offshore Rate for any requested Interest
Period with respect to a proposed Offshore Rate Loan, or that the
Offshore Rate applicable pursuant to subsection 2.11(a) for any
------------------
requested Interest Period with respect to a proposed Offshore Rate Loan
does not adequately and fairly reflect the cost to the Lenders of
funding such Loan, the Agent will promptly so notify the Company and
each Lender. Thereafter, the obligation of the Lenders to make or
maintain Offshore Rate Loans hereunder shall be suspended until the
Agent revokes such notice in writing. Upon receipt of such notice, the
Company may revoke without cost or penalty any Notice of Borrowing or
Notice of Conversion/Continuation then submitted by it. If the Company
does not revoke such Notice, the Lenders 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, as the case may be.
Section 4.06 Certificates of Lenders. Any Lender claiming
-----------------------
reimbursement or compensation under this Article IV shall deliver to
----------
the Company (with a copy to the Agent) a certificate setting forth in
reasonable detail the amount payable to the Lender hereunder and such
certificate shall be conclusive and binding on the Company in the
absence of manifest error.
Section 4.07 Substitution of Banks. Upon the receipt by the
----------------------
Company from any Lender (an "Affected Lender") of a claim for
---------------
compensation under Section 4.03, of notice that it cannot make
------------
Offshore Rate Loans under Section 4.02, or of a claim for Taxes or
------------
Further Taxes under Section 4.01, then the Agent, at the Company's
------------
direction, shall: (i) request the Affected Lender to use good faith
efforts to obtain a replacement bank or financial institution
satisfactory to the Company to acquire and assume all or a ratable part
of all of such Affected Lender's Loans and Commitments at the face
amount thereof (a "Replacement Lender"); (ii) request one more of the
------------------
other Lenders to acquire and assume all or part of such Affected
Lender's Loans and Commitments; or (iii) designate a Replacement Lender.
Any such designation of a Replacement Lender under clause (i) or (iii)
shall be subject to the prior written consent of the Agent (which
consent shall not be unreasonably withheld).
Section 4.08 Survival. The agreements and obligations of the
--------
Company in this Article IV shall survive the payment of all other
----------
Obligations.
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ARTICLE V
CONDITIONS PRECEDENT
--------------------
Section 5.01 Conditions of Initial Credit Extensions. The
---------------------------------------
obligation of each Lender to make its initial Credit Extension hereunder
is subject to the condition that the Agent shall have received on or
before the date of the initial Credit Extension all of the following, in
form and substance satisfactory to the Agent and each Lender, and in
sufficient copies for each Lender and to the fulfillment of each of the
following conditions:
(a) Credit Agreement and Notes. This Agreement, the
--------------------------
Notes, the Swing Line Note and all other Loan Documents executed by each
party thereto;
(b) Resolutions; Incumbency.
-----------------------
(i) Copies of the resolutions of the board of
directors of the Company and each Subsidiary party to a Loan
Document 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 Subsidiary party to a Loan
Document 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 Subsidiary party to any Loan
Document 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 certificate or certificate of
status for the Company and each Subsidiary party to any Loan
Document from the Secretary of State (or similar, applicable
Governmental Authority) of its state of incorporation and such
other states as shall be reasonably requested by Agent;
(d) Legal Opinions.
--------------
(i) an opinion of Wittner, Poger, Spewak & Maylack,
P.C., general counsel to the Company and its Subsidiaries
addressed to the Agent and the Lenders substantially in the form
of Exhibit G;
---------
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(ii) an opinion of such local counsel to the Company
as shall be requested by the Agent and addressed to the Agent and
the Lenders (or arrangements therefor satisfactory to the Agent);
and
(iii) confirmation from counsel to each party to the
Stock Purchase Agreement that the Agent and the Lenders may rely
upon its opinion delivered pursuant to the Stock Purchase
Agreement;
(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 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 2.12 and 11.04;
------------- -----
(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 on and as of such date, as
----------
though made on and as of such date;
(ii) no Default or Event of Default exists or would
result from the Credit Extension; and
(iii) there has occurred since October 31, 1998, no
event or circumstance that has resulted or could reasonably be
expected to result in a Material Adverse Effect;
(g) Consummation of the SEI Acquisition. The SEI
-----------------------------------
Acquisition has been or is being consummated substantially
simultaneously herewith in accordance with the Stock Purchase Agreement
and all applicable Requirements of Law for a net cash purchase price not
in excess of $85 million, none of the Acquisition Documents shall have
been materially altered, amended or otherwise changed or supplemented
without the prior written consent of the Agent (which consent shall not
be unreasonably withheld), no conditions to closing set forth therein
have been waived and the final financial results of SEI shall be
substantially in accordance with the financial projections previously
provided to the Agent and the Lenders;
(h) Approvals and Consents. All requisite or necessary
----------------------
Governmental Authorities and third parties of a material nature shall
have approved or consented to the SEI Acquisition to the extent required
and/or all applicable waiting periods shall have expired (including
pursuant to Hart-Scott Rodino), all such approvals and consents shall
remain in effect, there shall be no governmental or judicial action,
actual or threatened, that has a reasonable likelihood of restraining,
preventing or imposing burdensome conditions on the SEI Acquisition
55
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and no law or regulation shall be applicable which in the judgment of
the Agent could have such effect;
(i) ESOP Subordination. A subordination and
------------------
intercreditor agreement by and among the Company, the Agent and the ESOP
Lender in form and substance satisfactory to the Agent, together with
such UCC-3 amendments as may be reasonably requested by the Agent to
evidence such subordination of the Lien of the ESOP Lender;
(j) Collateral Documents. The Collateral Documents,
--------------------
executed by the Company and the Subsidiaries, in appropriate form for
recording, where necessary, together with:
(i) copies of all UCC-l financing statements to be
filed, registered or recorded to perfect the security interests of
the Agent for the benefit of the Lenders, and other filings,
registrations and recordings necessary and advisable to perfect
the Liens of the Agent for the benefit of the Lenders in
accordance with applicable law;
(ii) written advice relating to such Lien and
judgment searches as the Agent shall have requested, and such
termination statements or other documents as may be necessary to
confirm that the Collateral is subject to no other Liens in favor
of any Persons (other than Permitted Liens);
(iii) all certificates and instruments representing
the Pledged Collateral and stock and note transfer powers
executed in blank with signatures guaranteed as the Agent may
specify;
(iv) to the extent requested by the Agent, funds
sufficient to pay any filing or recording tax or fee in connection
with any and all UCC-1 financing statements and the Mortgages;
(v) with respect to the Mortgaged Property, an ALTA
Form B (or other form acceptable to the Agent and the Lenders)
mortgagee policy of title insurance or a binder issued by a title
insurance company satisfactory to the Agent insuring (or
undertaking to insure, in the case of a binder) that the Mortgages
create and constitute a valid first Lien against the Mortgaged
Property in favor of the Agent, subject only to exceptions
reasonably acceptable to the Agent, with such endorsements and
affirmative insurance as the Agent may reasonably request;
(vi) evidence that the Agent has been named as loss
payee under all policies of casualty insurance, and as additional
insured under all policies of liability insurance, required by the
Mortgage (or arrangements therefor satisfactory to the Agent);
(vii) flood insurance and earthquake insurance, to the
extent applicable, on terms reasonably satisfactory to the Agent
(or arrangements therefor satisfactory to the Agent);
56
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(viii) current ALTA surveys and surveyor's certification
as to all Mortgaged Property to the extent reasonably required by
the Agent, each in form and substance reasonably satisfactory to
the Agent;
(ix) proof of payment (or arrangements therefor
satisfactory to the Agent) of all title insurance premiums,
documentary stamp or intangible taxes, recording fees and mortgage
taxes payable in connection with the recording of any Mortgage or
the issuance of the title insurance policies (whether due on the
Closing Date or in the future) including sums due in connection
with any future advances;
(x) such consents, estoppels, subordination
agreements, waivers and other documents and instruments executed
by landlords, tenants, bailees, warehousemen and other Persons
party to material contracts relating to any Collateral as to which
the Agent shall be granted a Lien for the benefit of the Lenders,
as requested by the Agent; and
(xi) evidence that all other actions necessary or,
in the opinion of the Agent, desirable to perfect and protect the
first priority Lien created by the Collateral Documents, and to
enhance the Agent's ability to preserve and protect its interests
in and access to the Collateral, have been taken (or arrangements
therefor satisfactory to the Agent have been made);
(k) Insurance Policies. Standard lenders' payable
------------------
endorsements with respect to the insurance policies or other instruments
or documents evidencing insurance coverage on the properties of the
Company in accordance with Section 6.18 (or arrangements therefor
------------
satisfactory to the Agent);
(l) Environmental Review. Such environmental site
--------------------
assessments with respect to the real property of the Company and its
Subsidiaries as shall be requested by the Agent;
(m) Repayment of Prior Indebtedness. All outstanding
-------------------------------
Indebtedness of the Company, SEI or any of their Subsidiaries not
specified on Schedule 8.05 or otherwise permitted by Section 8.05
------------- ------------
shall have been paid in full and all Liens securing such Indebtedness
shall have been terminated;
(n) Corporate Proceedings. (i) All corporate and legal
---------------------
proceedings and all instruments and agreements to be executed by the
Company and each of its Subsidiaries in connection with the transactions
contemplated by this Agreement and the Loan Documents shall be
reasonably satisfactory in form and substance to the Agent, and the
Agent shall have received all information and copies of all
certificates, documents and papers, including good standing
certificates, bring-down certificates and any other records of corporate
proceedings and governmental approvals, if any, which the Agent
reasonably may have requested in connection therewith, such documents
and papers, where appropriate, to be certified by proper corporate or
governmental authorities;
57
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(ii) The ownership and capital structure (including
without limitation, the terms of any capital stock, options, warrants or
other securities issued by the Company or any of its Subsidiaries) of
the Company and its Subsidiaries shall be in form and substance
reasonably satisfactory to the Agent and the Lenders;
(o) Tax and Accounting Aspects of Transactions. The
------------------------------------------
Company shall have delivered to the Agent and each Lender the financial
statements as provided in subsection 6.11(a) and (b) in form and
--------------------------
substance satisfactory to the Agent and the Required Lenders;
(p) Solvency. The Agent shall have received a solvency
--------
certificate from a Responsible Officer addressed to the Agent and each
of the Lenders and dated the Closing Date and supporting the
conclusions, that, after giving effect to the SEI Acquisition and the
incurrence of all financing contemplated herein, the Company is not
insolvent and will not be rendered insolvent by the indebtedness
incurred in connection herewith, will not be left with unreasonably
small capital with which to engage in its respective businesses and will
not have incurred debts beyond its ability to pay such debts in the
ordinary course as they mature and become due;
(q) Year 2000 Information confirming that the Company's,
---------
SEI's and their respective Subsidiaries' material computer applications
and those of its key vendors and customers will, on a timely basis,
adequately address the Year 2000 Problem in all material respects;
(r) Litigation. There shall be no litigation or
----------
administrative proceedings or other legal or regulatory developments,
actual or threatened, that, in the judgment of the Agent, could
reasonably be expected to have a material adverse effect on the
business, assets, liabilities, operations, properties, prospects or
condition (financial or otherwise) of or relating to (i) the Company,
SEI and their respective Subsidiaries, (ii) the ability of the Company
or any of its Subsidiaries to perform their obligations under the Loan
Documents, (iii) the ability of the parties to consummate the SEI
Acquisition or (iv) the validity or enforceability of any of the Loan
Documents or the rights, remedies and benefits available to the Agent,
the Collateral Agent and the Lenders under the Loan Documents, and no
injunction or other restraining order shall have been issued or a
hearing therefor be pending or noticed with respect to the Company, SEI
or any of their respective subsidiaries concerning the SEI Acquisitions,
the Loan Documents or the transactions contemplated hereby or thereby;
(s) No Material Adverse Change. There shall not have
--------------------------
occurred or become known to the Company or SEI any material adverse
condition affecting, or material adverse change with respect to, (i) the
results of operations, condition (financial or otherwise), or prospects
of the Company and its Subsidiaries, taken as a whole, since October 31,
1998 or (ii) the results of operations or condition (financial or
otherwise) of SEI and its Subsidiaries, taken as a whole, since
September 30, 1998;
(t) Borrowing Availability. Evidence satisfactory to the
----------------------
Agent that, as of the Closing Date, Net Borrowing Availability is not
less than $30,000,000 after giving effect to the initial Revolving Loan
(on a pro forma basis, with trade payables continuing to be paid in
58
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accordance with current practices and with expenses and liabilities
being paid in the ordinary course of business and without acceleration
of sales); and
(u) Other Documents. Such other approvals, opinions,
---------------
documents or materials as the Agent or any Lender may reasonably
request.
