UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-9294
Imo Industries Inc.
(Exact name of registrant as specified in its charter)
Delaware 21-0733751
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1009 Lenox Drive, Building Four West
Lawrenceville, New Jersey 08648
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 609-896-7600
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date: Common Stock, $1.00 Par Value-17,127,848
shares as of October 31, 1997.
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
Condensed Consolidated Statements of Income--Three and
nine months ended September 30, 1997 and 1996 2
Condensed Consolidated Balance Sheets--September 30,1997 and
December 31, 1996 3
Condensed Consolidated Statements of Cash Flows--Nine
months ended September 30, 1997 and 1996 4
Notes to Condensed Consolidated Financial Statements--
September 30, 1997 5- 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 11-18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 18
Item 5. Other Information. 18
Item 6. Exhibits and Reports on Form 8-K. 19
SIGNATURES 20
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
Imo Industries Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Dollars in thousands except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996* 1997 1996*
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Sales $ 96,572 $ 92,762 $305,092 $295,455
Cost of products sold 72,454 70,110 225,137 219,857
Gross Profit 24,118 22,652 79,955 75,598
Selling, general and
administrative expenses 18,415 16,752 57,804 50,414
Research and development expenses 1,959 2,011 5,948 6,025
Unusual items 21,594 --- 32,094 ---
Income (Loss) from
Operations (17,850) 3,889 (15,891) 19,159
Interest expense 7,759 7,458 23,678 22,333
Interest income (443) (326) (1,285) (1,105)
Other expense (income), net (344) (39) (127) 75
Equity in (income) loss of
unconsolidated companies (356) 107 44 57
Income (Loss) from Continuing
Operations Before Income Taxes,
Minority Interest and
Extraordinary Item (24,466) (3,311) (38,201) (2,201)
Income Tax Expense 905 10,708 2,188 12,546
Minority Interest (30) 26 (29) (25)
Income (Loss) from Continuing
Operations Before
Extraordinary Item (25,341) (14,045) (40,360) (14,722)
Discontinued Operations:
Income from Operations 728 1,628 5,334 5,101
Estimated Gain (Loss) on Disposal (8,430) (7,349) (8,430) (7,349)
Total Income (Loss) from
Discontinued Operations (7,702) (5,721) (3,096) (2,248)
Extraordinary Item - Loss on
Extinguishment of Debt (287) --- (287) (8,455)
Net Loss $(33,330) $(19,766) $(43,743) $(25,425)
Earnings (Loss) Per Share:
Continuing operations
before extraordinary item $ (1.48) $ (0.82) $ (2.35) $ (0.86)
Discontinued operations $ (0.45) $ (0.34) $ (0.18) $ (0.14)
Extraordinary item $ (0.02) $ --- $ (0.02) $ (0.49)
Net loss $ (1.95) $ (1.16) $ (2.55) $ (1.49)
Weighted average number of
shares outstanding 17,127,547 17,105,047 17,126,359 17,093,234
</TABLE>
See accompanying notes to condensed consolidated financial statements.
*Restated to conform to 1997 presentation.
2
<PAGE>
<TABLE>
Imo Industries Inc.and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in thousands)
<CAPTION>
September 30, December 31,
1997 1996*
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 16,807 $ 4,907
Trade accounts and notes receivable,
less allowance of $0 in 1997
and $1,419 in 1996 66,859 65,367
Inventories-net 81,930 81,095
Deferred income taxes 9,956 9,165
Net assets of discontinued
operations-current --- 25,407
Prepaid expenses and other
current assets 11,342 7,349
Total Current Assets 186,894 193,290
Property, Plant and Equipment-on
the basis of cost 84,645 184,416
Less allowance for depreciation
and amortization (1,702) (96,327)
Net Property, Plant and Equipment 82,943 88,089
Intangible Assets, Principally
Goodwill 247,505 68,722
Net Assets of Discontinued
Operations - Noncurrent 4,073 11,938
Other Assets 15,552 31,869
Total Assets $536,967 $393,908
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable $ 19,180 $ 41,808
Trade accounts payable 46,493 38,686
Accrued expenses and other
liabilities 70,208 53,677
Current portion of long-term debt 5,709 14,994
Total Current Liabilities 141,590 149,165
Long-Term Debt 219,631 250,144
Deferred Income Taxes 4,789 3,890
Accrued Postretirement Benefits -
Long-Term 17,113 17,418
Accrued Pension Expense and Other
Liabilities 54,022 30,071
Total Liabilities 437,145 450,688
Minority Interest 818 954
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock: $1.00 par value;
authorized and unissued 5,000,000 shares --- ---
Common stock: $1.00 par value;
authorized 25,000,000 shares;
issued 18,800,636 and 18,796,897
in 1997 and 1996, respectively 18,801 18,797
Additional paid-in capital 112,641 80,466
Retained earnings (deficit) (14,865) (134,962)
Cumulative foreign currency
translation adjustments 447 (793)
Minimum pension liability adjustment --- (2,503)
Unearned compensation --- (719)
Treasury stock at cost -
1,672,788 shares in 1997 and 1996 (18,020) (18,020)
Total Shareholders' Equity (Deficit) 99,004 (57,734)
Total Liabilities and
Shareholders' Equity (Deficit) $536,967 $393,908
</TABLE>
See accompanying notes to condensed consolidated financial statements.
*Restated to conform to 1997 presentation.
3
<PAGE>
<TABLE>
Imo Industries Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
<CAPTION>
Nine Months Ended September 30,
1997 1996*
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (43,743) $ (25,425)
Adjustments to reconcile net loss to
net cash provided by (used in)
continuing operations:
Loss from discontinued operations 3,096 2,248
Depreciation 10,749 10,399
Amortization 2,908 3,128
Provision for deferred income taxes --- 10,000
Extraordinary item 287 8,455
Unusual items 32,094 ---
Other 424 148
Other changes in operating assets
and liabilities:
Increase in accounts and notes
receivable (1,779) (3,158)
Decrease (increase) in inventories (835) 4,322
Decrease in accounts payable and
accrued expenses (31,180) (9,493)
Other operating assets and
liabilities (622) (3,620)
Net cash used by continuing operations (28,601) (2,996)
Net cash used by discontinued operations (1,309) (1,138)
Net Cash Used in Operating Activities (29,910) (4,134)
INVESTING ACTIVITIES
Purchases of property, plant and
equipment (10,341) (10,209)
Proceeds from sale of businesses and
sales of property, plant and equipment 110,691 6,181
Acquisitions, net of cash acquired --- (7,972)
Other (118) 268
Net Cash Provided by (Used in)
Investing Activities 100,232 (11,732)
FINANCING ACTIVITIES
Decrease in notes payable (17,568) (10,527)
Proceeds from long-term borrowings 127,173 265,695
Principal payments on long-term debt (166,749) (224,935)
Payment of debt financing costs (384) (14,578)
Other (194) 28
Net Cash (Used in) Provided by
Financing Activities (57,722) 15,683
Effect of exchange rate changes on cash (700) (80)
Increase (Decrease) in Cash and Cash
Equivalents 11,900 (263)
Cash and cash equivalents at beginning
of period 4,907 5,727
Cash and Cash Equivalents at End of
Period $ 16,807 $ 5,464
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest expense $ 20,143 $ 22,017
Income taxes $ 2,848 $ 1,720
</TABLE>
See accompanying notes to condensed consolidated financial statements.
* Restated to conform to 1997 presentation.
4
<PAGE>
Imo Industries Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited with respect to September 30, 1997 and 1996 and
the periods then ended.)
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The accompanying unaudited condensed
consolidated financial statements have been prepared in
accordance with generally accepted accounting principles. For
further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's
annual report on Form 10-K for the year ended December 31,
1996. In the opinion of management, all adjustments
considered necessary for a fair presentation have been
included. Operating results for the nine months ended
September 30, 1997 are not necessarily indicative of the
results that may be expected for the year ending December 31,
1997.
Impact of Recently Issued Accounting Standards: In February
1997, the FASB issued Statement No. 128, "Earnings Per
Share," which specifies the computation, presentation, and
disclosure requirements for earnings per share. The
Statement is effective for annual periods ending after
December 15, 1997, and early adoption is not permitted. The
Company does not believe the effect of adoption will be
material.
Restatements: The Consolidated Financial Statements, and the
notes thereto, have been restated to reflect the Company's
Instrumentation business segment as a discontinued operation.
Certain prior year amounts have been restated to conform to
the current year presentation.
NOTE B - ACQUISITION BY II ACQUISITION CORP.
On July 25, 1997, the Company executed a definitive agreement
with II Acquisition Corp. ("Acquisition Corp.") pursuant to
which, on July 31, 1997, Acquisition Corp. commenced a cash
tender offer for all outstanding shares of the Company's
common stock at a price of $7.05 per share, net in cash.
The Company had previously announced on June 26, 1997 that it
had entered into a merger agreement with United Dominion
Industries Limited ("UDI") pursuant to which, on July 2,
1997, UDI commenced a cash tender offer for all of the
outstanding shares of the Company's common stock at a price
of $6 per share. The Company's Board of Directors
unanimously determined that the Acquisition Corp. offer was
fair and in the best interests of the Company's stockholders.
As a result, the Board of Directors withdrew its approval of
UDI's tender offer and the other transactions contemplated by
the merger agreement with UDI and exercised its right to
terminate the merger agreement.
5
<PAGE>
On August 28, 1997, Acquisition Corp. acquired approximately
93% of the Company's outstanding shares of common stock
pursuant to its tender offer, which expired, as scheduled, on
August 27, 1997. The total consideration paid was $112.1
million. The acquisition has been accounted for under the
purchase method. The purchase price was allocated based on
the estimated fair values at the date of acquisition and
resulted in an excess of purchase price over assets and
liabilities acquired of $239 million, which is being
amortized over 40 years. The purchase price allocation has
been completed on a preliminary basis, and as a result,
adjustments to the carrying value of assets and liabilities
may occur.
The unaudited pro forma information for the periods set forth
below give effect to the acquisition, the refinancing of the
Company's domestic senior debt (See Note G) and the sale of
the Instrumentation business segment (See Note C) as if they
had occurred on January 1, 1997 and January 1, 1996. The pro
forma information is presented for informational purposes
only and is not necessarily indicative of the results of
operations that actually would have been achieved had these
transactions been consummated at the beginning of the periods
presented.
Nine Months Ended September 30 (in thousands of dollars)
1997 1996
(Unaudited)
Net Sales $305,092 $295,455
Net Income (Loss) from
Continuing Operations before
Extraordinary Items $(37,988) $(13,614)
Income (Loss) from Discontinued
Operations (8,430) (7,349)
Extraordinary Item (287) (8,455)
Net Income (Loss) $(46,705) $(29,418)
Earnings (Loss) Per Share:
Continuing Operations
before Extraordinary Items $(2.22) $(0.80)
Discontinued Operations (0.49) (0.43)
Extraordinary Item (0.02) (0.49)
Net Income (Loss) $(2.73) $(1.72)
6
<PAGE>
In conjunction with the acquisition, the Company recorded a
third quarter charge of $16.6 million including a $10.0
million contract fee paid to UDI as a result of the
termination of the merger agreement between UDI and the
Company, $4.2 million of commissions, advisory and legal
fees, and $2.4 million of employee retention bonuses. (See
Note F)
The purchase of shares by Acquisition Corp. pursuant to the
tender offer reduced the number of shares traded publicly and
reduced the number of holders of shares. At present, the
Company's common stock continues to meet the requirements of
the New York Stock Exchange ("NYSE") for continued listing.
Based on certain criteria for the publicly traded shares, the
Company's common stock may, at some future time, no longer
meet the requirements for the NYSE for continued listing and
may be delisted from the NYSE and deregistered under the
provisions of the Securities Exchange Act of 1934, as
amended. Each of these events could adversely affect the
liquidity and market value of the remaining shares held by
the public.
NOTE C--DISCONTINUED OPERATIONS
On August 29, 1997, the Company completed the sale of its
Instrumentation business segment to Danaher Corporation for
proceeds of $85 million, which approximated its net book
value after the Acquisition Corp. acquisition, a
portion of which was used to reduce debt. Therefore, the
operating results of the Instrumentation segment have been
segregated and reported as a discontinued operation in the
accompanying Condensed Consolidated Statements of Income.
Prior year financial statements have been reclassified to
conform to the current year presentation.
The Company has also accounted for its former Electro-Optical
Systems business and Turbomachinery business segments as
discontinued operations. The sale of the Varo Electronic
Systems division of the Electro-Optical Systems business was
completed in April 1997 and the proceeds of $12.0 million
were used to reduce debt.
Net sales of the discontinued operations were $11.4 million
and $27.6 million for the three months ended September 30,
1997 and 1996, respectively, and $58.2 million and $75.9
million for the nine months ended September 30, 1997 and
1996, respectively. The operating results from discontinued
operations include allocated interest expense of $.3 million
and $1.2 million for the three months ended September 30,
1997 and 1996, respectively, and $1.9 million and $3.5
million for the nine months ended September 30, 1997 and
1996, respectively.
Based on its quarterly review of the assumptions used in
determining the estimated loss from discontinued operations,
the Company recorded a charge of $8.4 million and $7.3
million in the three months ended September 30, 1997 and
1996, respectively. These charges related to changes in
estimates on legal and other reserve requirements of its
former Electro-Optical and Turbomachinery businesses.
7
<PAGE>
NOTE D--INVENTORIES
Inventories (in thousands of dollars) are summarized as
follows:
September 30, December 31,
1997 1996
(Unaudited)
Finished products $ 36,256 $ 43,971
Work in process 26,905 26,754
Materials and supplies 19,722 23,142
82,883 93,867
Less customers' progress payments 953 2,710
Less valuation allowance --- 10,062
$ 81,930 $ 81,095
NOTE E--EARNINGS PER SHARE
Earnings per share for 1997 and 1996 are based upon the
weighted average number of shares of common stock
outstanding. Common stock equivalents related to stock
options and warrants are excluded because their effect is not
material.
NOTE F--UNUSUAL ITEMS
The first nine months of 1997 included an unusual charge of
$10.5 million relating to the judgment against the Company in
favor of International Insurance Company ("International"),
awarding International $11.2 million, plus interest from
March 1995. The Company recorded a charge to income in the
first quarter of 1997 of $12.9 million as an unusual item,
which represented the amount of the judgment plus interest to
date. On July 15, 1997, the Company agreed to settle with
International by dropping an appeal and paid a reduced amount
on July 30, 1997 in complete settlement of all outstanding
amounts. As a result of the settlement, the Company recorded
a favorable adjustment of $2.4 million as an unusual item in
the second quarter of 1997.
In addition, the Company recorded unusual charges of $21.6
million in the third quarter of 1997. Of these charges, $16.6
million related to the sale of the Company and represent
indirect and general expenses incurred by the Company in
connection with the sale process, and $5 million related to
an additional legal provision concerning certain litigation
matters.
8
<PAGE>
NOTE G--NOTES PAYABLE AND LONG-TERM DEBT
On August 29, 1997, the Company completed the refinancing of
its domestic senior debt. Under terms of the refinancing, the
Company entered into an agreement for $173 million in senior
secured credit facilities with a group of lenders (the "New
Credit Agreement"). Initial borrowings under the New Credit
Agreement were approximately $127.1 million. Proceeds of the
New Credit Agreement were used to refinance all obligations
under the Company's previous credit facility (the "Old Credit
Agreement"). The cost of the implementation of the New Credit
Agreement will be amortized over its term.
The New Credit Agreement provides for a five year, $70
million revolving credit facility, a $73 million term loan
amortizing to August 29, 2002 and a $30 million letter of
credit facility.
As of September 30, 1997, the Company had borrowings of $59.0
million in term loans and $13.0 million of outstanding
standby letters of credit under the New Credit Agreement. The
Company had $27.6 million in foreign short-term credit
facilities with amounts outstanding at September 30, 1997
of $19.2 million. Due to the short-term nature of these debt
instruments it is the Company's opinion that the carrying
amounts approximate the fair value. The weighted average
interest rate on short-term notes payable was 8.45% and 9.5%
at September 30, 1997 and December 31, 1996, respectively.
The New Credit Agreement requires the Company to meet certain
objectives with respect to financial ratios. The New Credit
Agreement and the senior subordinated notes contain
provisions, which place certain limitations on dividend
payments and outside borrowings. Under the most restrictive
of such provisions, the New Credit Agreement requires the
Company to maintain certain minimum interest coverage, fixed
charge coverage and maximum permitted debt levels.
NOTE H--CONTINGENCIES
Legal Proceedings
The Company and one of its subsidiaries are two of a large
number of defendants in a number of lawsuits brought in
various jurisdictions by approximately 6,100 claimants who
allege injury caused by exposure to asbestos. Although
neither the Company nor any of its subsidiaries has ever been
a producer or direct supplier of asbestos, it is alleged that
the industrial and marine products sold by the Company and
the subsidiary named in such complaints contained components
which contained asbestos. Suits against the Company and its
subsidiary have been tendered to their insurers, who are
defending under their stated reservation of rights. In
addition, the Company and the subsidiary are named in cases
9
<PAGE>
involving approximately 20,000 claimants which in 1996 were
"administratively dismissed" by the U.S. District Court for
the Eastern District of Pennsylvania. Cases that have been
"administratively dismissed" may be reinstated only upon a
showing to the Court that (i) there is satisfactory evidence
of an asbestos-related injury; and (ii) there is probative
evidence that the plaintiff was exposed to products or
equipment supplied by each individual defendant in the case.
The Company believes that it has adequate insurance coverage
or has established appropriate reserves to cover potential
liabilities.
The Company was a defendant in a lawsuit in the U.S. District
Court for the Western District of Pennsylvania, which alleged
component failures in equipment sold by its former diesel
engine division. The complaint sought damages of
approximately $3.0 million. On September 30, 1997 the Court
granted a Summary Judgment motion filed by the Company which
effectively dismissed all claims against it. Plaintiffs have
appealed this judgment to the United States Court of Appeals
for the Third Circuit.
The Company is a defendant in a lawsuit in the Circuit Court
of Cook County, Illinois alleging performance shortfalls in
products delivered by the Company's former Delaval Turbine
Division and claiming damages of approximately $8.0 million.
To date the Court has granted a series of Summary Judgment
motions filed by the Company which have significantly reduced
the scope of damages which the Plaintiff may claim but has
permitted additional discovery to determine whether any other
damages exist which plaintiff may be entitled to seek at a
trial.
On June 3, 1997 the Company was served with a complaint in a
case brought in the Superior Court of New Jersey by Litton
Industries Inc. alleging damages in excess of $10 million
incurred by Litton as a result of losses under a Government
Contract purchased by Litton in its acquisition of the
Company's former Electro-Optical Systems business. The
Electro-Optical Systems business was sold to Litton in a
transaction that closed on June 2, 1995. The sales contract
between the Company and Litton provided certain
representations and warranties as to the status of the
business at the time of sale. Litton has alleged that the
Company failed to notify them of a reasonably anticipated
loss under a bid that was pending at the time of the transfer
of the business and that the representations and warranties
were breached. The contract was subsequently awarded to the
Company's Varo subsidiary and thereafter transferred to
Litton. The case is in the preliminary stages of pleading
but the Company believes that there are legal and factual
defenses to the claims and intends to defend the action
vigorously.
The Company is one of 5 defendants in an action brought by
Triad Chemical in the United States District Court for the
Middle District of Louisiana. In April 1991 the Company's
former Deltex Division performed a repair of a turbine for CF
Industries. Following the repair the turbine was included in
a spare parts pool until January 1995, when the turbine was
provided to Triad by CF Industries pursuant to a spare parts
pooling agreement. Triad alleges that following installation
in its plant the turbine experienced severe vibrations
10
<PAGE>
requiring the turbine to be run at less than optimal speed.
They further allege that the shortfall in performance caused
Triad to incur repair costs, and consequential damages in
excess of $5 million. The lawsuit is in the discovery stage
and therefore the Company is unable at this time to determine
the potential liability, if any.
The operations of the Company, like those of other companies
engaged in similar businesses, involve the use, disposal and
clean up of substances regulated under environmental
protection laws. In a number of instances the Company has
been identified as a Potentially Responsible Party by the
U.S. Environmental Protection Agency, and in one instance by
the State of Washington, with respect to the disposal of
hazardous wastes at a number of facilities that have been
targeted for clean-up pursuant to CERCLA or similar State
law. Although CERCLA and corresponding State law liability
is joint and several, the Company believes that its liability
will not have a material adverse effect on the financial
condition of the Company since it believes that it either
qualifies as a de minimis or minor contributor at each site.
Accordingly, the Company believes that the portion of
remediation costs that it will be responsible for will not be
material.
The Company is also involved in various other pending legal
proceedings arising out of the ordinary course of the
Company's business. None of these legal proceedings is
expected to have a material adverse effect on the financial
condition of the Company. With respect to these proceedings
and the litigation and claims described in the preceding
paragraphs, management of the Company believes that it either
expects to prevail, has adequate insurance coverage or has
established appropriate reserves to cover potential
liabilities. There can be no assurance, however, as to the
ultimate outcome of any of these matters, and if all or
substantially all of these legal proceedings were to be
determined adversely to the Company, there could be a
material adverse effect on the financial condition of the
Company.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The following paragraphs provide Management's discussion and
analysis of the significant factors which have affected the
Company's consolidated results of operations and financial
condition during the three and nine months ended September
30, 1997.
Recent Events
II Acquisition Corp.: As previously discussed, 93% of the
outstanding shares of the Company's common stock were
acquired by Acquisition Corp. on August 28, 1997. Reference
is made to Note B in Part I of this Form 10-Q Report for
additional information.
11
<PAGE>
Debt Refinancing: In addition, on August 29, 1997, the
Company completed the refinancing of its domestic senior
debt. Under terms of the refinancing, the Company entered
into a New Credit Agreement for $173 million in senior
secured credit facilities with a group of lenders. Proceeds
of the New Credit Agreement were used to refinance all
obligations under the Company's Old Credit Agreement.
Reference is made to Note G in Part I of this Form 10-Q
Report for additional information.
Legal Settlement: On May 8, 1997, the Company was informed
that the U.S. District Court for the Northern District of
California had reinstated the International Judgment,
awarding International $11.2 million, plus interest from
March 1995. The Company therefore recorded a charge to income
in the first quarter of 1997 of $12.9 million as an unusual
item, which represented the amount of the judgment plus
interest to date. On July 15, 1997 the Company agreed to
settle with International by dropping an appeal and paid a
reduced amount on July 30, 1997 in complete settlement of all
outstanding amounts. As a result of the settlement, the
Company recorded a favorable adjustment of $2.4 million as an
unusual item in the second quarter of 1997. Reference is made
to Note F in Part I of this Form 10-Q Report for additional
information.
Asset Sales: On August 29, 1997, the Company completed the
sale of its Instrumentation business segment to Danaher
Corporation for proceeds of $85 million, which approximated
its net book value. The Company used a portion of the proceeds
to reduce domestic senior debt by $67.9 million.
In the first nine months of 1997, the Company also completed
sales of certain of its non-operating real estate for total
proceeds of approximately $12.7 million, $8.9 million of
which, was used to repay senior debt.
1997 Cost Reduction Program. In connection with the acquisition
by Acquisition Corp., the Company's new management
implemented a program throughout the Company. The cost of
this program is estimated to be $16.8 million and was accrued
for in accordance with the purchase method of accounting. It
is comprised of $10.3 million related to severance and
termination benefits as a result of headcount reductions at
the Company's Corporate headquarters. In addition, $1.3
million, $.9 million and $4.3 million of costs are estimated
for the Company's Power Transmission, Pumps, and Morse
Controls segments, respectively, related to severance and
termination benefits resulting from headcount reductions and
the consolidation of certain manufacturing facilities.
Results of Operations
The recently sold Instrumentation and Electro-Optical Systems
business segments were accounted for as discontinued
operations in the accompanying consolidated financial
statements. Accordingly, the discussion that follows concerns
only the results of continuing
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operations. The Company's continuing businesses are grouped
into four business segments for management and segment
reporting purposes: Power Transmission, Pumps, Morse Controls,
and Roltra-Morse.
Three Months Ended September 30, 1997 Compared with 1996
Sales. Net sales from continuing operations for the three
months ended September 30, 1997 were $96.6 million, an
increase of 4.1%, compared with $92.8 million in the
comparable 1996 period. Third quarter 1997 net sales
increased 14.9%, 4.3% and 2.9% for the Roltra-Morse, Power
Transmission and Morse Controls segments, respectively, while
the Pumps segment decreased 2.0%, compared to the prior year
period. The Company had volume increases across all of its
segments; however, these were offset by the effects of
negative foreign currency fluctuations.
Gross Profit. The gross profit in the third quarter of 1997
increased slightly to 25.0% compared with 24.4% in 1996. The
higher gross profit was the result of increased sales volume
in all segments and productivity gains in the Pumps segment.
Selling, General and Administrative Expenses. Selling,
general and administrative expenses increased as a percentage
of sales to 19.1% for the three months ended September 30,
1997 compared with 18.1% in the 1996 period. The increased
expenses as a percent of sales in 1997 was due primarily to
the fact that the 1996 period benefited from a favorable
adjustment of $.9 million related to the Company phase-out of
accumulated postretirement benefit obligations. Research and
development expenditures decreased slightly to 2.0% of net
sales for the three months ended September 30, 1997 compared
with 2.2% in 1996.
Unusual Items. The Company recorded unusual charges of $21.6
million in the third quarter of 1997. Of these charges, $16.6
million was related to the sale of the Company and $5 million
was related to additional legal provisions concerning certain
litigation matters.
Interest Expense. Average borrowings in the third quarter of
1997 were approximately $15 million lower than the third
quarter of 1996. Total interest expense (before allocation to
discontinued operations) decreased $.6 million to $8.1
million for the three months ended September 30, 1997
compared with $8.7 million for the same period in 1996.
Interest expense for continuing operations excludes a general
interest allocation to the discontinued operations of $.3
million and $1.2 million for the three months ended September
30, 1997 and 1996, respectively.
Provision for Income Taxes. Income tax expense for
continuing operations was $.9 million and $10.7 million for
the three months ended September 30, 1997 and 1996,
respectively. Of these amounts, $.9 million and $.7 million,
respectively, represent current tax expense for foreign and
state income taxes, as the Company is utilizing existing U.S.
net operating loss carryforwards with its domestic earnings.
As a result of withdrawing Roltra-Morse from
13
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potential sale in November of 1996, the results for the three
months ended September 30, 1996 also include a provision of
$10.0 million against deferred tax benefits previously
recognized based on an anticipated gain on the sale.
Income from Continuing Operations. The Company had a net
loss from continuing operations of $25.3 million, or $1.48
per share, for the three months ended September 30, 1997,
compared with a loss of $14.1 million, or $.82 per share, for
the comparable 1996 period.
Income (Loss) from Discontinued Operations. The income
(loss) from operations of the discontinued operations
resulted in income of $.7 million and $1.6 million for the
three months ended September 30, 1997 and 1996,
respectively. Results from operations for the discontinued
operations include allocations for interest of $.3 million
and $1.2 million for the respective 1997 and 1996 periods.
Based on its quarterly review of the assumptions used in
determining the estimated loss from discontinued operations,
the Company recorded a charge of $8.4 million and $7.3
million in the three months ended September 30, 1997 and
1996, respectively. These charges related to changes in
estimates on legal and other reserve requirements of its
former Electro-Optical and Turbomachinery businesses.
Extraordinary Item. As a result of the $67.9 million
prepayment of the New Credit Agreement on August 29, 1997, an
extraordinary charge of $.3 million was recorded in the third
quarter of 1997. This charge represents the write-off of
previously deferred loan costs.
Net (Loss) Income. The net loss in the third quarter of 1997
was $33.3 million, or $1.95 per share, compared with a net
loss of $19.8 million, or $1.16 per share, in the comparable
1996 period. See "Unusual Items" and "Income (Loss) from
Discontinued Operations" above.
Nine Months Ended September 30, 1997 Compared with 1996
Sales. Net sales from continuing operations for the nine
months ended September 30, 1997 were $305.1 million, a 3.3%
increase compared with the comparable 1996 period. Excluding
the effects of exchange rate changes, primarily in Italy,
Sweden and Germany for the nine months ended September 30,
1997, net sales increased 7.5% compared to 1996. The Power
Transmission, Pumps and Roltra-Morse segments experienced
increased sales levels in the first nine months of 1997 as
compared with the prior year. The net sales of the Morse
Controls segment remained relatively flat.
14
<PAGE>
Gross Profit. The gross profit in the first nine months of
1997 increased slightly to 26.2% compared with 25.6% in 1996.
The higher gross profit was the result of increased sales
volume in all segments and productivity gains in the Pumps
segment.
Selling, General and Administrative Expenses. Selling,
general and administrative expenses increased as a percentage
of sales to 18.9% for the nine months ended September 30,
1997 compared with 17.1% in the 1996 period. The increased
expenses as a percent of sales in 1997 was due to certain
Corporate expenses related to the proposed sale of the
Company, and to the fact that the 1996 period benefited from
a favorable adjustment of $2.7 million related to the Company
phase-out of accumulated postretirement benefit obligations.
The increased selling, general and administrative expenses in
the first nine months of 1997 were partially offset by net
reductions of $.6 million to previously recorded provisions.
Research and development expenditures were 1.9% and 2.0% of
net sales for the nine months ended September 30, 1997 and
1996, respectively.
Unusual Items. The Company recorded unusual charges of $32.1
million in the nine months ended September 30, 1997. Of
these charges, $10.5 million related to the International
judgment. See Recent Events above.
Additionally, in the third quarter of 1997, the Company
recorded unusual charges of $21.6 million. See "Unusual
Items" under the section entitled "Three Months Ended
September 30, 1997 Compared with 1996" for discussion of
these charges.
Interest Expense. Average borrowings in the first nine
months of 1997 were approximately $11.1 million higher than
the first nine months of 1996. Total interest expense (before
allocation to discontinued operations) decreased $.3 million
to $25.6 million for the nine months ended September 30, 1997
compared with $25.8 million for the same period in 1996. The
additional interest expense as a result of the increased
borrowing level was more than offset by the lower interest
rates incurred by the Company since refinancing its domestic
debt in April 1996. Interest expense for continuing
operations excludes a general interest allocation to the
discontinued operations of $1.9 million and $3.5 million for
the nine months ended September 30, 1997 and 1996,
respectively.