Section 5.02 Conditions to All Credit Extensions. The
-----------------------------------
obligation of each Revolving Lender to make any Revolving Loan to be
made by it (including its initial Revolving Loan) and the obligation of
the Issuer 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 or Issuance Date:
(a) Notice, Application. The Agent shall have received
-------------------
a Notice of Borrowing or in the case of any Issuance of any Letter of
Credit, the Issuer and the Agent shall have received an L/C Application
or L/C Amendment Application, as required under Section 3.02;
------------
(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 Issuance
Date with the same effect as if made on and as of such Borrowing 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 as of such earlier date); and
(c) No Existing Default. No Default or Event of Default
-------------------
shall exist or shall result from such Borrowing or Issuance.
Each Notice of Borrowing 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 or Issuance Date, as
applicable, that the conditions in this Section 5.02 are satisfied.
------------
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company represents and warrants to the Agent and each Lender
that both before and after giving effect to the consummation of the
transactions contemplated by the Transaction Documents:
Section 6.01 Corporate Existence and Power. The Company and
-----------------------------
each of its Material Subsidiaries:
(a) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
incorporation;
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(b) has the power and authority and all governmental
licenses, authorizations, consents and approvals to own its assets, to
carry on its business and to execute, deliver, and perform its
obligations under the Transaction Documents to which it is a party;
(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 (c) or clause (d), to the extent that
the failure to do so could not reasonably be expected to have a Material
Adverse Effect.
Section 6.02 Corporate Authorization; No Contravention. The
-----------------------------------------
execution, delivery and performance by the Company and its Subsidiaries
of this Agreement and each other Transaction 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
Contractual Obligation to which such Person is a party or any order,
injunction, writ or decree of any Governmental Authority to which such
Person or its property is subject; or
(c) violate any Requirement of Law.
Section 6.03 Governmental Authorization. No approval, consent,
--------------------------
exemption, authorization, or other action by, or notice to, or filing
with, any Governmental Authority (except those that have been obtained
and remain in effect and for recordings or filings in connection with
the Liens granted to the Agent under the Collateral Documents) 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 Transaction Document.
Section 6.04 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.
Section 6.05 Litigation. There are no actions, suits,
----------
proceedings, claims or disputes pending, or to the best knowledge of the
Company, threatened or contemplated, at law, in equity, in arbitration
or before any Governmental Authority, against the Company, or its
Subsidiaries or any of their respective properties:
(a) which purport to affect or pertain to this Agreement
or any other Transaction Document, or any of the transactions
contemplated hereby or thereby; or
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(b) except as disclosed on Schedule 6.05, as to which
-------------
there exists a substantial likelihood of an adverse determination, which
determination could 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 Transaction Document, or
directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.
Section 6.06 No Default. No Default or Event of Default exists
----------
or would result from the incurring of any Obligations by the Company or
from the grant or perfection of the Liens of the Agent and the Lenders
on the Collateral. 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 9.01(e).
------------------
Section 6.07 ERISA Compliance. Except as specifically
----------------
disclosed in Schedule 6.07:
-------------
(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) no Pension Plan has any Unfunded Pension
Liability; (iii) neither the Company nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability under Title IV
of ERISA with respect to any Pension Plan (other than premiums due and
not delinquent under Section 4007 of ERISA); (iv) neither the Company
nor any ERISA Affiliate has incurred, or reasonably expects to incur,
any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability)
under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v) neither the Company nor any ERISA Affiliate has engaged in
a transaction that could be subject to Section 4069 or 4212(c) of ERISA.
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Section 6.08 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 8.07. 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.
Section 6.09 Title to Properties. The Company and each
-------------------
Material Subsidiary have good record and marketable title in fee simple
to, or valid leasehold interests in, all real property necessary or used
in the ordinary conduct of their respective businesses, except for such
defects in title as could not, individually or in the aggregate,
reasonably be expected to 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.
Section 6.10 Taxes. The Company and its Subsidiaries have
-----
filed all Federal and other material tax returns and reports required to
be filed, and have paid all Federal and other material taxes,
assessments, fees and other governmental charges levied or imposed upon
them or their properties, income or assets otherwise due and payable,
except those which are being contested in good faith by appropriate
proceedings and for which adequate reserves have been provided in
accordance with GAAP. There is no proposed tax assessment against the
Company or any Subsidiary that would, if made, have a Material Adverse
Effect.
Section 6.11 Financial Condition. (a) Each of (i) the audited
-------------------
consolidated financial statements of the Company and its Subsidiaries
dated October 31, 1996, October 31, 1997 and October 31, 1998, and the
related consolidated statements of income or operations, shareholders'
equity and cash flows for the fiscal years ended on such dates, (ii) the
unaudited consolidated financial statements of the Company and its
Subsidiaries dated July 31, 1999, and the related consolidated
statements of income or operations, shareholders' equity and cash flows
for the nine months ended on that date, (iii) to best of the Company's
knowledge the audited consolidated financial statements of SEI and its
Subsidiaries dated September 30, 1997 and September 30, 1998, and the
related consolidated statements of income or operations, shareholders'
equity and cash flows for the fiscal years ended on such dates and (iv)
to best of the Company's knowledge the unaudited consolidated financial
statements of SEI and its Subsidiaries dated July 31, 1999, and the
related consolidated statements of income or operations, shareholders'
equity and cash flows for the ten months ended on that date:
(x) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except
for the absence of footnotes and as otherwise expressly noted
therein, subject, in the case of such unaudited financial
statements, to ordinary, good faith year end adjustments;
(y) fairly present the financial condition of the
Company and its Subsidiaries or SEI and its Subsidiaries, as
applicable, as of the date thereof and results of operations for
the period covered thereby; and
(z) except as specifically disclosed in Schedule 6.11
-------------
or Schedule 8.08 show all material indebtedness and other
-------------
liabilities of the Company and its Subsidiaries, SEI and its
Subsidiaries, as applicable, as of the date thereof.
62
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(b) The unaudited Pro Forma Financial Statements are
attached hereto as Schedule 6.11. As of the date of the Agreement,
-------------
the Pro Forma Financial Statements (other than the projections contained
therein) fairly represent the Company's and the Subsidiaries' assets,
liabilities, financial condition and results of operations on a
consolidated basis in accordance with GAAP (except for the absence of
footnotes and statements of cash flow and recognizing such Pro Forma
Financial Statements involve estimated purchase price accounting
adjustments), consistently applied and taking into account the
transactions contemplated by the Transaction Documents. The projections
contained in the Pro Forma Financial Statements represent good faith
estimates of the future financial performance of the Company and its
Subsidiaries.
(c) Since October 31, 1998, there has been no Material
Adverse Effect.
Section 6.12 Environmental Matters. (a) Except as
---------------------
specifically disclosed in Schedule 6.12, the on-going operations of
-------------
the Company and each of its Subsidiaries comply in all respects with all
Environmental Laws, except such non-compliance which would not (if
enforced in accordance with applicable law) result in liability in
excess of $1,000,000 in the aggregate (exclusive of amounts payable
under insurance policies and indemnity agreements which the Company or
such Subsidiary reasonably expects to receive).
(b) Except as specifically disclosed in Schedule 6.12,
-------------
the Company and each of its Subsidiaries have obtained all licenses,
permits, authorizations and registrations required under any
Environmental Law ("Environmental Permits") and necessary for their
---------------------
respective ordinary course operations, all such Environmental Permits
are in good standing, and the Company and each of its Subsidiaries are
in compliance with all material terms and conditions of such
Environmental Permits.
(c) Except as specifically disclosed in Schedule 6.12,
-------------
none of the Company, any of its Subsidiaries or any of their respective
present property or operations, is subject to any outstanding written
order from or agreement with any Governmental Authority, nor subject to
(i) any judicial or docketed administrative proceeding, respecting any
Environmental Law, Environmental Claim or Hazardous Material or (ii) to
the extent that it could reasonably be expected to have a Material
Adverse Effect, any claim, proceeding or written notice from any Person
regarding any Environmental Law, Environmental Claim or Hazardous
Material.
(d) Except as specifically disclosed in Schedule 6.12,
-------------
there are no Hazardous Materials or other conditions or circumstances
existing with respect to any property of the Company or any Subsidiary,
or arising from operations prior to the Closing Date, of the Company or
any of its Subsidiaries that would reasonably be expected to give rise
to Environmental Claims with a potential liability of the Company and
its Subsidiaries in excess of $1,000,000 in the aggregate for all such
conditions, circumstances and properties (exclusive of amounts payable
under insurance policies and indemnity agreements which the Company or
such Subsidiary reasonably expects to receive). Except as disclosed in
Schedule 6.12, (i) neither the Company nor any Subsidiary has any
- -------------
underground storage tanks (x) that are not properly registered or
permitted under applicable Environmental Laws, or (y) that are leaking
or disposing of Hazardous Materials off-site, which in any such case
could reasonably be expected to have a
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Material Adverse Effect, and (ii) the Company and its Subsidiaries have
met all material notification requirements under applicable
Environmental Laws.
Section 6.13 Collateral Documents. (a) The provisions of each
--------------------
of the Collateral Documents are effective to create in favor of the
Agent for the benefit of the Lenders, a legal, valid and enforceable
first priority security interest in all right, title and interest of the
Company and its Subsidiaries in the collateral described therein,
subject only to any Permitted Liens.
(b) Each Mortgage when delivered will be effective to
grant to the Agent for the benefit of the Lenders a legal, valid and
enforceable lien on all the right, title and interest of the mortgagor
under such Mortgage in the mortgaged property described therein. When
each such Mortgage is duly recorded in the offices listed on the
schedule to such Mortgage and the mortgage recording fees and taxes in
respect thereof are paid and compliance is otherwise had with the formal
requirements of state law applicable to the recording of real estate
mortgages generally, each such mortgaged property, subject to the
encumbrances and exceptions to title set forth therein and any Permitted
Liens and except as noted in the title policies delivered to the Agent
pursuant to Section 5.01, is subject to a legal, valid, enforceable
------------
and perfected first priority lien; and when financing statements have
been filed in the offices specified in such Mortgage, such Mortgage also
creates a legal, valid, enforceable and perfected first lien on, and
security interest in, all right, title and interest of the Company or
such Subsidiary under such Mortgage in all personal property and
fixtures covered by such Mortgage, subject to no other Liens, except the
encumbrances and exceptions to title set forth therein and except as
noted in the title policies delivered to the Agent pursuant to Section
-------
5.01, and Permitted Liens.
- ----
(c) All representations and warranties of the Company and
any of its Subsidiaries party thereto contained in the Collateral
Documents are true and correct.
Section 6.14 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 Federal or state statute
or regulation limiting its ability to incur Indebtedness.
Section 6.15 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.
Section 6.16 Copyrights, Patents, Trademarks and Licenses, etc.
-------------------------------------------------
The Company and its Material Subsidiaries own or are licensed or
otherwise have the right to use all of the patents, trademarks, service
marks, trade names, copyrights, contractual franchises, authorizations
and other rights that are reasonably necessary for the operation of
their respective businesses, without conflict with the rights of any
other Person. To the best knowledge of the Company, no slogan or other
advertising device, product, process, method, substance, part or other
material now employed, or now contemplated to be employed, by the
Company or any Subsidiary infringes
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<PAGE>
upon any rights held by any other Person. Except as specifically
disclosed in Schedule 6.16, no claim or litigation regarding any of
-------------
the foregoing is pending or, to the knowledge of the Company,
threatened, and no patent, invention, device, application, principle or
any statute, law, rule, regulation, standard or code is pending or, to
the knowledge of the Company, proposed, which, in either case, could
reasonably be expected to have a Material Adverse Effect.
Section 6.17 Capitalization; Subsidiaries. As of the Closing
----------------------------
Date, after giving effect to the consummation of the transactions
contemplated by the Transaction Documents, the Company has no
Subsidiaries other than those specifically disclosed in part (a) of
Schedule 6.17 hereto and has no equity investments in any other
- -------------
corporation or entity other than those specifically disclosed in part
(b) of Schedule 6.17. The capitalization of the Company and its
-------------
Subsidiaries as of the Closing Date is as set forth on part (a) of
Schedule 6.17.
- -------------
Section 6.18 Insurance. Except as specifically disclosed in
---------
Schedule 6.18, 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 are similarly situated.
Section 6.19 Swap Obligations. Neither the Company nor any of
----------------
its Subsidiaries has incurred 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 and has not
relied on any swap counterparty or any Affiliate of any swap
counterparty in determining whether to enter into any Swap Contract.
Section 6.20 Acquisition Documents. The Company has delivered
---------------------
to the Agent true, complete and correct copies of the Acquisition
Documents (including all schedules, exhibits, annexes, amendments,
supplements, modifications and all other documents delivered pursuant
thereto or in connection therewith). The Acquisition Documents as
originally executed and delivered by the parties thereto have not been
amended, waived, supplemented or modified without the consent of the
Agent. To the Company's knowledge, the representations and warranties
of the parties set forth therein are true and correct in all material
respects as of the date thereof. On the date of this Agreement, neither
the Company nor, to the Company's knowledge, any other party to any of
the Acquisition Documents is in default in the performance of or
compliance with any provisions under the Acquisition Documents. The SEI
Acquisition is being consummated contemporaneously with the initial
Borrowing Date in accordance with applicable laws and regulations.
Section 6.21 Solvency. The Company and each of its Material
--------
Subsidiaries are Solvent.
Section 6.22 ESOP Subordination Provisions. The subordination
-----------------------------
provisions contained in the ESOP Documents are enforceable against the
Company and the holders thereof, and the Loans are within the definition
of "Senior Debt" included in such provisions.
Section 6.23 Year 2000 Compliance. The Company and its
--------------------
Subsidiaries have conducted a comprehensive review and assessment of its
computer applications, and have made
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inquiry of their material suppliers, vendors and customers, with respect
to any defect in computer software, data bases, hardware, controls and
peripherals related to the occurrence of the year 2000 or the use of any
date after December 31, 1999 in connection therewith. Based on the
foregoing review, assessment and inquiry, the Company believes that no
such defect could reasonably be expected to have a Material Adverse
Effect.
Section 6.24 Full Disclosure. None of the representations or
---------------
warranties made by the Company or any Subsidiary in the Loan Documents
as of the date such representations and warranties are made or deemed
made, and none of the statements contained in any exhibit, report,
statement or certificate furnished by or on behalf of the Company or any
Subsidiary in connection with the Loan Documents (including the offering
and disclosure materials delivered by or on behalf of the Company to the
Lenders prior to the Closing Date), contains any untrue statement of a
material fact or omits any material fact required to be stated therein
or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time
when made or delivered.
ARTICLE VII
AFFIRMATIVE COVENANTS
---------------------
So long as any Lender shall have any Commitment hereunder,
or any Loan or other Obligation shall remain unpaid or unsatisfied, or
any Letter of Credit shall remain outstanding, unless the Required
Lenders waive compliance in writing:
Section 7.01 Financial Statements. The Company shall deliver
--------------------
to the Agent, in form and detail satisfactory to the Agent and the
Required Lenders, with sufficient copies for each Lender:
(a) as soon as available, but not later than 120 days
after the end of each fiscal year (commencing with the fiscal year ended
October 31, 1999), 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, 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
Pricewaterhouse Coopers 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;
(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 January 31, 2000), a copy of
the unaudited consolidated balance sheet of the Company and its
Subsidiaries as of the end of such fiscal 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 fiscal quarter, together with a consolidating income statement for
66
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such period, 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 footnotes), the financial
position and the results of operations of the Company and the
Subsidiaries; and
(c) as soon as available, but not later than 25 days after
the end of each fiscal quarter of each fiscal year (commencing with the
fiscal quarter ending October 31, 1999), a Borrowing Base Certificate as
of the end of the immediately preceding fiscal quarter, substantially in
the form of Exhibit H and certified by a Responsible Officer to be
---------
true and correct as of the date thereof; provided, however, if the
-------- -------
borrowing availability is less than $5,000,000 as reported on the most
recently delivered Borrowing Base Certificate, the Company shall deliver
a Borrowing Base Certificate as soon as available, but not later than 25
days after the end of each month. In the event of a material change in
the size or scope of the Eligible Inventory or Eligible Accounts of the
Company and its Subsidiaries, or in the event of a circumstance having a
material adverse effect upon the collateral or the operations of the
Company, the Agent may in its discretion require the submission of a
Borrowing Base Certificate at intervals more frequent than quarterly.
Section 7.02 Certificates; Other Information. The Company
-------------------------------
shall furnish to the Agent, with sufficient copies for each Lender:
(a) concurrently with the delivery of the financial
statements referred to in subsection 7.01(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 7.01(a) and (b), a Compliance
------------------- ---
Certificate executed by a Responsible Officer;
(c) concurrently with the delivery of the financial
statements referred to in subsection 7.01(a), (i) a consolidating
------------------
balance sheet and income statement for such year (which need not be
audited) and, in the case of such income statement, setting forth in
comparative form the figures for the previous fiscal year, and (ii) a
budget for the next succeeding four fiscal quarters;
(d) promptly, copies of all financial statements and
reports that the Company sends to its shareholders, and copies of all
financial statements and regular, periodic or special reports (including
Forms 10K, 10Q and 8K) that the Company or any Subsidiary may make to,
or file with, the SEC; and
(e) promptly, such additional information regarding the
business, financial or corporate affairs of the Company or any
Subsidiary as the Agent, at the request of any Lender, may from time to
time reasonably request.
Section 7.03 Notices. The Company shall promptly notify the
-------
Agent:
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(a) of the occurrence of any Default or Event of Default,
and of the occurrence or existence of any event or circumstance that
foreseeably will become a Default or Event of Default;
(b) of any matter that has resulted or may reasonably be
expected to result in a Material Adverse Effect, including (i) any
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 an officer of the Company or
any Subsidiary), and deliver to the Agent 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;
(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 resulting in a material
contribution obligation; 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, but in no event later than 15 days after, any
officer of the Company or any Subsidiary becoming aware of (i) any and
all enforcement, investigation, cleanup, removal or other governmental
or regulatory actions instituted, completed or threatened against the
Company or any Subsidiary or any of their respective properties pursuant
to any applicable Environmental Laws which could reasonably be expected
to have a Material Adverse Effect, (ii) all other material Environmental
Claims, and (iii) any environmental or similar condition on any real
property adjoining or in the vicinity of the property of the Company or
any Subsidiary that could reasonably be anticipated to cause such
property of the Company or such Subsidiary or any part thereof to be
subject to any restrictions on the ownership, occupancy, transferability
or use of such property under any Environmental Laws that could
reasonably be expected to have a Material Adverse Effect.
68
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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.
Section 7.04 Preservation of Corporate Existence, Etc. The
----------------------------------------
Company shall, and shall cause each Subsidiary to:
(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its state or
jurisdiction of incorporation, except to the extent otherwise expressly
permitted herein;
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business
except in connection with transactions permitted by Section 8.03 and
------------
sales of assets permitted by Section 8.02;
------------
(c) use reasonable efforts, in the ordinary course of
business, to preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation of which
could reasonably be expected to have a Material Adverse Effect.
The Company shall cause each Subsidiary which is a Wholly-Owned
Subsidiary as of the date hereof to continue to exist as a Wholly-Owned
Subsidiary so long as it shall be a Subsidiary.
Section 7.05 Maintenance of Property. The Company shall
-----------------------
maintain, and shall cause each Subsidiary to maintain, and preserve all
its property which is used or useful in its business in reasonably good
working order and condition, ordinary wear and tear excepted, and make
all necessary repairs thereto and renewals and replacements thereof
except where the failure to do so could not reasonably be expected to
have a Material Adverse Effect.
Section 7.06 Insurance. In addition to insurance requirements
---------
set forth in the Collateral Documents, the Company shall maintain, and
shall cause each Subsidiary to maintain, with financially sound and
reputable independent insurers, insurance with respect to its properties
and business against loss or damage of the kinds 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; including workers' compensation
insurance, public liability and property and casualty insurance which
amount shall not be materially reduced by the Company in the absence of
30 days' prior written notice to the Agent. All casualty insurance
maintained by the Company shall name the Agent as loss payee and all
liability insurance shall name the Agent as additional insured for the
benefit of the Lenders, as their interests may appear. Upon request of
the Agent or any Lender, the Company shall furnish the Agent, with
sufficient copies for each Lender, at reasonable intervals (but not more
than once per calendar year) a certificate of a Responsible Officer of
the Company (and, if requested by the Agent, any
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insurance broker of the Company) setting forth the nature and extent
of all insurance maintained by the Company and its Subsidiaries in
accordance with this Section or any Collateral Documents (and which, in
the case of a certificate of a broker, were placed through such broker).
Section 7.07 Payment of Obligations. The Company shall, and
----------------------
shall cause each Subsidiary to, pay and discharge as the same shall
become due and payable, all their respective obligations and
liabilities, including:
(a) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the same
are being contested in good faith by appropriate proceedings and
adequate reserves in accordance with GAAP are being maintained by the
Company or such Subsidiary; and
(b) all lawful claims which, if unpaid, would by law
become a Lien upon its property.
Section 7.08 Compliance with Laws. The Company shall comply,
--------------------
and shall cause each Subsidiary to comply, in all material respects with
all Requirements of Law of any Governmental Authority having
jurisdiction over it or its business (including the Federal Fair Labor
Standards Act), except such as may be contested in good faith or as to
which a bona fide dispute may exist.
Section 7.09 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.
Section 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 Lender 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,
to perform collateral audits, and to discuss their respective affairs,
finances and accounts with their respective directors, officers, and
independent public accountants, all at such reasonable times during
normal business hours and as often as may be reasonably desired, upon
reasonable advance notice to the Company. The Company shall pay or
reimburse the expenses of the Agent incurred in connection with the
foregoing not to exceed $15,000 in any fiscal year; provided,
--------
however, the Company shall have no obligation to pay or reimburse the
- -------
expenses of any Lender incurred in connection with the foregoing;
provided, further, when an Event of Default exists the Agent or any
- -------- -------
Lender may do any of the foregoing at the expense of the Company at any
time during normal business hours and without advance notice.
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<PAGE>
Section 7.11 Environmental Laws. (a) The Company shall, and
------------------
shall cause each Subsidiary to, conduct its operations and keep and
maintain its property in compliance with all Environmental Laws, the
violation of which could reasonably be expected to result in liability
to the Company and its Subsidiaries in excess of $1,000,000 in the
aggregate (net of any payments under insurance policies or indemnity
agreements which the Company or such Subsidiary reasonably expects to
receive).
(b) Upon the written request of the Agent or any Lender,
the Company shall submit and cause each of its Subsidiaries to submit,
to the Agent with sufficient copies for each Lender, at the Company's
sole cost and expense, at reasonable intervals, a report providing an
update of the status of any environmental, health or safety compliance,
hazard or liability issue identified in any notice or report required
pursuant to subsection 7.03(e), that could, individually or in the
------------------
aggregate, result in liability in excess of $1,000,000 (net of any
payments under insurance policies or indemnity agreements which the
Company or such Subsidiary reasonably expects to receive).
Section 7.12 Use of Proceeds. The Company shall use the
---------------
proceeds of the Loans (a) to finance in part the SEI Acquisition and to
pay certain fees and expenses related thereto, (b) to refinance existing
Indebtedness of the Company and its Subsidiaries and of SEI and (c) for
working capital and other general corporate purposes, including to
finance performance of its obligations under any Government Contract or
Subcontract, not in contravention of any Requirement of Law or of any
Loan Document.