Provision for Income Taxes. Income tax expense for
continuing operations was $2.2 million and $12.5 million for
the nine months ended September 30, 1997 and 1996,
respectively. Of these amounts, $2.2 million and $2.5
million, respectively, represent current tax expense for
foreign and state income taxes, as the Company is utilizing
existing U.S. net operating loss carryforwards with its
domestic earnings. As a result of withdrawing Roltra-Morse
from potential sale in November of 1996, the results for the
nine months ended September 30, 1996 also include a provision
of $10.0 million against deferred tax benefits previously
recognized based on an anticipated gain on the sale.
15
<PAGE>
Income (Loss) from Continuing Operations. The Company had a
net loss from continuing operations of $40.4 million, or
$2.35 per share, for the nine months ended September 30,
1997, compared with a loss of $14.7 million, or $.86 per
share, for the comparable 1996 period. See "Unusual Items"
above.
Extraordinary Item. An extraordinary charge of $.3 million
was recorded in the third quarter of 1997. This charge
represents the write-off of previously deferred loan costs.
Income (Loss) from Discontinued Operations. The income
(loss) from operations of the discontinued operations
resulted in income of $5.3 million and $5.1 million for the
nine months ended September 30, 1997 and 1996, respectively.
Results from operations for the discontinued operations
include allocations for interest of $1.9 million and $3.5
million for the respective 1997 and 1996 periods.
See "Income (Loss) from Discontinued Operations" under the
section entitled "Three Months Ended September 30, 1997
Compared with 1996" for discussion of additional charges
recorded to adjust the estimated loss on disposal of
discontinued operations in both the nine months ended
September 30, 1997 and 1996.
Net (Loss) Income. The net loss in the nine months ended
September 30, 1997 was $43.7 million, or $2.55 per share,
compared to a net loss of $25.4 million, or $1.49 per share,
in the comparable 1996 period. See "Unusual Items" and
"Income (Loss) from Discontinued Operations" above.
Liquidity and Capital Resources
Short-term and Long-term Debt
For discussion of the refinancing of the Company's domestic
senior debt on August 29, 1997, see "Recent Events" above,
and Note G in Part I of this Form 10-Q Report.
As of September 30, 1997, the availability under the
revolving credit facility was $57.0 million, as the Company
had borrowings of $59.0 million in term loans and $13.0
million of outstanding standby letters of credit under the
New Credit Agreement. The Company's continuing operations had
$27.6 million in foreign short-term credit facilities with
amounts outstanding at September 30, 1997 of $19.2 million.
In addition, the Company had outstanding $155 million of its
11.75% senior subordinated notes due in 2006.
16
<PAGE>
Cash Flow
The Company's operating activities used net cash of $29.9
million in the first nine months of 1997, compared with cash
used of $4.1 million in the comparable 1996 period. The cash
used by operating activities in 1997 was attributable to
certain non-recurring payments. Approximately $21.2 million
was paid in connection with the Company's sale process, which
amount was comprised of a $10 million contract termination
fee, $4.2 million of commissions, advisory and legal fees,
and approximately $7.0 million of severance and other
employee benefits related to measures taken at the Corporate
headquarters. Additionally, approximately $10 million was
paid in connection with the International judgment. Net cash
provided by investing activities of $100.2 million in the
first nine months of 1997 was due primarily to the sales of
the Company's Varo Electronic Systems business, the
Instrumentation business and non-operating real estate. This
compared with cash used in investing activities of $11.7
million for the nine months ended September 30, 1996. Cash
and cash equivalents were $16.8 million at September 30, 1997
compared with $4.9 million at December 31, 1996.
Working capital at September 30, 1997 was $45.3 million, an
increase of $1.2 million from the end of 1996. The ratio of
current assets to current liabilities was 1.3 at both
September 30, 1997 and December 31, 1996. The Company's
total debt as a percent of its total capitalization decreased
to 71.2% at September 30, 1997 compared with 123.2% at
December 31, 1996, due to the purchase accounting for the
acquisition of 93% of the Company's common stock by II
Acquisition Corp. and the further reduction of debt with a
portion of the proceeds from the sale of the Instrumentation
business segment.
The Company's sale of its Instrumentation business segment
and refinancing of its domestic senior debt has significantly
improved the liquidity position. Management believes that
cash flow from operations, cash available from unused credit
facilities and cash generated by additional asset sales will
be sufficient to meet the Company's foreseeable liquidity
needs.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. Except for historical matters, the matters discussed
in this Form 10-Q Report are forward-looking statements based
on current expectations and involve risks and uncertainties.
Forward-looking statements include, but are not limited to,
statements under the following headings: (i) "Restructuring
Plans" - the impact of various cost reduction programs;
(ii) Legal Proceedings - the future impact of legal
proceedings on the financial condition of the Company; and,
(iii) "Results of Operations" - the future performance of
various programs and foreign market conditions in each
segment and the impact of such programs and foreign market
conditions on future sales and on operating income. The
Company wishes to caution the reader that, in addition to the
matters described above, various factors such as delays in
contracts from key customers, demand and market acceptance
risk for
17
<PAGE>
new products, continued or increased competitive
pricing and the effects of under-utilization of plants and
facilities, particularly in Europe, and the impact of
worldwide economic conditions on demand for the Company's
products, could cause results to differ materially from those
in any forward-looking statement.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
For information regarding certain pending lawsuits, reference
is made to the Company's Form 10-K for the year ended
December 31, 1996, which is incorporated herein by reference,
and to Note H in Part I of this Form 10-Q Report.
Item 5. Other Information.
In connection with the acquisition of 93% of the Company's
outstanding shares of common stock by Acquisition Corp. on
August 28, 1997, each of Mr. Donald K. Farrar, Mr. Carter B.
Thacher, Mr. Arthur E. Van Leuven, Mr. Richard J. Grosh, Mr.
James B. Edwards and Mr. Donald C. Trauscht resigned as
directors of the Company and Mr. Steven M. Rales took office
as a Class I Director of the Company, Mr. Mitchell P. Rales
took office as a Class II Director of the Company, Mr. Philip
W. Knisely, took office as a Class III Director of the
Company, Mr. Neil D. Cohen took office as a Class II Director
of the Company and Mr. King David Boyer Jr., took office as a
Class I Director of the Company. Messrs. Cohen and Boyer
were appointed to succeed Messrs. Edwards and Grosh and each
of Messrs. Cohen and Boyer is a Continuing Director for the
purposes of Article Ten of the Company's Restated Certificate
of Incorporation.
Reference is also made to the Information Statement pursuant
to Section 14 (f) of the Securities Exchange Act of 1934, as
amended, and Rule 14f-1 thereunder (the "Information
Statement") and to the Supplement to the Information
Statement.
18
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
The following exhibits are being filed as part of
this Report:
Exhibit No. Description
10.27 Credit and Guaranty Agreement dated as of
August 29, 1997 among the Company, as
Borrower, II Acquisition Corp., as Guarantor,
Certain Financial Institutions, as Lenders,
The Bank of Nova Scotia, as Administrative
and Documentation Agent and Nationsbanc
Capital Markets, Inc., as Syndication Agent
for the Lenders.
27 Financial Data Schedule as of September 30,
1997
(b) Reports on Form 8-K:
On July 1, 1997, the Company filed a report on Form 8-K,
reporting under Item 5, disclosing the announcement that
the Registrant and United Dominion Industries Limited
("UDI") had executed a definitive merger agreement
providing for a tender offer for all shares of the
Registrant's common stock by UDI.
On July 29, 1997, the Company filed a report on Form 8-
K, reporting under Item 5, disclosing the announcement
that the Registrant and II Acquisition Corp. had
executed a definitive agreement providing for a tender
offer for all shares of the Registrant's common stock by
II Acquisition Corp. and had terminated the merger
agreement with United Dominion Industries Limited.
On August 27, 1997, the Company filed a report on Form 8-
K, reporting under Item 5, disclosing that the Board of
Directors of the Registrant amended the Rights Agreement
dated as of April 30, 1997 between the registrant and
the Rights Agent.
On September 15, 1997, the Company filed a report on
Form 8-K, reporting under Item 1, disclosing that on
August 28, 1997, II Acquisition Corp. had acquired
approximately 93% of the Registrant's outstanding shares
of common stock pursuant to its tender offer for all
outstanding shares of common stock of the Registrant
which expired, as scheduled on August 27, 1997.
On September 15, 1997, the Company filed a report on
Form 8-K, reporting under Item 2, disclosing that on
August 29, 1997, the Registrant had sold substantially
all of the assets of the Instrumentation business
segment to Danaher Corporation for a purchase price of
$85 million plus certain assumed liabilities.
19
<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, thereunto duly authorized.
Imo Industries Inc.
(Registrant)
Date:November 13, 1997 /s/ PHILIP W. KNISELY
Philip W. Knisely
President and Chief
Executive Officer
(principal executive
officer)
Date:November 13,1997
/s/ JOHN A. YOUNG
John A. Young
Vice President and Chief
Financial Officer
(principal financial and
accounting officer)
CREDIT AND GUARANTY AGREEMENT,
dated as of August 29, 1997,
among
IMO INDUSTRIES INC.,
as Borrower,
II ACQUISITION CORP.,
as Guarantor,
CERTAIN FINANCIAL INSTITUTIONS,
as Lenders,
THE BANK OF NOVA SCOTIA,
as Administrative Agent and Documentation Agent
and
NATIONSBANC CAPITAL MARKETS, INC.,
as Syndication Agent for the Lenders.
TABLE OF CONTENTS
SECTION PAGE
ARTICLE IDEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms 2
1.2. Use of Defined Terms 30
1.3. Cross-References 30
1.4. Accounting and Financial Determinations 30
ARTICLE IICOMMITMENTS, BORROWING PROCEDURES,LETTERS OF CREDIT AND
NOTES
2.1. Commitments 31
2.1.1. Term Loan Commitment 31
2.1.2. Revolving Loan Commitment 31
2.1.3. Letter of Credit Commitment 31
2.2. Lenders Not Permitted or Required to Make
Credit Extensions 32
2.2.1. Term Loans 32
2.2.2. Revolving Loans 32
2.2.3. Letters of Credit 32
2.3. Optional Reduction of the Commitment
Amounts 32
2.4. Borrowing Procedure 32
2.5. Continuation and Conversion Elections 33
2.6. Funding 33
2.7. Issuance Procedures 34
2.7.1. Other Lenders' Participation 34
2.7.2. Disbursements 34
2.7.3. Reimbursement 35
2.7.4. Deemed Disbursements 35
2.7.5. Nature of Reimbursement Obligations 36
2.8. Notes 37
ARTICLE IIIREPAYMENTS, PREPAYMENTS, INTEREST AND FEES
3.1. Repayments and Prepayments 37
3.1.1. Voluntary Prepayments 37
3.1.2. Mandatory Repayments and Prepayments 38
3.2. Interest Provisions 39
3.2.1. Rates 39
3.2.2. Post-Default Rates 40
3.2.3. Payment Dates 41
3.3. Fees 41
3.3.1. Commitment Fee 41
3.3.2. Letter of Credit Fee 41
3.3.3. Managing Agents' Fees, etc. 42
ARTICLE IVCERTAIN LIBO RATE AND OTHER PROVISIONS
4.1. LIBO Rate Lending Unlawful 42
4.2. Deposits Unavailable 42
4.3. Increased Costs, etc. 43
4.4. Funding Losses 44
4.5. Increased Capital Costs 44
4.6. Taxes 45
4.7. Payments, Computations, etc. 46
4.8. Sharing of Payments 47
4.9. Setoff 48
4.10. Use of Proceeds 48
ARTICLE VCONDITIONS TO CREDIT EXTENSIONS
5.1. Initial Credit Extension 49
5.1.1. Resolutions, etc. 49
5.1.2. Agreement 49
5.1.3. Delivery of Notes 49
5.1.4. Required Consents and Approvals 50
5.1.5. Consummation of Tender Offer 50
5.1.6. Consummation of the Acquisition 50
5.1.7. Financial Information, etc. 51
5.1.8. Subsidiary Guaranties. 51
5.1.9. Pledged Property 52
5.1.10. Foreign Pledge Agreements 52
5.1.11. U.C.C. Search Results, Intellectual
Property 52
5.1.12. Security Agreements, Filings, Lockboxes,
etc. 53
5.1.13. Real Estate Mortgages 53
5.1.14. Title Insurance 53
5.1.15. Realty Survey 54
5.1.16. Environmental Assessment Reports, etc. 54
5.1.17. Preferred Stock 54
5.1.18. Trustee's Certificate 55
5.1.19. Credit Line 55
5.1.20. Solvency Certificates 55
5.1.21. Closing Date Certificates 55
5.1.22. Reliance Letters 55
5.1.23. Fairness Opinion 56
5.1.24. Evidence of Insurance 56
5.1.25. Payment of Outstanding Indebtedness, etc. 56
5.1.26. Opinions of Counsel 56
5.1.27. Managing Agents' Closing Fees, Expenses,
etc. 56
5.1.28. Statement of Sources and Uses 57
5.1.29. Closing Date 57
5.1.30. Form U-1 57
5.1.31. Subscription Agreements 57
5.1.32. Supplemental Indenture 57
5.1.33. Assignment of Parent Subscription
Agreement. 57
5.1.34. Satisfactory Legal Form, etc. 57
5.2. All Credit Extensions 57
5.2.1. Compliance with Warranties, No Default,
etc. 58
5.2.2. Credit Extension Request, etc. 59
ARTICLE VIREPRESENTATIONS AND WARRANTIES
6.1. Organization, etc. 59
6.2. Due Authorization, Non-Contravention, etc. 59
6.3. Government Approval, Regulation, Compliance
with Law, etc. 60
6.4. Validity, etc. 60
6.5. Financial Information 61
6.6. No Material Adverse Change 61
6.7. Litigation, Labor Controversies, etc. 61
6.8. Subsidiaries 61
6.9. Ownership of Properties 62
6.10. Taxes 62
6.11. Pension and Welfare Plans 62
6.12. Environmental Warranties 63
6.13. Accuracy of Information 66
6.14. Purchase Agreement 67
6.15. Expropriation and Condemnation 67
6.16. Intellectual Property Collateral 67
6.17. Ownership of Stock 68
6.18. Absence of Default 68
6.19. Regulations G, U and X 68
6.20. Subordinated Debt 69
6.21. Government Regulation 69
6.22. Government Contracts 69
6.23. Subsidiary Guarantees 71
6.24. Burdensome Agreements 71
ARTICLE VIICOVENANTS
7.1. Affirmative Covenants 71
7.1.1. Financial Information, Reports, Notices,
etc. 71
7.1.2. Compliance with Laws, etc. 74
7.1.3. Maintenance of Properties 75
7.1.4. Insurance 75
7.1.5. Books and Records 77
7.1.6. Environmental Covenant 77
7.1.7. As to Intellectual Property Collateral 78
7.1.8. Future Subsidiaries 79
7.1.9. Future Real Estate Properties 81
7.1.10. Sale of Instrumentation Segment 81
7.1.11. Purchase of Preferred Stock 81
7.1.12. Credit Line of Non-U.S. Subsidiaries 81
7.1.13. Landlord Waivers 81
7.1.14. Foreign Employee Benefit Plan Compliance 82
7.1.15. Government Contracts 82
7.1.16. Future Guarantees, Pledged Stock 83
7.1.17. Notice Under Subordinated Note Indenture. 83
7.1.18. Further Assurances 83
7.2. Negative Covenants 84
7.2.1. Business Activities 84
7.2.2. Indebtedness 84
7.2.3. Liens 87
7.2.4. Financial Condition 88
7.2.5. Investments 92
7.2.6. Restricted Payments, etc. 93
7.2.7. Capital Expenditures, etc. 94
7.2.8. Rental Obligations 95
7.2.9. Take or Pay Contracts 95
7.2.10. Consolidation, Merger, etc. 95
7.2.11. Asset Dispositions, etc. 96
7.2.12. Modification of Certain Agreements 97
7.2.13. Transactions with Affiliates 97
7.2.14. Negative Pledges, Restrictive Agreements,
etc. 97
7.2.15. Management and Director Fees, Expenses,
etc. 98
7.2.16. Environmental Liens 98
7.2.17. Fiscal Year End 98
7.2.18. Stock of Subsidiaries 98
7.2.19. Activities of the Parent 99
7.2.20. No Investments, etc. in Certain
Subsidiaries 99
ARTICLE VIIIEVENTS OF DEFAULT
8.1. Listing of Events of Default 99
8.1.1. Non-Payment of Obligations 99
8.1.2. Breach of Warranty 100
8.1.3. Non-Performance of Certain Covenants and
Obligations 100
8.1.4. Non-Performance of Other Covenants and
Obligations 100
8.1.5. Default on Other Indebtedness 100
8.1.6. Judgments 101
8.1.7. Pension Plans 101
8.1.8. Change in Control 101
8.1.9. Bankruptcy, Insolvency, etc. 101
8.1.10. Impairment of Security, Senior Subordinated
Notes, etc. 102
8.2. Action if Bankruptcy 103
8.3. Action if Other Event of Default 103
ARTICLE IXGUARANTY
9.1. The Guaranty 103
9.2. Guaranty Unconditional 104
9.3. Reinstatement in Certain Circumstances 105
9.4. Waiver by the Parent 105
9.5. Postponement of Subrogation, etc. 105
9.6. Stay of Acceleration 106
9.7. Non-Recourse, etc 106
ARTICLE XTHE ADMINISTRATIVE AGENT
10.1. Actions 107
10.2. Funding Reliance, etc. 108
10.3. Exculpation 108
10.4. Successor 108
10.5. Credit Extensions by Managing Agents 109
10.6. Credit Decisions 109
10.7. Loan Documents, etc. 110
10.8. Copies, etc. 110
10.9. Limitation on Duties 110
ARTICLE XIMISCELLANEOUS PROVISIONS
11.1. Waivers, Amendments, etc. 111
11.2. Notices 112
11.3. Payment of Costs and Expenses 112
11.4. Indemnification 113
11.5. Survival 115
11.6. Severability 115
11.7. Headings 115
11.8. Execution in Counterparts, Effectiveness,
etc. 115
11.9. Governing Law; Entire Agreement 115
11.10. Successors and Assigns 116
11.11. Sale and Transfer of Loans and Notes;
Participations in Loans and Notes 116
11.11.1. Assignments 116
11.11.2. Participations 117
11.11.3. Certain Other Provisions 118
11.12. Other Transactions 119
11.13. Certain Collateral and Other Matters 119
11.14. Confidential Information 120
11.15. Forum Selection and Consent to Jurisdiction 120
11.16. Waiver of Jury Trial, etc. 121
SCHEDULE I - Disclosure Schedule
SCHEDULE II - Percentages
SCHEDULE III - Administrative Information
SCHEDULE IV - Real Estate Dispositions
SCHEDULE V - Mortgages in Favor of the Administrative
Agent
SCHEDULE VI - Discontinued Operations
EXHIBIT A - Form of Revolving Note
EXHIBIT B - Form of Term Note
EXHIBIT C - Form of Borrowing Request
EXHIBIT D - Form of Continuation/Conversion Notice
EXHIBIT E - Form of Issuance Request
EXHIBIT F - Form of Compliance Certificate
EXHIBIT G-1 - Form of Parent Pledge Agreement
EXHIBIT G-2 - Form of Borrower Pledge Agreement
EXHIBIT H-1 - Form of Borrower Security Agreement
EXHIBIT H-2 - Form of Subsidiary Security Agreement
EXHIBIT I - Form of Subsidiary Guaranty
EXHIBIT J - Form of Mortgage
EXHIBIT K - Form of Closing Date Certificate
EXHIBIT L - Form of CFO/CEO Solvency Certificates
EXHIBIT M - Form of Lender Assignment Agreement
EXHIBIT N - Form of Opinion of Counsel to the Obligors
CREDIT AND GUARANTY AGREEMENT
CREDIT AND GUARANTY AGREEMENT, dated as of August 29, 1997,
among IMO INDUSTRIES INC., a Delaware corporation (the
"Borrower"), II ACQUISITION CORP., a Delaware corporation (the
"Parent"), the various financial institutions as are or may
become parties hereto (collectively, the "Lenders"), THE BANK OF
NOVA SCOTIA ("Scotiabank"), as administrative agent (in such
capacity, the "Administrative Agent") and as documentation agent
(the "Documentation Agent") for the Lenders and NATIONSBANC
CAPITAL MARKETS, INC. ("NationsBanc"), as syndication agent (the
"Syndication Agent") for the Lenders (NationsBanc and Scotiabank
are also referred to herein as the "Managing Agents").
W I T N E S S E T H:
WHEREAS, the Borrower is a direct, and at least 80% owned
Subsidiary (such capitalized term and other capitalized terms
used in these recitals without definition shall have the meanings
provided for in Section 1.1) of the Parent; and
WHEREAS, pursuant to the Purchase Agreement, dated as of
July 25, 1997, between the Parent and the Borrower (as heretofore
amended with the consent of the Required Lenders, the "Purchase
Agreement"), the Parent has made a tender offer (the "Tender
Offer"), upon the terms and subject to the conditions of the
Purchase Agreement, to acquire all of the issued and outstanding
shares of common stock, par value $1.00 per share (the "Shares"),
of the Borrower, as may be tendered at a price of $7.05 per
share, net to the seller in cash (the "Acquisition"); and
WHEREAS, the Borrower is engaged directly and through
various Subsidiaries in the businesses of designing and producing
electronic adjustable-speed motor drives, gears and speed
reducers, rotary pumps, transducers and switches for sensing,
measuring and controlling pressure, temperature and liquid level
and flow, push-pull cables and remote control systems, and
automotive products including actuators, window controls, latches
and door panels/assemblies; and
WHEREAS, in order to refinance Indebtedness (including
interest thereon) currently outstanding in the amount of
$112,479,724.57 and to fund ongoing operations of the Borrower,
the Borrower desires to obtain from the Lenders
(a) Term Loan Commitments pursuant to which Term Loans
will be made to the Borrower on the date the Acquisition is
consummated in an aggregate principal amount not to exceed
$72,868,754.71;
(b) Revolving Loan Commitments pursuant to which
Revolving Loans will be made from time to time in a maximum
aggregate principal amount at any one time outstanding not
to exceed $70,000,000; and
(c) Letter of Credit Commitments pursuant to which the
Issuer will issue Letters of Credit from time to time in a
maximum aggregate Stated Amount at any one time outstanding
not to exceed $30,000,000; provided that, in any event, the
aggregate outstanding principal amount of all Revolving
Loans, together with the aggregate amount of all Letter of
Credit Outstandings, shall not at any one time exceed
$70,000,000; and
WHEREAS, in order to induce the Lenders, each Issuer and the
Managing Agents to enter into this Agreement and to make Credit
Extensions hereunder, the Parent and certain of its Subsidiaries
have agreed to deliver the Security Agreements, the Pledge
Agreements (including the Foreign Pledge Agreements), the
Mortgages, and the Guaranties, as the case may be, to secure all
of the Obligations; and
WHEREAS, the Lenders and the Issuer are willing, on the
terms and subject to the conditions hereinafter set forth
(including Article V), to extend such Commitments and make such
Loans to the Borrower and issue (or participate in) Letters of
Credit for the account of the Borrower;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION I.1. Defined Terms. The following terms (whether
or not underscored) when used in this Agreement, including its
preamble and recitals, shall, except where the context otherwise
requires, have the following meanings (such meanings to be
equally applicable to the singular and plural forms thereof):
"Acquisition" is defined in the second recital.
"Affiliate" of any Person means any other Person which,
directly or indirectly, controls, is controlled by or is under
common control with such Person (excluding any trustee under, or
any committee with responsibility for administering, any Plan).
A Person shall be deemed to be "controlled by" any other Person
if such other Person has, directly or indirectly,
(a) power to vote 10% or more of the securities (on a
fully diluted basis) or other interests having ordinary
voting power for the election of directors or managing
general partners;
(b) power to direct or cause the direction of the
management and policies of such Person whether by contract
or otherwise; or
(c) beneficial ownership of 10% or more of any class
of the voting stock of such Person or 10% or more of all
outstanding equity interests in such Person.
"Administrative Agent" is defined in the preamble and
includes each other Person as shall have subsequently been
appointed as the successor Administrative Agent pursuant to
Section 10.4.
"Agreement" means this Credit and Guaranty Agreement, as
amended, supplemented, restated or otherwise modified from time
to time.
"Applicable Commitment Fee Margin" means at all times during
the applicable periods set forth below with respect to the
commitment fee payable to the Lenders, pursuant to Section 3.3.1,
the applicable percentage set forth below under the column
entitled "Applicable Commitment Fee Margin":
Applicable Commitment
Leverage Ratio Fee Margin
Less than 3.50:1 0.250%
Greater than or equal to 0.375%
3.50:1 and less than 4.50:1
Greater than or equal to 0.500%.
4.50:1
The Leverage Ratio used to compute the Applicable Commitment
Fee Margin shall be the Leverage Ratio set forth in the
Compliance Certificate most recently delivered by the Borrower to
the Administrative Agent pursuant to clause (c) of Section 7.1.1
(provided, however, for purposes of determining the Applicable
Commitment Fee Margin for the period from the Effective Date
through (and including) the date on which the Administrative
Agent receives the Compliance Certificate in respect of the
Fiscal Quarter ended September 30, 1997 delivered pursuant to
clause (b) of Section 7.1.1, such Applicable Commitment Fee
Margin shall be 0.500%; changes in the Applicable Commitment Fee
Margin resulting from a change in the Leverage Ratio shall become
effective upon delivery by the Borrower to the Administrative
Agent of a new Compliance Certificate pursuant to clause (c) of
Section 7.1.1 and notice therein of such change. If the Borrower
shall fail to deliver a Compliance Certificate within 45 days
after the end of any Fiscal Quarter (or within 90 days, in the
case of the last Fiscal Quarter of the Fiscal Year) as required
pursuant to clause (b) of Section 7.1.1, the Applicable
Commitment Fee Margin from and including the 46th (or 91st, as
the case may be) day after the end of such Fiscal Quarter to but
not including the date the Borrower delivers to the
Administrative Agent a Compliance Certificate shall equal 0.500%.
"Applicable Margin" means at all times during the applicable
periods set forth below
Leverage Ratio Applicable Applicable
Margin For Margin For
Base Rate LIBO
Loans Rate Loans
Less than 3.0:1 0.00% 1.25%
Greater than or equal 0.25% 1.50%
to 3.0:1 and less
than 3.50:1
Greater than or equal 0.50% 1.75%
to 3.50:1 and less
than 4.0:1
Greater than or equal 0.75% 2.00%
to 4.0:1 and less
than 4.50:1
Greater than or equal 1.00% 2.25%
to 4.50:1 and less
than 5.0:1
Greater than or equal 1.25% 2.50%.
to 5.0:1
The Leverage Ratio used to compute the Applicable Margin
shall be the Leverage Ratio set forth in the Compliance
Certificate most recently delivered by the Borrower to the
Administrative Agent pursuant to clause (c) of Section 7.1.1
(provided, however, for purposes of determining the Applicable
Margin for the period from the Effective Date through (and
including) the date on which the Administrative Agent receives
the Compliance Certificate in respect of the Fiscal Quarter ended
September 30, 1997 delivered pursuant to clause (b) of Section
7.1.1, such Applicable Margin shall be 2.50% for LIBO Rate Loans
and 1.25% for Base Rate Loans; changes in the Applicable Margin
resulting from a change in the Leverage Ratio shall become
effective upon delivery by the Borrower to the Administrative
Agent of a new Compliance Certificate pursuant to clause (c) of
Section 7.1.1 and notice therein of such change. If the Borrower
shall fail to deliver a Compliance Certificate within 45 days
after the end of any Fiscal Quarter (or within 90 days, in the
case of the last Fiscal Quarter of the Fiscal Year) as required
pursuant to clause (b) of Section 7.1.1, the Applicable Margin
from and including the 46th (or 91st, as the case may be) day
after the end of such Fiscal Quarter to but not including the
date the Borrower delivers to the Administrative Agent a
Compliance Certificate shall equal 2.50% for LIBO Rate Loans and
1.25% for Base Rate Loans.
"Assignment of Claims Act" is defined in Section 7.1.15.
"Authorized Officer" means, relative to any Obligor, those
of its officers whose signatures and incumbency shall have been
certified to the Administrative Agent and the Lenders pursuant to
Section 5.1.1.
"Base Rate Loan" means a Loan bearing interest at a
fluctuating interest rate determined by reference to the
Scotiabank Base Rate.
"Borrower" is defined in the preamble.
"Borrower Pledge Agreement" means the Pledge Agreement
executed and delivered pursuant to clause (b) of Section 5.1.9,
substantially in the form of Exhibit G-2 hereto, as the same may
be amended, supplemented, restated or otherwise modified from
time to time.
"Borrower Preferred Stock" is defined in Section 5.1.17.
"Borrower Stock Subscription Agreement" means the Stock
Subscription Agreement, dated as of July 23, 1997, between the
Parent and the Borrower.
"Borrower Security Agreement" means the Borrower Security
Agreement executed and delivered pursuant to Section 5.1.12,
substantially in the form of Exhibit H-1 hereto, together with
the Security Agreement (Trademark), the Security Agreement
(Patents) and the Security Agreement (Copyrights) related
thereto, in each case as amended, supplemented, restated or
otherwise modified from time to time.
"Borrowing" means the Loans of the same type and, in the
case of LIBO Rate Loans, having the same Interest Period, made by
all Lenders on the same Business Day and pursuant to the same
Borrowing Request in accordance with Section 2.4.
"Borrowing Request" means a loan request and certificate
duly executed by an Authorized Officer of the Borrower,
substantially in the form of Exhibit C hereto.
"Business Acquisition" means (a) any Investment in the
capital stock of any Person or (b) any acquisition of the assets
of any Person pursuant to a transaction not in the ordinary
course of such Person's business.
"Business Day" means
(a) any day which is neither a Saturday or Sunday nor
a legal holiday on which banks are authorized or required to
be closed in New York, New York; and
(b) relative to the making, continuing, prepaying or
repaying of any LIBO Rate Loan, any day which is a Business
Day described in clause (a) above and which is also a day on
which dealings in Dollars are carried on in the interbank
eurodollar market of the Administrative Agent's LIBOR
Office.
"Capital Expenditures" means, for any period, without
duplication, the sum of
(a) the aggregate amount of all expenditures of the
Borrower and its Subsidiaries (including the Borrower and
its Subsidiaries) for fixed or capital assets made during
such period which, in accordance with GAAP, would be
classified as capital expenditures; and
(b) the aggregate amount of all Capitalized Lease
Liabilities incurred during such period.