Section 7.13 Further Assurances. (a) The Company shall ensure
------------------
that all written information, exhibits and reports furnished to the
Agent or the Lenders do not and will not contain any untrue statement of
a material fact and do not and will not omit to state any material fact
or any fact necessary to make the statements contained therein not
misleading in light of the circumstances in which made, and will
promptly disclose to the Agent and the Lenders and correct any defect or
error that may be discovered therein or in any Loan Document or in the
execution, acknowledgment or recordation thereof.
(b) Promptly upon request by the Agent or the Required
Lenders, the Company shall (and shall cause any of its Subsidiaries to)
do, execute, acknowledge, deliver, record, re-record, file, re-file,
register and re-register, any and all such further acts, deeds,
conveyances, security agreements, mortgages, assignments, estoppel
certificates, financing statements and continuations thereof,
termination statements, notices of assignment, transfers, certificates,
assurances and other instruments the Agent or such Lenders, as the case
may be, may reasonably require from time to time in order (i) to carry
out more effectively the purposes of this Agreement or any other Loan
Document, (ii) to subject to the Liens created by any of the Collateral
Documents any of the properties, rights or interests covered by any of
the Collateral Documents, (iii) to perfect and maintain the validity,
effectiveness and priority of any of the Collateral Documents and the
Liens intended to be created thereby, and (iv) to better assure, convey,
grant, assign, transfer, preserve, protect and confirm to the Agent and
Lenders the rights granted or now or hereafter intended to be granted to
the Lenders under any Loan Document or under any other document executed
in connection therewith.
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<PAGE>
Section 7.14 Additional Guaranties and Personal Property
--------------------------------------------
Pledge. Effective upon any Person becoming a Domestic Subsidiary
- ------
(other than any Domestic Subsidiary that is not a Material Subsidiary),
such Person shall (i) join as a guarantor under the Subsidiary Guaranty
and the Subsidiary Security Agreement pursuant to amendments thereto in
form and substance acceptable to the Agent and (ii) provide an
intercompany note to the extent such exists to the Company which shall
be pledged to the Agent pursuant to the Pledge Agreement; provided,
--------
that any Domestic Subsidiary which does not become a party to the
Subsidiary Guaranty and the Subsidiary Security Agreement because it
does not satisfy the requirement in the parenthetical clause above shall
execute the Subsidiary Guaranty and the Subsidiary Security Agreement if
it subsequently acquires sufficient assets to satisfy such requirement;
provided, further, that if all Domestic Subsidiaries which are not
- -------- -------
party to the Subsidiary Guaranty and the Subsidiary Security Agreement
hold 2.0% or more of the total assets of the Company and its
Subsidiaries, then such Domestic Subsidiaries shall promptly execute the
Subsidiary Guaranty and the Subsidiary Security Agreement so that, upon
such execution, such 2.0% threshold is no longer exceeded. The Company
shall promptly notify the Agent at any time at which, in accordance with
this Section 7.14, any Subsidiary shall be required to join as a
------------
guarantor under the Subsidiary Guaranty and the Subsidiary Security
Agreement.
Section 7.15 Additional Real Property. Concurrent with (a) the
------------------------
acquisition by the Company or any Domestic Subsidiary of any parcel of
property which has a fair market value in excess of $500,000 or (b) the
acquisition or lease by the Company or any Domestic Subsidiary of any
parcel of property which, in the Agent's determination, is otherwise of
significant value to the operations of the Company and its Subsidiaries,
unless the Required Lenders shall otherwise direct, the Company shall,
or shall cause such Domestic Subsidiary to, execute and deliver to the
Agent a Mortgage on such parcel or leasehold substantially in the form
of the applicable Mortgages executed and delivered on the date hereof,
together with such other of the items specified in subsection 5.01(j)
------------------
as shall be applicable thereto, in each case in form and substance
reasonably acceptable to the Agent.
Section 7.16 Additional Pledge. Effective upon any Person
-----------------
becoming a Subsidiary, the shareholder or shareholders thereof, shall
pledge the stock or other equity interests thereof to the Agent pursuant
to documentation reasonably acceptable to the Agent; provided, that
--------
such shareholder shall only be required to pledge 65% of the equity
interests of any Subsidiary which is not a Domestic Subsidiary.
Section 7.17 Year 2000 Compliance. The Company shall perform
--------------------
all acts reasonably necessary to ensure that the Company, and any
business in which the Company holds a substantial interest, become Year
2000 Compliant in a timely manner, and in any event by December 1, 1999.
Such acts shall include, without limitation, performing a comprehensive
review and assessment of all of the Company's systems and adopting a
detailed plan, with itemized budget, for the remediation, monitoring and
testing of such systems. As used in this paragraph, "Year 2000
Compliant" shall mean, in regard to any entity, that all software,
hardware, firmware, computer equipment and goods, or computer systems
under such entity's control and material to the business operations or
financial condition of such entity, will properly perform without error
relating to date data before, during and after the year 2000.
72
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<PAGE>
Section 7.18 Government Contracts. The Company shall (i)
--------------------
deliver or cause to be delivered to the Agent a list in the form of
Schedule 7.18 of each Government Contract and Government Subcontract
- -------------
which has a remaining contract value in excess of $500,000, and any
amendments thereto, to which the Company or any of its Subsidiaries is a
party and (ii) notify the Agent of (A) the name and address of any
surety with respect to any such Government Contract or Subcontract to
which the Company or any of its Subsidiaries is a party and (B) the
cancellation or early termination of any of such Government Contracts
or, Subcontracts.
Section 7.19 SEI Financial Statements. The Company shall
------------------------
deliver the audited consolidated financial statements of SEI dated
September 30, 1999, and the related consolidated statements of income or
operations, shareholders' equity and cash flows for the fiscal year
ended on that date to the Agent no later than the date which is sixty
(60) days after the date of the initial Credit Extension hereunder.
Section 7.20 Interest Rate Protection. Within thirty (30)
------------------------
Business Days of the Closing Date, enter into an interest rate swap, cap
or collar (i) covering an initial notional principal amount of at least
$45,000,000, reduced over time to reflect scheduled principal payments
of the Term Loan, (ii) for a maximum interest rate with respect to such
notional amount no greater than three percent (3%) in excess of the
interest rate applicable to Offshore Rate Loans on the Closing Date,
(iii) with a term ending no earlier than three (3) years from the
Closing Date, and (iv) on such other terms and conditions as shall be
reasonably satisfactory to the Agent.
ARTICLE VIII
NEGATIVE COVENANTS
------------------
So long as any Lender shall have any Commitment hereunder, or any
Loan or other Obligation shall remain unpaid or unsatisfied, or any
Letter of Credit shall remain outstanding, unless the Required Lenders
waive compliance in writing:
Section 8.01 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 8.01 securing
-------------
or reflecting Indebtedness outstanding on such date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other
governmental charges which are not delinquent or remain payable without
penalty, or to the extent that non-payment thereof is permitted by
Section 7.07, provided that no notice of lien has been filed or
- ------------
recorded under the Code;
73
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<PAGE>
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the
ordinary course of business which are not delinquent or remain payable
without penalty or which are being contested in good faith and by
appropriate proceedings, which proceedings have the effect of preventing
the forfeiture or sale of the property subject thereto;
(e) Liens (other than any Lien imposed by ERISA)
consisting of pledges or deposits required in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other social security legislation;
(f) Liens on the property of the Company or its
Subsidiaries securing (i) the non-delinquent performance of bids, trade
contracts (other than for borrowed money), leases, statutory
obligations, (ii) Contingent Obligations in connection with performance
bonds, Surety Bonds and appeal bonds, and (iii) other non-delinquent
obligations of a like nature, in each case, incurred in the ordinary
course of business; provided that all such Liens in the aggregate
--------
could not reasonably be expected to cause a Material Adverse Effect;
(g) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business which,
in the aggregate, are not substantial in amount, and which do not in any
case materially detract from the value of the property subject thereto
or materially interfere with the ordinary conduct of the businesses of
the Company and its Subsidiaries;
(h) Liens securing obligations in respect of capital
leases on assets subject to such leases, provided that such capital
leases are otherwise permitted hereunder;
(i) Liens arising solely by virtue of any statutory or
common law provision relating to banker's liens, rights of set-off or
similar rights and remedies as to deposit accounts or other funds
maintained with a creditor depository institution; provided that (i)
-------- ----
such deposit account is not a dedicated cash collateral account and is
not subject to restrictions against access by the Company or any
Subsidiary in excess of those set forth by regulations promulgated by
the FRB, and (ii) such deposit account is not intended by the Company or
any Subsidiary to provide collateral to the depository institution;
(j) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in
connection with the importation of goods;
(k) Liens in favor of the ESOP Lender to secure the ESOP
Loan so long as such Liens are junior and secondary to the Liens created
under the Loan Documents; and
(l) Liens securing other obligations of the Company and
its Subsidiaries not to exceed in the aggregate at any one time
outstanding $1,000,000.
Section 8.02 Disposition of Assets. The Company shall not, and
---------------------
shall not suffer or permit any Subsidiary to, directly or indirectly,
(x) issue any equity interests of any Subsidiary to
74
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<PAGE>
any Person which is not the Company or a Subsidiary or (y) 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 (each, an "Asset Disposition"),
-----------------
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) Asset Dispositions by any Subsidiary to any Wholly-
Owned Subsidiary that is party to the Subsidiary Guaranty;
(d) sale/leaseback transactions involving an aggregate
consideration not to exceed $1,000,000 after the date hereof;
(e) sale/leaseback or other disposition of the Borrower's
real property located at 1270 North Price, St. Louis, Missouri; and
(f) dispositions not otherwise permitted hereunder which
are made for fair market value; provided, that (i) at the time of any
--------
disposition, no Event of Default shall exist or shall result from such
disposition, and (ii) the aggregate value of all assets so sold by the
Company and its Subsidiaries after the date hereof, shall not exceed
$500,000 in any transaction or $1,000,000 in any fiscal year.
Section 8.03 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 (i) the Company shall be the continuing or surviving corporation,
or with any one or more Subsidiaries, and (ii) if any transaction shall
be between a Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned
Subsidiary shall be the continuing or surviving corporation;
(b) another Person organized under the laws of any state
of the United States may merge with or consolidate into the Company or
any Subsidiary so long as (i) no Default or Event of Default shall have
occurred and be continuing either before or after giving effect to such
transaction (determined in respect of Sections 8.16, 8.17 and 8.18
------------- ---- ----
on a pro forma basis as of the last day of the prior fiscal quarter),
(ii) the Company or such Subsidiary is the surviving Person, and (iii)
all applicable legal requirements have been satisfied; and
(c) any Subsidiary may sell all or substantially all of
its assets (upon voluntary liquidation or otherwise), to the Company or
another Wholly-Owned Subsidiary.
75
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<PAGE>
Section 8.04 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 or capital
contribution to or any other investment in, any Person including any
Affiliate of the Company (together, "Investments"), except for:
-----------
(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) Investments by the Company or any Subsidiary in
Wholly-Owned Subsidiaries party to the Subsidiary Guaranty or unsecured
loans made by any Subsidiary to the Company;
(d) Investments incurred in order to consummate
Acquisitions otherwise permitted herein, provided that (i) the cash
--------
consideration for Acquisitions undertaken by the Company and its
Subsidiaries shall not exceed $5,000,000 in the aggregate in any fiscal
year, (ii) such Acquisitions are undertaken in accordance with all
applicable Requirements of Law, (iii) the prior, effective written
consent or approval to such Acquisition of the board of directors or
equivalent governing body of the acquiree is obtained, (iv) so long as
Leverage Ratio is at or above 2.0 on the most recent Compliance
Certificate, the Company provides the Agent and the Lenders with a
certificate at least ten days prior to the consummation of such
Acquisition evidencing that, after giving effect to such Acquisition,
its Leverage Ratio would be at least .25 less than that required
pursuant to Section 8.17 as of such date (as determined on a pro forma
------------
basis as of the last day of the preceding fiscal quarter), (v) the
Person or business which is the subject of such Acquisition is in the
same or similar line of business as the Company and its Subsidiaries,
and (vi) such Acquisition consists exclusively of (A) assets located in
the United States or (b) a Person organized under the laws of the United
States or any state thereof;
(e) Investments constituting Permitted Swap Obligations or
payments or advances under Swap Contracts relating to Permitted Swap
Obligations;
(f) advances to vendors and customers of the Company and
its Subsidiaries, or suppliers to such vendors, to enable such vendors,
customers and suppliers to purchase goods or parts to be processed and
sold to the Company and its Subsidiaries in the ordinary course of
business and consistent with past practices;
(g) loans and advances to officers, directors and
employees of the Company and its Subsidiaries not to exceed $150,000 to
any one director, officer or employee or $1,000,000 in the aggregate at
any one time outstanding;
76
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<PAGE>
(h) Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of suppliers and
customers and in settlement of delinquent obligations of, and other
disputes with, customers and suppliers arising in the ordinary course of
business;
(i) Investments of a nature not contemplated by the
foregoing clauses hereof that are outstanding as of the Closing Date and
set forth in Schedule 8.04 hereto; and
-------------
(j) other Investments not exceeding $2,500,000 in the
aggregate after the Closing Date.
Section 8.05 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;
(b) Indebtedness consisting of Contingent Obligations
permitted pursuant to Section 8.08;
------------
(c) Indebtedness existing on the Closing Date and set
forth in Schedule 8.05;
-------------
(d) Indebtedness incurred in connection with leases
permitted pursuant to Section 8.10;
------------
(e) (i) unsecured Indebtedness owed to the Company by any
Subsidiary so long as it is (A) evidenced by a note pledged to the Agent
and (B) incurred in accordance with Section 8.04 and (ii) unsecured
------------
Indebtedness owed by the Company or any Subsidiary to a Subsidiary so
long as it is incurred in accordance with Section 8.04; and
------------
(f) other Indebtedness with an aggregate principal amount
not to exceed $2,500,000 at any time outstanding.
Section 8.06 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 obtain in a comparable arm's-length transaction with a Person
not an Affiliate of the Company or such Subsidiary and except for the
following:
(a) employment or severance agreements entered into by the
Company or any of its Subsidiaries in the ordinary course of business;
(b) transactions between or among the Company and/or its
Subsidiaries in the ordinary course of business;
77
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<PAGE>
(c) the payment of reasonable directors' fees and
benefits, provided that the amount of such fees and benefits paid to any
Affiliate does not exceed the amount of such fees and benefits paid to
any Person who is not otherwise an Affiliate of the Company;
(d) payments permitted pursuant to Section 8.11 and
------------
transactions permitted pursuant to Section 8.04 or Section 8.08;
------------ ------------
(e) the provision of officers' and directors'
indemnification and insurance in the ordinary course of business to the
extent permitted by applicable law; and
(f) the payment of employee salaries, bonuses and employee
benefits in the ordinary course of business.
Section 8.07 Use of Proceeds. The Company shall not, and shall
---------------
not suffer or permit any Subsidiary to, use any portion of the proceeds
of any Loan or any Letter of Credit, directly or indirectly, (i) to
purchase or carry Margin Stock, (ii) to repay or otherwise refinance
indebtedness of the Company or others incurred to purchase or carry
Margin Stock, (iii) to extend credit for the purpose of purchasing or
carrying any Margin Stock, or (iv) to acquire any security in any
transaction that is subject to Section 13 or 14 of the Exchange Act.
Section 8.08 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) endorsements for collection or deposit in the ordinary
course of business;
(b) Permitted Swap Obligations;
(c) Contingent Obligations of the Company and its
Subsidiaries existing as of the Closing Date and listed in Schedule 8.08;
-------------
(d) Contingent Obligations with respect to Indebtedness of
the Company's Wholly-Owned Subsidiaries permitted pursuant to Section 8.05;
------------
(e) Contingent Obligations with respect to Surety
Instruments incurred by the Company and its Subsidiaries (including on
behalf of third parties) in the ordinary course of business; and
(f) other Contingent Obligations not exceeding at any time
$1,000,000 in the aggregate in respect of the Company and its
Subsidiaries together.
Section 8.09 Intentionally Omitted.
---------------------
Section 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:
78
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(a) leases of the Company and of Subsidiaries in existence
on the Closing Date and any renewal, extension or refinancing thereof;
(b) operating leases for real or personal property entered
into by the Company or any Subsidiary after the Closing Date in the
ordinary course of business;
(c) leases entered into by the Company or any Subsidiary
after the Closing Date pursuant to sale-leaseback transactions permitted
under subsection 8.05; and
---------------
(d) 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; provided that the annual rental payments for all such capital
leases shall not exceed in any fiscal year $500,000.
Section 8.11 Restricted Payments. The Company shall not, and
-------------------
shall not suffer or permit any Subsidiary to, declare or make any
dividend payment or other distribution of assets, properties, cash,
rights, obligations or securities on account of any shares of any class
of its capital stock, or purchase, redeem or otherwise acquire for value
any shares of its capital stock or any warrants, rights or options to
acquire such shares, now or hereafter outstanding (collectively,
"Restricted Equity Payments"); except that any Subsidiary may declare
and make dividend payments and other distributions to its shareholders
on a pro rata basis and the Company may:
(a) declare and make dividend payments or other distributions
payable solely in its common stock;
(b) purchase, redeem or otherwise acquire shares of its
common stock or warrants or options to acquire any such shares with the
proceeds received from the substantially concurrent issue of new shares
of its common stock; and
(c) declare or pay cash dividends to its stockholders and
purchase, redeem or otherwise acquire shares of its capital stock or
warrants, rights or options to acquire any such shares for cash and
computed on a cumulative consolidated basis; provided, that, (i) all
--------
such payments made in any period of four fiscal quarters (ending with
the fiscal quarter in which any such payment is made) shall not exceed
$400,000 for dividends and $2,800,000 for purchases, redemptions or
other acquisitions of its capital stock or the like as aforesaid, and
(ii) immediately after giving effect to such proposed action, no Default
or Event of Default would exist (determined with respect to Sections
--------
8.16, 8.17 and 8.18 on a pro forma basis as of the last day of the
- ---- ---- ----
previous fiscal quarter).
Section 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 be
subject to Section 4069 or 4212(c) of ERISA.
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Section 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.
Section 8.14 Accounting Changes. The Company shall not, and
------------------
shall not suffer or permit any Subsidiary to, (a) make any significant
change in accounting treatment or reporting practices, except (i) as
required by GAAP, (ii) a change in the depreciation method employed
thereby to straight line depreciation, (iii) a change in a Subsidiary's
accounting treatment or reporting practices to conform the accounting
practices or reporting practices of newly acquired Subsidiaries to the
methods used by the Company, and (iv) any other change which does not
affect the calculations required to determine compliance with Section
-------
8.16, 8.17 or 8.18, or (b) change the fiscal year of the Company or
- ---- ---- ----
of any Subsidiary.
Section 8.15 Amendments to Charter and Agreements; Subordinated
---------------------------------------------------
Indebtedness. The Company will not, nor will it permit any Subsidiary
- ------------
to, (a) make any amendment or modification to any indenture, notes or
other agreement evidencing or governing any subordinated Indebtedness,
including without limitation the ESOP Loan, (b) directly or indirectly
prepay, defease or in substance defease, purchase, redeem, retire or
otherwise acquire, any such Indebtedness, except that the Company may
pay the ESOP Loan on the scheduled maturity date therefor in accordance
with the terms thereof (including without limitation the terms of
subordination set forth therein) as in effect on the date of this
Agreement, (c) make any amendment or modification to any terms or
provisions of its Certificate or Articles of Incorporation or bylaws
which is materially adverse to the Agent or the Lenders without the
prior written consent of the Required Lenders or (d) issue any preferred
stock. The Company shall not, and shall not permit any Subsidiary to,
amend, waive, modify or terminate any material portion of any
Acquisition Document.
Section 8.16 Net Worth. The Company shall not permit its
---------
consolidated Net Worth at any time to be less than the sum of (a)
$55,000,000, plus (b) the aggregate Net Proceeds of all offerings and
----
sales of equity securities by the Company or any Subsidiary after the
Closing Date plus (c) 50% of positive net income for each fiscal
----
quarter of the Company ending after the Closing Date.
Section 8.17 Leverage Ratio. The Company shall not permit its
--------------
Leverage Ratio as determined as of the last day of each fiscal quarter
in any period set forth below to be greater than the ratio set forth
below for such period:
Period Ratio
------ -----
10/31/99 through 4/30/00 3.75:1.0
5/1/00 through 10/31/00 3.25:1.0
11/1/00 through 10/31/01 2.75:1.0
11/1/01 and thereafter 2.50:1.0
Section 8.18 Fixed Charge Coverage Ratio. The Company shall
---------------------------
not permit its Fixed Charge Coverage Ratio determined as of the last day
of each fiscal quarter in any period set forth below to be less than the
ratio set forth below for such period:
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Period Ratio
------ -----
10/31/99 through 4/30/00 1.50:1.0
5/1/00 through 10/31/01 1.70:1.0
11/01/01 through 10/31/02 1.80:1.0
11/01/02 and thereafter 2.00:1.0
Section 8.19 Capital Expenditures. (i) The Company will not,
--------------------
and will not permit any of its Subsidiaries to, make any Capital
Expenditures, except that during any fiscal year set forth below the
Company and its Subsidiaries may make Capital Expenditures so long as
the aggregate amount so made by the Company and its Subsidiaries (on a
consolidated basis) during any such fiscal year does not exceed the
amount set forth opposite such fiscal year below:
Fiscal Year Ending Amount
------------------ ------
October 31, 2000 $6,500,000
October 31, 2001 $7,000,000
October 31, 2002 and thereafter $8,000,000
(ii) Notwithstanding the foregoing, in the event that the
amount of Capital Expenditures permitted to be made by the Company and
its Subsidiaries pursuant to clause (i) above in any fiscal year (before
giving effect to any increase in such permitted expenditure amount
pursuant to this clause (ii)) is greater than the amount of such Capital
Expenditures made by the Company and its Subsidiaries during such fiscal
year, such excess (the "Rollover Amount") may be carried forward and
---------------
used to make Capital Expenditures in the next succeeding fiscal year.
Section 8.20 Restrictive Agreements. The Company shall not,
----------------------
nor shall it permit any of its Subsidiaries to, enter into any
indenture, agreement, instrument or other arrangement which directly or
indirectly prohibits or restrains, or has the effect of prohibiting or
restraining, or imposes materially adverse conditions upon, the ability
of any Subsidiary to (a) pay dividends or make other distributions (i)
on its Capital Stock or (ii) with respect to any other interest or
participation in, or measured by, its profits, (b) make loans or
advances to the Company or any Subsidiary, (c) repay loans or advances
from the Company or any Subsidiary or (d) transfer any of its properties
or assets to the Company or any Subsidiary.