"Capitalized Lease Liabilities" means all monetary
obligations of the Borrower or any of its Subsidiaries under any
leasing or similar arrangement which, in accordance with GAAP,
would be classified as capitalized leases, and, for purposes of
this Agreement and each other Loan Document, the amount of such
obligations shall be the capitalized amount thereof, determined
in accordance with GAAP, and the stated maturity thereof shall be
the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of Indebtedness, maturing not more
than one year after the date of issuance, issued or
guaranteed by the United States Government;
(b) commercial paper, maturing not more than nine
months from the date of issuance and rated at least A-1 by
Standard & Poor's Ratings Group or P-1 by Moody's Investors
Service, Inc., which is issued by
(i) a corporation (other than an Affiliate of any
Obligor) organized under the laws of any state of the
United States or of the District of Columbia, or
(ii) any Lender or any Affiliate thereof;
(c) any certificate of deposit or bankers acceptance,
maturing not more than one year after such time, which is
issued by (i) a Lender or (ii) a commercial banking
institution that (A) is a member of the Federal Reserve
System, (B) has a combined capital and surplus and undivided
profits of not less than $500,000,000 and (C) has
outstanding short-term debt securities which are rated at
least A-1 by Standard & Poor's Ratings Group or P-1 by
Moody's Investors Service, Inc.;
(d) any repurchase agreement entered into with any
Lender (or other commercial banking institution of the
stature referred to in clause (c)) secured by a fully
perfected Lien in any obligation thereunder of the type
described in any of clauses (a) through (c), having a market
value at the time such repurchase agreement is entered into
of not less than 100% of the repurchase obligation
thereunder of such Lender or other commercial banking
institution; or
(e) any money market mutual fund with a daily right of
redemption and a net asset value of $1.00 per share
substantially all the assets of which are comprised of
investments of the types described in the preceding clauses
(a) through (d).
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response
Compensation Liability Information System List.
"Change in Control" means
(a) Prior to the Merger, the failure of the
Stockholders at any time (i) to own beneficially free and
clear of all Liens at all times, at least 51% of the issued
and outstanding shares of common stock of the Parent (both
voting and non-voting), on a fully diluted basis, and
(ii) to have and exercise voting power for the election of
at least a majority of the board of directors of the Parent;
(b) immediately following the Merger, the failure of
the Stockholders and management shareholders of the Borrower
at any time (i) to own beneficially 80% or more of the
issued and outstanding shares of common stock of the
Borrower (both voting and non-voting) free and clear of all
Liens, on a fully diluted basis, and (ii) to have and
exercise voting power for the election of at least a
majority of the board of directors of the Borrower;
(c) the direct or indirect acquisition by any Person
or a group (as such term is defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended), other than
the Stockholders, of beneficial ownership (as such term is
defined in Rule 13D-3 promulgated under the Securities
Exchange Act of 1934, as amended) of 20% or more of the
outstanding shares of common stock of the Parent and
following the Merger, the Borrower;
(d) prior to the Merger, the failure of the Parent and
management shareholders of the Borrower and the Parent at
any time to own beneficially 80% or more of the issued and
outstanding shares of common stock of the Borrower (both
voting and non-voting) free and clear of all Liens (other
than Liens in favor of the Administrative Agent arising
pursuant to the Parent Pledge Agreement),on a fully diluted
basis (excluding the warrants in the amount of up to 1% of
the common stock of the Borrower held by Prudential
Insurance Company); or
(e) a change in the majority of the board of directors
of the Parent or the Borrower unless approved by the then
majority of the board of directors of the Parent or the
Borrower, as the case may be.
"Code" means the Internal Revenue Code of 1986, as amended,
reformed or otherwise modified from time to time.
"Collateral" means any assets of the Borrower or any of its
Subsidiaries or of any other Obligor subject to a Lien pursuant
to any Loan Document.
"Commitment" means, as the context may require, a Lender's
Revolving Loan Commitment, Term Loan Commitment or Letter of
Credit Commitment.
"Commitment Amount" means, as the context may require,
either the Revolving Loan Commitment Amount, the Term Loan
Commitment Amount or the Letter of Credit Commitment Amount.
"Commitment Termination Date" means, as the case may be, the
Revolving Loan Commitment Termination Date or the Term Loan
Commitment Termination Date.
"Commitment Termination Event" means
(a) the occurrence of any Default described in clauses
(b) through (d) of Section 8.1.9; or
(b) the occurrence and continuance of any other Event
of Default and either
(i) the declaration of the Loans to be due and
payable pursuant to Section 8.3, or
(ii) the giving of notice by the Administrative
Agent, acting at the direction of the Required Lenders,
to the Borrower that the Commitments have been
terminated.
"Compliance Certificate" means a certificate duly executed
by the chief accounting or financial Authorized Officer of the
Borrower, substantially in the form of Exhibit F hereto, together
with such changes thereto as the Administrative Agent may from
time to time reasonably request for the purpose of monitoring the
Borrower's compliance with the financial covenants contained
herein.
"Contingent Liability" means any agreement, undertaking or
arrangement by which any Person guarantees, endorses or otherwise
becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment,
to supply funds to, or otherwise to invest in, a debtor, or
otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other Person (other than
by endorsements of instruments in the course of collection or in
the ordinary course of business), or guarantees the payment of
dividends or other distributions upon the shares of any other
Person. The amount of any Person's obligation under any
Contingent Liability shall (subject to any limitation set forth
therein) be deemed to be the outstanding principal amount (or
maximum principal amount, if larger) of the debt, obligation or
other liability guaranteed thereby.
"Continuation/Conversion Notice" means a notice duly
executed by an Authorized Officer of the Borrower, substantially
in the form of Exhibit D hereto.
"Controlled Group" means all members of a controlled group
of corporations and all members of a controlled group of trades
or businesses (whether or not incorporated) under common control
which, together with the Parent or any Subsidiary, are treated as
a single employer under Section 414(b) or 414(c) of the Code or
Section 4001 of ERISA.
"Credit Extension" means, as the context may require,
(a) the making of a Loan by a Lender; or
(b) the issuance of any Letter of Credit, the
extension of any Stated Expiry Date of any existing Letter
of Credit or the increase in the Stated Amount of any
existing Letter of Credit, in each case by an Issuer.
"Credit Extension Request" means, as the context may
require, any Borrowing Request or Issuance Request.
"Default" means any Event of Default or any condition,
occurrence or event which, after notice or lapse of time or both,
would constitute an Event of Default.
"Disbursement" is defined in Section 2.7.2.
"Disbursement Date" is defined in Section 2.7.2.
"Disclosure Schedule" means the Disclosure Schedule attached
hereto as Schedule I, as it may be amended, supplemented or
otherwise modified from time to time by the Borrower with the
written consent of the Administrative Agent and the Required
Lenders.
"Discontinued Operations" means the discontinued operations
listed on Schedule VI hereto, as such Schedule may be amended
from time to time with the prior written consent of the
Administrative Agent.
"Documentation Agent" is defined in the preamble.
"Dollar" and the symbol "$" mean lawful money of the United
States.
"Domestic Office" means, relative to any Lender, the office
of such Lender designated as such on Schedule III hereto or
designated in a Lender Assignment Agreement, or such other office
of a Lender (or any successor or assign of such Lender) within
the United States as may be designated from time to time by
notice from such Lender to each other Person party hereto.
"EBITDA" means, for any period, the sum, without
duplication, of
(a) Net Income for such period excluding any equity
income from Affiliates of the Borrower to the extent not
received by the Borrower in cash;
plus
(b) the amounts deducted, in determining Net Income
for such period, for
(i) all income taxes paid by, or accrued to be
paid by, the Borrower and its Subsidiaries during such
period in respect of such period,
plus
(ii) Interest Expense for such period,
plus
(iii) the amount deducted, in determining Net
Income for such period, for amortization and
depreciation of assets of the Borrower and its
Subsidiaries during such period.
"Effective Date" means the date this Agreement becomes
effective pursuant to Section 11.8.
"Environmental Laws" means all applicable sovereign,
federal, state, county, parish or local statutes, laws,
ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to public
health and safety and protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import,
together with the regulations thereunder, in each case as in
effect from time to time. References to sections of ERISA also
refer to any successor sections.
"ERISA Affiliate" means any (i) corporation which is a
member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Internal Revenue Code) as the
Borrower, (ii) partnership or other trade or business (whether or
not incorporated) under common control (within the meaning of
Section 414(c) of the Internal Revenue Code) with the Borrower,
and (iii) member of the same affiliated service group (within the
meaning of section 414(m) of the Internal Revenue Code) as the
Borrower, any corporation described in clause (i) above or any
partnership or trade or business described in clause (ii) above.
"Event of Default" is defined in Section 8.1.
"Excess Cash Flow" means, for any Fiscal Year, the excess
for such Fiscal Year of
(a) the sum, determined for such Fiscal Year, of
EBITDA;
over
(b) the sum, determined for such Fiscal Year, of
(i) Capital Expenditures permitted by Section
7.2.7 made or incurred by the Borrower and its
Subsidiaries and paid in cash during such Fiscal Year;
plus
(ii) all prepayments and repayments of Term Loans
made pursuant to Section 3.1.1 or 3.1.2 (other than
pursuant to Section 3.1.2(c)(ii)(C));
plus
(iii) all income taxes paid by the Borrower and
its Subsidiaries in cash during such Fiscal Year in
respect of such Fiscal Year;
plus
(iv) Interest Expense paid in cash during such
Fiscal Year.
"Excess Insurance Proceeds" means the insurance proceeds
received by the Administrative Agent pursuant to clause (d) of
Section 7.1.4.
"Existing Bank Facility" means the Credit Agreement, dated
as of April 29, 1996, among the Borrower, the Guarantors (as
defined therein), the Lenders (as defined therein) and Citicorp
USA, Inc., as agent thereunder.
"Facility" means (a) any real property, fixture or
appurtenance owned or operated by the Borrower or any of its
Subsidiaries or predecessors in interest, (b) any stationary
source of air pollution or any air pollution control equipment
owned or operated by the Borrower or any of its Subsidiaries or
predecessors in interest, (c) any source of water pollution
(including indirect sources to sewer systems) or any water
pollution control equipment owned or operated by the Borrower or
any of its Subsidiaries or predecessors in interest, (d) all
contiguous property under the control of the Borrower or any of
its Subsidiaries or predecessors in interest, (e) any building,
structure, installation, equipment, pipe or pipeline (including
any pipe into a sewer or publicly owned treatment works), well,
pit, pond, lagoon, impoundment, ditch, landfill, storage
container, motor vehicle, rolling stock, or aircraft owned or
operated by the Borrower or any of its Subsidiaries or
predecessors in interest, and (f) any site or area where a
hazardous substance provided to or generated by the Borrower or
any of its Subsidiaries or predecessors in interest has been
deposited, stored, disposed of, or placed, or otherwise come to
be located; but does not include any consumer product in consumer
use or any vessel.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to
(a) the weighted average of the rates on overnight
federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York; or
(b) if such rate is not so published for any day which
is a Business Day, the average of the quotations for such
day on such transactions received by Scotiabank from three
federal funds brokers of recognized standing selected by it.
"Fee Letters" means the confidential fee letters, each dated
July 24, 1997, from Scotiabank and NationsBank, addressed to, and
agreed and accepted by, the Parent and Constellation Partners
LLC.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive
calendar months ending on the 31st day of each December.
References to a Fiscal Year with a number corresponding to any
calendar year (e.g., "Fiscal Year 1997") refer to the Fiscal Year
ending during such calendar year.
"Fixed Charge Coverage Ratio" means, as of the last day of
any Fiscal Quarter, the ratio of:
(a) EBITDA for the Rolling Period ending on such day
minus all Capital Expenditures of the Borrower and its
Subsidiaries incurred or committed to be incurred during
such Rolling Period;
to
(b) the sum of
(i) Interest Expense paid in cash for such
Rolling Period;
plus
(ii) all scheduled repayments of Term Loans made
pursuant to Section 3.1.2(b) during such Rolling
Period.
"Foreign Employee Benefit Plan" means any employee benefit
plan as defined in Section 3(3) of ERISA which is maintained or
contributed to for the benefit of the employees of the Borrower,
any of its Subsidiaries or any of its ERISA Affiliates, but which
is not covered by ERISA pursuant to ERISA Section 4(b)(4).
"Foreign Pension Plan" means any employee benefit plan as
defined in Section 3(3) of ERISA which (i) is maintained or
contributed to for the benefit of employees of the Borrower, any
of its Subsidiaries or any of its ERISA Affiliates, (ii) is not
covered by ERISA pursuant to Section 4(b)(4) of ERISA, and (iii)
under applicable local law, is required to be funded through a
trust or other funding vehicle.
"Foreign Pledge Agreement" means any supplemental pledge
agreement governed by the laws of a jurisdiction other than the
United States or a State thereof executed and delivered by the
Borrower or any of its Subsidiaries pursuant to the terms of this
Agreement, in form and substance satisfactory to the
Administrative Agent, as may be necessary or desirable under the
laws of organization or incorporation of the Borrower or any
Subsidiary to further protect or perfect the Lien on and security
interest in any Pledged Shares and/or Pledged Notes (as such
terms are defined in a Pledge Agreement).
"F.R.S. Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"GAAP" is defined in Section 1.4.
"Governmental Authority" means any nation or government, any
federal, state, local or other political subdivision thereof and
any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to
government.
"Government Contract" means any bid, quotation, proposal,
contract, agreement, work authorization, lease, commitment or
sale or purchase order of the Borrower or any of its Subsidiaries
that is with the United States Government, or any state, local or
foreign government, including, without limitation, all contracts
and work authorizations to supply goods and services to the
United States Government.
"Guaranteed Obligations" is defined in Section 9.1.
"Guaranties" means, as the context may require, the
Subsidiary Guaranty and the guaranty of the Parent contained in
Article IX herein.
"Guarantor" means the Parent.
"Hazardous Material" means
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous or toxic
chemical, material or substance within the meaning of any
other applicable federal, state or local law, regulation,
ordinance or requirement, as amended (including consent
decrees and administrative orders) relating to or imposing
liability or standards of conduct concerning any hazardous,
toxic or dangerous waste, substance or material.
"Hedging Obligations" means, with respect to any Person, all
liabilities of such Person under Rate Protection Agreements.
"herein", "hereof", "hereto", "hereunder" and similar terms
contained in this Agreement or any other Loan Document refer to
this Agreement or such other Loan Document, as the case may be,
as a whole and not to any particular Section, paragraph or
provision of this Agreement or such other Loan Document.
"Impermissible Qualification" means, relative to the opinion
or certification of any independent public accountant as to any
financial statement of the Borrower or any Subsidiary Guarantor,
any qualification or exception to such opinion or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination
of matters relevant to such financial statement; or
(c) which relates to the treatment or classification
of any item in such financial statement and which, as a
condition to its removal, would require an adjustment to
such item the effect of which would be to cause such Obligor
to be in default of any of its obligations under Section
7.2.4.
"including" means including without limiting the generality
of any description preceding such term, and, for purposes of this
Agreement and each other Loan Document, the parties hereto agree
that the rule of contract interpretation to the effect that where
general words are followed by a specific listing of items the
general words shall not be given their widest meaning, shall not
be applicable to limit a general statement, which is followed by
or referable to an enumeration of specific matters, to matters
similar to the matters specifically mentioned.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money,
all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments and all
capital stock which has redemption provisions exercisable at
the option of the holder thereof in whole or in part for
cash;
(b) all obligations, contingent or otherwise, relative
to all Letter of Credit Outstandings, whether or not drawn,
and banker's acceptances issued for the account of such
Person;
(c) all obligations of such Person as lessee under
leases which have been or should be, in accordance with
GAAP, recorded as Capitalized Lease Liabilities;
(d) for purposes of Section 8.1.5 only, all other items
which, in accordance with GAAP, would be included as
liabilities on the liability side of the balance sheet of
such Person as of the date at which Indebtedness is to be
determined;
(e) net liabilities of such Person with respect to
each Hedging Obligation;
(f) whether or not so included as liabilities in
accordance with GAAP, all obligations of such Person to pay
the deferred purchase price of property or services, and
indebtedness (excluding prepaid interest thereon) secured by
a Lien on property owned or being purchased by such Person
(including indebtedness arising under conditional sales or
other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is
limited in recourse; and
(g) all Contingent Liabilities of such Person in
respect of any of the foregoing.
For all purposes of this Agreement, the Indebtedness of any
Person shall include the Indebtedness of any partnership or joint
venture in which such Person is a general partner thereof or has
direct liability in the nature of a general partner.
"Indemnified Liabilities" is defined in Section 11.4.
"Indemnified Parties" is defined in Section 11.4.
"Initial Capital Contribution" is defined in Section 5.1.17.
"Initial Sale" is defined in Section 7.1.10.
"Instrumentation Segment" means the instrumentation segment
of the Borrower's business.
"Intellectual Property Collateral" has the meaning provided
for such term in the Security Agreements.
"Interest Coverage Ratio" means, as of the last day of any
Fiscal Quarter, the ratio of:
(a) EBITDA for the Rolling Period ending on such day,
to
(b) Interest Expense for such Rolling Period.
"Interest Expense" means, for any period, the aggregate
consolidated interest expense of the Borrower and its
Subsidiaries for such period, as determined in accordance with
GAAP, including, without duplication, net obligations of the
Borrower and its Subsidiaries (including fees) in respect of Rate
Protection Agreements and the portion of any Capitalized Lease
Liabilities of the Borrower and its Subsidiaries allocable to
interest expense, in each case paid or payable in cash during
such period.
"Interest Period" means, relative to any LIBO Rate Loan, the
period beginning on (and including) the date on which such LIBO
Rate Loan is made or continued as, or converted into, a LIBO Rate
Loan pursuant to Section 2.4 or 2.5 and ending on (but excluding)
the day which is one, two, three, six or twelve (if available to
all of the Lenders) months thereafter (or, if such month has no
numerically corresponding day, on the last Business Day of such
month), as the Borrower may select in its relevant notice
pursuant to Section 2.4 or 2.5; provided, however, that
(a) the Borrower shall not be permitted to select
Interest Periods to be in effect at any one time which have
expiration dates occurring on more than five different
dates;
(b) if such Interest Period would otherwise end on a
day which is not a Business Day, such Interest Period shall
end on the next following Business Day (unless such next
following Business Day is the first Business Day of a month,
in which case such Interest Period shall end on the Business
Day next preceding the day on which such Interest Period
would otherwise end); and
(c) the Borrower shall not be permitted to select, and
there shall not be applicable, any Interest Period that
would be broken by reason of a mandatory payment of Term
Loans required pursuant to clause (b) of Section 3.1.2 or
any Interest Period for any Loan which would end later than
the Stated Maturity Date for such Loan.
"Inventory" means any "inventory" (as defined in Section
9-109(4) of the U.C.C.) of any Person.
"Investment" means, relative to any Person,
(a) any loan or advance made by such Person to any
other Person (excluding commission, travel and similar
advances to officers and employees made in the ordinary
course of business);
(b) any Contingent Liability of such Person incurred
in connection with loans or advances made by others to such
Person; and
(c) any ownership or similar interest held by such
Person in any other Person.
The amount of any Investment shall be the original principal or
capital amount thereof less all returns of principal or equity
thereon (and without adjustment by reason of the financial
condition of such other Person) and shall, if made by the
transfer or exchange of property other than cash, be deemed to
have been made in an original principal or capital amount equal
to the fair market value of such property.
"Issuance Request" means a Letter of Credit request and
certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of Exhibit E hereto.
"Issuer" means Scotiabank in its capacity as issuer of the
Letters of Credit. At the request of Scotiabank, another Lender
or an Affiliate of Scotiabank may issue one or more Letters of
Credit hereunder, in which case the term "Issuer" as used herein
shall refer to each of Scotiabank, any such Lender and any such
Affiliate of Scotiabank.
"Lenders" is defined in the preamble.
"Lender Assignment Agreement" means a lender assignment
agreement in substantially the form of Exhibit M hereto.
"Letter of Credit" is defined in clause (a) of Section
2.1.3.
"Letter of Credit Commitment" means, with respect to the
Issuer, the Issuer's obligation to issue Letters of Credit
pursuant to Section 2.7 and, with respect to each of the other
Lenders, the obligations of each such Lender to participate in
such Letters of Credit pursuant to Section 2.7.1.
"Letter of Credit Commitment Amount" means, on any date,
$30,000,000, as such amount may be permanently reduced from time
to time pursuant to Section 2.3.
"Letter of Credit Outstandings" means, on any date, an
amount equal to the sum of
(a) the then aggregate amount which is undrawn and
available under all issued and outstanding Letters of
Credit;
plus
(b) the then aggregate amount of all unpaid and
outstanding Reimbursement Obligations.
"Leverage Ratio" means, as of the last day of any Rolling
Period, the ratio of:
(a) Total Debt as at the last day of such Rolling
Period;
to
(b) EBITDA for such Rolling Period.
"LIBO Rate" is defined in Section 3.2.1.
"LIBO Rate Loan" means a Loan bearing interest, at all times
during an Interest Period applicable to such Loan, at a fixed
rate of interest determined by reference to the LIBO Rate
(Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" is defined in Section 3.2.1.
"LIBOR Office" means, relative to any Lender, the office of
such Lender designated as such on Schedule III hereto or
designated in a Lender Assignment Agreement, or such other office
of a Lender as designated from time to time by notice from such
Lender to the Borrower and the Administrative Agent, whether or
not outside the United States, which shall be making or
maintaining LIBO Rate Loans of such Lender hereunder.
"LIBOR Reserve Percentage" is defined in Section 3.2.1.
"Lien" means any security interest, mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or otherwise), charge against or interest in property
to secure payment of a debt or performance of an obligation or
other priority or preferential arrangement of any kind or nature
whatsoever.
"Loan" means, as the context may require, either a Revolving
Loan or a Term Loan.
"Loan Document" means this Agreement, the Notes, the Letters
of Credit, the Fee Letters, the Borrower Security Agreement, the
Subsidiary Security Agreement, each Lockbox Agreement, the Parent
Pledge Agreement, the Borrower Pledge Agreement, the Foreign
Pledge Agreements, the Subsidiary Guaranty, each Rate Protection
Agreement with a Lender or an Affiliate of a Lender or a Person
that was a Lender or an Affiliate of a Lender at the time the
applicable Rate Protection Agreement was entered into, each
Lender Assignment Agreement and each other agreement, instrument
or document executed and delivered pursuant to or in connection
with this Agreement and the other Loan Documents (including the
agreements executed from time to time by Subsidiaries of the
Borrower pursuant to Section 7.1.8 and Section 7.1.16 the
agreements executed from time to time by the Borrower and its
Subsidiaries pursuant to Section 7.1.9 and the promissory notes
evidencing Indebtedness permitted by clauses (d) and (l) of
Section 7.2.2).
"Lockbox Accounts" means, collectively, the lockbox accounts
established at the Lockbox Banks; and "Lockbox Account" means any
one of the Lockbox Accounts.
"Lockbox Agreements" means the deposit account agreements,
blocked account agreements, lockbox agreements or similar
agreements, executed by and among the Borrower or its United
States Subsidiaries, the Administrative Agent and the financial
institutions at which the relevant accounts are being maintained,
each in form and substance satisfactory to the Administrative
Agent, as such agreements may be amended, supplemented, amended
and restated or otherwise modified from time to time.
"Lockbox Bank" means each bank identified as such in Item C
of Schedule I in each of the Borrower and the Subsidiary Security
Agreements that has executed a Lockbox Agreement and has been
confirmed by the Administrative Agent not to be in uncertain
financial condition, at which the Borrower, or any of its
Subsidiaries, deposit proceeds of Collateral.
"Lockboxes" means, collectively, the lockboxes established
at the Lockbox Banks for collection of payments in respect of
Receivables or other Collateral; and "Lockbox" means any one of
the Lockboxes.
"Managing Agents" is defined in the Preamble.
"Material Government Contract" means any Government Contract
(or group of present or future related Government Contracts) with
respect to which the estimated Receivables generated or to be
generated pursuant thereto equals or exceeds $10,000,000.
"Merger" means the merger of the Parent with and into the
Borrower, with the Borrower being the survivor of such merger
pursuant to the terms of Section 7.2.10.
"Mortgage" is defined in Section 5.1.13, together with any
and all mortgages, deeds of trust and other real estate security
instruments securing the payment of the Obligations.
"Net Debt Proceeds" means, in the case of the issuance,
incurrence, placement or sale of any Indebtedness (other than
Indebtedness in respect of the Notes and any refinancing pursuant
to clause (m) of Section 7.2.2) of the type referred to in clause
(a) of the definition thereof (whether pursuant to a public or
private offering), with the prior consent of the Required Lenders
from and after the Effective Date, the excess of
(a) the gross cash proceeds received by the Parent,
the Borrower or any of their U.S. Subsidiaries from such
issuance, incurrence, placement or sale of permitted
Indebtedness (including any cash payments received by way of
deferred payment of principal pursuant to a permitted
promissory note or installment receivable or otherwise, but
only as and when received);
over
(b) in connection with the issuance, incurrence,
placement or sale of permitted Indebtedness, (i) all
reasonable and customary fees and expenses actually paid by
the Parent, the Borrower or their U.S. Subsidiaries (except
as provided in clause (ii)) and (ii) underwriters' discounts
and commissions not payable to the Parent, the Borrower, any
of their U.S. Subsidiaries or any of their Affiliates.
"Net Disposition Proceeds" means the excess of
(a) the gross cash proceeds (other than proceeds from
(i) any sale of Inventory of the Borrower or any of its
Subsidiaries in the ordinary course of their business and
(ii) Real Estate Dispositions) received by the Borrower or
any of its Subsidiaries (excluding Non-U.S. Subsidiaries
unless, the Borrower or its Subsidiaries receives net cash
proceeds from any such disposition after the repayment of
all existing Indebtedness at the time of any such
disposition) from any Permitted Disposition with a purchase
price in excess of $1,000,000, including any cash payments
received by way of a deferred payment of principal pursuant
to a permitted note or installment receivable or otherwise,
but only when and as received;
over
(b) (i) all reasonable and customary fees and expenses
with respect to legal, investment banking, brokerage,
accounting and other professional fees actually incurred by
the Borrower and its Subsidiaries in connection with such
Permitted Disposition which have not been paid to Affiliates
of the Borrower or any of its Subsidiaries; and (ii) if
permitted hereunder or otherwise by the Required Lenders,
the aggregate amount of any Indebtedness of the type
referred to in clause (a) of the definition thereof.
"Net Equity Proceeds" means, in the case of the issuance,
placement or sale of equity (other than the Borrower Preferred
Stock) securities (whether pursuant to a public or private
offering) from and after the Effective Date, the excess of
(a) the gross cash proceeds received by the Borrower
or any of its Subsidiaries from such issuance, placement or
sale of equity securities (including any cash payments
received by way of deferred payment of principal pursuant to
a permitted promissory note or installment receivable or
otherwise, but only as and when received);
over
(b) in connection with such issuance, placement or
sale of such equity securities, all (i) reasonable and
customary fees and expenses actually paid by the Borrower or
its Subsidiaries and (ii) underwriters' discounts and
commissions not payable to the Borrower or any of its
Subsidiaries.
"Net Income" means, for any period, all amounts (exclusive
of all amounts in respect of any nonrecurring or extraordinary
gains or losses and non-cash equity losses) which, in accordance
with GAAP, would be included as net income on the consolidated
statements of income of the Borrower and its Subsidiaries (other
than from Discontinued Operations) for such period.
"Non-U.S. Subsidiary" means any Subsidiary of the Borrower
that is not incorporated or organized under the laws of the
United states of any State thereof (including the United States
Virgin Islands).
"Note" means, as the context may require, either a Revolving
Note or a Term Note.
"Obligations" means all obligations (monetary or otherwise)
of the Borrower arising under or in connection with this
Agreement, the Notes and each other Loan Document.
"Obligor" means the Parent and any of its Subsidiaries
(including the Borrower and any of its Subsidiaries).
"Organic Document" means, relative to any Obligor, its
articles or certificate of incorporation, its by-laws and all
shareholder agreements, voting trusts and similar arrangements
applicable to any of its authorized shares of capital stock.
"Parent" is defined in the preamble.
"Parent Pledge Agreement" means the Pledge Agreement
(Parent) executed and delivered pursuant to clause (a) of Section
5.1.9, substantially in the form of Exhibit G-1 hereto, as the
same may be amended, supplemented, restated or otherwise modified
from time to time.
"Participant" is defined in Section 11.11.2.
"PBGC" means the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is
defined in Section 3(2) of ERISA, which is subject to Title IV of
ERISA (other than a multiemployer plan as defined in Section
4001(a)(3) of ERISA), and to which the Parent, the Borrower or
any Subsidiary or any corporation, trade or business that is,
along with the Parent, the Borrower or any Subsidiary, a member
of a Controlled Group, may have liability, including any
liability by reason of having been a substantial employer within
the meaning of Section 4063 of ERISA at any time during the
preceding five years, or by reason of being deemed to be a
contributing sponsor under Section 4069 of ERISA.
"Percentage" means, relative to any Lender, the percentage
set forth opposite the name of such Lender on Schedule II hereto
or set forth in a duly executed Lender Assignment Agreement, as
such percentage may be adjusted from time to time pursuant to
Lender Assignment Agreement(s) executed by such Lender and its
Assignee Lender(s) and delivered pursuant to Section 11.11.
"Permitted Acquisition" means any Business Acquisition by
the Borrower in which all of the following is satisfied:
(a) such business is related or substantially similar
to the business of the Borrower as described in the third
recital;
(b) immediately before and after giving effect to such
acquisition no Default shall have occurred and be continuing
or would result therefrom; and
(c) the aggregate amount of such Business Acquisitions
does not exceed $5,000,000 in the aggregate over the term of
this Agreement, provided that such amount shall be increased
by an amount equal to 50% of the net cash proceeds (after
the repayment of its existing indebtedness) received from
the sale of Roltra Morse; provided, however, that the usage
of such increased amounts shall be subject to the Borrower
having availability under the Revolving Loan Commitment of
no less than $25,000,000, the Borrower being in pro forma
compliance with the covenants set forth in Section 7.2.4 and
no Default shall have occurred or will occur as a result of
any usage thereof; and
(d) the Borrower shall have delivered to the
Administrative Agent a Compliance Certificate for the period
of four full Fiscal Quarters immediately preceding such
acquisition (prepared in good faith and in a manner and
using such methodology which is consistent with the most
recent financial statements delivered pursuant to Section
7.1.1) giving pro forma effect to the consummation of such
acquisition and evidencing compliance with the covenants set
forth in Section 7.2.4.