ARTICLE IX
EVENTS OF DEFAULT
-----------------
Section 9.01 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 or of
any L/C Obligation, or (ii) within five (5) days after the same becomes
due, any interest, fee or any other amount payable hereunder or under
any other Loan Document; or
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(b) Representation or Warranty. Any representation or
--------------------------
warranty by the Company or any Subsidiary made or deemed made herein or
in any other Loan Document, or 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
-------
7.01, 7.02, 7.03 or 7.09 or in Article VIII; 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, and such default shall
continue unremedied for a period of thirty (30) days after the date upon
which written notice thereof is given to the Company by the Agent or any
Lender; 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), having
an aggregate principal amount (including undrawn committed or available
amounts and including amounts owing to all creditors under any combined
or syndicated credit arrangement) of more than $1,000,000 when due
(whether by scheduled maturity, required prepayment, acceleration,
demand, or otherwise) and such failure continues after the applicable
grace or notice period, if any, specified in the relevant document on
the date of such failure; or (B) fails to perform or observe any other
condition or covenant, or any other event shall occur or condition
exist, under any agreement or instrument relating to any such
Indebtedness or Contingent Obligation, and such failure continues after
the applicable grace or notice period, if any, specified in the relevant
document on the date of such failure if the effect of such failure,
event or condition is to cause, or to permit the holder or holders of
such Indebtedness or beneficiary or beneficiaries of such Indebtedness
(or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such Indebtedness to be declared
to be due and payable, or to be required to be repurchased, prior to
its stated maturity, or such Contingent Obligation to become payable or
cash collateral in respect thereof to be demanded; (ii) there occurs
under any Swap Contract an Early Termination Date (as defined in such
Swap Contract) resulting from (1) any event of default under such Swap
Contract as to which the Company or any Subsidiary is the Defaulting
Party (as defined in such Swap Contract) or (2) any Termination Event
(as so defined) as to which the Company or any Subsidiary is an Affected
Party (as so defined) and, in either event, the Swap Termination Value
owed by the Company or such Subsidiary as a result thereof is greater
than $1,000,000; or (iii) the Company or any Subsidiary fails to perform
or observe any condition or covenant under any contract providing for
the issuance of, or reimbursement of amounts in respect of, Surety
Instruments (other than Non-Surety L/C's), which in such event requires
the making of payments in excess of $1,000,000 in the aggregate, net of
the proceeds of insurance policies and indemnity agreements in favor of
the Company or any Subsidiary and received or reasonably expected to be
received thereby; or
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(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
Subsidiary, or any writ, judgment, warrant of attachment, execution or
similar process, is issued or levied against a substantial part of the
Company's or any Subsidiary's properties, and any such proceeding or
petition shall not be dismissed, or such writ, judgment, warrant of
attachment, execution or similar process shall not be released, vacated
or fully bonded within 60 days after commencement, filing or levy; (ii)
the Company or any Subsidiary admits the material allegations of a
petition against it in any Insolvency Proceeding, or an order for relief
(or similar order under non-U.S. law) is ordered in any Insolvency
Proceeding; or (iii) the Company or any Subsidiary acquiesces in the
appointment of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefor), or other similar Person for
itself or a substantial portion of its property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect
-----
to a Pension Plan or Multiemployer Plan which has resulted or could
reasonably be expected to result in liability of the Company or any
ERISA Affiliate under Title IV of ERISA to such Pension Plan or
Multiemployer Plan or to the PBGC in an aggregate amount for all such
Pension Plans and Multiemployer Plans in excess of $1,000,000; (ii) the
aggregate amount of Unfunded Pension Liability among all Pension Plans
and Multiemployer Plans at any time exceeds $5,000,000 (determined, in
respect of Multiemployer Plans, by reference to the Unfunded Pension
Liability for which the Company or any ERISA Affiliate may be liable)
and could reasonably be expected to have a Material Adverse Effect; 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 Material Adverse Effect,
and there shall be any period of 30 consecutive days during
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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) Loss of Licenses. Any Governmental Authority
----------------
revokes or fails to renew any license, permit or franchise of the
Company or any Material Subsidiary, or the Company or any Material
Subsidiary for any reason loses any license, permit or franchise, or the
Company or any Material Subsidiary suffers the imposition of any
restraining order, escrow, suspension or impound of funds in connection
with any proceeding (judicial or administrative) with respect to any
license, permit or franchise and any of the foregoing has or could
reasonably be expected to have a Material Adverse Effect; or
(m) Guarantor Defaults. Any Guarantor fails in any
------------------
material respect to perform or observe any term, covenant or agreement
in the Subsidiary Guaranty; or the Subsidiary 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
(n) Invalidity of Subordination Provisions. The
--------------------------------------
subordination provisions of the ESOP Documents or any agreement or
instrument governing any other subordinated debt with an outstanding
principal amount of $1,000,000 or more are for any reason revoked or
invalidated, or otherwise cease to be in full force and effect, any
Person contests in any manner the validity or enforceability thereof, or
the Indebtedness hereunder is for any reason subordinated or does not
have the priority contemplated by this Agreement or such subordination
provisions; or
(o) Collateral.
----------
(i) any material provision of any Collateral
Document shall for any reason cease to be valid and binding on or
enforceable against the Company or any Subsidiary party thereto or
the Company or any Subsidiary shall so state in writing or bring
an action to limit its obligations or liabilities thereunder; or
(ii) any Collateral Document shall for any reason
(other than pursuant to the terms thereof) cease to create a
valid security interest in the Collateral purported to be covered
thereby or such security interest shall for any reason cease to be
a perfected and first priority security interest subject only to
Permitted Liens.
Section 9.02 Remedies. If any Event of Default occurs, the
--------
Agent shall, at the request of, or may, with the consent of, the
Required Lenders,
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(a) declare the Commitment of each Lender to make Loans
and any obligation of the Issuer 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) 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 (except as
otherwise expressly provided herein), all of which are hereby expressly
waived by the Company; and
(c) exercise on behalf of itself and the Lenders all
rights and remedies available to it and the Lenders under the Loan
Documents or applicable law;
provided, however, that upon the occurrence of any event specified
- -------- -------
in subsection (f) or (g) of Section 9.01 (in the case of clause (i) of
------------
subsection (g) upon the expiration of the 60-day period mentioned
therein), the obligation of each Lender to make Loans and any obligation
of the Issuer 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 Issuer or any Lender.
Section 9.03 Rights Not Exclusive. The rights provided for in
--------------------
this Agreement and the other Loan Documents are cumulative and are not
exclusive of any other rights, powers, privileges or remedies provided
by law or in equity, or under any other instrument, document or
agreement now existing or hereafter arising.
ARTICLE X
THE AGENT
---------
Section 10.01 Appointment and Authorization; "Agent". (a) Each
-------------------------------------
Lender hereby irrevocably (subject to Section 10.09) appoints,
-------------
designates and authorizes the Agent to take such action on its behalf
under the provisions of this Agreement and each other Loan Document and
to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document, the Agent
shall not have any duties or responsibilities, except those expressly
set forth herein, nor shall the Agent have or be deemed to have any
fiduciary relationship with any Lender, 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
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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) Each Issuer shall act on behalf of the Lenders 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 Required Lenders to act for such Issuer
with respect thereto; provided, however, that such Issuer shall have
-------- -------
all of the benefits and immunities (i) provided to the Agent in this
Article X with respect to any acts taken or omissions suffered by the
- ---------
Issuer 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 X, included such Issuer with respect to such acts
---------
or omissions, and (ii) as additionally provided in this Agreement with
respect to such Issuer.
Section 10.02 Delegation of Duties. The Agent may execute any
--------------------
of its duties under this Agreement or any other Loan Document by or
through agents, employees or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The
Agent shall not be responsible for the negligence or misconduct of any
agent or attorney-in-fact that it selects with reasonable care.
Section 10.03 Liability of Agent. None of the Agent-Related
------------------
Persons shall (a) 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 (b) be responsible in
any manner to any of the Lenders 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 for the value of or title to any Collateral, 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 Lender 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.
Section 10.04 Reliance by Agent. (a) The Agent shall be
-----------------
entitled to rely, and shall be fully protected in relying, upon any
writing, resolution, notice, consent, certificate, affidavit, letter,
telegram, facsimile, telex or telephone message, statement or other
document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons, and upon
advice and statements of legal counsel (including counsel to 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 Required Lenders
as it deems appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by the
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Lenders 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 Required Lenders and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all of the Lenders.
(b) For purposes of determining compliance with the
conditions specified in Section 5.01, each Lender 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 Lender for consent, approval, acceptance or
satisfaction, or required thereunder to be consented to or approved by
or acceptable or satisfactory to such Lender.
Section 10.05 Notice of Default. The Agent shall not be deemed
-----------------
to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal,
interest and fees required to be paid to the Agent for the account of
the Lenders, unless the Agent shall have received written notice from a
Lender 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 Lenders 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 Required Lenders 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 Lenders.
Section 10.06 Credit Decision. Each Lender 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 Lender. Each Lender 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, the value of
and title to any Collateral, 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 Lender 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 Lenders by the Agent, the Agent
shall not have any duty or responsibility to provide any Lender 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.
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Section 10.07 Indemnification of Agent. Whether or not the
------------------------
transactions contemplated hereby are consummated, the Lenders 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), in accordance with such Lender's
Pro Rata Share of all Loans and Commitments, from and against any and
all Indemnified Liabilities; provided, however, that no Lender shall
-------- -------
be liable for the payment to the Agent-Related Persons of any portion of
such Indemnified Liabilities resulting from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing,
each Lender shall reimburse the Agent upon demand for its ratable share
of any costs or out-of-pocket expenses (including Attorney Costs)
incurred by the Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or
legal advice in respect of rights or responsibilities under, this
Agreement, any other Loan Document, or any document contemplated by or
referred to herein, to the extent that the Agent is 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.
Section 10.08 Agent in Individual Capacity. BofA and its
----------------------------
Affiliates may make loans to, issue letters of credit for the account
of, accept deposits from, acquire equity interests in and generally
engage in any kind of banking, trust, financial advisory, underwriting
or other business with the Company and its Subsidiaries and Affiliates
as though BofA were not the Agent or an Issuer hereunder and without
notice to or consent of the Lenders. The Lenders 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 Lender and may exercise the same as though
it were not the Agent or an Issuer.
Section 10.09 Successor Agent. The Agent may, and at the
---------------
request of the Required Lenders shall, resign as Agent upon 30 days'
notice to the Lenders. If the Agent resigns under this Agreement, the
Required Lenders shall appoint from among the Lenders a successor agent
for the Lenders subject, so long as no Event of Default has occurred and
is then continuing, to the consent of the Company, which 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 Lenders and the Company, a
successor agent from among the Lenders. 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 X and Sections 11.04 and 11.05 shall
--------- -------------- -----
inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement. If no successor agent has
accepted appointment as Agent by the date which is 30 days following a
retiring Agent's notice of resignation, the retiring Agent's resignation
shall nevertheless thereupon become effective and the Lenders shall
perform all of the duties of the Agent
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hereunder until such time, if any, as the Required Lenders 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
Required Lenders unless BofA shall also simultaneously be replaced as an
"Issuer" (if any letters of credit Issued by BofA are then outstanding)
hereunder pursuant to documentation in form and substance reasonably
satisfactory to BofA.
Section 10.10 Withholding Tax. (a) (i) If any Lender is a
---------------
"foreign corporation, partnership or trust" within the meaning of the
Code and such Lender claims exemption from, or a reduction of, U.S.
withholding tax under Sections 1441 or 1442 of the Code, such Lender
agrees with and in favor of the Agent and the Company, to deliver to the
Agent and the Company:
(A) if such Lender 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;
(B) if such Lender 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 Lender, 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 Lender and in each succeeding
taxable year of such Lender during which interest may be paid
under this Agreement; and
(C) such other form or forms as may be required
under the Code or other laws of the United States as a condition
to exemption from, or reduction of, United States withholding tax.
Such Lender agrees to promptly notify the Agent and the Company of any
change in circumstances which would modify or render invalid any claimed
exemption or reduction.
(ii) If any foreign Lender claims exemption from U.S.
federal withholding tax under Section 871(h) or 881(c) of the Code with
respect to payments of "portfolio interest", such Lender agrees with and
in favor of the Agent and the Company to deliver to the Agent and the
Company a Form W-8, or any subsequent versions thereof or successors
thereto (and, if such Lender delivers a Form W-8, a certificate
representing that such Lender is not a "bank" for purposes of Section
881(c) of the Code, is not a 10-percent shareholder (within the meaning
of Section 871(h)(3)(B) of the Code) of the Company and is not a
controlled foreign corporation related to the Company (within the
meaning of Section 864(d)(4) of the Code)).
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form
1001 and such Lender sells, assigns, grants a participation in, or
otherwise transfers all or part of the Obligations of the Company to
such Lender, such Lender agrees to notify the Agent of the percentage
amount in which it is no longer
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the beneficial owner of Obligations of the Company to such Lender. To
the extent of such percentage amount, the Agent will treat such Lender's
IRS Form 1001 as no longer valid.