"Permitted Amount" means in the case of (a) the permitted
maximum amount of Revolving Loans which may be applied by the
Borrower to purchase outstanding Senior Subordinated Notes "put"
to the Borrower pursuant to the "put" provision contained in the
Senior Subordinated Notes in the event of a Change of Control (as
defined therein) pursuant to the terms of Section 4.10,
$40,000,000, (b) the permitted maximum amount of Revolving Loans
which may be applied by the Borrower to open market purchases of
outstanding Senior Subordinated Notes pursuant to the terms of
Section 4.10, $25,000,000, (c) the permitted maximum amount of
Revolving Loans which may be applied by the Borrower to make
intercompany loans to Non-U.S. Subsidiaries to refinance existing
Indebtedness of such Non-U.S. Subsidiaries, $40,000,000, which
amount shall automatically be reduced to $25,000,000 following
the sale of Roltra Morse and (d) guarantees by the Borrower of
Indebtedness of Non-U.S. Subsidiaries, in an amount not to exceed
$20,000,000; provided, however, that the sum of clauses (a), (b),
(c) and (d) above, shall not at any time exceed $40,000,000 in
the aggregate.
"Permitted Disposition" means any sale, lease, transfer or
other disposition of assets of the Borrower or any of its
Subsidiaries to the extent that
(a) the Borrower or such other Subsidiary shall
receive only cash consideration therefor;
(b) the aggregate fair market value of all such
dispositions shall not exceed $5,000,000 in any Fiscal Year
(excluding the (i) sale by the Borrower of the
Instrumentation Segment pursuant to the terms of Section
7.1.10, (ii) the sale by the Borrower of Roltra Morse for
net cash proceeds of not less than $15,000,000 (after the
repayment of its existing indebtedness) and (iii) permitted
Real Estate Dispositions);
(c) the Borrower and such other Subsidiaries shall
have received fair value therefor and shall be in compliance
with Section 7.2.13; and
(d) at the time of each such disposition, no Event of
Default shall have occurred and be continuing.
"Permitted Encumbrances" means Liens permitted under Section
7.2.3.
"Person" means any natural person, corporation, partnership,
firm, association, trust, government, governmental agency or any
other entity, whether acting in an individual, fiduciary or other
capacity.
"Plan" means any Pension Plan or Welfare Plan.
"Pledge Agreements" means, as the context may require, the
Parent Pledge Agreement, the Borrower Pledge Agreement or the
Foreign Pledge Agreements.
"Purchase Agreement" is defined in the second recital.
"Quarterly Payment Date" means the 30th day of each
December, March, June and September or, if any such day is not a
Business Day, the next succeeding Business Day.
"Rate Protection Agreement" means any interest rate swap
agreement, interest rate cap agreement, interest rate collar
agreement, currency swap or exchange agreement or any similar
arrangement designed to protect a Person against fluctuations in
interest rates or currency fluctuations and entered into, from
time to time, by the Borrower or any of its Subsidiaries.
"Real Estate Dispositions" means the schedule of real estate
to be sold as set forth on Schedule IV hereto.
"Realty" means all right, title and interest of the
Borrower, the Parent and their respective Subsidiaries in any
land, buildings, improvements, fixtures, other interests in real
estate and any leasehold interest in any of the foregoing.
"Reimbursement Obligation" is defined in Section 2.7.3.
"Release" means any spilling, leaking, pumping, pouring
emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing of any Hazardous Material or pollutant or
contaminant into the environment (including the abandonment or
discarding of barrels, containers, and other closed receptacles
containing any Hazardous Material).
"Required Lenders" means, at the time any determination
thereof is to be made, Lenders holding 51% or more of the then
aggregate unpaid principal amount of the Notes and Letter of
Credit Outstandings or, if no such principal amount or Letter of
Credit Outstandings are outstanding, Lenders having an aggregate
Percentage of 51% or more of the Total Commitment Amount.
"Requirements of Law" means, as to any Person, the charter
and by-laws or other organizational or governing documents of
such Person, and any law, rule or regulation, or determination of
an arbitrator or a court or other Governmental Authority, in each
case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is
subject including, without limitation, the Securities Act, the
Securities Exchange Act, Regulations G, U and X, ERISA, the Fair
Labor Standards Act and any certificate of occupancy, zoning
ordinance, building, or land use requirement or Permit or labor
or employment rule or regulation, including environmental, health
or safety Requirements of Law.
"Resource Conservation and Recovery Act" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq.,
as in effect from time to time.
"Revolving Credit Facility" means, collectively, the
Revolving Loan Commitment and the Letter of Credit Commitment.
"Revolving Loan" is defined in Section 2.1.2.
"Revolving Loan Commitment" means, relative to any Lender,
such Lender's obligation to make Revolving Loans pursuant to
Section 2.1.2.
"Revolving Loan Commitment Amount" means, on any date,
$70,000,000, as such amount is reduced from time to time pursuant
to Section 2.3.
"Revolving Loan Commitment Termination Date" means the
earliest of
(a) August 29, 2002;
(b) the date on which the Revolving Loan Commitment
Amount is terminated in full or reduced to zero pursuant to
Section 2.3; and
(c) the date on which any Commitment Termination Event
occurs.
Upon the occurrence of any event described above, the Revolving
Loan Commitments shall terminate automatically and without any
further action.
"Revolving Note" means a promissory note of the Borrower
payable to any Lender, in the form of Exhibit A hereto (as such
promissory note may be amended, endorsed or otherwise modified
from time to time), evidencing the aggregate Indebtedness of the
Borrower to such Lender resulting from outstanding Revolving
Loans, and also means all other promissory notes accepted from
time to time in substitution therefor or renewal thereof.
"Rolling Period" means, as of any date of calculation, the
immediately preceding four full Fiscal Quarters; provided,
however, that if the sale of the Instrumentation Segment occurs
within 60 days of the Effective Date, the calculations for the
first three Fiscal Quarters will be calculated on a pro forma
basis to give effect to the sale of the Instrumentation Segment
as if it had occurred on January 1, 1997; provided, further, that
if the sale of Roltra Morse occurs after the Effective Date, the
calculations for the first three Fiscal Quarters prior to such
sale will be calculated on a pro forma basis to give effect to
the sale of Roltra Morse as if it had occurred at the beginning
of such period.
"Roltra Morse" means Roltra Morse S.p.A., a corporation
organized under the laws of Italy, including its subsidiaries and
joint ventures.
"Scotiabank" is defined in the preamble.
"Scotiabank Base Rate" means, on any date and with respect
to all Base Rate Loans, a fluctuating rate of interest per annum
equal to the higher of
(a) the Scotiabank Rate in effect on such day; and
(b) the Federal Funds Rate in effect on such day plus
1/2 of 1%.
The Scotiabank Base Rate is not necessarily intended to be the
lowest rate of interest determined by Scotiabank in connection
with extensions of credit. Changes in the rate of interest on
that portion of any Loans maintained as Base Rate Loans will take
effect simultaneously with each change in the Scotiabank Base
Rate. The Administrative Agent will give notice promptly to the
Borrower and the Lenders of changes in the Scotiabank Base Rate.
"Scotiabank Fee Letter" means the confidential fee letter,
dated July 24, 1997, from Scotiabank, addressed to, and agreed
and accepted by, the Parent and Constellation Partners LLC.
"Scotiabank Rate" means, at any time, the rate of interest
then most recently established by Scotiabank in New York,
New York as its base rate for U.S. dollars loaned in the United
States.
"Security Agreements" means, as the context may require, the
Borrower Security Agreement and the Subsidiary Security
Agreement.
"Senior Subordinated Notes" means the 11 3/4% senior
subordinated notes of the Borrower due 2006 in the amount of
$155,000,000 governed by the terms of the Subordinated Note
Indenture.
"Shares" is defined in the second recital.
"State" means the several states of the United States of
America, including the District of Columbia, and their political
subdivisions.
"Stated Amount" of each Letter of Credit means the total
amount available to be drawn under such Letter of Credit upon the
issuance thereof.
"Stated Expiry Date" is defined in Section 2.7.
"Stated Maturity Date" means August 29, 2002.
"Stockholders" means Steven M. Rales, Mitchell P. Rales,
Philip W. Knisely, Michael G. Ryan, Joseph O. Bunting III and
John A. Young.
"Parent Stock Subscription Agreement" means the Stock
Subscription Agreement, dated as of July 23, 1997, between Colfax
Capital Corporation and the Parent.
"Subordinated Debt Refunding" is defined in Section 4.10.
"Subordinated Note Indenture" means the indenture dated as
of April 15, 1996 between the Borrower and IBJ Schroeder Bank and
Trust Company, as trustee, as amended by Second Supplemental
Indenture, dated as of August 26, 1997.
"Subsidiary" means, with respect to any Person, (a) any
corporation of which more than 50% of the outstanding capital
stock having ordinary voting power to elect the board of
directors of such corporation (irrespective of whether at the
time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence
of any contingency) is at the time directly or indirectly owned
by such Person, by such Person and one or more Subsidiaries of
such Person, or by one or more other Subsidiaries of such Person,
or (b) any partnership, joint venture, or other entity as to
which such Person, such Person and one or more of its
Subsidiaries or one or more Subsidiaries of such Person owns more
than a 50% ownership, equity or similar interest or has power to
direct or cause the direction of management and policies, or the
power to elect the managing partner (or the equivalent), of such
partnership, joint venture or other entity, as the case may be.
"Subsidiary Guarantors" means VHC Inc.(formerly known as
Varo Inc.) and Warren Pumps Inc. and each of the Persons as may
become parties to this Agreement in accordance with Section 7.1.8
and Section 7.1.16.
"Subsidiary Guaranty" means the Subsidiary Guaranty executed
and delivered by each Subsidiary Guarantor pursuant to Section
5.1.8, substantially in the form of Exhibit I hereto.
"Subsidiary Security Agreement" means the Subsidiary
Security Agreement executed and delivered pursuant to Section
5.1.12, substantially in the form of Exhibit H-2 hereto, together
with the Security Agreement (Trademark), the Security Agreement
(Copyright) and the Security Agreement (Patents) related thereto,
in each case as amended, supplemented, restated or otherwise
modified from time to time.
"Subscription Agreements" means, collectively, the Parent
Subscription Agreement and the Borrower Subscription Agreement.
"Syndication Agent" is defined in the preamble.
"Taxes" means all federal, state, local or foreign income,
gross receipts, windfall profits, severance, real and personal
property, production, sales, use, license, excise, franchise,
stamp, leasing, lease, value added, employment, withholding,
transfer, registration, alternative or add-on minimum, estimated,
unemployment, social security, payroll, capital stock or similar
taxes, charges, fees, duties, levies, or other assessments,
together with any interest, additions or penalties with respect
thereto and any interest in respect of such additions or
penalties.
"Tender Offer" is defined in the second recital.
"Term Loan" is defined in Section 2.1.1.
"Term Loan Commitment" means, relative to any Lender, such
Lender's obligation to make Term Loans pursuant to Section 2.1.1.
"Term Loan Commitment Amount" means, on any date prior to
the Term Loan Commitment Termination Date, $72,868,754.71 (minus
any prepayments or repayments under the Existing Bank Facility
prior to the Effective Date).
"Term Loan Commitment Termination Date" means the earlier of
(a) immediately after the making of the initial Credit
Extension; and
(b) the date on which any Commitment Termination Event
occurs.
Upon the occurrence of any event described in clause (a) or (b),
the Term Loan Commitments shall terminate automatically and
without any further action.
"Term Note" means a promissory note of the Borrower payable
to any Lender, in the form of Exhibit B hereto (as such
promissory note may be amended, endorsed or otherwise modified
from time to time), evidencing the aggregate Indebtedness of the
Borrower to such Lender resulting from outstanding Term Loans,
and also means all other promissory notes accepted from time to
time in substitution therefor or renewal thereof.
"Total Commitment Amount" means the sum, without
duplication, of the Term Loan Commitment Amount and the Revolving
Loan Commitment Amount.
"Total Debt" means, as of any date of determination, without
duplication, any Indebtedness of the Borrower and its
Subsidiaries of a type described in clause (a), (b) or (c) of the
definition of Indebtedness, or any Contingent Liability of the
Borrower or any of its Subsidiaries in respect of any such type
of Indebtedness.
"Type" means, relative to any Loan, that part of such Loan
being maintained as a Base Rate Loan or a LIBO Rate Loan.
"U.C.C." means the Uniform Commercial Code as from time to
time in effect in the State of New York.
"United States" or "U.S." means the United States of
America, its fifty States and the District of Columbia.
"U.S. Subsidiary" means any Subsidiary of the Borrower
organized under the laws of the United States or any State
thereof (including the United States Virgin Islands).
"Unsecured Line of Credit" means the Credit Agreement, dated
as of August 29, 1997, between the Borrower and the Parent, the
proceeds of which shall be applied in accordance with
Section 5.1.19.
"Welfare Plan" means a "welfare plan" (as such term is
defined in Section 3(1) of ERISA), maintained by the Borrower or
for which the Borrower or any of its Subsidiaries has any
contractual liability.
SECTION I.2. Use of Defined Terms. Unless otherwise
defined or the context otherwise requires, terms for which
meanings are provided in this Agreement shall have such meanings
when used in the Disclosure Schedule and each other Loan
Document.
SECTION I.3. Cross-References. Unless otherwise specified,
references in this Agreement and in each other Loan Document to
any Article or Section are references to such Article or Section
of this Agreement or such other Loan Document, as the case may
be, and, unless otherwise specified, references in any Article,
Section or definition to any clause are references to such clause
of such Article, Section or definition.
SECTION I.4. Accounting and Financial Determinations.
Unless otherwise specified, all accounting terms used herein or
in any other Loan Document shall be interpreted, all accounting
determinations and computations hereunder or thereunder
(including under Section 7.2.4) shall be made, and all financial
statements required to be delivered hereunder or thereunder shall
be prepared in accordance with, those generally accepted
accounting principles ("GAAP") applied in the preparation of the
financial statements referred to in Section 6.5.
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES,
LETTERS OF CREDIT AND NOTES
SECTION II.1. Commitments. On the terms and subject to the
conditions of this Agreement (including Article V), each Lender
severally agrees to make Credit Extensions pursuant to the Term
Loan Commitment and the Revolving Credit Facility described in
this Section 2.1.
SECTION II.1.1. Term Loan Commitment. On the Business Day
the Acquisition and the Tender Offer are consummated (but only if
the Term Loans are requested to be made on, or prior to, the Term
Loan Commitment Termination Date), each Lender agrees to make a
Loan (relative to such Lender, its "Term Loan") to the Borrower
equal to such Lender's Percentage of the aggregate amount of the
Borrowing of Term Loans requested by the Borrower to be made on
such day. The Commitment of each Lender described in this
Section is herein referred to as its "Term Loan Commitment". No
amounts paid or prepaid with respect to Term Loans may be
reborrowed.
SECTION II.1.2. Revolving Loan Commitment. From time to
time on any Business Day occurring prior to the Revolving Loan
Commitment Termination Date, each Lender agrees to make Loans
(relative to such Lender, its "Revolving Loans") to the Borrower
equal to such Lender's Percentage of the aggregate amount of the
Borrowing of Revolving Loans requested by the Borrower to be made
on such day. The Commitment of each Lender described in this
Section is herein referred to as its "Revolving Loan Commitment".
On the terms and subject to the conditions hereof, the Borrower
may from time to time borrow, prepay and reborrow the Revolving
Loans.
SECTION II.1.3. Letter of Credit Commitment. From time to
time on any Business Day occurring prior to the Revolving Loan
Commitment Termination Date, the Issuer will
(a) issue one or more letters of credit (relative to
such Issuer, its "Letter of Credit") for the account of the
Borrower in respect of obligations of the Borrower or its
Subsidiaries in Stated Amounts requested by the Borrower on
such day with a Stated Expiry Date not later than two years
from such requested date of issuance; or
(b) extend the Stated Expiry Date of an existing
Letter of Credit previously issued hereunder to a date not
later than the earlier of (i) the Revolving Loan Commitment
Termination Date and (ii) two years from the date of such
extension.
SECTION II.2. Lenders Not Permitted or Required to Make
Credit Extensions. No Lender shall be permitted or required to
make any Loan, and no Issuer shall be obligated to issue or
extend any Letter of Credit, under any circumstance described
below in this Section.
SECTION II.2.1. Term Loans. No Borrowing of Term Loans
shall be made if, after giving effect thereto, the aggregate
outstanding principal amount of all the Term Loans (a) of all
Lenders would exceed the Term Loan Commitment Amount or (b) of
such Lender would exceed such Lender's Percentage of the Term
Loan Commitment Amount.
SECTION II.2.2. Revolving Loans. No Borrowing of Revolving
Loans shall be made if, after giving effect thereto, the
aggregate outstanding principal amount of all the Revolving
Loans, together with the aggregate amount of all Letter of Credit
Outstandings, (a) of all the Lenders would exceed the Revolving
Loan Commitment Amount, or (b) of such Lender would exceed such
Lender's Percentage of the Revolving Loan Commitment Amount.
SECTION II.2.3. Letters of Credit. No issuance or
extension of a Letter of Credit shall be made if, after giving
effect thereto, (a) the aggregate amount of all Letter of Credit
Outstandings would exceed the Letter of Credit Commitment Amount
or (b) the aggregate amount of all Letter of Credit Outstandings
together with the aggregate outstanding principal amount of all
Revolving Loans, would exceed the Revolving Loan Commitment
Amount.
SECTION II.3. Optional Reduction of the Commitment Amounts.
The Borrower may, from time to time on any Business Day occurring
after the time of the initial Credit Extension hereunder,
voluntarily reduce the unused amount of the Revolving Loan
Commitment Amount; provided, however, that all such reductions
shall require at least one Business Days' prior notice to the
Administrative Agent and be permanent, and any partial reduction
of the unused amount of the Revolving Loan Commitment Amount
shall be in a minimum amount of $1,000,000 and in an integral
multiple of $500,000.
SECTION II.4. Borrowing Procedure. By delivering a
Borrowing Request to the Administrative Agent on or before
10:00 a.m. (New York City time) on a Business Day, the Borrower
may from time to time irrevocably request that Base Rate Loans be
made on such Business Day or on another Business Day within five
Business Days of such Business Day, or that LIBO Rate Loans be
made on any Business Day not less than three nor more than five
Business Days thereafter. All Loans shall be made in a minimum
aggregate amount of $1,000,000 and an aggregate integral multiple
of $500,000 or, if less, in the unused amount of the applicable
Commitment, and the proceeds of all Loans shall be used solely
for the purposes described in Section 4.10. On the terms and
subject to the conditions of this Agreement, each Borrowing shall
be made on the Business Day specified in such Borrowing Request.
On or before 1:00 p.m. (New York City time) on such Business Day,
each Lender shall deposit with the Administrative Agent same day
funds in an amount equal to such Lender's Percentage of the
requested Borrowing. Such deposit will be made to an account
which the Administrative Agent shall specify from time to time by
notice to the Lenders. To the extent funds are received from the
Lenders, the Administrative Agent shall make such funds available
to the Borrower by wire transfer to the accounts the Borrower
shall have specified in its Borrowing Request. No Lender's
obligation to make any Loan shall be affected by any other
Lender's failure to make any Loan.
SECTION II.5. Continuation and Conversion Elections. By
delivering a Continuation/Conversion Notice to the Administrative
Agent on or before 10:00 a.m. (New York City time) on a Business
Day, the Borrower may from time to time irrevocably elect, on not
less than one Business Day's notice in the case of conversions to
Base Rate Loans, or three Business Days' notice in the case of
conversions to or continuations of LIBO Rate Loans, and in either
case not more than five Business Days' notice, that all, or any
portion in an aggregate minimum aggregate amount of $1,000,000
and an aggregate integral multiple of $500,000 be, in the case of
Base Rate Loans converted into LIBO Rate Loans or be, in the case
of LIBO Rate Loans converted into Base Rate Loans or continued as
LIBO Rate Loans (in the absence of delivery of a
Continuation/Conversion Notice with respect to any LIBO Rate Loan
at least three Business Days (but not more than five Business
Days) before the last day of the then current Interest Period
with respect thereto, such LIBO Rate Loan shall, on such last
day, automatically convert to a Base Rate Loan); provided,
however, that (a) each such conversion or continuation shall be
prorated among the applicable outstanding Revolving Loans of all
Lenders and (b) no portion of the outstanding principal amount of
any Loans may be continued as, or be converted into, LIBO Rate
Loans when any Default or any Event of Default has occurred and
is continuing (unless the Required Lenders otherwise agree in
writing).
SECTION II.6. Funding. Each Lender may, if it so elects,
fulfill its obligation to make, continue or convert LIBO Rate
Loans hereunder by causing one of its foreign branches or
Affiliates (or an international banking facility created by such
Lender) to make or maintain such LIBO Rate Loan; provided,
however, that such LIBO Rate Loan shall nonetheless be deemed to
have been made and to be held by such Lender, and the obligation
of the Borrower to repay such LIBO Rate Loan shall nevertheless
be to such Lender for the account of such foreign branch,
Affiliate or international banking facility. In addition, the
Borrower hereby consents and agrees that, for purposes of any
determination to be made for purposes of Sections 4.1 through
4.5, it shall be conclusively assumed that each Lender elected to
fund all LIBO Rate Loans by purchasing Dollar deposits in its
LIBOR Office's interbank eurodollar market.
SECTION II.7. Issuance Procedures. By delivering to the
Administrative Agent an Issuance Request on or before 10:00 a.m.,
New York City time, on a Business Day, the Borrower may, from
time to time irrevocably request, on not less than three nor more
than 15 Business Days' notice, that the Issuer issue, increase
the Stated Amount of, or extend the Stated Expiry Date of, as the
case may be, a Letter of Credit in such form as may be requested
by the Borrower and approved by the Issuer, such Letter of Credit
to be used solely for the purposes described in Section 4.10.
Each Letter of Credit shall by its terms be stated to expire on a
date (its "Stated Expiry Date") no later than the earlier of
(a) two years from the date of issuance (or, if extendable beyond
such period, cancelable upon at least 30 days' notice given by
the Issuer to the beneficiary of such Letters of Credit) and
(b) the Revolving Loan Commitment Termination Date. The Issuer
will make available to the beneficiary thereof the original of
each Letter of Credit which it issues hereunder. Unless notified
in writing by the Required Banks before it issues a Letter of
Credit that a Default or Event of Default exists, the Issuer may
issue the requested Letter of Credit in accordance with the
Issuer's customary practices.
SECTION II.7.1. Other Lenders' Participation. Upon the
issuance of each Letter of Credit issued by the Issuer pursuant
hereto, and without further action, each Lender (other than the
Issuer) shall be deemed to have irrevocably and unconditionally
purchased (without recourse, representation or warranty), to the
extent of its Percentage, a participation interest in such Letter
of Credit (including the Contingent Liability and any
Reimbursement Obligation with respect thereto), and such Lender
shall, to the extent of its Percentage, be responsible for
reimbursing promptly (and in any event within one Business Day
together with interest at the Federal Funds Rate (rounded upward,
if necessary, to the next highest 1/16 of 1%) for each day until
reimbursement is made) the Issuer for Reimbursement Obligations
which have not been reimbursed by the Borrower in accordance with
Section 2.7.3 or which have been reimbursed by the Borrower but
have been required to be returned or disgorged by the Issuer. In
addition, such Lender shall, to the extent of its Percentage and
so long as it shall have complied with its obligations under this
Section and Section 2.7.3, be entitled to receive a ratable
portion of the Letter of Credit fees payable pursuant to Section
3.3.2 with respect to each Letter of Credit and of interest
payable pursuant to Section 3.2 with respect to any Reimbursement
Obligation.
SECTION II.7.2. Disbursements. The Issuer will notify the
Borrower and the Administrative Agent promptly of the presentment
for payment of any Letter of Credit issued by the Issuer,
together with notice of the date (the "Disbursement Date") such
payment shall be made (each such payment, a "Disbursement").
Subject to the terms and provisions of such Letter of Credit and
this Agreement, the Issuer shall make such payment to the
beneficiary (or its designee) of such Letter of Credit. Prior to
11:00 a.m. (New York City time) on the first Business Day
following the Disbursement Date, the Borrower will reimburse the
Administrative Agent, for the account of the Issuer, for all
amounts which the Issuer has disbursed under such Letter of
Credit, together with interest thereon at a rate per annum equal
to the highest rate per annum then in effect pursuant to Section
3.2 for the period from the Disbursement Date through the date of
such reimbursement.
SECTION II.7.3. Reimbursement. The obligation (a
"Reimbursement Obligation") of the Borrower under Section 2.7.2
to reimburse the Issuer with respect to each Disbursement
(including interest thereon), and, upon the failure of the
Borrower to reimburse the Issuer (or if any reimbursement by the
Borrower must be returned or disgorged by the Issuer for any
reason), each Lender's obligation under Section 2.7.1 to
reimburse the Issuer, shall be absolute and unconditional under
any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which the Borrower or such
Lender, as the case may be, may have or have had against the
Issuer or any Lender, including any defense based upon the
failure of any Disbursement to conform to the terms of the
applicable Letter of Credit or any non-application or
misapplication by the beneficiary of the proceeds of such Letter
of Credit; provided, however, that after paying in full its
Reimbursement Obligation hereunder, nothing herein shall
adversely affect the right of the Borrower or such Lender, as the
case may be, to commence any proceeding against the Issuer for
any wrongful Disbursement made by the Issuer under a Letter of
Credit as a result of acts or omissions constituting gross
negligence or wilful misconduct on the part of such Issuer.
SECTION II.7.4. Deemed Disbursements. Upon the occurrence
and during the continuation of any Default of the type described
in Section 8.1.9 or, with notice from the Administrative Agent,
upon the occurrence and during the continuation of any other
Event of Default
(a) an amount equal to that portion of all Letter of
Credit Outstandings attributable to the then aggregate
amount which is undrawn and available under all Letters of
Credit issued and outstanding for the account of the
Borrower shall, without demand upon or notice to the
Borrower, be deemed to have been paid or disbursed by the
Issuer under such Letters of Credit (notwithstanding that
such amount may not in fact have been so paid or disbursed);
and
(b) upon notification by the Administrative Agent to
the Borrower of its obligations under this Section, the
Borrower shall be immediately obligated to reimburse the
Issuer for the amount deemed to have been so paid or
disbursed by such Issuer.
Any amounts so payable by the Borrower pursuant to this Section
shall be deposited in cash in an account under the sole control
of the Administrative Agent and otherwise on terms satisfactory
to the Administrative Agent and held as collateral security for
the Obligations in connection with the Letters of Credit issued
by the Issuers. In the case of any such deemed disbursement
resulting from the occurrence of a Default or Event of Default,
if such Default or Event of Default has been cured or waived, the
Administrative Agent shall return to the Borrower all amounts
then on deposit with the Administrative Agent pursuant to this
Section which have not been applied to the partial satisfaction
of such Obligations.
SECTION II.7.5. Nature of Reimbursement Obligations. The
Borrower and, to the extent set forth in Section 2.7.1, each
Lender shall assume all risks of the acts, omissions or misuse of
any Letter of Credit by the beneficiary thereof. The Issuer
shall not be responsible for:
(a) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any Letter of Credit or any
document submitted by any party in connection with the
application for and issuance of a Letter of Credit, even if
it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(b) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any instrument transferring
or assigning or purporting to transfer or assign a Letter of
Credit or the rights or benefits thereunder or the proceeds
thereof in whole or in part, which may prove to be invalid
or ineffective for any reason;
(c) failure of the beneficiary to comply fully with
conditions required in order to demand payment under a
Letter of Credit;
(d) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise; or
(e) any loss or delay in the transmission or otherwise
of any document or draft required in order to make a
Disbursement under a Letter of Credit.
None of the foregoing shall affect, impair or prevent the vesting
of any of the rights or powers granted to the Issuer or any
Lender hereunder. In furtherance and extension and not in
limitation or derogation of any of the foregoing, any action
taken or omitted to be taken by an Issuer in good faith (and not
constituting gross negligence or wilful misconduct) shall be
binding upon the Borrower and each such Lender, and shall not put
such Issuer under any resulting liability to the Borrower or any
such Lender, as the case may be.
SECTION II.8. Notes. Each Lender's Loans under a
Commitment shall be evidenced by a Note payable to the order of
such Lender in a maximum principal amount equal to such Lender's
Percentage of the original applicable Commitment Amount. The
Borrower hereby irrevocably authorizes each Lender to make (or
cause to be made) appropriate notations on the grid attached to
such Lender's Notes (or on any continuation of such grid), which
notations, if made, shall evidence, inter alia, the date of, the
outstanding principal of, and the interest rate applicable to,
the Loans evidenced thereby. Such notations shall be prima facie
evidence of the accuracy of such information; provided, however,
that the failure of any Lender to make any such notations shall
not limit or otherwise affect any Obligations of the Parent, the
Borrower or any other Obligor.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION III.1. Repayments and Prepayments. The Borrower
shall repay in full the unpaid principal amount of each Loan upon
the Stated Maturity Date therefor and pursuant to Section 8.2 and
Section 8.3. Prior thereto, repayments and prepayments of Loans
shall be made as set forth in this Section 3.1.
SECTION III.1.1. Voluntary Prepayments. Prior to the
Stated Maturity Date, the Borrower may, from time to time on any
Business Day, make a voluntary prepayment, in whole or in part,
of the outstanding principal amount of all Term Loans or
Revolving Loans; provided, however, that
(a) any such prepayments shall be made pro rata among
Loans of the same type and, if applicable, having the same
Interest Period of all the Lenders;
(b) all such voluntary prepayments shall require at
least one but no more than five Business Days' prior written
notice to the Administrative Agent; and
(c) all such voluntary partial prepayments of Loans
shall be in an aggregate minimum amount of $1,000,000 and an
integral multiple of $500,000.
Each voluntary prepayment of Term Loans made pursuant to this
Section, shall be applied, to the extent of such prepayment, in
the inverse order of the scheduled repayments of the Term Loans
set forth in clause (b) of Section 3.1.2 and shall be applied
first to any Base Rate Loans outstanding prior to being applied
to any LIBO Rate Loans outstanding. Each prepayment of any Loans
made pursuant to this Section shall be without premium or penalty
but subject to Section 4.4.
SECTION III.1.2. Mandatory Repayments and Prepayments.
Prior to the Stated Maturity Date,
(a) the Borrower shall, on each date when the sum of
(x) the aggregate outstanding principal amount of all
Revolving Loans and (y) Letter of Credit Outstandings
exceeds the Revolving Loan Commitment Amount (as it may be
reduced from time to time), make a mandatory prepayment of
all Revolving Loans in an amount equal to such excess;
(b) the Borrower shall, on each date set forth below,
make a scheduled repayment of the aggregate outstanding
principal amount of all Term Loans in the amount set forth
opposite each such date:
Amount of Required
Repayment Date Principal Repayment
May 29, 1998 $ 1,821,718.87
August 29, 1998 $ 1,821,718.87
November 29, 1998 $ 2,732,578.30
February 28, 1999 $ 2,732,578.30
May 29, 1999 $ 2,732,578.30
August 29, 1999 $ 2,732,578.30
November 29, 1999 $ 3,188,008.02
February 29, 2000 $ 3,188,008.02
May 29, 2000 $ 3,188,008.02
August 29, 2000 $ 3,188,008.02
November 29, 2000 $ 4,554,297.17
February 28, 2001 $ 4,554,297.17
May 29, 2001 $ 4,554,297.17
August 29, 2001 $ 4,554,297.17
November 29, 2001 $ 6,831,445.76
February 28, 2002 $ 6,831,445.76
May 29, 2002 $ 6,831,445.76
August 29, 2002 $ 6,831,445.73, or
the then outstanding principal amount of all Term Loans, if
different;
(c) the Borrower shall, (i) on the date of receipt (or
if not practicable, promptly following such receipt) by it
or any of its Subsidiaries of any Net Disposition Proceeds,
Net Equity Proceeds, Net Debt Proceeds or Excess Insurance
Proceeds and (ii) on the date of delivery of the audited
financial statements pursuant to clause (b) of Section 7.1.1
(and, in any event, on the date 90 days after the end of
each Fiscal Year), in the case of Excess Cash Flow, apply
(A) 100% of all Net Disposition Proceeds (provided, however,
in the case of the disposition of Roltra Morse, if the net
cash proceeds received from such sale are in excess of
$15,000,000 (after the repayment of outstanding
Indebtedness of Roltra Morse), then $15,000,000 plus 50% of
such excess shall be deemed to be Net Disposition Proceeds
hereunder), Excess Insurance Proceeds and Net Debt Proceeds,
as the case may be, (B) 75% of all Net Equity Proceeds and
(C) commencing in the 1998 Fiscal Year, 75% of all such
Excess Cash Flow, provided, however, that such percentage of
Excess Cash Flow shall be decreased to (X) 50% at such time
the Leverage Ratio (at the end of the immediately preceding
Rolling Period) is less than 5.0:1.00 and (Y) 25% at such
time the Leverage Ratio (at the end of the immediately
preceding Rolling Period) is less than 3.0:1.00, to make a
mandatory prepayment of the Term Loans to be applied to the
installments thereof on a pro rata basis and thereafter, if
no Term Loans are outstanding, to make a mandatory
prepayment of the Revolving Loans; and
(d) the Borrower shall, immediately upon any
acceleration of the Stated Maturity Date of any Loans
pursuant to Section 8.2 or Section 8.3, repay all (or if
only a portion of the Loans are accelerated thereunder, such
portion of) the Loans.
Each prepayment of any Loans made pursuant to this Section shall
be made without premium or penalty, except as specified herein.
SECTION III.2. Interest Provisions. Interest on the
outstanding principal amount of Loans shall accrue and be payable
in accordance with this Section 3.2.
SECTION III.2.1. Rates. Subject to Sections 2.4 and 2.5,
the Borrower may elect, pursuant to an appropriately delivered
Borrowing Request or Continuation/Conversion Notice, that Loans
comprising a Borrowing accrue interest at a rate per annum:
(a) on that portion maintained from time to time as
Base Rate Loans, equal to the sum of the Scotiabank Base
Rate from time to time in effect plus the Applicable Margin;
and
(b) on that portion maintained as a LIBO Rate Loan,
during each Interest Period applicable thereto, equal to the
sum of the LIBO Rate (Reserve Adjusted) for such Interest
Period plus the Applicable Margin.
"LIBO Rate (Reserve Adjusted)" means, relative to any Loan
to be made, continued or maintained as, or converted into, a LIBO
Rate Loan for any Interest Period, a rate per annum (rounded
upwards, if necessary, to the nearest 1/16 of 1%) determined
pursuant to the following formula:
LIBO Rate = LIBO Rate
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO
Rate Loans will be determined by the Administrative Agent on the
basis of the LIBOR Reserve Percentage in effect on, and the
applicable rates furnished to and received by the Administrative
Agent from Scotiabank, two Business Days before the first day of
such Interest Period.
"LIBO Rate" means, relative to any Interest Period for LIBO
Rate Loans, the rate of interest equal to the average (rounded
upwards, if necessary, to the nearest 1/16 of 1%) of the rates
per annum at which Dollar deposits in immediately available funds
are offered to Scotiabank's LIBOR Office in the London, England
interbank market at or about 11:00 a.m. (London, England time)
two Business Days prior to the beginning of such Interest Period
for delivery on the first day of such Interest Period, and in an
amount approximately equal to the amount of Scotiabank's LIBO
Rate Loan and for a period approximately equal to such Interest
Period.
"LIBOR Reserve Percentage" means, relative to any Interest
Period for LIBO Rate Loans, the reserve requirements (expressed
as a decimal) equal to the maximum aggregate reserve requirements
(including all basic, emergency, supplemental, marginal and other
reserves and taking into account any transitional adjustments or
other scheduled changes in reserve requirements) specified under
regulations issued from time to time by the F.R.S. Board and then
applicable to assets or liabilities consisting of or including
"Eurocurrency Liabilities", as currently defined in Regulation D
of the F.R.S. Board, having a term approximately equal or
comparable to such Interest Period.
All LIBO Rate Loans shall bear interest from and including
the first day of the applicable Interest Period to (but not
including) the last day of such Interest Period at the interest
rate determined as applicable to such LIBO Rate Loan.
SECTION III.2.2. Post-Default Rates. From and after the
occurrence of any Event of Default, the Borrower shall pay, but
only to the extent permitted by law, interest (after as well as
before judgment) on such amounts at a rate per annum equal to the
rate per annum otherwise in effect (including any additional
margin in effect) plus a further margin of 2% per annum.
SECTION III.2.3. Payment Dates. Interest accrued on each
Loan shall be payable, without duplication:
(a on the Stated Maturity Date therefor;
(b on the date of any payment or prepayment, in whole
or in part, of principal outstanding on such Loan on the
principal amount so paid or prepaid;
(c with respect to Base Rate Loans, on each
Quarterly Payment Date occurring after the Effective Date;
(d with respect to LIBO Rate Loans, on the last day
of each applicable Interest Period (and, if such Interest
Period shall exceed 90 days, on the 90th day of such
Interest Period); and
(e on that portion of any Loans the Stated Maturity
Date of which is accelerated pursuant to Section 8.2 or
Section 8.3, immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising
under this Agreement or any other Loan Document after the date
such amount is due and payable (whether on the Stated Maturity
Date therefor, upon acceleration or otherwise) shall be payable
upon demand.
SECTION III.3. Fees. The Borrower agrees to pay the fees
set forth in this Section 3.3. All such fees shall be non-
refundable.
SECTION III.3.1. Commitment Fee. The Borrower agrees to
pay to the Administrative Agent, for the pro rata account of each
Lender of Revolving Loans, for the period (including any portion
thereof when the Revolving Loan Commitment is suspended by reason
of the Borrower's inability to satisfy any condition of
Article V) commencing on the Effective Date and continuing
through the Revolving Loan Commitment Termination Date, a
commitment fee at the Applicable Commitment Fee Margin per annum
on such Lender's Percentage of the sum of the average daily
undrawn and unused portion of the Revolving Loan Commitment
Amount. The Revolving Loan Commitment shall be considered to be
used by the amount of the Letter of Credit Outstandings. Such
commitment fees shall be payable by the Borrower in arrears on
each Quarterly Payment Date, commencing with the first Quarterly
Payment Date following the Effective Date, and on the Revolving
Loan Commitment Termination Date.
SECTION III.3.2. Letter of Credit Fee. The Borrower agrees
to pay to the Administrative Agent, for the pro rata account of
the Issuer and each other Lender of Revolving Loans, a Letter of
Credit fee in an amount equal to the then Applicable Margin for
Loans maintained as LIBO Rate Loans multiplied by the Letter of
Credit Outstandings, such fee to be paid quarterly in arrears on
each Quarterly Payment Date and on the Revolving Loan Commitment
Termination Date. The Borrower further agrees to pay to the
Issuer (a) on the date of (x) the issuance of each Letter of
Credit, (y) each increase in the Stated Amount thereof and (z)
each extension (automatic or otherwise) of the Stated Expiry Date
thereof, an issuance fee in an amount equal to the amount set
forth in the Scotia Bank Fee Letter of the Stated Amount thereof
(or increase in such Stated Amount) and (b) all costs and
expenses incurred by the Issuer in connection with such Letter of
Credit.
SECTION III.3.3. Managing Agents' Fees, etc. The Borrower
agrees to pay to the Managing Agents for their own accounts, fees
in the amounts, on the dates and in the manner set forth in the
Fee Letters.
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION IV.1. LIBO Rate Lending Unlawful. If any Lender
shall determine (which determination shall, upon notice thereof
to the Borrower and the Administrative Agent, be conclusive and
binding on the Borrower) that the introduction of or any change
in or in the interpretation of any law makes it unlawful, or any
central bank or other governmental authority asserts that it is
unlawful, for such Lender to make, continue or maintain any Loan
as, or to convert any Loan into, a LIBO Rate Loan, the
obligations of such Lender to make, continue, maintain or convert
any such LIBO Rate Loan shall, upon such determination, forthwith
be suspended until such Lender shall notify the Administrative
Agent that the circumstances causing such suspension no longer
exist, and all outstanding LIBO Rate Loans of such Lender shall
automatically convert into Base Rate Loans at the end of the then
current Interest Periods with respect thereto or sooner, if
required by such law or assertion.
SECTION IV.2. Deposits Unavailable. If the Administrative
Agent shall have determined that
(a Dollar deposits in the relevant amount and for the
relevant Interest Period are not available to Scotiabank in
its relevant market; or
(b by reason of circumstances affecting Scotiabank's
relevant market, adequate means do not exist for
ascertaining the interest rate applicable hereunder to LIBO
Rate Loans,
then, upon notice from the Administrative Agent to the Borrower
and the Lenders, the obligations of all Lenders under Section 2.3
and Section 2.4 to make or continue any Loans as, or to convert
any Loans into, LIBO Rate Loans shall forthwith be suspended
until the Administrative Agent shall notify the Borrower and the
Lenders that the circumstances causing such suspension no longer
exist.
SECTION IV.3. Increased Costs, etc. (a) The Borrower
agrees to reimburse each Lender for any increase in the cost to
such Lender of, or any reduction in the amount of any sum
receivable by such Lender in respect of, making, continuing or
maintaining (or of its obligation to make, continue or maintain)
any Loans as, or of converting (or of its obligation to convert)
any Loans into, LIBO Rate Loans (including but not limited to any
imposition or effectiveness of reserve requirements not already
included in the LIBO Rate Reserve Percentage but excluding
increases in Taxes and taxes expressly excluded from Taxes
pursuant to the first sentence of Section 4.6, as to which the
provisions of Section 4.6 shall control) that arise in connection
with any change in, or the introduction, adoption, effectiveness,
interpretation, reinterpretation or phase-in, after the Effective
Date, of, any law or regulation, directive, guideline, decision
or request (whether or not having the force of law) of any court,
central bank, regulator or other governmental authority. Such
Lender shall promptly notify the Administrative Agent and the
Borrower in writing of the occurrence of any such event, such
notice to state, in reasonable detail, the reasons therefor and
the additional amount required fully to compensate such Lender
for such increased cost or reduced amount. Such additional
amounts shall be paid by the Borrower directly to such Lender
promptly (and, in any event, within 15 Business Days of receipt
of such notice), and such notice shall, in the absence of
manifest error, be conclusive and binding on the Borrower.
(b If at any time the introduction or effectiveness of or
any change in any applicable law, rule or regulation (including
without limitation those announced or published prior to the date
of this Agreement), or in the interpretation or administration
thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by any
Lender with any request or directive issued by any such authority
(whether or not having the force of law) shall either (i) impose,
modify or make applicable any reserve, deposit, capital adequacy
or similar requirement against letters of credit issued, or
participated in, by any Issuer or Lender, or (ii) impose on any
Issuer or Lender any other conditions affecting this Agreement or
any Letter of Credit; and the result of any of the foregoing is
to increase the cost to any Issuer or Lender of issuing,
maintaining or participating in any Letter of Credit, or reduce
the amount of any sum received or receivable by any Issuer or
Lender hereunder with respect to Letters of Credit, then, within
15 Business Days of the receipt of the notice referred to below
(which notice shall be given by the respective Issuer or Lender
promptly after it determines such increased cost or reduction is
applicable to Letters of Credit or its participation therein) to
the Borrower by the respective Issuer or Lender (a copy of which
notice shall be sent by such Issuer or Lender to the
Administrative Agent), the Borrower shall pay to such Issuer or
Lender such additional amount or amounts as will compensate such
Issuer or Lender for such increased cost or reduction. A notice
submitted to the Borrower by such Issuer or Lender, setting forth
the basis for the calculation of such additional amount or
amounts necessary to compensate such Issuer or Lender as
aforesaid shall be conclusive and binding on the Borrower absent
manifest error.
SECTION IV.4. Funding Losses. In the event any Lender
shall incur any loss or expense (including any loss or expense
incurred by reason of the liquidation or reemployment of deposits
or other funds acquired by such Lender to make, continue or
maintain any portion of the principal amount of any Loan as, or
to convert any portion of the principal amount of any Loan into,
a LIBO Rate Loan) as a result of
(a any conversion or repayment or prepayment of the
principal amount of any LIBO Rate Loans on a date other than
the scheduled last day of the Interest Period applicable
thereto, whether pursuant to Section 3.1 or otherwise;
(b any Loans not being made as LIBO Rate Loans in
accordance with the Borrowing Request therefor as a result
of the conditions precedent to such Loans not being
satisfied or as a result of the Borrower attempting to
revoke such Borrowing Request; or
(c any Loans not being continued as, or converted
into LIBO Rate Loans in accordance with the
Continuation/Conversion Notice therefor,
then, upon the written notice of such Lender to the Borrower
(with a copy to the Administrative Agent), the Borrower shall
promptly (and, in any event, within 15 Business Days of receipt
of such notice) pay directly to such Lender such amount as will
(in the determination of such Lender) reimburse such Lender for
such loss or expense. Such written notice (which shall include
calculations in reasonable detail) shall, in the absence of
manifest error, be conclusive and binding on the Borrower.
SECTION IV.5. Increased Capital Costs. If any change in,
or the introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in of, any law or regulation,
directive, guideline, decision or request (whether or not having
the force of law) of any court, central bank, regulator or other
governmental authority affects or would affect the amount of
capital required or expected to be maintained by any Lender or
Issuer or any Person controlling such Lender or Issuer, and such
Lender or Issuer determines (in its sole and absolute discretion)
that the rate of return on its or such controlling Person's
capital as a consequence of its Commitments or the Loans made by
such Lender or (to the extent, if any, not covered by Section
4.3(b) hereof) Letters of Credit issued or participated in by
such Lender or Issuer is reduced to a level below that which such
Lender, Issuer or such controlling Person (to the extent, if any,
not covered by Section 4.3(b) hereof) could have achieved but for
the occurrence of any such circumstance, then, in any such case
upon notice from time to time by such Lender or Issuer to the
Borrower, the Borrower shall immediately pay directly to such
Lender or Issuer additional amounts sufficient to compensate such
Lender or Issuer or such controlling Person for such reduction in
rate of return. A statement of such Lender or Issuer as to any
such additional amount or amounts (including calculations thereof
in reasonable detail) shall, in the absence of manifest error, be
conclusive and binding on the Borrower. In determining such
amount, such Lender or Issuer may use any method of averaging and
attribution that it (in its sole and absolute discretion) shall
deem applicable.
SECTION IV.6. Taxes. All payments by the Borrower
hereunder and under all other Loan Documents shall be made free
and clear of and without deduction for any present or future
income, excise, stamp or franchise taxes and other taxes, fees,
duties or withholdings or other charges of any nature whatsoever
imposed by any taxing authority, but excluding franchise taxes,
taxes imposed on or measured by any Lender's net income or
receipts or similar taxes (such non-excluded items, solely for
purposes of this Section, being called "Charges"). In the event
that any withholding or deduction from any payment to be made by
the Borrower hereunder is required in respect of any Charges
pursuant to any applicable law, rule or regulation (whether such
law, rule or regulation is in effect at the Effective Date or is
enacted or implemented at any time thereafter), then the Borrower
will
(i pay directly to the relevant authority the full
amount required to be so withheld or deducted;
(ii promptly forward to the Administrative Agent an
official receipt or other documentation satisfactory to the
Administrative Agent evidencing such payment to such
authority; and
(iii pay to the Administrative Agent for the account
of the Lenders such additional amount or amounts as is
necessary to ensure that the net amount actually received by
each Lender will equal the full amount such Lender would
have received had no such withholding or deduction been
required.
Moreover, if any Charges are directly asserted against the
Administrative Agent, any Lender or any Issuer with respect to
any payment received by the Administrative Agent, such Lender or
such Issuer hereunder, the Administrative Agent or such Lender
may pay such Charges and the Borrower will promptly pay such
additional amounts (including any penalties, interest or
expenses) as is necessary in order that the net amount received
by such person after the payment of such Charges (including any
Charges on such additional amount) shall equal the amount such
person would have received had not such Charges been asserted.
If the Borrower fails to pay any Charges when due to the
appropriate taxing authority or fails to remit to the
Administrative Agent, for the account of the respective Lenders
and the Issuer, the required receipts or other required
documentary evidence, the Borrower shall indemnify the Lenders
and the Issuer for any incremental Charges, interest or penalties
that may become payable by any Lender as a result of any such
failure. For purposes of this Section, a distribution hereunder
by the Administrative Agent or any Lender or the Issuer to or for
the account of any Lender or the Issuer shall be deemed a payment
by the Borrower.
Each Lender which is not a United States Person for Federal
income tax purposes agrees, to the extent that (i) all income
realized by such Lender in respect of any loan or this Agreement
is, or is expected to be, effectively connected with the conduct
by such Lender of a trade or business in the United States and is
includable in gross income of such Lender for the relevant tax
year or (ii) such Lender is entitled to a total or partial
exemption from withholding that is required to be evidenced by
United States Internal Revenue Service Form 1001 or 4224, to
deliver to the Administrative Agent and the Borrower, from time
to time as requested to the Administrative Agent and the
Borrower, such Form 1001 or 4224 ("Exemption Certificate") or any
applicable successor form thereto, completed in a manner
reasonably satisfactory to the Administrative Agent and the
Borrower.
If a Lender which is not a United States person for federal
income tax purposes has not delivered an Exemption Certificate to
the Borrower on or before its first participation as Lender
hereunder or within a reasonable period of time thereafter, then
the Borrower shall not have any obligation to indemnify such
Lender for charges (including related penalties, interest and
expenses) imposed by the United States or any political
subdivision thereof pursuant to this section.
SECTION IV.7. Payments, Computations, etc. Unless
otherwise expressly provided, all payments by the Borrower
pursuant to or in respect of this Agreement, the Notes, each
Letter of Credit or any other Loan Document shall be made by the
Borrower to the Administrative Agent for the pro rata account of
the Lenders entitled to receive such payment. All such payments
required to be made to the Administrative Agent shall be made,
without setoff, deduction or counterclaim, not later than
11:00 a.m. (New York City time), on the date due, in same day or
immediately available funds, to such account as the
Administrative Agent shall specify from time to time by notice to
the Borrower. Funds received after that time shall be deemed to
have been received by the Administrative Agent on the next
succeeding Business Day. The Administrative Agent shall promptly
remit in same day funds to each Lender its share, if any, of such
payments received by the Administrative Agent for the account of
such Lender. All interest and fees (including any Post-Default
Rate interest payments made pursuant to Section 3.2.2) shall be
computed on the basis of the actual number of days (including the
first day but excluding the last day) occurring during the period
for which such interest or fee is payable over a year comprised
of 360 days (or, in the case of interest on Base Rate Loans,
365 days or, if appropriate, 366 days). Whenever any payment to
be made shall otherwise be due on a day which is not a Business
Day, such payment shall (except as otherwise required by clause
(c) of the definition of the term "Interest Period" with respect
to LIBO Rate Loans) be made on the next succeeding Business Day
and such extension of time shall be included in computing
interest and fees, if any, in connection with such payment. The
Administrative Agent is authorized to charge any account
maintained by the Borrower with it for any Obligations owing to
it or any of the Lenders.
SECTION IV.8. Sharing of Payments. If any Lender shall
obtain any payment or other recovery (whether voluntary,
involuntary, by application of setoff or otherwise) on account of
any Loan (other than pursuant to the terms of Sections 4.3, 4.4,
4.5 and 4.6) in excess of its pro rata share of payments pursuant
to Section 4.7, then or therewith obtained by all Lenders, such
Lender shall purchase from the other Lenders such participations
in Credit Extensions made by them (without recourse,
representation or warranty) as shall be necessary to cause such
purchasing Lender to share the excess payment or other recovery
ratably with each of them; provided, however, that if all or any
portion of the excess payment or other recovery is thereafter
recovered from such purchasing Lender, the purchase shall be
rescinded and each Lender which has sold a participation to the
purchasing Lender shall repay to the purchasing Lender the
purchase price to the ratable extent of such recovery together
with an amount equal to such selling Lender's ratable share
(according to the proportion of (a) the amount of such selling
Lender's required repayment to the purchasing Lender to (b) 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 Borrower agrees
that any Lender so purchasing a participation from another Lender
pursuant to this Section may, to the fullest extent permitted by
law, exercise all its rights of payment (including pursuant to
Section 4.9) with respect to such participation as fully as if
such Lender were the direct creditor of the Borrower in the
amount of such participation. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives
a secured claim in lieu of a setoff to which this Section
applies, such Lender shall, to the extent practicable, exercise
its rights in respect of such secured claim in a manner
consistent with the rights of the Lenders entitled under this
Section to share in the benefits of any recovery on such secured
claim.
SECTION IV.9. Setoff. Each Lender shall, upon the
occurrence of any Event of Default and with the consent of the
Required Lenders, to the extent permitted under applicable law,
appropriate and apply to the payment of the Obligations owing to
it (whether or not then due), and (as security for such
Obligations) each of the Borrower and the Parent hereby grants to
each Lender a continuing security interest in, any and all
balances, credits, deposits, accounts or moneys of the Borrower
and the Parent then or thereafter maintained with such Lender;
provided, however, that any such appropriation and application
shall be subject to the provisions of Section 4.8 (each Lender
agreeing promptly to notify the Borrower or the Parent, as the
case may be, and the Administrative Agent after any such setoff
and application made by such Lender; but the failure to give such
notice shall not affect the validity of such setoff and
application). The rights of each Lender under this Section are
in addition to other rights and remedies (including other rights
of setoff under applicable law or otherwise) which such Lender
may have.
SECTION IV.10. Use of Proceeds. The Borrower shall apply
the Revolving Loans to (i) the general corporate and working
capital needs of the Borrower and its Subsidiaries (including
intercompany loans by the Borrower to Non-U.S. Subsidiaries to
refinance existing indebtedness of such Non-U.S. Subsidiaries in
an amount not to exceed such Non-U.S. Subsidiaries' existing
indebtedness outstanding on the Effective Date), (ii) refinance
the outstanding principal amount of revolving loans under the
Existing Bank Facility, (iii) to pay fees and expenses related to
the Acquisition and the Tender Offer and the related transactions
in an amount not to exceed $20,000,000 in the aggregate, and (iv)
to refinance up to $40,000,000 (or if less than such amount at
any time, the Permitted Amount) (the "Subordinated Debt Refunding
Availability") of the Borrower's Senior Subordinated Notes
through redemptions pursuant to the put provision contained in
the Senior Subordinated Notes in the event of a Change of Control
(as defined therein) or subject to certain conditions, open
market purchases in an amount up to $25,000,000, or if less than
such amount at any time, the Permitted Amount, provided that the
purchase price paid pursuant to any such open market purchases
does not exceed 112% of the face amount of such Senior
Subordinated Notes (the "Subordinated Debt Refunding"), provided,
however, that on a pro forma basis after giving effect to each
Subordinated Debt Refunding and the aggregate amount of Revolving
Loans used to make intercompany loans to Non-U.S. Subsidiaries,
the Borrower must maintain availability under the Revolving Loan
Commitment of no less than $25,000,000. The Borrower shall apply
the Term Loans to refinance the term loans of the Borrower
outstanding under the Existing Credit Facility.
ARTICLE V
CONDITIONS TO CREDIT EXTENSIONS
SECTION V.1. Initial Credit Extension. The obligations of
the Lenders and, if applicable, the Issuer to fund the initial
Credit Extension shall be subject to the prior or concurrent
fulfillment of each of the conditions precedent set forth in this
Section 5.1 to the satisfaction of the Managing Agents.
SECTION V.1.1. Resolutions, etc. The Administrative Agent
shall have received from the Parent, the Borrower and other
Obligor party to a Loan Document, a certificate, dated the date
of the initial Credit Extension, of its Secretary or Assistant
Secretary as to
(a resolutions of its Board of Directors then in full
force and effect authorizing the execution, delivery and
performance of this Agreement, the Notes and each other Loan
Document to be executed by it;
(b each Organic Document of the Parent, the Borrower
and each such other Obligor; and
(c the incumbency and signatures of the officers of
the Parent, the Borrower and each such other Obligor
authorized to act with respect to this Agreement, the Notes
and each other Loan Document as is to be executed by it,
upon which certificate each Lender may conclusively rely until it
shall have received a further certificate of the Secretary or
Assistant Secretary of the Parent, the Borrower and each other
Obligor canceling or amending such prior certificate.
SECTION V.1.2. Agreement. The Administrative Agent shall
have received, with counterparts for each Lender identified on
the signature pages hereto, this Agreement duly executed by each
Lender, the Administrative Agent, the Documentation Agent, the
Syndication Agent and an Authorized Officer of the Borrower and
the Parent.
SECTION V.1.3. Delivery of Notes. The Administrative Agent
shall have received, for the account of each Lender entitled
thereto, its Term Note and Revolving Note, dated the date of the
initial Credit Extension, and duly executed and delivered by an
Authorized Officer of the Borrower.
SECTION V.1.4. Required Consents and Approvals. All
required consents and approvals shall have been obtained and be
in full force and effect with respect to the transactions
contemplated hereby and the Acquisition and the Tender Offer from
(a) all relevant governmental authorities and regulatory bodies
and (b) any other Person whose consent or approval the
Administrative Agent reasonably deems necessary or appropriate to
effect the transactions contemplated hereby and by the
Acquisition and the Tender Offer.
SECTION V.1.5. Consummation of Tender Offer. The
Administrative Agent shall be satisfied that (a) the Parent has
acquired pursuant to the Tender Offer free and clear of any Liens
at least 80% of all outstanding Shares of the common stock of the
Borrower, (b) that the depository for the Parent shall have
certified to the Administrative Agent (i) that as of midnight,
New York City time, on Wednesday, August 27, 1997, not less than
80% of the Shares of common stock of the Borrower outstanding on
July 24, 1997, have been tendered pursuant to the Tender Offer,
(ii) that such depository shall deliver to the Administrative
Agent no later than 5:00 p.m. New York City time on Friday,
August 29, 1997, a certificate representing all Shares of the
common stock of the Borrower tendered by midnight, New York City
time, on Wednesday, August 27, 1997, and (iii) that such
depository shall deliver to the Administrative Agent by 5:00 p.m.
New York City time on Friday, September 5, 1997, a certificate
representing all Shares of the commons stock of the Borrower
tendered pursuant to the guaranteed delivery provisions of the
Tender Offer, (c) the Parent is able to have and exercise voting
power for the election of at least a majority of the board of
directors of the Borrower, (d) the Shares to be purchased (and
the certificates representing such Shares, other than book-entry
Shares which have been deposited with a book-entry transfer
Facility) shall have been validly tendered to the Parent, free of
all restrictions to purchase imposed by applicable law or
otherwise, and such Shares shall not have been withdrawn and
shall be available for purchase in accordance with the terms and
conditions set forth in the Purchase Agreement, (e) the
consummation of the Tender Offer will not violate or cause a
default under any applicable law, statute, rule or regulation or
any material agreement or right of the Parent, the Borrower or
any of their Subsidiaries or the Borrower, and (f) the Boards of
Directors of the Borrower and the Parent have not sought to
withdraw, modify or terminate their approval of the Purchase
Agreement or any of the transactions contemplated thereby.
SECTION V.1.6. Consummation of the Acquisition. The
Administrative Agent shall have received evidence satisfactory to
it that the Purchase Agreement has not been amended, modified or
supplemented without the Required Lenders' prior written consent;
that all conditions precedent to the consummation of the
transactions contemplated by the Purchase Agreement have been
fully satisfied or, with the prior written consent of the
Required Lenders, waived; and that the Acquisition has been
consummated in accordance with all the terms of the Purchase
Agreement. In addition, the Borrower shall have delivered or
caused to be delivered to the Administrative Agent counterparts
for each Lender of the following:
(a Resolutions. Resolutions of the Boards of
Directors of the Parent and the Borrower, each certified by
the Secretary or an Assistant Secretary of the Parent and
the Borrower, as the case may be, duly adopted and in full
force and effect on the date of the initial Credit
Extension, authorizing the execution, delivery and
performance by the Parent and the Borrower of the Purchase
Agreement and all other agreements, documents and
instruments being delivered in connection therewith; and
(b Certificates. A certificate from an Authorized
Officer of the Borrower to the effect that attached thereto
are true and correct copies of the Purchase Agreement
(including all schedules and annexes thereto) and each of
the agreements, documents, instruments, opinions, filings,
consents and approvals executed and delivered, and furnished
or filed, pursuant to the Purchase Agreement.
SECTION V.1.7. Financial Information, etc. The
Administrative Agent shall have received prior to the Effective
Date, with counterparts for each Lender,
(a audited consolidated financial statements for the
Borrower and its Subsidiaries for the fiscal year ending
December 31, 1996 and for their prior two fiscal years, in
each case prepared in accordance with GAAP consistently
applied and free of any Impermissible Qualification;
(b unaudited consolidated financial statements of the
Borrower and its Subsidiaries for the fiscal quarter ending
on or about June 30, 1997, certified by the chief financial
Authorized Officer of the Borrower, in each case prepared in
accordance with GAAP consistently applied; and
(c a pro forma consolidated balance sheet for the
Borrower and its Subsidiaries, satisfactory in form and
substance to the Administrative Agent and the Lenders,
certified by the chief financial Authorized Officer of the
Borrower, giving effect to the consummation of the
Acquisition and the Tender Offer and all the transactions
contemplated by this Agreement and the other Loan Documents.