(c) If any Lender 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 Lender, such Lender agrees to
undertake sole responsibility for complying with the withholding tax
requirements imposed by Sections 1441 and 1442 of the Code.
(d) If any Lender is entitled to a reduction in the
applicable withholding tax, the Agent may withhold from any interest
payment to such Lender 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 Lender 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
Lender (because the appropriate form was not delivered or was not
properly executed, or because such Lender 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
Lender shall indemnify the Agent fully for all amounts paid, directly or
indirectly, by the Agent as tax or otherwise, including penalties and
interest, and including any taxes imposed by any jurisdiction on the
amounts payable to the Agent under this Section, together with all costs
and expenses (including Attorney Costs). The obligation of the Lenders
under this subsection shall survive the payment of all Obligations and
the resignation or replacement of the Agent.
Section 10.11 Collateral Matters. (a) The Agent is authorized
------------------
on behalf of all the Lenders, without the necessity of any notice to or
further consent from the Lenders, from time to time to take any action
with respect to any Collateral or the Collateral Documents which may be
necessary to perfect and maintain perfected the security interest in and
Liens upon the Collateral granted pursuant to the Collateral Documents.
(b) The Lenders irrevocably authorize the Agent, at its
option and in its discretion, to release any Lien granted to or held by
the Agent upon any Collateral (i) upon termination of the Commitments
and payment in full of all Loans and all other Obligations known to the
Agent and payable under this Agreement or any other Loan Document;
(ii) constituting property sold or to be sold or disposed of as part of
or in connection with any disposition permitted hereunder;
(iii) constituting property in which the Company or any Subsidiary owned
no interest at the time the Lien was granted or at any time thereafter;
(iv) constituting property leased to the Company or any Subsidiary under
a lease which has expired or been terminated in a transaction permitted
under this Agreement or is about to expire and which has not been, and
is not intended by the Company or such Subsidiary to be, renewed
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or extended; (v) consisting of an instrument evidencing Indebtedness or
other debt instrument, if the indebtedness evidenced thereby has been
paid in full; or (vi) if approved, authorized or ratified in writing by
the Required Lenders or all the Lenders, as the case may be, as provided
in subsection 11.01(f). Upon request by the Agent at any time, the
-------------------
Lenders will confirm in writing the Agent's authority to release
particular types or items of Collateral pursuant to this subsection
-----------
10.11(b), provided that the absence of any such confirmation for
- --------
whatever reason shall not affect the Agent's rights under this
Section 10.11.
- -------------
(c) Each Lender agrees with and in favor of each other
(which agreement shall not be for the benefit of the Company or any
Subsidiary) that the Company's obligation to such Lender under this
Agreement and the other Loan Documents is not and shall not be secured
by any real property collateral now or hereafter acquired by such Lender
other than the real property described in the Mortgages.
ARTICLE XI
MISCELLANEOUS
-------------
Section 11.01 Amendments and Waivers. No amendment or waiver
----------------------
of any provision of this Agreement or any other Loan Document, and no
consent with respect to any departure by the Company or any applicable
Subsidiary therefrom, shall be effective unless the same shall be in
writing and signed by the Required Lenders (or by the Agent at the
written request of the Required Lenders) 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 Lenders and the
Company and acknowledged by the Agent, do any of the following:
(a) increase or extend the Commitment of any Lender (or
reinstate any Commitment terminated pursuant to Section 9.02);
------------
(b) postpone or delay any date fixed by this Agreement or
any other Loan Document for any payment of principal, interest, fees or
other amounts due to the Lenders (or any of them) hereunder or under any
other Loan Document including without limitation any mandatory
prepayment required pursuant to subsection 2.07(b);
------------------
(c) 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;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the
Lenders or any of them to take any action hereunder or reduce the
percentage specified in the definition of "Required Lenders" or, without
the consent of each Revolving Lender, "Required Revolving Lenders"; or
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(e) amend this Section, or Section 2.16, or any
------------
provision herein providing for consent or other action by all Lenders;
(f) release all or substantially all of the Collateral
except as otherwise may be provided in the Collateral Documents or
except where the consent of the Required Lenders only is specifically
provided for;
and, provided further, that (i) no amendment, waiver or consent
-------- -------
shall, unless in writing and signed by the Issuer in addition to the
Required Lenders or all the Lenders, as the case may be, affect the
rights or duties of the Issuer 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 Required Lenders or all the Lenders, as
the case may be, affect the rights or duties of the Agent under this
Agreement or any other Loan Document, (iii) no amendment, waiver or
consent shall, unless in writing and signed by the Swing Line Lender in
addition to the Required Lenders or all the Lenders, as the case may be,
affect the rights or duties of the Swing Line Lender under this
Agreement or any other Loan Document, and (iv) the Fee Letter may be
amended, or rights or privileges thereunder waived, in a writing
executed by the parties thereto.
Section 11.02 Notices. (a) All notices, requests, consents,
-------
approvals, waivers and other communications shall be in writing
(including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by the
Company by facsimile (i) shall be immediately confirmed by a telephone
call to the recipient at the number specified on Schedule 11.02, and
--------------
(ii) shall be followed promptly by delivery of a hard copy original
thereof) and mailed, faxed or delivered, to the address or facsimile
number specified for notices on Schedule 11.02; 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 or 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 any Issuer shall not be
-----------
effective until actually received by such Issuer at the address
specified on Schedule 11.02.
--------------
(c) Any agreement of the Agent and the Lenders 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
Lenders 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 Lenders 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 Lenders 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 Lenders to receive
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written confirmation of any telephonic or facsimile notice or the
receipt by the Agent and the Lenders of a confirmation which is at
variance with the terms understood by the Agent and the Lenders to be
contained in the telephonic or facsimile notice.
Section 11.03 No Waiver; Cumulative Remedies. No failure to
------------------------------
exercise and no delay in exercising, on the part of the Agent or any
Lender, any right, remedy, power or privilege 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.
Section 11.04 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 an Issuer) and the Arranger within five Business Days after
demand (subject to subsection 5.01(e)) for all costs and expenses
------------------
incurred by BofA (including in its capacity as Agent and Issuer) and the
Arranger in connection with the development, preparation, delivery,
administration, syndication 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
an Issuer) and the Arranger with respect thereto;
(b) pay or reimburse the Agent, the Arranger and each
Lender within five Business Days after demand (subject to subsection
----------
5.01(e)) for all costs and expenses (including Attorney Costs) incurred
- -------
by them in connection with the enforcement, attempted enforcement, or
preservation of any rights or remedies under this Agreement or any other
Loan Document during the existence of an Event of Default or after
acceleration of the Loans (including in connection with any "workout" or
restructuring regarding the Loans, and including in any Insolvency
Proceeding or appellate proceeding); and
(c) pay or reimburse BofA (including in its capacity as
Agent) within five Business Days after demand (subject to subsection
----------
5.01(e)) for all reasonable appraisal, audit (including collateral
- -------
audits), environmental inspection and review (including the allocated
cost of such internal services), search and filing costs, fees and
expenses, incurred or sustained by BofA (including in its capacity as
Agent) in connection with the matters referred to under subsections (a)
and (b) of this Section.
Section 11.05 Company Indemnification. (a) The Company shall
-----------------------
indemnify, defend and hold the Agent-Related Persons, and each Lender
and each of its respective officers, directors, employees, counsel,
agents and attorneys-in-fact (each, an "Indemnified Person") harmless
------------------
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses and
disbursements (including Attorney Costs) of any kind or nature
whatsoever which may at any time (including at any time following
repayment of the Loans, the termination of the Letters of Credit and the
termination, resignation or replacement of
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the Agent or replacement of any Lender or assignment by any Lender of
its Loans or Commitments) be imposed on, incurred by or asserted against
any Indemnified Person in any way relating to or arising out of this
Agreement or any document contemplated by or referred to herein, or the
transactions contemplated hereby, or any action taken or omitted by any
such Person under or in connection with any of the foregoing, including
with respect to any investigation, litigation or proceeding (including
any Insolvency Proceeding or appellate proceeding) related to or arising
out of this Agreement or the Loans or Letters of Credit or the use of
the proceeds thereof or related to any Offshore Currency transactions
entered into in connection herewith, whether or not any Indemnified
Person is a party thereto (all the foregoing, collectively, the
"Indemnified Liabilities"); provided, that the Company shall have no
----------------------- --------
obligation hereunder to any Indemnified Person with respect to
Indemnified Liabilities resulting from the gross negligence or willful
misconduct of such Indemnified Person. The agreements in this Section
shall survive payment of all other Obligations.
(b)(i) The Company shall indemnify, defend and hold harmless
each Indemnified Person, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, charges, expenses or disbursements (including Attorney Costs and
the allocated cost of internal environmental audit or review services),
which may be incurred by or asserted against such Indemnified Person in
connection with or arising out of any pending or threatened
investigation, litigation or proceeding, or any action reasonably taken
by any Person, with respect to any Environmental Claim arising out of or
related to any property, whether or not subject to a Mortgage in favor
of the Agent or any Lender, or arising out of or related to any
operations of the Company or any Subsidiary. No action taken by legal
counsel chosen by the Agent or any Lender in defending against any such
investigation, litigation or proceeding or requested remedial, removal
or response action shall vitiate or in any way impair the Company's
obligation and duty hereunder to indemnify and hold harmless the Agent
and each Lender.
(ii) In no event shall any site visit, observation, or
testing by the Agent or any Lender (or any contractee of the Agent or
any Lender) be deemed a representation or warranty that Hazardous
Materials are or are not present in, on, or under, the site, or that
there has been or shall be compliance with any Environmental Law.
Neither the Company nor any other Person is entitled to rely on any site
visit, observation, or testing by the Agent or any Lender. Neither the
Agent nor any Lender owes any duty of care to protect the Company or any
other Person against, or to inform the Company or any other party of,
any Hazardous Materials or any other adverse condition affecting any
site or property. The Agent or any Lender may, at its discretion,
disclose to the Company or any other Person any report or findings made
as a result of, or in connection with, any site visit, observation, or
testing by the Agent or any Lender. The Company understands and agrees
that the Agent and the Lenders make no warranty or representation to the
Company or any other Person regarding the truth, accuracy or
completeness of any such report or findings that may be disclosed. The
Company also understands that, depending upon the results of any site
visit, observation or testing by the Agent or any Lender and disclosed
to the Company, the Company may have a legal obligation to notify one or
more environmental agencies of the results and that such reporting
requirements are site-specific and are to be evaluated by the Company
without advice or assistance from the Agent or any Lender.
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(c) Survival; Defense. The obligations in this Section
shall survive payment of all other Obligations. At the election of any
Indemnified Person, the Company shall defend such Indemnified Person
using legal counsel reasonably satisfactory to such Indemnified Person
in such Person's sole discretion, at the sole cost and expense of the
Company. All amounts owing under this Section shall be paid within 30
days after demand.
Section 11.06 Marshalling; Payments Set Aside. Neither the
-------------------------------
Agent nor the Lenders shall be under any obligation to marshall any
assets in favor of the Company or any other Person or against or in
payment of any or all of the Obligations. To the extent that the
Company makes a payment to the Agent or the Lenders, or the Agent or the
Lenders 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 Lender 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 Lender severally agrees
to pay to the Agent upon demand its pro rata share of any amount so
recovered from or repaid by the Agent.
Section 11.07 Successors and Assigns. The provisions of this
----------------------
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that 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 Lender.