SECTION V.1.8. Subsidiary Guaranties. The Administrative
Agent shall have received the Subsidiary Guaranty, dated as of
the date of the initial Credit Extension, duly executed by each
Subsidiary Guarantor.
SECTION V.1.9. Pledged Property. The Administrative Agent
shall have received:
(a the Parent Pledge Agreement, dated as of the date
of the initial Credit Extension, duly executed by the
Parent;
(b the Borrower Pledge Agreement, dated as of the
date of the initial Credit Extension, duly executed by the
Borrower;
(c the original certificates evidencing all of the
issued and outstanding shares of capital stock required to
be pledged pursuant to the terms of the Pledge Agreements,
which certificates shall be accompanied by undated stock
powers duly executed in blank by each relevant Pledgor; and
(d the original promissory notes evidencing
intercompany Indebtedness required to be pledged pursuant to
the terms of the Borrower Pledge Agreement, duly endorsed in
blank by such Pledgor in favor of the Administrative Agent.
SECTION V.1.10. Foreign Pledge Agreements. All Foreign
Pledge Agreements shall have been duly executed and delivered by
all parties thereto and shall remain in full force and effect,
and all Liens granted to the Administrative Agent thereunder
shall be duly perfected to provide the Administrative Agent with
a security interest in and Lien on all collateral granted
thereunder free and clear of other Liens, except to the extent
consented to by the Administrative Agent.
SECTION V.1.11. U.C.C. Search Results, Intellectual
Property. The Administrative Agent shall have received certified
copies of Uniform Commercial Code Requests for Information or
Copies (Form U.C.C.-11), or a similar search report certified by
a party acceptable to the Administrative Agent, dated a date
reasonably near (but prior to) the date of the initial Credit
Extension, listing all effective financing statements and, to the
extent requested by the Administrative Agent, tax liens and
judgment liens which name the Borrower and its Subsidiaries and
the Parent as the debtor and which are filed in the jurisdictions
in which filings are to be made pursuant to this Agreement and
the other Loan Documents, and in such other jurisdictions as the
Administrative Agent may reasonably request, together with copies
of such financing statements (none of which (other than financing
statements (i) filed pursuant to the terms hereof in favor of the
Administrative Agent, if such Form U.C.C.-11 or search report, as
the case may be, is current enough to list such financing
statements, (ii) being terminated pursuant to the termination
statements referred to in Section 5.1.25 or (iii) in respect of
protective filings or Liens permitted under Section 7.2.3) shall
cover any of the Collateral). In addition, the Administrative
Agent shall have received copies of searches conducted with
respect to all patents, trademarks and copyrights of the Borrower
and its U.S. Subsidiaries at the applicable United States filing
office.
SECTION V.1.12. Security Agreements, Filings, Lockboxes,
etc. The Administrative Agent shall have received executed
counterparts of the Borrower Security Agreement, the Subsidiary
Security Agreement, and each Lockbox Agreement, each dated as of
the date of the initial Credit Extension duly executed by the
Borrower, and each applicable Subsidiary, together with executed
copies of U.C.C. financing statements naming the Borrower, and
each such applicable Subsidiary, as appropriate, as the debtor
and the Administrative Agent as the secured party, filed under
the U.C.C. of all jurisdictions as may be necessary or, in the
opinion of the Administrative Agent, desirable to perfect the
first priority security interest of the Administrative Agent
pursuant to the Security Agreements, together with evidence
satisfactory to the Administrative Agent of the filing (or
delivery for filing) of appropriate trademark, copyright and
patent security supplements.
SECTION V.1.13. Real Estate Mortgages. The Administrative
Agent shall have received counterparts of the real estate
mortgages, substantially in the form of Exhibit J hereto (as
amended, supplemented, restated or otherwise modified from time
to time, the "Mortgages"), duly executed by the Borrower and its
U.S. Subsidiaries, together with
(a evidence of the completion (or satisfactory
arrangements for the completion) of all recordings and
filings of the Mortgages (and related fixture filings) as
may be necessary or, in the opinion of the Administrative
Agent, desirable to effectively create a valid first
priority mortgage Lien against all of the Realty listed on
Schedule V hereto owned by the Borrower and its U.S.
Subsidiaries; and
(b such other approvals, opinions or documents in
connection therewith as the Administrative Agent may
reasonably request.
SECTION V.1.14. Title Insurance. The Administrative Agent
shall have received in its favor mortgagees' title insurance
policies satisfactory to it and from an independent title insurer
satisfactory to it (the "Title Insurer"), with respect to the
Realty owned by the Borrower and its U.S. Subsidiaries, insuring
that title to such Realty is marketable and that the interests
created by the Mortgages constitute valid Liens thereon free and
clear of all defects and encumbrances, and such other matters
reasonably approved by the Administrative Agent, and such
policies shall also include a revolving credit endorsement,
comprehensive endorsement, variable rate endorsement, access and
utilities endorsements, a mechanic's lien endorsement and such
other endorsements as the Administrative Agent shall reasonably
request. All premiums, title examination, survey, departmental
violations, judgment and U.C.C. search charges, mortgage
recording taxes and fees, and other taxes, charges and fees shall
have been paid in full or provided for in a manner satisfactory
to the Title Insurer and the Administrative Agent, and the
Administrative Agent shall have received satisfactory evidence of
such payment or provision.
SECTION V.1.15. Realty Survey. The Administrative Agent
shall have received a current survey of the Realty owned by the
Borrower and its U.S. Subsidiaries and the improvements thereon
prepared in accordance with the current Minimum Standard Detail
Requirements for Land Title Surveys as adopted by the American
Land Title Association and the American Congress on Surveying and
Mapping, prepared and certified to the Administrative Agent and
the Title Insurer by a licensed surveyor or engineer, which
surveyor and survey shall be reasonably satisfactory in all
respects to the Administrative Agent and to the Title Insurer and
which certification shall include, among other things, a
statement to the effect that all portions of such Realty that lie
within any flood areas designated on any maps entitled "Flood
Insurance Rate Map", "Flood Hazard Floodway Boundary Map", "Flood
Hazard Boundary Map", or "Flood Boundary and Floodway Map"
published by the Federal Emergency Management Agency or on any
Flood Hazard Boundary Map published by the U.S. Department of
Housing and Urban Development have been outlined and labeled on
the survey.
SECTION V.1.16. Environmental Assessment Reports, etc. The
Administrative Agent shall have received, with copies for each
Lender, copies of all environmental assessment reports with
respect to all of the Realty, which environmental reports
(including the scope and coverage thereof) shall be reasonably
satisfactory in form and substance to the Administrative Agent
and shall (by their terms or pursuant to a separate agreement)
expressly permit the Administrative Agent and the Lenders to rely
thereon.
SECTION V.1.17. Preferred Stock. The Administrative Agent
shall have received evidence reasonably satisfactory to the
Managing Agents that (a) the Parent is obligated to purchase
payable-in-kind preferred stock of the Borrower (which shall have
terms satisfactory to the Managing Agents) in an amount of
$156,550,000 which shall be used to redeem all of the Senior
Subordinated Notes that can be "put" to the Borrower as a result
of the Change in Control (as defined in the Senior Subordinated
Notes) caused by the Tender Offer and Acquisition and (b) the
Parent is committed to purchase preferred stock of the Borrower
(which shall have terms satisfactory to the Managing Agents) in
an amount of not less than $40,000,000 (which can include up to
$10,000,000 of debt under the Unsecured Line of Credit converted
into preferred stock of the Borrower (the "Initial Capital
Contribution") within 60 days following the Effective Date if the
Initial Sale has not been consummated (collectively, the
"Borrower Preferred Stock").
SECTION V.1.18. Trustee's Certificate. The Administrative
Agent shall have received a certificate from the trustee under
the Senior Subordinated Notes stating that all of the Obligations
under this Agreement and the other Loan Documents are Specified
Senior Indebtedness (as defined in the Senior Subordinated Notes)
and as to such other items as reasonably requested by the
Administrative Agent.
SECTION V.1.19. Credit Line. The Administrative Agent
shall have received satisfactory evidence that the Borrower has a
committed Unsecured Line of Credit in an amount of $10,000,000
from the Parent or an Affiliate of the Parent (other than the
Borrower or any of its Subsidiaries) on terms and conditions
reasonably satisfactory to the Managing Agents, which shall
provide for a conversion of all outstanding debt thereunder into
preferred Stock of the Borrower (on terms satisfactory to the
Managing Agents) within sixty days following the Effective Date
if the Initial Sale has not been consummated on the terms
described in Section 7.1.10.
SECTION V.1.20. Solvency Certificates. The Administrative
Agent shall have received, with copies for each Lender, solvency
certificates in substantially the form of Exhibit L attached
hereto, duly executed by the Assistant Secretary and Vice
President (and Authorized Officer) of the Borrower and the
Parent, dated the date of the initial Credit Extension and
expressly permitting the Managing Agents and the Lenders to rely
thereon.
SECTION V.1.21. Closing Date Certificates. The
Administrative Agent shall have received, with copies for each
Lender, a closing date certificate in substantially the form of
Exhibit K attached hereto, duly executed by the chief financial
or executive Authorized Officer of the Borrower and the Parent,
and dated the date of the initial Credit Extension, in which
certificate the Borrower and the Parent shall agree and
acknowledge that the statements made therein shall be true and
correct representations and warranties of the Borrower and the
Parent as of such date. All documents and agreements appended to
such Closing Date Certificate shall be in form and substance
satisfactory to the Managing Agents and the Lenders.
SECTION V.1.22. Reliance Letters. The Administrative Agent
shall have received from legal counsel to the Borrower the
opinions rendered in connection with the Acquisition and the
Tender Offer, which opinions shall provide that the Managing
Agents and the Lenders may rely thereon.
SECTION V.1.23. Fairness Opinion. The Administrative Agent
and the Lenders shall have received a copy of the "fairness"
opinion delivered by Credit Suisse First Boston Corporation to
the Board of Directors of the Borrower, and such letter shall
remain in full force and effect without modification or
withdrawal.
SECTION V.1.24. Evidence of Insurance. The Managing Agents
shall have received evidence of the insurance coverage required
to be maintained pursuant to Section 7.1.4, which insurance shall
be satisfactory to the same, together with a satisfactory
insurance broker's letter or letters as to the compliance of the
same with the requirements of this Agreement.
SECTION V.1.25. Payment of Outstanding Indebtedness, etc.
The Administrative Agent shall have received satisfactory
evidence that all the Indebtedness identified in Item 7.2.2(b)
("Indebtedness to be Paid") of the Disclosure Schedule, together
with all interest, all prepayment premiums and other amounts due
and payable with respect thereto, have been paid in full and all
obligations with respect thereto have been terminated and that
all Liens securing payment of any such Indebtedness have been
released. In addition, the Administrative Agent shall have
received all Uniform Commercial Code Form U.C.C.-3 termination
statements and mortgage releases or other instruments as may be
suitable or appropriate in connection with the foregoing.
SECTION V.1.26. Opinions of Counsel. The Administrative
Agent shall have received opinions, dated the date of the initial
Credit Extension and addressed to the Administrative Agent and
all the Lenders, from
(a Hogan and Hartson L.L.P., Debevoise & Plimpton, and
Thomas J. Bird, Esq., counsel to the Obligors, substantially
in the form of Exhibit N hereto;
(b local counsel for real estate and personal property
matters in each jurisdiction in which a Mortgage is executed
and delivered to the Administrative Agent, in form and
substance satisfactory to the Administrative Agent; and
(c Baker & McKenzie, Italian counsel to the Borrower,
Bruckhaus Westrick Stegemann, German counsel to the
Borrower, Baker & McKenzie, United Kingdom counsel to the
Borrower and Baker & McKenzie, Swedish counsel to the
Borrower, in each case in form and substance satisfactory
to the Administrative Agent and its counsel, and as to such
other matters related to the transactions contemplated
hereby as the Administrative Agent may reasonably require.
SECTION V.1.27. Managing Agents' Closing Fees, Expenses,
etc. The Administrative Agent shall have received for its own
account, for the account of NationsBanc, and for the account of
each Lender, as the case may be, all fees, costs and expenses due
and payable pursuant to Sections 3.3 and, if then invoiced, 11.3.
SECTION V.1.28. Statement of Sources and Uses. The
Managing Agents shall have received from the Borrower, a detailed
statement of sources and uses giving effect to the consummation
of the transactions contemplated by the Acquisition and the
Tender Offer and the sale of Instrumentation Segment (including
the transactions contemplated by this Agreement) as of the
Effective Date, satisfactory to the Managing Agents.
SECTION V.1.29. Closing Date. The initial Credit Extension
shall have occurred in accordance with the terms of this
Agreement on or prior to October 31, 1997.
SECTION V.1.30. Form U-1. The Borrower shall have
delivered to the Administrative Agent properly completed Federal
Reserve Form U-1 for each Lender with respect to the Loans, the
Pledge Agreement and the transactions contemplated thereby.
SECTION V.1.31. Subscription Agreements. The
Administrative Agent shall have received executed copies of the
Parent Subscription Agreement and the Borrower Subscription
Agreement.
SECTION V.1.32. Supplemental Indenture. The Administrative
Agent shall have received an executed copy of the Second
Supplemental Indenture, dated as of August 26, 1997 to the
Subordinated Note Indenture.
SECTION V.1.33. Assignment of Parent Subscription
Agreement. The Administrative Agent shall have received (a) the
Assignment and Security Agreement, with respect to the assignment
by Parent to the Administrative Agent of its contract rights with
respect to the Stock Subscription Agreement, dated as of July 23,
1997, between Colfax Capital Corporation and the Parent and (b)
the Consent and Agreement, attached to the Stock Subscription
Agreement, executed by Colfax Capital Corporation, each in form
and substance satisfactory to the Administrative Agent.
SECTION V.1.34. Satisfactory Legal Form, etc. All
documents executed or submitted pursuant hereto on or prior to
the Effective Date by or on behalf of the Borrower or any of its
Subsidiaries or any other Obligors shall be satisfactory in form
and substance to the Managing Agents, the Lenders and their
counsel; the Managing Agents, the Lenders and their counsel shall
have received all information, approvals, opinions, documents or
instruments as the Managing Agents, the Lenders or their counsel
may reasonably request.
SECTION V.2. All Credit Extensions. The obligation of each
Lender and Issuer to make any Credit Extension (including the
initial Credit Extension) shall be subject to the fulfillment of
each of the conditions precedent set forth in this Section 5.2 to
the satisfaction of the Administrative Agent:
SECTION V.2.1. Compliance with Warranties, No Default, etc.
Both before and after giving effect to any Credit Extension, the
following statements shall be true and correct:
(a) the representations and warranties set forth in
Article VI (excluding, however, those contained in Section
6.7) and those set forth in the other Loan Documents shall
be true and correct in all material respects with the same
effect as if then made (unless stated to relate solely to an
earlier date, in which case such representations and
warranties shall be true and correct as of such earlier
date);
(b) except as disclosed by the Borrower to the
Administrative Agent and the Lenders pursuant to
Section 6.7,
(i) no labor controversy, litigation, arbitration
or governmental investigation or proceeding shall be
pending or, to the knowledge (after due inquiry) of the
Parent or the Borrower, threatened against the Borrower
or any of its Subsidiaries which has a reasonable
likelihood of materially and adversely affecting the
Borrower's consolidated business, operations, assets,
revenues, properties or prospects, taken as a whole,
which purports to affect the legality, validity or
enforceability of this Agreement, the Notes or any
other Loan Document or, in the case of the initial
Credit Extension, seeks to restrain, enjoin or
otherwise prevent the consummation of, or to recover
damages or obtain relief as a result of, the
transactions contemplated by or in connection with the
Acquisition, the Tender Offer, this Agreement or the
other Loan Documents; and
(ii) no development shall have occurred in any
labor controversy, litigation, arbitration or
governmental investigation or proceeding disclosed
pursuant to Section 6.7 which has a reasonable
likelihood of materially and adversely affecting the
consolidated businesses, operations, assets, revenues,
properties or prospects of the Borrower and its
Subsidiaries taken as a whole;
(c) the sum of the (i) aggregate outstanding principal
amount of all Revolving Loans and (ii) aggregate amount of
Letter of Credit Outstandings does not exceed the Revolving
Loan Commitment Amount (as such amount may be reduced from
time to time); and
(d) no Default or Event of Default shall have then
occurred and be continuing.
SECTION V.2.2. Credit Extension Request, etc. The
Administrative Agent shall have received a Borrowing Request if
Loans are being requested or an Issuance Request if a Letter of
Credit is being requested or extended. Each of the delivery of a
Borrowing Request or Issuance Request and the acceptance by the
Borrower of the proceeds of such Credit Extension shall
constitute a representation and warranty by the Borrower that on
the date of such Credit Extension (both immediately before and
after giving effect to such Credit Extension and the application
of the proceeds thereof) the statements made in Section 5.2.1 are
true and correct.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders, each Issuer and the
Administrative Agent to enter into this Agreement and to make
Credit Extensions hereunder, the Borrower and the Parent jointly
and severally represent and warrant to the Managing Agents, each
Issuer and each Lender as set forth in this Article VI.
SECTION VI.1. Organization, etc. The Parent, the Borrower
and each of their Subsidiaries and each other Obligor (a) is a
corporation validly organized and existing and in good standing
under the laws of the jurisdiction of its incorporation and
(b) is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the nature of its
business requires such qualification except where the failure to
be so qualified or in good standing could not reasonably be
expected to have a material adverse effect on the financial
condition, operations, assets, business, properties, revenues or
prospects of the Borrower and its Subsidiaries taken as a whole,
and has full power and authority and holds all requisite
governmental licenses, permits and other approvals to enter into
and perform its Obligations under this Agreement, the Notes and
each other Loan Document to which it is a party and to own and
hold under lease its property and to conduct its business
substantially as currently conducted by it except where the
failure to hold a governmental license, permit, or other approval
to own or hold under lease its property and to conduct its
business substantially as currently conducted could not
reasonably be expected to have a material adverse effect on the
financial condition, operations, assets, business, properties,
revenues or prospects of the Borrower and its Subsidiaries taken
as a whole.
SECTION VI.2. Due Authorization, Non-Contravention, etc.
The execution, delivery and performance by the Borrower and the
Parent of this Agreement, the Notes, the Subscription Agreements
and each other Loan Document executed or to be executed by it,
and the execution, delivery and performance by each other Obligor
of each Loan Document executed or to be executed by it, are
within the Borrower's, the Parent's and each such Obligor's
corporate powers, have been duly authorized by all necessary
corporate action, and do not
(a) contravene or result in a default under the
Borrower's, the Parent's or any such Obligor's Organic
Documents;
(b) contravene or result in a default under any
contractual restriction, law or governmental regulation or
court decree or order binding on the Borrower, the Parent or
any such Obligor; or
(c) result in, or require the creation or imposition
of, any Lien on any of any Obligor's properties other than
the Liens created under the Loan Documents in favor of the
Administrative Agent.
SECTION VI.3. Government Approval, Regulation, Compliance
with Law, etc. No authorization or approval or other action by,
and no notice to or filing with, any governmental authority or
regulatory body or other Person (other than the filing of
U.C.C.-1 financing statements in the appropriate jurisdictions)
is required for (a) the due execution, delivery or performance by
the Borrower, the Parent or any other Obligor of this Agreement,
the Notes, the Subscription Agreements or any other Loan Document
to which it is a party, (b) the grant by the Borrower and each
applicable Obligor of the security interests, pledges and Liens
granted by the Loan Documents, or (c) the perfection of or the
exercise by the Administrative Agent of its rights and remedies
under this Agreement or any other Loan Document.
SECTION VI.4. Validity, etc. This Agreement and each of
the Notes has been duly executed and delivered, and the
Subscription Agreement and each other Loan Document executed by
the Borrower, and the Parent, as the case may be, will, on the
due execution and delivery thereof, constitute, the legal, valid
and binding obligations of the Borrower, and the Parent, as the
case may be, enforceable in accordance with their respective
terms; and each Loan Document executed pursuant hereto by each
other Obligor will, on the due execution and delivery thereof by
such Obligor, be the legal, valid and binding obligation of such
Obligor enforceable in accordance with its terms, subject in each
case to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors'
rights generally, and subject to the effect of general principles
of equity (regardless of whether considered in a proceeding in
equity or at law). Each of the Loan Documents which purports to
create a security interest creates a valid first priority
security interest in the Collateral subject thereto, subject only
to Liens permitted by Section 7.2.3, securing the payment of the
Obligations.
SECTION VI.5. Financial Information. The financial
statements of the Borrower and its Subsidiaries have been
prepared in accordance with GAAP consistently applied unless
otherwise disclosed therein with respect solely to the financial
statements delivered prior to the Effective Date (including
application of Financial Accounting Statement No. 106) and such
financial statements and the pro forma balance sheets delivered
pursuant to clause (c) of Section 5.1.7 present fairly the
financial condition of the corporations covered thereby as at the
dates thereof and the results of their operations for the periods
then ended. The Borrower and its Subsidiaries have no material
liabilities, including as to contingencies and unusual or forward
commitments, that are not disclosed in the foregoing financial
statements or the footnotes thereto or set forth in Item 6.5
("Certain Material Liabilities") of the Disclosure Schedule. The
pro forma balance sheet delivered pursuant to clause (c) of
Section 5.1.7 have been prepared in accordance with the
requirements of GAAP for the preparation of pro forma financial
statements.
SECTION VI.6. No Material Adverse Change. (a) Since the
date of the financial statements described in clause (a) of
Section 5.1.7, there has been no material adverse change in the
financial condition, operations, assets, business, properties,
revenues or prospects of the corporations or businesses covered
thereby.
(b) From and after the date of the initial Credit
Extension, there has been no material adverse change in the
financial condition, operations, assets, business, properties,
revenues or prospects of the Borrower and its Subsidiaries, taken
as a whole.
SECTION VI.7. Litigation, Labor Controversies, etc. There
is no pending or, to the knowledge of the Borrower, threatened
litigation, action, proceeding, or labor controversy affecting
the Borrower or any of its Subsidiaries or any other Obligor, or
any of their respective properties, businesses, assets or
revenues, which could reasonably be expected to materially
adversely affect the financial condition, operations, assets,
business, properties, revenues or prospects of the Borrower and
its Subsidiaries taken as a whole, except as disclosed in
Item 6.7 ("Litigation") of the Disclosure Schedule, or which
purports to affect the legality, validity or enforceability of
this Agreement, the Notes or any other Loan Document.
SECTION VI.8. Subsidiaries. The Parent has no direct
Subsidiaries except the Borrower. The Borrower has no
Subsidiaries except those Subsidiaries listed on Item 6.8
("Borrower's Subsidiaries") of the Disclosure Schedule and those
Subsidiaries, if any, which it may acquire or create after the
date of the initial Credit Extension in accordance with the
provisions hereof.
SECTION VI.9. Ownership of Properties. Except as set forth
in Item 6.9 ("Ownership of Properties") of the Disclosure
Schedule, the Borrower and each of its Subsidiaries own good and
marketable title to all of their properties and assets, have
valid fee or leasehold interests in all property, real and
personal, tangible and intangible, of any nature whatsoever
(including patents, trademarks, trade names, service marks and
copyrights), free and clear of all Liens, charges or claims
(including infringement claims with respect to patents,
trademarks, copyrights and the like) which could interfere in the
conduct of their businesses as currently conducted.
SECTION VI.10. Taxes. The Borrower and each of its
Subsidiaries have filed (a) all returns and reports required by
law to have been filed by or with respect to it in connection
with federal, state and local income taxes (including any
predecessor or prior consolidated group of which it may have been
a member) and (b) all other returns and reports with respect to
Taxes required by law to have been filed to the extent (as to
this clause (b)) the failure to do so could reasonably be
expected to have a material adverse effect on the financial
condition, operations, assets, business, properties, revenues or
prospects of the Borrower and its Subsidiaries taken as a whole,
except as disclosed on Item 6.10 ("Taxes") of the Disclosure
Schedule. All federal, state and local income taxes (as
described above) that are owing have been paid in full and all
other Taxes and governmental charges that are owing have been
paid in full to the extent the failure to do so could reasonably
be expected to have a material adverse effect on the financial
condition, operations, assets, business, properties or prospects
of the Borrower and its Subsidiaries taken as a whole, except in
each such case any such taxes or charges which are being
diligently contested in good faith by appropriate proceedings and
for which adequate reserves in accordance with GAAP shall have
been set aside on its books.
SECTION VI.11. Pension and Welfare Plans. During the
twelve-consecutive-month period prior to the date of the
execution and delivery of this Agreement and prior to the date of
any Credit Extension hereunder, no steps have been taken to
terminate any Pension Plan, and no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise
to a Lien under Section 302(f) of ERISA. No condition exists or
event or transaction has occurred with respect to any Pension
Plan which might result in the incurrence by the Borrower or any
member of the Controlled Group of any material liability, fine or
penalty. Except as disclosed in Item 6.11 ("Employee Benefit
Plans") of the Disclosure Schedule, neither the Borrower nor any
member of the Controlled Group or any other Obligor has any
contingent liability with respect to any post-retirement benefit
under a Welfare Plan, other than liability for continuation
coverage described in Part 6 of Title I of ERISA. Each Foreign
Employee Benefit Plan maintained or contributed to by the
Borrower, any of its Subsidiaries or any ERISA Affiliate is in
compliance in all material respects with all laws, regulations
and rules applicable thereto and the respective requirements of
the governing documents for such Plan. The aggregate of the
liabilities to provide all of the accrued benefits under any
Foreign Pension Plan maintained or contributed to by the
Borrower, any of its Subsidiaries or any ERISA Affiliate does not
exceed the current fair market value of the assets held in the
trust or other funding vehicle for such Plan. With respect to
any Foreign Employee Benefit Plan maintained by the Borrower, any
of its subsidiaries or any ERISA Affiliate (other than a Foreign
Pension Plan), reasonable reserves have been established in
accordance with prudent business practice or where required by
ordinary accounting practices in the jurisdiction in which such
Plan is maintained. The aggregate unfunded liabilities, after
giving effect to any reserves for such liabilities, with respect
to such Plans is not reasonably expected to result in a material
liability. There are no actions, suits or claims (other than
routine claims for benefits) pending or threatened against the
Borrower, any of its subsidiaries or any ERISA Affiliate with
respect to any Foreign Employee Benefit Plan.
SECTION VI.12. Environmental Warranties. Except as set
forth in Item 6.12 ("Environmental Matters") of the Disclosure
Schedule:
(a) all facilities and property (including underlying
groundwater) owned or leased by the Borrower or any of its
Subsidiaries have been, and continue to be, owned or leased
by the Borrower and such Subsidiaries in compliance in all
material respects with all Environmental Laws;
(b) there have been no past, and there are no pending
or, to the best knowledge of the Borrower, threatened
(i) claims, complaints, notices or requests for
information received by the Borrower or any of its
Subsidiaries with respect to any alleged material
violation of any Environmental Law, as to which the
Administrative Agent has not received written notice,
or
(ii) complaints, notices or inquiries to the
Borrower or any of its Subsidiaries regarding potential
material liability under any Environmental Law or, with
regard to contamination, any common or civil law, as to
which the Administrative Agent has not received written
notice;
(c) there is no claim, complaint, notice, request for
information or inquiry that has been received by or made to
the Borrower or any of its Subsidiaries with respect to any
alleged violation of any Environmental Law or regarding
potential liability under any Environmental Law or, with
regard to contamination, any common or civil law, which,
singly or in aggregate, could reasonably be expected to have
a material adverse effect on the financial condition,
operations, assets, business, properties, revenues or
prospects of the Borrower and its Subsidiaries taken as a
whole;
(d) there have been no Releases of Hazardous Materials
at, on or under any property now or previously owned or
leased by the Borrower or any of its Subsidiaries that,
singly or in the aggregate, could reasonably be expected to
have a material adverse effect on the financial condition,
operations, assets, business, properties, revenues or
prospects of the Borrower and its Subsidiaries taken as a
whole;
(e) the Borrower and its Subsidiaries have been issued
and are in compliance in all material respects with all
permits, certificates, approvals, licenses and other
authorizations relating to environmental matters and
necessary or desirable for their businesses;
(f) no property now or previously owned or leased by
the Borrower or any of its Subsidiaries is listed or
proposed for listing (with respect to owned property only)
on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any similar state list of sites requiring
investigation or clean-up;
(g) there are no underground storage tanks (including
petroleum storage tanks) that are abandoned or that have
been inactive for greater than one year on or under any
property now or previously owned or leased by the Borrower
or any of its Subsidiaries;
(h) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under
any property now or previously owned or leased by the
Borrower or any of its Subsidiaries that do not have leak
detection systems as required by and in compliance in all
material respects with all Environmental Law;
(i) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under
any property now or previously owned or leased by the
Borrower or any of its Subsidiaries that have Released or
suffered Release(s) of Hazardous Materials that, singly or
in the aggregate, could reasonably be expected to have a
material adverse effect on the financial condition,
operations, assets, business, properties, revenues or
prospects of the Borrower and its Subsidiaries taken as a
whole;
(j) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under
any property now or previously owned or leased by the
Borrower or any of its Subsidiaries that have Released
Hazardous Materials and have not or would not qualify and be
eligible for the funding (subject to applicable deductibles)
of the cleanup of Release(s) and third party liability by a
State fund;
(k) there are no underground storage tanks, active or
abandoned, including petroleum storage tanks, on or under
any property now or previously owned or leased by the
Borrower or any of its Subsidiaries that have Release(s) the
cleanup of which will or is reasonably expected to exceed
the maximum funding of cleanup by a State fund;
(l) there are no septic systems, cess pools,
underground systems or underground injection wells on or
under any property now or previously owned or leased by the
Borrower or any of its Subsidiaries that have Released or
suffered Releases of Hazardous Materials which, singly or in
the aggregate, could reasonably be expected to have a
material adverse effect on the financial condition,
operations, assets, business, properties, revenues or
prospects of the Borrower and its Subsidiaries taken as a
whole;
(m) there are no fuel pumps, underground storage
tanks, or above ground storage tanks, including petroleum
storage tanks, on or under any property now owned or leased
by the Borrower or any of its Subsidiaries that required or
are reasonably expected to be required to be modified,
upgraded or replaced to include emission control devices in
a manner (including as to costs and expenses) that, singly
or in the aggregate, could reasonably be expected to have a
material adverse effect on the financial condition,
operations, assets, business, properties, revenues or
prospects of the Borrower and its Subsidiaries taken as a
whole;
(n) any tank or pump replacement program of the
Borrower or any of its Subsidiaries, singly or in the
aggregate, is not reasonably expected to have a material
adverse effect on the financial condition, operations,
assets, business, properties, revenues or prospects of
Borrower and its Subsidiaries taken as a whole;
(o) neither the Borrower nor any of its Subsidiaries
has directly transported or directly arranged for the
transportation of any Hazardous Material to any location
which is listed or proposed for listing on the National
Priorities List pursuant to CERCLA, on the CERCLIS or on any
similar state list or which is the subject of federal, state
or local enforcement actions or other investigations which
may lead to material claims against the Borrower or such
Subsidiary thereof for any remedial work, damage to natural
resources or personal injury, including claims under CERCLA;
(p) there are no polychlorinated biphenyls or friable
asbestos present at any property now or previously owned or
leased by the Borrower or any of its Subsidiaries that,
singly or in the aggregate, have, or may reasonably be
expected to have, a material adverse effect on the financial
condition, operations, assets, business, properties,
revenues or prospects of the Borrower and its Subsidiaries
taken as a whole; and
(q) no conditions (other than those covered in the
preceding clauses (a) through (p)) exist at, on or under any
property now or previously owned or leased by the Borrower
or any of its Subsidiaries which, with the passage of time,
or the giving of notice or both, could reasonably be
expected to give rise to any material liability under any
Environmental Law.
SECTION VI.13. Accuracy of Information. (a) All factual
information heretofore or contemporaneously furnished by or on
behalf of the Borrower and the Parent or any of their
Subsidiaries in writing to the Administrative Agent or any Lender
for purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all other such factual
information hereafter furnished by or on behalf of the Borrower
and the Parent or any of their Subsidiaries to the Administrative
Agent or any Lender, will be, when taken as a whole true and
accurate in every material respect on the date as of which such
information is dated or certified and, as to information
delivered before the Effective Date, as of the date of execution
and delivery of this Agreement by the Administrative Agent and
such Lender, and such information is not, when taken as a whole
or shall not be, as the case may be, incomplete by omitting to
state any material fact necessary to make such information not
misleading.
(b) All written information prepared by any consultant or
professional advisor on behalf of the Parent or any of its
Subsidiaries which was furnished to the Administrative Agent or
any Lender in connection with the preparation, execution and
delivery of this Agreement has been reviewed by the Borrower and
the Parent, and nothing has come to the attention of the Borrower
and the Parent in the context of such review which would lead it
to believe that such information (or the assumptions on which
such information is based) is not, taken as a whole, true and
correct in all material respects or that such information, taken
as a whole, omits to state any material fact necessary to make
such information not misleading in any material respect.
(c) Insofar as any of the information described above
includes assumptions, estimates, projections or opinions, the
Borrower and the Parent have reviewed such matters and nothing
has come to the attention of the Borrower and the Parent in the
context of such review which would lead it to believe that such
assumptions, estimates, projections or opinions, omit to state
any material fact necessary to make such assumptions, estimates,
projections or opinions not reasonable or not misleading in any
material respect. All projections and estimates have been
prepared in good faith on the basis of reasonable assumptions and
represent the best estimate of future performance by the party
supplying the same.
SECTION VI.14. Purchase Agreement. As of the Effective
Date, the Purchase Agreement has not been amended or otherwise
modified except as disclosed in Item 6.14 ("Amendments to
Purchase Agreement") of the Disclosure Schedule, true and
complete copies of which have heretofore been delivered to the
Lenders. All representations and warranties by the Borrower
under the Purchase Agreement are true and correct in all material
respects as of the date hereof as if made on the date hereof.
SECTION VI.15. Expropriation and Condemnation. Not more
than fifteen locations as to which any Realty is located is the
subject of a condemnation, expropriation or other taking by any
federal, state, provincial, municipal or other competent
authority or a notice or proceeding in respect thereof.
SECTION VI.16. Intellectual Property Collateral. With
respect to any Intellectual Property Collateral the loss,
impairment or infringement of which might have a material adverse
effect on the financial condition, operations, assets, business,
properties, revenues or prospects of the Borrower and its
Subsidiaries taken as whole:
(a) such Intellectual Property Collateral is
subsisting and has not been adjudged invalid or
unenforceable, in whole or in part;
(b) such Intellectual Property Collateral is valid and
enforceable;
(c) the Borrower and each of its Subsidiaries have
made all necessary filings and recordations to protect their
respective interests in such Intellectual Property
Collateral, including recordations of all such interests in
the Intellectual Property Collateral in the United States
Patent and Trademark Office and/or the United States
Copyright Office;
(d) the Borrower and its Subsidiaries are the
exclusive owners of the entire and unencumbered right, title
and interest in and to such Intellectual Property Collateral
(except for Liens created under the Loan Documents) and no
claim has been made that the use of such Intellectual
Property Collateral does or may violate the asserted rights
of any third party except for claims that could not
reasonably be expected to have a material adverse effect on
the financial condition, operations, assets, business,
properties, revenues or prospects of the Borrower and its
Subsidiaries taken as a whole, except as set forth in Item
6.16 ("Intellectual Property") of the Disclosure Schedule;
and
(e) the Borrower and its Subsidiaries have performed
and will continue to perform all acts and have paid and will
continue to pay all required fees and taxes to maintain each
and every item of such Intellectual Property Collateral in
full force and effect in the United States.
SECTION VI.17. Ownership of Stock. The Parent (together
with management shareholders of the Parent and the Borrower) owns
free and clear of all Liens (other than any Lien pursuant to the
Parent Pledge Agreement), 80% of the outstanding shares of common
stock (whether voting or non-voting) of the Borrower on a fully
diluted basis (excluding the warrants held by Prudential
Insurance Company). There are no outstanding options, warrants
or convertible securities with respect to the shares of common
stock of the Borrower other than those disclosed on Item 6.17
("Outstanding Options, Warrants and Convertible Securities") of
the Disclosure Schedule.
SECTION VI.18. Absence of Default. Neither the Borrower,
nor any of its Subsidiaries is (i) in default as of the Effective
Date in the payment of (or in the performance of any obligation
applicable to) any Indebtedness, except as disclosed in Item 6.18
("Absence of Default") in the Disclosure Schedule or (ii) in
violation of any law or governmental regulation or court decree
or order, except where such violation could not reasonably be
expected to have a material adverse effect on the financial
condition, operations, assets, business, properties, revenues or
prospects of the Borrower and its Subsidiaries taken as a whole.
SECTION VI.19. Regulations G, U and X. Neither the Parent,
the Borrower, nor any of their Subsidiaries is engaged
principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or
carrying "margin stock". None of the proceeds of any Loan or any
Letter of Credit will be used for the purpose of, or be made
available by the Borrower in any manner to any other Person to
enable or assist such Person in, directly or indirectly
purchasing or carrying "margin stock". Terms for which meanings
are provided in F.R.S. Board Regulation G, U or X or any
regulations substituted therefor, as from time to time in effect,
are used in this Section with such meanings.
SECTION VI.20. Subordinated Debt. The Borrower has
delivered true and complete copies of the Purchase Agreement and
the form of Senior Subordinated Notes to the Administrative Agent
and the Lenders together with all amendments, waivers and other
changes thereto. Notwithstanding any bankruptcy, insolvency,
reorganization or moratorium in respect of the Borrower, at all
times, (a) the subordination provisions of the Senior
Subordinated Notes will be enforceable against the holders
thereof by the Lenders, (b) all Obligations (including, without
limitation, the guaranty of the Guarantor hereunder and the
Parent Pledge Agreement), including the Obligations to pay
principal of and interest on the Loans and fees in connection
therewith, constitute "Specified Senior Indebtedness", as defined
in the Senior Subordinated Notes, and all such Obligations will
be entitled to the benefits of subordination created by the
Senior Subordinated Notes and (c) all payments of principal of or
interest on any Senior Subordinated Note made by the Borrower or
from the liquidation of its property will be subject to such
subordination provisions. At the time of the execution and
delivery of the Senior Subordinated Notes, the Senior
Subordinated Notes were duly registered or qualified under all
applicable United States Federal and state securities laws or
exempt therefrom. Each of the Parent and the Borrower
acknowledge that each of the Administrative Agent and each Lender
is entering into this Agreement, and has extended the Loans and
other Credit Extensions, in reliance upon the subordination
provisions contained in the Senior Subordinated Notes and this
Section.
SECTION VI.21. Government Regulation. Neither the Parent,
the Borrower, nor any of their Subsidiaries is an "investment
company" nor a "company controlled by an investment company"
within the meaning of the Investment Company Act of 1940, as
amended, or a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
SECTION VI.22. Government Contracts. (a) None of the
Borrower or any of its Subsidiaries or any of their respective
Affiliates is party to any Contractual Obligation or subject to
any Requirement of Law as a result of any conflict of interest
by, between or among the Borrower, such Subsidiaries or such
Affiliates or otherwise that would result in the termination of
any Material Government Contract or that would impose any
material limitation on the Borrower's or such Subsidiary's
ability to perform such contract or to continue its business as
presently conducted and proposed to be conducted.
(b) No payment has been made by the Borrower or any of its
Subsidiaries, or by any Person authorized to act on their behalf,
to any Person in connection with any Government Contract of the
Borrower or any such Subsidiary, which payment would be a
material violation of applicable procurement laws or regulations
or of the Foreign Corrupt Practices Act or of any other material
Requirement of Law.
(c) With respect to each Government Contract to which the
Borrower or any of its Subsidiaries is a party: (i) all
representations and certifications executed, acknowledged or set
forth in or pertaining to such Government Contract were complete
and correct in all material respects as of their effective date,
and the Borrower and each such Subsidiary have complied in all
material respects with all such representations and
certifications; (ii) except as set forth on Item 6.22
("Government Contracts") of the Disclosure Schedule, neither the
United States Government nor any prime contractor, subcontractor
or other Person has notified the Borrower or any such Subsidiary,
either orally or in writing, that Borrower or such Subsidiary has
breached or violated any material Requirement of Law, or any
material certificate, representation, clause, provision or
requirement pertaining to such Government Contract; and
(iii) solely with respect to Material Government Contracts, no
termination for convenience, termination for default, cure notice
or show cause notice is currently in effect pertaining to any
such Material Government Contract.
(d) Except as set forth on Item 6.22 of the Disclosure
Schedule, (i) none of the Borrower or any of its Subsidiaries or
any of their respective directors, officers or employees is (or
during the last three (3) years has been) under administrative,
civil or criminal investigation or indictment by any Governmental
Authority, with respect to any alleged irregularity, misstatement
or omission arising under or relating to any Government Contract;
and (ii) during the last three (3) years, none of the Borrower or
any of the Subsidiaries has conducted or initiated any internal
investigation or made a voluntary disclosure to the United States
Government, with respect to any alleged irregularity,
misstatement or omission arising under or relating to a
Government Contract, in each case except (with respect to such
matters occurring after the Effective Date) as disclosed to the
Lenders.
(e) Except as set forth on Item 6.22 of the Disclosure
Schedule, there exist (i) no outstanding material claims against
the Borrower or any of the Subsidiaries, either by the United
States Government or by any prime contractor, subcontractor,
vendor or other third party, arising under or relating to any
Government Contract; and (ii) no material disputes between the
Borrower or any of the Subsidiaries and the United States
Government under the Contract Disputes Act or any other Federal
statute or between the Borrower or any of the Subsidiaries and
any prime contractor, subcontractor or vendor arising under or
relating to any such Government Contract.
(f) None of the Borrower or any of its Subsidiaries or any
of their respective directors, officers or employees is (or
during the last three (3) years has been) suspended or debarred
from doing business with the United States Government or is (or
during such period was) the subject of a finding of
nonresponsibility or ineligibility for United States Government
contracting.
SECTION VI.23. Subsidiary Guarantees. No U.S. Subsidiary
which is not a party to the Subsidiary Guaranty has assets with a
book value in excess of 5% of the book value of the assets of the
Borrower and its Subsidiaries on a consolidated basis as
determined in accordance with GAAP. The book value of the assets
on the Effective Date of the U.S. Subsidiaries of the Borrower
which are not a party to the Subsidiary Guaranty does not exceed
$1,000,000 in the aggregate.
SECTION VI.24. Burdensome Agreements. Neither the Borrower
nor any of its Subsidiaries is or will be a party to any
instrument or subject to any charter or other corporate
restriction which could have a materially adverse effect on its
financial condition, operations, assets, business, properties,
revenues or prospects, taken as a whole.
ARTICLE VII
COVENANTS
SECTION VII.1. Affirmative Covenants. The Borrower agrees
with the Managing Agents, each Issuer and each Lender that, until
all Commitments have terminated and all Obligations have been
paid and performed in full, the Borrower will perform the
obligations set forth in this Section 7.1.
SECTION VII.1.1. Financial Information, Reports, Notices,
etc. The Borrower will furnish, or will cause to be furnished,
to each Lender and the Administrative Agent copies of the
following financial statements, reports, notices and information:
(a) (i) as soon as available and in any event within
90 days after the end of each Fiscal Year of the Borrower, a
copy of the annual audit report for such Fiscal Year for the
Borrower and its Subsidiaries, including therein
consolidated balance sheets of the Borrower and its
Subsidiaries (including a detailed statement by division) as
of the end of such Fiscal Year and consolidated statements
of earnings and consolidated statements of cash flow of the
Borrower and its Subsidiaries for such Fiscal Year, in each
case certified (without any Impermissible Qualification) by
Ernst & Young LLP or other independent public accountants of
nationally recognized standing as fairly presenting, in
accordance with GAAP consistently applied, the financial
condition, results of operations and cash flows of the
Borrower and its Subsidiaries at the end of such Fiscal Year
and for the Fiscal Year then ended, together with a
certificate, executed by the chief financial Authorized
Officer of the Borrower, showing (in reasonable detail and
with appropriate calculations and computations in all
respects satisfactory to the Administrative Agent) the
calculation of Excess Cash Flow, and (ii) as soon as
available and in any event within 180 days after the end of
each Fiscal Year of the Borrower, all material management
letters and internal control and similar memoranda prepared
by the accountants certifying the financial statements of
the Borrower for such Fiscal Year;
(b) as soon as available and in any event within
45 days after the end of each Fiscal Quarter of each Fiscal
Year of the Borrower, (i) a quarterly financial report and
consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such Fiscal Quarter and
consolidated statements of earnings and consolidated
statements of cash flow of the Borrower and its Subsidiaries
(including a detailed statement by division) for such Fiscal
Quarter and for the period commencing at the end of the
previous Fiscal Year and ending with the end of such Fiscal
Quarter, setting forth in each case in comparative form the
consolidated figures for the corresponding periods of the
previous Fiscal Year certified by the chief financial
Authorized Officer of the Borrower in a manner acceptable to
the Administrative Agent and (ii) a Compliance Certificate,
executed by the chief financial Authorized Officer of the
Borrower, showing (in reasonable detail and with appropriate
calculations and computations in all respects satisfactory
to the Administrative Agent) compliance with the financial
covenants set forth in Section 7.2.4;
(c) as soon as possible and in any event within three
Business Days after knowledge of an Authorized Officer of
the occurrence of any Default, a statement of the chief
financial Authorized Officer of the Borrower setting forth
details of such Default and the action which the Borrower
has taken and proposes to take with respect thereto;
(d) as soon as possible and in any event within three
Business Days after (x) the occurrence of any materially
adverse development with respect to any litigation, action,
proceeding, or labor controversy described in Section 6.7 or
(y) the commencement of any labor controversy, litigation,
action, proceeding of the type described in Section 6.7,
notice thereof and, at the Administrative Agent's request,
copies of all documentation relating thereto;
(e) promptly after the sending or filing thereof,
copies of all reports which the Borrower sends to any class
of its security holders generally, in their capacities as
such, and all reports and registration statements which the
Borrower or any of its Subsidiaries files with the
Securities Exchange Commission or any securities exchange;
(f) immediately upon becoming aware of the institution
of any steps by the Borrower or any other Person to
terminate any Pension Plan, or the failure to make a
required contribution to any Pension Plan if such failure is
sufficient to give rise to a Lien under Section 302(f) of
ERISA, or the taking of any action with respect to a Pension
Plan which could result in the requirement that the Borrower
furnish a bond or other security to the PBGC or such Pension
Plan, or the occurrence of any event with respect to any
Pension Plan which could result in the incurrence by the
Borrower of any material liability, fine or penalty, or any
material increase in the contingent liability of the
Borrower with respect to any post-retirement Welfare Plan
benefit, notice thereof and copies of all documentation
relating thereto;
(g) promptly when available and, in any event within
30 days after the beginning of each Fiscal Year, a
definitive budget in form and scope satisfactory to the
Administrative Agent for such Fiscal Year, in each case in
reasonable detail for the relevant Fiscal Year and setting
forth the principal assumptions upon which such budget is
based;
(h) (a) promptly upon knowledge of any loss or
threatened loss of the security clearances referenced in
Section 7.1.15 unless disclosure thereof is prohibited by
any law; and (b) the Borrower shall notify the
Administrative Agent in writing promptly upon (and, in any
event, within five (5) Business Days of) the Borrower
obtaining knowledge of any material change in the status of
any action, suit, proceeding, governmental investigation or
other matter disclosed on or arising out of the matters
disclosed on Item 6.22 of the Disclosure Schedule and shall
provide such other information as may be reasonably
available to it to enable each Lender and the Administrative
Agent and its counsel to evaluate such matters;
(i) promptly upon its receipt a copy thereof to the
Administrative Agent and the Lenders (a) any material notice
or material communication delivered by or on behalf of the
Borrower to any Person in connection with the Subordinated
Notes or the Subordinated Note Indenture, including, without
limitation, any notice of default, any amendment or waiver
request or any notice of redemption or defeasance; and (b)
any material notice or other material communication received
by such Borrower from any Person in connection with any
agreement or other document relating to the Subordinated
Notes or the Subordinated Note Indenture promptly after such
notice or other communication is received by the Borrower;
(j) promptly when available and in any event within
15 days following the last day of each calendar month, a
monthly management report, prepared in reasonable detail by
the chief accounting or financial Authorized Officer of the
Borrower; and
(k) such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any
of its Subsidiaries as any Lender through the Administrative
Agent may from time to time reasonably request.
SECTION VII.1.2. Compliance with Laws, etc. The Borrower
and the Parent will, and will cause each of their respective
Subsidiaries to:
(a) comply in all respects with all governmental rules
and regulations and all other applicable laws, rules,
regulations and orders (except where the failure to so
comply could not reasonably be expected to have a material
adverse effect on the financial condition, operations,
assets, business, properties, revenues or prospects of the
Borrower and its Subsidiaries taken as a whole or the Parent
and its Subsidiaries taken as a whole), such compliance to
include the maintenance and preservation of its corporate
existence (except to the extent permitted under Section
7.2.10) and qualification as a foreign corporation in any
jurisdiction where the Borrower or the other Subsidiaries of
the Parent have assets or conduct business, except where
failure to maintain and preserve such existence or
qualification would not materially adversely affect the
Borrower's consolidated financial condition, operations,
assets, business, revenues, properties or prospects; and
(b) comply in all material respects with all
governmental rules and regulations and all other material
applicable laws, rules, regulations and orders relating to
taxation, including the payment, before the same become
delinquent, of (i) all federal, state and local income taxes
and (ii) all other taxes, assessments and governmental
charges except in each such case to the extent being
diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books.
SECTION VII.1.3. Maintenance of Properties. The Borrower
will, and will cause each of its Subsidiaries to, maintain,
preserve, protect and keep their respective properties in good
repair, working order and condition (except to the extent sold,
transferred or otherwise disposed of pursuant to a Permitted
Disposition), and make necessary and proper repairs, renewals
(including lease payments on leasehold properties) and
replacements so that the business carried on in connection
therewith may be properly conducted at all times, unless the
Borrower, determines in good faith that the continued maintenance
of any of its properties is no longer economically desirable
(provided that any such determination with respect to any
property material to the operations of the Borrower or any of its
Subsidiaries shall be made only after consultation with the
Administrative Agent).
SECTION VII.1.4. Insurance. (a) The Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain,
with responsible and reputable insurance carriers licensed to
write insurance, insurance with respect to all their property,
business and assets against such casualties and contingencies and
of such types and in such amounts as is customary in the case of
similar businesses.
(b) All premiums on insurance policies required under this
Section shall be paid by the Borrower and its Subsidiaries. Each
policy for property insurance maintained by the Borrower and its
Subsidiaries shall (i) name the Administrative Agent (as
Administrative Agent for the Lenders) as loss payee under a
lenders loss payable clause, (ii) provide that no cancellation,
reduction in amount or material change in coverage thereof or any
portion thereof shall be effective until at least 30 days after
receipt by the Administrative Agent of written notice thereof,
(iii) provide that any notice under such policies relating to
cancellation, reduction or material change in coverage or the
occurrence of any loss in excess of $1,000,000 shall be
simultaneously delivered to the Administrative Agent and (iv) be
reasonably satisfactory in all other respects to the
Administrative Agent. Each policy for liability insurance
maintained by the Borrower and its Subsidiaries shall (i) name
the Administrative Agent as an additional insured, (ii) provide
that no cancellation, reduction in amount or material change in
coverage thereof or any portion thereof shall occur by reason of
any breach of any representation or warranty, nor shall any
thereof be effective until at least 30 days after receipt by the
Administrative Agent of written notice thereof, (iii) provide
that any notice under such policies relating to cancellation,
reduction or material change in coverage or the occurrence of any
loss in excess of $1,000,000 shall be simultaneously delivered to
the Administrative Agent and (iv) be reasonably satisfactory in
all other respects to the Administrative Agent.
(c) The Borrower will deliver, and will cause each of its
Subsidiaries to deliver, to the Administrative Agent, promptly
upon request, (i) the originals of all policies evidencing all
insurance required to be maintained under clause (a) or
certificates thereof by the insurers together with a counterpart
of each policy, (ii) a satisfactory insurance broker's letter as
to the adequacy of the insurance being maintained by the Borrower
and its Subsidiaries and as to the compliance of the same with
the requirements of this Section and (iii) evidence as to the
payment of all premiums then due thereon (or with respect to any
insurance policies providing for payment other than by a single
lump sum, all installments for the current year due thereon to
such date), provided that neither the Administrative Agent nor
any Lender shall be deemed by reason of its custody of such
policies to have knowledge of the contents thereof. The Borrower
will also deliver, and will also cause its Subsidiaries to
deliver, to the Administrative Agent not later than five days
prior to the expiration of any policy a binder or certificate of
the insurer evidencing the replacement thereof.
(d) If an Event of Default has not occurred and is
continuing, all proceeds of property insurance (other than any
such proceeds which reimburse the Borrower or any other
applicable Subsidiary of the Borrower for environmental
liabilities or remediation costs previously paid by the Borrower
or such Subsidiary) paid on account of the loss of or damage to
any property or asset of the Borrower or any of its Subsidiaries
shall be paid to the Borrower or other applicable Subsidiary of
the Borrower, and the Borrower or such Subsidiary shall use such
proceeds within 180 days thereafter to repair, restore or replace
such property or asset or to reinvest in other capital assets
reasonably related thereto. With respect to any casualty or
other covered occurrence in which the aggregate proceeds of
property insurance receivable by the Borrower or any other
applicable Subsidiary of the Borrower (other than any such
proceeds which reimburse the Borrower or such Subsidiary for
environmental liabilities or remediation costs previously paid by
the Borrower or such Subsidiary) exceeds $1,000,000, to the
extent the Borrower or such Subsidiary elects not to apply such
insurance proceeds for the repair, replacement or restoration of
such property or asset or for reinvestment in capital assets
reasonably related thereto, or such insurance proceeds are not in
fact so applied within 180 days, all of such unutilized insurance
proceeds shall be delivered by the Borrower or such Subsidiary
(and the Borrower shall cause such Subsidiary to so deliver) to
the Administrative Agent and shall constitute "Excess Insurance
Proceeds," to be applied as a mandatory prepayment of the Term
Loans pursuant to clause (c) of Section 3.1.2. Notwithstanding
any provision to the contrary in this Agreement or any other Loan
Document, if an Event of Default has occurred and is continuing,
all proceeds of property insurance (including business
interruption insurance) shall be payable directly to the
Administrative Agent and the Administrative Agent in its sole
discretion may treat such proceeds as "Excess Insurance Proceeds"
or, subject to the consent of the Required Lenders, permit the
use of such proceeds to repair, restore or replace the property
or asset which suffered the loss for which such proceeds are
being paid.
SECTION VII.1.5. Books and Records. (a) The Borrower and
the Parent will, and will cause each of their respective
Subsidiaries to, keep books and records which accurately reflect
all of their respective business affairs and transactions.
(b) The Borrower will, and will cause each of its
respective Subsidiaries to, permit the Managing Agents and each
Lender or any of their representatives, at reasonable times and
intervals and upon reasonable notice, to visit all of their
respective offices, and the Parent will permit the Managing
Agents or any of their representatives, at reasonable times and
intervals and upon reasonable notice, to visit all of their
respective offices, to discuss their respective financial matters
with their respective officers and independent public accountant
and consultants (and the Borrower and the Parent hereby authorize
such independent public accountant and consultants to discuss
such financial matters with the Managing Agents or with respect
to the Borrower and its Subsidiaries, the Lenders, as the case
may be, or their representatives whether or not any
representative of the Borrower or Parent is present) and to
examine (and, at the expense of the Borrower, copy extracts from)
any of their respective books or other corporate records
(including computer records).
(c) The Borrower shall pay any fees of such independent
public accountant and consultants incurred in connection with the
Managing Agents' exercise of its rights pursuant to this Section.
The Administrative Agents, in their sole discretion and at the
sole expense of the Borrower, may conduct such audits and
examinations of the books and records of the Parent and its
Subsidiaries as the Managing Agents reasonably deems necessary or
advisable.
SECTION VII.1.6. Environmental Covenant. The Borrower
will, and will cause each of its Subsidiaries to,
(a) use and operate all of its Facilities and
properties in compliance in all material respects with all
Environmental Laws, keep (and, when applicable, obtain in a
timely manner) all necessary material permits, approvals,
certificates, licenses and other authorizations relating to
environmental matters in effect and remain in compliance in
all material respects therewith, and handle all Hazardous
Materials (including the disposition and storing thereof) in
compliance in all material respects with all applicable
Environmental Laws;
(b) respond to all Releases in accordance with law and
in a manner that assures and will assure that, to the
maximum extent commercially reasonable, State funds pay for
the response to Releases;
(c) promptly notify the Administrative Agent and
provide copies upon receipt of all written claims,
complaints, notices or inquiries from third parties relating
to Releases of Hazardous Materials from its facilities and
properties or compliance with Environmental Laws; and
(d) provide such information and certifications which
the Administrative Agent may reasonably request from time to
time to evidence compliance with this Section.
SECTION VII.1.7. As to Intellectual Property Collateral.
(a) The Borrower shall not, and shall not permit any of its
Subsidiaries to, except in the exercise of their reasonable
business judgement, do any act, or omit to do any act, whereby
any of such Intellectual Property Collateral may lapse or become
abandoned or dedicated to the public or unenforceable.
(b) The Borrower shall notify the Administrative Agent
immediately if it knows, or has reason to know, that any
application or registration relating to any material item of the
Intellectual Property Collateral may become abandoned or
dedicated to the public or placed in the public domain or invalid
or unenforceable, or of any adverse determination or development
(including the institution of, or any such determination or
development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any
foreign counterpart thereof or any court) regarding the ownership
of the Borrower or any of its Subsidiaries of any material item
of the Intellectual Property Collateral or the Borrower's or such
Subsidiary's right to register the same or to keep and maintain
and enforce the same.
(c) In no event shall the Borrower or any of its
Subsidiaries, or any of their respective agents, employees,
designees or licensees, file an application for the registration
of any Intellectual Property Collateral with the United States
Patent and Trademark Office, the United States Copyright Office
or any similar office or agency in any other country or any
political subdivision thereof, unless it promptly informs the
Administrative Agent, and upon request of the Administrative
Agent, executes and delivers any and all agreements, instruments,
documents and papers as the Administrative Agent may reasonably
request to evidence the Administrative Agent's security interest
in such Intellectual Property Collateral and the goodwill and
general intangibles of the Borrower or such Subsidiary relating
thereto or represented thereby.
(d) Unless the Borrower shall otherwise determine in the
exercise of its reasonable business judgement, the Borrower shall
take, and shall cause its Subsidiaries to take, all necessary
steps, including in any proceeding before the United States
Patent and Trademark Office, the United States Copyright Office,
to maintain and pursue any application (and to obtain the
relevant registration) filed with respect to, and to maintain any
registration of, any material item of the Intellectual Property
Collateral, including the filing of applications for renewal,
affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings and the payment of fees
and taxes (except to the extent that dedication, abandonment or
invalidation is permitted under the foregoing clauses (a), (b)
and (c)).
SECTION VII.1.8. Future Subsidiaries. Without limiting the
effect of any provision contained herein (including Section
7.2.5), upon any Person becoming, after the Effective Date,
either a direct or indirect Subsidiary of the Borrower, or upon
the Parent or the Borrower acquiring additional capital stock of
any existing Subsidiary having voting rights or contingent voting
rights
(a) such Person shall become a party to (x) a guaranty
in substantially the form of the Subsidiary Guaranty, and
(y) a security agreement in substantially the form of the
Subsidiary Security Agreement, if not already a party to any
of the foregoing, with such modifications as the
Administrative Agent may reasonably request, in a manner
satisfactory to the Administrative Agent;
(b) the Borrower and the applicable Subsidiary shall,
pursuant to the Borrower Pledge Agreement, or the Parent and
the applicable Subsidiary shall, pursuant to the Parent
Pledge Agreement, as the case may be, pledge to the
Administrative Agent
(i) all of the outstanding shares of such capital
stock of such Subsidiary owned directly by it, along
with undated stock powers for such certificates,
executed in blank (or, if any such shares of capital
stock are uncertificated, confirmation and evidence
satisfactory to the Administrative Agent that the
security interest in such uncertificated securities has
been perfected by the Administrative Agent in
accordance with Section 8-313 and Section 8-321 of the
U.C.C. or any similar law which may be applicable); and
(ii) all notes (if any) evidencing intercompany
Indebtedness in favor of the Borrower and each such
Subsidiary (which shall be in substantially the form of
Attachment A to the Borrower Pledge Agreement), as the
case may be;
(c) the Administrative Agent shall have received from
each such Subsidiary certified copies of Uniform Commercial
Code Requests for Information or Copies (Form U.C.C.-11), or
a similar search report certified by a party acceptable to
the Administrative Agent, dated a date reasonably near (but
prior to) the date of any such Person becoming a direct or
indirect Subsidiary of the Borrower, listing all effective
financing statements, tax liens and judgment liens which
name such Person as the debtor and which are filed in the
jurisdictions in which filings are to be made pursuant to
this Agreement and the other Loan Documents, and in such
other jurisdictions as the Administrative Agent may
reasonably request, together with copies of such financing
statements (none of which (other than financing statements
(i) filed pursuant to the terms hereof in favor of the
Administrative Agent, if such Form U.C.C.-11 or search
report, as the case may be, is current enough to list such
financing statements, (ii) being terminated pursuant to
termination statements that are to be delivered on or prior
to the date such Person becomes such Subsidiary or (iii) in
respect of protective filings or Liens permitted under
Section 7.2.3) shall cover any of the Collateral); and
(d) the Administrative Agent shall have received from
each such Subsidiary executed copies of U.C.C. financing
statements naming each such Subsidiary as the debtor and the
Administrative Agent as the secured party, suitable for
filing under the U.C.C. of all jurisdictions as may be
necessary or, in the reasonable opinion of the
Administrative Agent, desirable to perfect the first
priority security interest of the Administrative Agent
pursuant to the security agreement entered into by such
Subsidiary, together with evidence satisfactory to the
Administrative Agent of the filing (or delivery for filing)
of appropriate trademark, copyright and patent security
supplements,
together, in each case, with such opinions of legal counsel for
the Borrower relating thereto, which legal opinions shall be in
form and substance reasonably satisfactory to the Administrative
Agent; provided, that notwithstanding the foregoing, no Non-U.S.