Section 11.08 Assignments, Participations, etc. (a) Any Lender
---------------------------------
may, with the written consent of the Company at all times other than
during the existence of an Event of Default and the Agent, the Swing
Line Lender and, in respect of assignments of Revolving Loans or a
Revolving Loan Commitment, each Issuer with an outstanding Letter of
Credit, which consents shall not be unreasonably withheld or delayed, at
any time assign and delegate to one or more Eligible Assignees (each an
"Assignee") all, or any part of all, of the Loans, the Commitments,
--------
the L/C Obligations and the other rights and obligations of such Lender
hereunder, in a minimum amount of $5,000,000 or, if less, the total
amount of such Lender's outstanding Loans and/or Commitments (provided
that (x) no written consent of the Company, the Agent, the Swing Line
Lender or any Issuer shall be required in connection with any assignment
and delegation by a Lender to an Eligible Assignee that is an Affiliate
of such Lender or any Approved Fund, (y) no consent of the Swing Line
Lender or any Issuer shall be required in respect of any assignment and
delegation consisting solely of Term Loans and (z) assignments must be
made ratably as between the Revolving Loans and the Term Loans);
provided, however, that the Company and the Agent may continue to
- -------- -------
deal solely and directly with such Lender 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 Lender and the Assignee; (ii) such Lender
and its Assignee shall have delivered to the Company and the Agent an
Assignment and Acceptance in the form of Exhibit D ("Assignment and
--------- --------------
Acceptance") together with any Note or Notes subject to such assignment
- ----------
and (iii) the assignor Lender or Assignee has paid to the Agent a
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processing fee in the amount of $3,500; provided, that in the case of
--------
contemporaneous assignments by a Lender to more than one fund managed by
the same investment advisor, only a single fee of $3,500 shall be
payable for all such contemporaneous assignments.
(b) From and after the date that the Agent notifies the
assignor Lender that it has received (and, if required, 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 (including without limitation any obligations
under Section 10.10) have been assigned to it pursuant to such
-------------
Assignment and Acceptance, shall have the rights and obligations of a
Lender under the Loan Documents, and (ii) the assignor Lender shall, to
the extent that rights and obligations hereunder and under the other
Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations
under the Loan Documents.
(c) Within five Business Days after its receipt of notice
by the Agent that it has received an executed Assignment and Acceptance
and payment of the processing fee, (and, if required, provided that it
consents to such assignment in accordance with subsection 11.08(a)),
-------------------
the Company shall execute and deliver to the Agent new Notes evidencing
such Assignee's assigned Loans and Commitment and, if the assignor
Lender has retained a portion of its Loans and its Commitment,
replacement Notes in the principal amount of the Loans retained by the
assignor Lender (such Notes to be in exchange for, but not in payment
of, the Notes held by such Lender). Immediately upon each Assignee's
making its processing fee payment under the Assignment and Acceptance,
this Agreement shall be deemed to be amended to the extent, but only to
the extent, necessary to reflect the addition of the Assignee and the
resulting adjustment of the Commitments arising therefrom. The
Commitment allocated to each Assignee shall reduce such Commitments of
the assigning Lender pro tanto.
--- -----
(d) The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register for the recordation of the
names and addresses of the Lenders and the Commitments of, and principal
amount of the Loans owing to, each Lender from time to time. The
entries in such register shall be conclusive, in the absence of manifest
error, and the Company, the Agent and the Lenders shall treat each
person whose name is recorded in such register as the owner of the
Commitments and the Loans recorded therein for all purposes of this
Agreement. The register shall be available for inspection by the
Company, any Lender and their representatives, at any reasonable time
and from time to time upon reasonable prior notice.
(e) Any Lender 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 Lender and the other interests of that Lender (the "originating
-----------
Lender") hereunder and under the other Loan Documents; provided,
- ------ --------
however, that (i) the originating Lender's obligations under this
- -------
Agreement shall remain unchanged, (ii) the originating Lender shall
remain solely responsible for the performance of such obligations,
(iii) the Company, each Issuer and the Agent shall continue to deal
solely and directly with the originating Lender in connection with the
originating Lender's rights and obligations under this Agreement and the
other Loan Documents, and (iv) no Lender shall transfer or grant any
participating interest under
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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 Lenders as described in clause (a) (but
only in respect of any increase of any Commitment of any Originating
Lender), (b) or (c) of the first proviso to Section 11.01. In the
----- ------- -------------
case of any such participation, the Participant shall be entitled to the
benefit of Sections 4.01, 4.03 and 11.05 as though it were also a
------------- ---- -----
Lender 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 Lender under this Agreement.
(f) Notwithstanding any other provision in this Agreement,
(i) any Lender 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 Notes held by it in favor of any Federal Reserve Bank in
accordance with Regulation A of the FRB or U.S. Treasury Regulation 31
CFR Section 203.14, and such Federal Reserve Bank may enforce such
pledge or security interest in any manner permitted under applicable law
and (ii) any Lender that is a fund that invests in bank loans may,
without the consent of the Agent or the Company, pledge all or any
portion of its rights under and interest in this Agreement to any
trustee or to any other representative of holders of obligations owed or
securities issued by such fund as security for such obligations or
securities; provided, that any transfer to any Person upon the
--------
enforcement of such pledge or security interest may only be made subject
to Section 11.08.
-------------
Section 11.09 Confidentiality. Each Lender 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
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 Lender or its Affiliates, 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 Lender; provided, however, that any Lender may
-------- -------
disclose such information (A) at the request or pursuant to any
requirement of any Governmental Authority to which the Lender is subject
or in connection with an examination of such Lender 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 Lender or
their respective Affiliates may be party; (E) to the extent reasonably
required in connection with the exercise of any remedy hereunder or
under any other Loan Document; (F) to such Lender's independent auditors
and other professional advisors; (G) to any Participant or Assignee,
actual or potential, provided that such Person agrees in
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writing to keep such information confidential to the same extent
required of the Lenders hereunder; (H) as to any Lender 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 Lender or such
Affiliate; (I) to its Affiliates; and (J) to the National Association of
Insurance Commissioners or any similar organization or any nationally
recognized rating agency that requires access to information about such
Lender's investment portfolio in connection with ratings issued with
respect to such Lender.
Section 11.10 Set-off. In addition to any rights and remedies
-------
of the Lenders provided by law, if an Event of Default exists or the
Loans have been accelerated, each Lender 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 Lender to or for the credit or
the account of the Company against any and all Obligations owing to such
Lender, now or hereafter existing, irrespective of whether or not the
Agent or such Lender shall have made demand under this Agreement or any
Loan Document and although such Obligations may be contingent or
unmatured. Each Lender agrees promptly to notify the Company and the
Agent after any such set-off and application made by such Lender;
provided, however, that the failure to give such notice shall not
- -------- -------
affect the validity of such set-off and application.
Section 11.11 Automatic Debits of Fees. With respect to any
------------------------
commitment fee, arrangement fee, letter of credit fee or other fee, or
any other cost or expense (including Attorney Costs) due and payable to
the Agent, any Issuer, BofA or the Arranger under the Loan Documents,
the Company hereby irrevocably authorizes BofA to debit any deposit
account of the Company with BofA in an amount such that the aggregate
amount debited from all such deposit accounts does not exceed such fee
or other cost or expense; provided, that so long as no Event of
--------
Default has occurred and is continuing, BofA has given notice to the
Company thereof not later than 9:00 a.m. (Central time) on the date of
such debit. 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 so as not to create an overdraft (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.
Section 11.12 Notification of Addresses, Lending Offices, Etc.
------------------------------------------------
Each Lender shall notify the Agent in writing of any changes in the
address to which notices to the Lender 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.
Section 11.13 Counterparts. This Agreement may be executed in
------------
any number of separate counterparts, each of which, when so executed,
shall be deemed an original, and all of said counterparts taken together
shall be deemed to constitute but one and the same instrument.
Section 11.14 Severability. The illegality or unenforceability
------------
of any provision of this Agreement or any instrument or agreement
required hereunder shall not in any way affect or
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impair the legality or enforceability of the remaining provisions of
this Agreement or any instrument or agreement required hereunder.
Section 11.15 No Third Parties Benefited. This Agreement is
--------------------------
made and entered into for the sole protection and legal benefit of the
Company, the Lenders, 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.
Section 11.16 Governing Law and Jurisdiction. (a) THIS
------------------------------
AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE OF MISSOURI (WITHOUT
REGARD TO CONFLICTS OF LAW PROVISIONS THEREOF); PROVIDED THAT THE
COMPANY, THE AGENT AND THE LENDERS 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 MISSOURI OR OF THE UNITED STATES FOR THE EASTERN DISTRICT OF
MISSOURI, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE
COMPANY, THE AGENT AND THE LENDERS 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 LENDERS IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
--------------------
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN
RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO.
Section 11.17 WAIVER OF JURY TRIAL. THE COMPANY, THE LENDERS
--------------------
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
LENDERS 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,
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SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
Section 11.18 Entire Agreement. (a) This Agreement, together
----------------
with the other Loan Documents, embodies the entire agreement and
understanding among the Company, the Lenders and the Agent, and
supersedes all prior or contemporaneous agreements and understandings of
such Persons, verbal or written, relating to the subject matter hereof
and thereof.
(b) The following is added pursuant to Section 432.045 of
the Missouri Revised Statutes; as used below "you" shall refer to the
Company and Guarantors, "us" shall refer to the Agent and the Lenders
and "this writing" shall refer to the Loan Documents:
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY,
EXTEND CREDIT OR TO FORBEAR FROM ENFORCING
REPAYMENT OF A DEBT INCLUDING PROMISES TO
EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE.
TO PROTECT YOU AND US FROM MISUNDERSTANDING OR
DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING
SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH
IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE
AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE
IN WRITING TO MODIFY IT.
Section 11.19 Collateral Protection Coverage. The following is
------------------------------
added pursuant to Section 427.120 of the Missouri Revised Statutes; as
used below "you" and "your" shall refer to the Company and Guarantors,
"us", "we" and "our" shall refer to the Agent and the Lenders and
"agreement" shall refer to the Loan Documents:
Unless you provide evidence of the insurance
coverage required by your agreement with us, we
may purchase insurance at your expense to
protect our interests in your collateral. This
insurance may, but need not, protect your
interests. The coverage that we purchase may
not pay any claim that you make or any claim
that is made against you in connection with the
collateral. You may later cancel any insurance
purchased by us, but only after providing
evidence that you have obtained insurance as
required by our agreement. If we purchase
insurance for the collateral, you will be
responsible for the costs of that insurance,
including the insurance premium, interest and
any other charges we may impose in connection
with the placement of the insurance, until the
effective date of the cancellation or expiration
of the insurance. The costs of the insurance
may be added to your total outstanding balance
or obligation. The costs of the insurance may
be more than the cost of insurance you may be
able to obtain on your own.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered in Chicago, Missouri by their proper
and duly authorized officers as of the day and year first above written.
ENGINEERED SUPPORT SYSTEMS, INC.
By: /s/ Gary C. Gerhardt
------------------------------
Name: Gary C. Gerhardt
----------------------------
Title: Executive V.P./C.F.O.
---------------------------
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BANK OF AMERICA, NATIONAL ASSOCIATION,
as Agent
By: /s/ Dwight D. Erdbruegger
-----------------------------
Name: Dwight D. Erdbruegger
---------------------------
Title: Senior Vice President
--------------------------
BANK OF AMERICA, NATIONAL
ASSOCIATION, as a Lender
and as Swing Line Lender
By: /s/ Dwight D. Erdbruegger
-----------------------------
Name: Dwight D. Erdbruegger
---------------------------
Title: Senior Vice President
--------------------------
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MERCANTILE BANK NATIONAL
ASSOCIATION, as a Lender
By: /s/ Scott R. Goodman
---------------------------
Name: Scott R. Goodman
-------------------------
Title: President
------------------------
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BANK ONE, NA (Main Office Chicago),
as a Lender
By: /s/ Krys Szrenski
-----------------------------
Name: Krys Szrenski
---------------------------
Title: First Vice President
--------------------------
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LASALLE BANK NATIONAL ASSOCIATION,
as a Lender
By: /s/ David J. Carney
-----------------------------
Name: David J. Carney
---------------------------
Title: AVP
--------------------------
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UNION PLANTERS BANK, N.A.,
as a Lender
By: /s/ Anne D. Silvestri
-----------------------------
Name: Anne D. Silvestri
---------------------------
Title: Vice President
--------------------------
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U.S. BANK NATIONAL ASSOCIATION,
as a Lender
By: /s/ Michael J. Reymann
-----------------------------
Name: Michael J. Reymann
---------------------------
Title: Vice President
--------------------------
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HARRIS TRUST AND SAVINGS BANK,
as a Lender
By: /s/ Donald J. Buse
-----------------------------
Name: Donald J. Buse
---------------------------
Title: Vice President
--------------------------
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