Subsidiary of the Borrower shall be required to execute and
deliver a Mortgage, a supplement to the Subsidiary Guaranty or a
supplement to the Subsidiary Security Agreement, nor will the
Borrower or any such Subsidiary be required to deliver in pledge
pursuant to a Pledge Agreement in excess of 65% of the total
combined voting power of all classes of capital stock of a Non-
U.S. Subsidiary entitled to vote, if the Borrower has delivered
evidence satisfactory to the Administrative Agent that such
actions would result in material adverse tax consequences to the
Borrower and its Subsidiaries.
SECTION VII.1.9. Future Real Estate Properties. Within 30
days after the acquisition by the Borrower of any real property
owned in fee with a value in excess of $1,000,000, the Borrower
shall take all steps necessary, at its own cost and expense, to
(a) grant the Administrative Agent a first priority mortgage Lien
on such real property and buildings and improvements thereon and
(b) obtain title insurance coverage on such property in an
amount, containing such terms and exceptions and issued by an
insurance company, acceptable to the Administrative Agent in the
Administrative Agent's reasonable discretion (together with such
favorable legal opinions with respect thereto as the
Administrative Agent may reasonably request).
SECTION VII.1.10. Sale of Instrumentation Segment. The
Borrower shall sell the Instrumentation Segment promptly, but in
any event, within 60 days following the Effective Date (the
"Initial Sale"), resulting in net cash proceeds of no less than
$85,000,000 minus the existing Indebtedness existing on the
Effective Date in an amount not to exceed $5,000,000 owed by the
Instrumentation Segment which shall be applied (i) as a
prepayment of the Loans in an amount of not less than $80,000,000
minus the amount of transaction fees and expenses paid by the
Borrower in connection with the Acquisition and the related
transactions in an amount not to exceed $15,000,000 (to be
applied first, to prepay all outstanding Revolving Loans (without
a reduction in the Revolving Loan Commitment Amount), and then to
a prepayment of the Term Loans on a pro rata basis) and (ii) to
repay agreed upon Indebtedness of the Borrower's Non-U.S.
Subsidiaries.
SECTION VII.1.11. Purchase of Preferred Stock. The Parent
shall purchase preferred stock (and comply with the terms of, and
obligations under, the Parent Subscription Agreement) of the
Borrower in an amount sufficient to (i) pay for all Senior
Subordinated Notes on the date of any redemption of such Senior
Subordinated Notes resulting from the Change in Control (as
defined in the Senior Subordinated Notes) caused by the Tender
Offer and (ii) make the Initial Capital Contribution to the
Borrower.
SECTION VII.1.12. Credit Line of Non-U.S. Subsidiaries.
The Borrower shall use its best efforts to cause each of its Non-
U.S. Subsidiaries to maintain the credit facilities (or
replacement thereof on similar terms) availability existing on
the Effective Date in an amount not in excess of $45,000,000.
SECTION VII.1.13. Landlord Waivers. The Borrower shall use
it best efforts to obtain and deliver to the Administrative Agent
landlord waivers (with copies of the relevant Lease attached)
with respect to (a) any Lease which relates to a location in
which there is, or is reasonably expected to be, collateral with
a fair market value of $500,000 or more and (b) any Lease entered
into after the Effective Date which relates to a location in
which there is, or is reasonably expected to be, Collateral with
a fair market value of $500,000 or more (it being understood and
agreed that, if possible, the landlord waivers referred to in
clause (a) shall be obtained within ninety (90) days after the
Effective Date, and that the Borrower shall not be required to
make any material payment to, or to make any material lease
concessions for the benefit of, any landlord in order to obtain
any such landlord waiver referred to in either clause (a) or
(b)).
SECTION VII.1.14. Foreign Employee Benefit Plan Compliance.
The Borrower shall cause each of its Subsidiaries and ERISA
Affiliates to establish, maintain and operate all Foreign
Employee Benefit Plans (other than government-sponsored plans) to
comply in all material respects with all laws, regulations and
rules applicable thereto and the respective requirements of the
governing documents for such Plans.
SECTION VII.1.15. Government Contracts. (a) Within sixty
(60) days after the Effective Date, the Borrower shall have
executed and delivered to the Administrative Agent all documents,
in form and substance reasonably satisfactory to the
Administrative Agent, and taken all such other action (other than
the transmittal of the notice of assignment to the United States
Government) reasonably required by the Administrative Agent to
request an assignment of all Receivables of the Borrower and its
Subsidiaries (created on or prior to such date) arising under any
Material Government Contract to the Administrative Agent pursuant
to the Assignment of Claims Act of 1940, as amended (the
"Assignment of Claims Act"). Within thirty (30) days of the
creation of a Material Government Contract or, upon the
occurrence and during the continuance of a Default or an Event of
Default, of the creation of any Government Contract (other than
in either case a Government Contract subject to the foregoing
sentence and Government Contracts which by their express terms
are not assignable) the Borrower shall execute and deliver to the
Administrative Agent all documents, in form and substance
reasonably satisfactory to the Administrative Agent, and take all
such other action (other than the transmittal of the notice of
assignment to the United States Government) reasonably required
by the Administrative Agent to request an assignment of the
Receivables of the Borrower and its Subsidiaries arising under
such Material Government Contract, to the Administrative Agent
pursuant to the Assignment of Claims Act. Upon the occurrence
and during the continuance of a Default or Event of Default, the
Administrative Agent may, and shall at the direction of the
Requisite Lenders, transmit any such notice of assignment
received by it from the Borrower to the United States Government.
(b) The Borrower shall apply for and maintain all facility
security clearances and personnel security clearances required of
the Borrower or any of its Subsidiaries under all Requirements of
Law to perform and deliver under any and all Government Contracts
and as otherwise may be necessary to continue to perform the
Borrower's business.
SECTION VII.1.16. Future Guarantees, Pledged Stock. In the
event that the Administrative Agent (in its sole discretion)
requests that all, or certain U.S. Subsidiaries of the Borrower
become Subsidiary Guarantors and that the Borrower pledge the
shares of capital stock of such Guarantors or any other
Subsidiaries of the Borrower to the Administrative Agent, within
15 days following written notice from the Administrative Agent,
the Borrower shall and shall cause each of its applicable U.S.
Subsidiaries to, take all steps necessary, at their own cost and
expense, to deliver a supplement to both the Subsidiary Guaranty
and the Borrower Pledge Agreement, so that such applicable U.S.
Subsidiaries thereby become Subsidiary Guarantors under the
Subsidiary Guaranty and such Subsidiaries are pledged by the
Borrower to the Administrative Agent pursuant to the Borrower
Pledge Agreement.
SECTION VII.1.17. Notice Under Subordinated Note Indenture.
The Borrower shall, within 10 Business Days of the Effective
Date, deliver a notice to the holders of Senior Subordinated
Notes as set forth in clause (b) of Section 4.10 of the
Subordinated Note Indenture (the "Subordinated Debt Mailing
Date") and state in such notice that for purposes of clause
(b)(3) of such Section 4.10, the Borrower will repurchase the
outstanding Senior Subordinated Notes 30 days following the
Subordinated Debt Mailing Date.
SECTION VII.1.18. Further Assurances. The Borrower and the
Parent agree that from time to time, at the expense of the
Borrower, the Borrower and the Parent will, and will cause each
of their respective Subsidiaries to, promptly execute and deliver
all further instruments and documents, and take all further
action, that may be reasonably necessary or desirable, or that
the Administrative Agent may reasonably request, in order to
perfect and protect the assignments, security interests and Liens
granted or purported to be granted under the Loan Documents or to
enable the Administrative Agent to exercise and enforce its
rights and remedies under this Agreement or any other Loan
Document with respect to any Collateral. Without limiting the
generality of the foregoing, the Borrower and the Parent will,
and will cause each of their respective Subsidiaries to
(a) execute and file such financing or continuation
statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or
as the Administrative Agent may request, in order to perfect
and preserve the assignments, security interests and Liens
granted or purported to be granted under the Loan Documents;
(b) furnish to the Administrative Agent, at the
request of the Administrative Agent, an opinion of counsel
acceptable to the Required Lenders to the effect that all
financing or continuation statements have been filed, and
all other action has been taken, to perfect and validate
continuously from the date hereof the assignments, security
interests and Liens granted under the Loan Documents; and
(c) furnish to the Administrative Agent, from time to
time at the Administrative Agent's request, statements and
schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as
the Administrative Agent may reasonably request, all in
reasonable detail.
With respect to the foregoing and the grant of the security
interest under the Loan Documents, the Borrower and the Parent
and each of their respective Subsidiaries hereby authorize the
Administrative Agent to file one or more financing or
continuation statements, and amendments thereto, relative to all
or any part of the Collateral without the signature of the
Borrower, the Parent or any such Subsidiary where permitted by
law. A carbon, photographic or other reproduction of this
Agreement or any financing statement covering the Collateral or
any part thereof shall be sufficient as a financing statement
where permitted by law.
SECTION VII.2. Negative Covenants. The Borrower and the
Parent agree with the Administrative Agent, each Issuer and each
Lender that, until all Commitments have terminated and all
Obligations have been paid and performed in full, the Borrower
and the Parent will perform the obligations set forth in this
Section 7.2.
SECTION VII.2.1. Business Activities. The Borrower will
not, and will not permit any of its Subsidiaries to, engage in
any business activity, except those described in the third
recital and such activities as may be incidental or related
thereto and activities incidental or related to the consummation
of the Acquisition and the Tender Offer.
SECTION VII.2.2. Indebtedness. The Borrower and the Parent
will not, and will not permit any of their respective
Subsidiaries to, create, incur, assume or suffer to exist or
otherwise become or be liable in respect of any Indebtedness,
other than, without duplication, the following:
(a) Indebtedness in respect of the Credit Extensions
and other Obligations;
(b) until the date of the initial Credit Extension,
Indebtedness of the Borrower and its Subsidiaries identified
in Item 7.2.2(b) ("Indebtedness to be Paid") of the
Disclosure Schedule;
(c) Indebtedness existing as of the Effective Date
which is identified in Item 7.2.2(c) ("Ongoing
Indebtedness") of the Disclosure Schedule (including
intercompany Indebtedness owed to the Borrower existing
prior to the Effective Date, but excluding all Non-U.S.
Subsidiary Indebtedness); provided that for purposes of the
Disclosure Schedule, clause (d) of the definition of
Indebtedness and clause (e) of the definition of
Indebtedness (only if the Borrower has no liability in
excess of $1,000,000 related thereof) shall be excluded from
such Item 7.2.2(c) of the Disclosure Schedule;
(d) Indebtedness of Non-U.S. Subsidiaries in an amount
not in excess of $45,000,000 (which amount shall
automatically be reduced to $25,000,000 immediately
following the sale of Roltra Morse), provided that no more
than $40,000,000 of such amount may constitute intercompany
Indebtedness, or if less than such amount at any time, the
Permitted Amount;
(e) unsecured Indebtedness of the Parent in an amount
equal to $135,000,000 (as such amount may be increased from
time to time for the purpose of purchasing outstanding
common stock of the Borrower), provided that such
Indebtedness is fully subordinated (and payable-in-kind) to
the obligations of the Parent under the guaranty of the
Parent contained in Article IX hereof;
(f) unsecured intercompany Indebtedness of the
Borrower owing to a Subsidiary of the Borrower, which shall
be evidenced by one or more promissory notes that have been
duly executed and delivered to (and endorsed to the order
of) the Administrative Agent in pledge pursuant to a pledge
agreement;
(g) Indebtedness in respect of the Senior Subordinated
Notes, provided that the aggregate principal amount thereof
shall not exceed $155,000,000, less the amount of any
payments, redemptions or repurchases in respect thereof, at
any one time outstanding;
(h) Indebtedness in an aggregate principal amount not
to exceed $5,000,000 at any time outstanding in respect of
(i) Indebtedness which is incurred by the Borrower or any of
its Subsidiaries to a vendor to finance its acquisition of
any assets permitted to be acquired pursuant to Section
7.2.7 and (ii) Capitalized Lease Liabilities to the extent
permitted by Section 7.2.7;
(i) unsecured Indebtedness incurred in the ordinary
course of business (including open accounts extended by
suppliers on normal trade terms in connection with purchases
of goods and services, but excluding all Indebtedness
incurred through the borrowing of money and all Contingent
Liabilities);
(j) Indebtedness in respect of Rate Protection
Agreements or, as to currency matters, for protection in
connection with the Borrower's ordinary course of business;
(k) Indebtedness of the Borrower evidenced by
guarantees of wholly-owned Non-U.S. Subsidiaries of the
Borrower in an aggregate amount not in excess of $20,000,000
(or if less than such amount at any time, the Permitted
Amount);
(l) other Indebtedness in an aggregate amount not
exceeding $10,000,000 at any time provided, that in the case
of intercompany Indebtedness, all of the capital stock or
other ownership interests of such Subsidiary are pledged to
the Administrative Agent, a guaranty is executed by such
Subsidiary in the form of the guaranty described in Article
IX hereto and all promissory notes evidencing such
Indebtedness are pledged to the Administrative Agent and as
further described in Section 7.1.8; and
(m) Indebtedness incurred in respect of the refinancing of
Indebtedness permitted pursuant to clause (g) above, provided that (i) the
aggregate amount of the refinancing Indebtedness shall not exceed the amount of
Indebtedness being refinanced which is outstanding immediately prior to such
refinancing, (ii) none of the covenants or events of default contained in the
refinancing Indebtedness shall be more restrictive on the Borrower than the
covenants and events of default contained in the Indebtedness so refinanced,
(iii) none of the subordination provisions contained in the refinancing
Indebtedness shall be less favorable to the Lenders than the subordination
provisions contained in the Indebtedness so refinanced, (iv)the payment terms
contained in the refinancing Indebtedness shall be no more onerous on the
Borrower than those contained in the Indebtedness so refinanced, (v) the
incurrence by the Borrower or any of its Subsidiaries of such refinancing
Indebtedness shall have no adverse effect on the projected cash flow of the
Borrower during the then remaining term of this Agreement on an "all in" basis,
with reference to (but not limited to) the interest rate, fees, premiums,
underwriting expenses and other amounts payable in connection with the
refinancing Indebtedness and (vi) the Managing Agents shall consent to any
such refinancing (such consent not to be unreasonably withheld);
provided, however, that no Indebtedness pursuant to clauses (d),
(e), (f), (g), (h) (i), (j), (k), (l) and (m) may be incurred
if, after giving effect to the incurrence thereof, any Default
shall have occurred and be continuing.
SECTION VII.2.3. Liens. The Borrower and the Parent will
not, and will not permit any of their respective Subsidiaries to,
create, incur, assume or suffer to exist any Lien upon any of its
property, revenues or assets, whether now owned or hereafter
acquired, except:
(a) Liens securing payment of the Obligations granted
pursuant to any Loan Document;
(b) Liens granted to secure payment of Indebtedness
described in clause (c) of Section 7.2.2 to the extent such
Liens are identified in Item 7.2.2(c) ("Ongoing
Indebtedness") of the Disclosure Schedule;
(c) Liens granted to secure payment of the
Indebtedness of the type permitted and described in clause
(h) of Section 7.2.2 and covering only those assets acquired
with the proceeds of such Indebtedness;
(d) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or thereafter
payable without penalty or being diligently contested in
good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside
on its books;
(e) Liens of carriers, warehousemen, mechanics,
materialmen and landlords incurred in the ordinary course of
business for sums not overdue or being diligently contested
in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been
set aside on its books;
(f) Liens incurred in the ordinary course of business
in connection with worker's compensation, unemployment
insurance or other forms of governmental insurance or
benefits (excluding any Liens in favor of a Pension Plan or
PBGC), or to secure performance of tenders, statutory
obligations, leases and contracts (other than for borrowed
money) entered into in the ordinary course of business or to
secure obligations on surety or appeal bonds;
(g) judgment Liens in existence less than 15 days
after the entry thereof or with respect to which execution
has been stayed or the payment of which is covered in full
(subject to a customary deductible) by insurance maintained
with responsible insurance companies;
(h) easements, rights-of-way, zoning and similar
restrictions and other similar encumbrances or title defects
which, in the aggregate, are not substantial in amount, and
which do not in any case materially detract from the value
of the property subject thereto or interfere with the
ordinary conduct of the business of the Borrower or its
Subsidiaries; and
(i) Liens in the Cash Collateral Account (as such term
is defined in the Pay-Off Letter, dated as of August 29,
1997, among Citicorp USA, Inc., the other financial
institutions party thereto, the Borrower, Warren Pumps Inc.
and VHC Inc.).
SECTION VII.2.4. Financial Condition. The Borrower and the
Parent will not permit:
(a) the Interest Coverage Ratio, as of the last day of
each Fiscal Quarter set forth below, to be less than the
ratio set forth opposite such Fiscal Quarter:
Fiscal Quarter Minimum Interest
Coverage Ratio
The fourth Fiscal Quarter of 1.40:1.00
the 1997 Fiscal Year
The first Fiscal Quarter of 1.50:1.00
the 1998 Fiscal Year
The second Fiscal Quarter of 1.65:1.00
the 1998 Fiscal Year
The third Fiscal Quarter of 1.75:1.00
the 1998 Fiscal Year
The fourth Fiscal Quarter of 1.85:1.00
the 1998 Fiscal Year
The first Fiscal Quarter of 2.00:1.00
the 1999 Fiscal Year
The second Fiscal Quarter of 2.15:1.00
the 1999 Fiscal Year
The third Fiscal Quarter of 2.25:1.00
the 1999 Fiscal Year
The fourth Fiscal Quarter of 2.25:1.00
the 1999 Fiscal Year
Each Fiscal Quarter of the 2.50:1.00
2000 Fiscal Year
Each Fiscal Quarter of the 2.75:1.00
2001 Fiscal Year
Each Fiscal Quarter of the 3.00:1.00;
2002 Fiscal Year and
thereafter
(b) the Fixed Charge Coverage Ratio, as of the last
day of each Fiscal Quarter set forth below, to be less than
the ratio set forth opposite such Fiscal Quarter:
Fiscal Quarter Minimum Fixed Charge
Coverage Ratio
The fourth Fiscal Quarter of .85:1.00
the 1997 Fiscal Year
The first Fiscal Quarter of .90:1.00
the 1998 Fiscal Year
The second Fiscal Quarter of 1.00:1.00
the 1998 Fiscal Year
The third Fiscal Quarter of 1.00:1.00
the 1998 Fiscal Year
The fourth Fiscal Quarter of 1.10:1.00
the 1998 Fiscal Year
The first Fiscal Quarter of 1.10:1.00
the 1999 Fiscal Year
The second Fiscal Quarter of 1.20:1.00
the 1999 Fiscal Year
The third Fiscal Quarter of 1.20:1.00
the 1999 Fiscal Year
The fourth Fiscal Quarter of 1.25:1.00;
the 1999 Fiscal Year, and
thereafter
(c) the Leverage Ratio, as of the last day of each
Fiscal Quarter set forth below, to be greater than the ratio
set forth opposite such Fiscal Quarter:
Fiscal Quarter Leverage Ratio
The fourth Fiscal Quarter of 6.75:1.00
the 1997 Fiscal Year
The first Fiscal Quarter of the 6.50:1.00
1998 Fiscal Year
The second Fiscal Quarter of the 6.25:1.00
1998 Fiscal Year
The third Fiscal Quarter of the 5.75:1.00
1998 Fiscal Year
The fourth Fiscal Quarter of the 5.25:1.00
1998 Fiscal Year
The first Fiscal Quarter of the 4.75:1.00
1999 Fiscal Year
The second Fiscal Quarter of the 4.50:1.00
1999 Fiscal Year
The third Fiscal Quarter of the 4.25:1.00
1999 Fiscal Year
The fourth Fiscal Quarter of the 4.00:1.00
1999 Fiscal Year
Each Fiscal Quarter of the 3.75:1.00
2000 Fiscal Year
Each Fiscal Quarter of the 3.25:1.00
2001 Fiscal Year
Each Fiscal Quarter of the 3.00:1.00; and
2002 Fiscal Year and
thereafter
(d) EBITDA, as of the last day of each Fiscal Quarter set
forth below, to be less than the amount set forth opposite such
Fiscal Quarter (prior to the sale of Roltra Morse):
Fiscal Quarter Minimum EBITDA
The fourth Fiscal Quarter of $40,000,000
the 1997 Fiscal Year
The first Fiscal Quarter of $42,000,000
the 1998 Fiscal Year
The second Fiscal Quarter of $44,000,000
the 1998 Fiscal Year
The third Fiscal Quarter of $46,000,000
the 1998 Fiscal Year
The fourth Fiscal Quarter of $52,000,000
the 1998 Fiscal Year
The first Fiscal Quarter of $56,000,000
the 1999 Fiscal Year
The second Fiscal Quarter of $58,000,000
the 1999 Fiscal Year
The third Fiscal Quarter of $60,000,000
the 1999 Fiscal Year
The fourth Fiscal Quarter of $64,000,000
the 1999 Fiscal Year
Each Fiscal Quarter of $66,000,000
the 2000 Fiscal Year
Each Fiscal Quarter of $68,000,000
the 2001 Fiscal Year
Each Fiscal Quarter of the $70,000,000; and
2002 Fiscal Year
and thereafter
(e) EBITDA, as of the last day of each Fiscal Quarter
set forth below, to be less than the amount set forth opposite
such Fiscal Quarter (after the sale of Roltra Morse):
Fiscal Quarter Minimum EBITDA
The fourth Fiscal Quarter of $32,000,000
the 1997 Fiscal Year
The first Fiscal Quarter of $34,000,000
the 1998 Fiscal Year
The second Fiscal Quarter of $36,000,000
the 1998 Fiscal Year
The third Fiscal Quarter of $38,000,000
the 1998 Fiscal Year
The fourth Fiscal Quarter of $42,000,000
the 1998 Fiscal Year
The first Fiscal Quarter of $44,000,000
the 1999 Fiscal Year
The second Fiscal Quarter of $46,000,000
the 1999 Fiscal Year
The third Fiscal Quarter of $48,000,000
the 1999 Fiscal Year
The fourth Fiscal Quarter of $50,000,000
the 1999 Fiscal Year
Each Fiscal Quarter of $52,000,000
the 2000 Fiscal Year
Each Fiscal Quarter of $54,000,000
the 2001 Fiscal Year
Each Fiscal Quarter of the $56,000,000.
2002 Fiscal Year
and thereafter
SECTION VII.2.5. Investments. The Borrower and the Parent
will not, and will not permit any of their respective
Subsidiaries to, make, incur, assume or suffer to exist any
Investment in any other Person, except:
(a) the Parent's Investment existing on the Effective
Date in the Borrower and the Borrower's Investment existing
on the Effective Date in its Subsidiaries;
(b) Cash Equivalent Investments;
(c) without duplication, Investments permitted as
Indebtedness pursuant to clauses (d), (f), (h) and (k) of
Section 7.2.2;
(d) without duplication, Investments permitted
pursuant to Section 7.2.7;
(e) promissory notes received as consideration in
respect of Permitted Dispositions (subject to the
limitations set forth in the definition thereof), to the
extent pledged to the Administrative Agent for the benefit
of the Administrative Agent and the Lenders;
(f) Investments constituting Permitted Acquisitions in
an aggregate amount not to exceed $5,000,000, subject to
clause (c) of the definition of Permitted Acquisition;
provided, that (i) such Investments shall (if capital stock
is being acquired), result in the acquisition of a wholly-
owned Subsidiary of the Borrower and (ii) upon making such
Investments, the provisions of Sections 7.1.8 and 7.1.10 are
complied with; and
(g) other Investments in an aggregate amount at any
one time not to exceed $ 10,000,000;
provided, however, that
(i) any Investment which when made complies with the
requirements of the definition of the term "Cash Equivalent
Investment" may continue to be held notwithstanding that
such Investment if made thereafter would not comply with
such requirements; and
(ii) no Investment otherwise permitted by clauses (e),
(f) or (g) shall be permitted to be made if, immediately
before or after giving effect thereto, any Default shall
have occurred and be continuing.
SECTION VII.2.6. Restricted Payments, etc. (a) On and at
all times after the Effective Date, the Borrower
(i) will not declare, pay or make any dividend or
distribution (in cash, property or obligations) on any
shares of any class of capital stock (now or hereafter
outstanding) of the Borrower or on any warrants, options or
other rights with respect to any shares of any class of
capital stock (now or hereafter outstanding) of the Borrower
(other than dividends or distributions payable in its common
stock or warrants to purchase its common stock or split-ups
or reclassifications of its stock into additional or other
shares of its common stock) or apply, or permit any of its
Subsidiaries to apply, any of its funds, property or assets
to the purchase, redemption, sinking fund or other
retirement of, or agree or permit any of its Subsidiaries to
purchase or redeem, any shares of any class of capital stock
(now or hereafter outstanding) of the Borrower, or warrants,
options or other rights with respect to any shares of any
class of capital stock (now or hereafter outstanding) of the
Borrower;
(ii) will not, and will not permit any of its
Subsidiaries to, pay, prepay or repay any principal amount
of, or make any payment of interest on, or redeem, purchase,
set aside any funds for or defease, or give any notice of
redemption for, or purchase or otherwise acquire, any Senior
Subordinated Notes, other than pursuant to a "put" provision
triggered on the Effective Date pursuant to a Change of
Control (as defined in the Senior Subordinated Notes); and
(iii) will not, and will not permit any of its
Subsidiaries to, make any deposit for any of the purposes
described in the preceding clause (a)(i);
provided, however, that, notwithstanding clauses (a)(i), (a)(ii)
and (a)(iii) of this Section 7.2.6, the Borrower may, (a) subject
to the subordination provisions applicable thereto, make payments
of interest accrued on the Senior Subordinated Notes when due,
provided that no Default has occurred and is continuing and (b)
redeem Senior Subordinated Notes in an amount not in excess of
$25,000,000 outstanding at such time (or if less than such amount
at any time, the Permitted Amount), through open market purchases
so long as the purchase price of such Senior Subordinated Debt
does not exceed 112% of the face amount thereof.
SECTION VII.2.7. Capital Expenditures, etc. The Borrower
will not, and will not permit any of its Subsidiaries to, make
or, without duplication, commit to make Capital Expenditures in
any Fiscal Year, except Capital Expenditures (other than
Capitalized Lease Liabilities) of the Borrower and other
Subsidiaries of the Parent which do not aggregate in any Fiscal
Year in excess of (i) prior to the sale of Roltra Morse,
$18,000,000 and (ii) following the sale of Roltra Morse,
$12,500,000 plus, solely for the Fiscal Year of such sale, the
result of $5,500,000 divided by twelve and multiplied by the
remaining months of the then current Fiscal Year (the "Applicable
Capital Expenditure Level"); provided, however, that
(a) to the extent Capital Expenditures are made or,
without duplication, committed to be made in any Fiscal Year
in an amount less than the Applicable Capital Expenditure
Level, the Capital Expenditures the Borrower or its
Subsidiaries may make or, without duplication, commit to
make in the next following Fiscal Year shall, if the
Borrower establishes to the satisfaction of the
Administrative Agent compliance on a prospective basis based
upon the budget delivered pursuant to Section 7.1.1 and with
the financial covenants set forth in Section 7.2.4., be
increased by 50% of the amount of the permitted Capital
Expenditures not so made or, without duplication, committed
to be made in the immediately preceding Fiscal Year (the
"Carry-Forward Amount");
(b) no Carry-Forward Amount may be carried forward
beyond the Fiscal Year immediately following the Fiscal Year
in which it arose; and
(c) no portion of any Carry-Forward Amount shall be
used in any Fiscal Year until the entire amount of the
Capital Expenditures permitted to be made or committed to be
made in such Fiscal Year (without giving effect to any Carry-
Forward Amount) shall have been used, and no portion of a
Carry-Forward Amount may be used unless the Borrower shall
have certified to the Administrative Agent that, after
giving effect thereto, the Borrower shall be in compliance
with all the provisions of this Agreement and the other Loan
Documents.
SECTION VII.2.8. Rental Obligations. The Borrower and the
Parent will not, and will not permit any of their respective
Subsidiaries to, enter into at any time any arrangement which
does not create a Capitalized Lease Liability and which involves
the leasing by the Borrower or any other Subsidiary of the Parent
from any lessor of any real or personal property (or any interest
therein), except arrangements which, together with all other such
arrangements which shall then be in effect, will not require the
payment of an aggregate amount of rentals by the Borrower and
such other Subsidiaries of the Parent in excess of (excluding
escalations resulting from a rise in the consumer price or
similar index) $10,000,000 for any Fiscal Year; provided,
however, that any calculation made for purposes of this Section
shall exclude any amounts required to be expended for maintenance
and repairs, insurance, taxes, assessments, and other similar
charges.
SECTION VII.2.9. Take or Pay Contracts. The Borrower and
the Parent will not, and will not permit any of their respective
Subsidiaries to, enter into or be a party to any arrangement for
the purchase of materials, supplies, other property or services
if such arrangement by its express terms requires that payment be
made by the Borrower, the Parent or any such Subsidiary
regardless of whether such materials, supplies, other property or
services are delivered or furnished to it.
SECTION VII.2.10. Consolidation, Merger, etc. The Borrower
and the Parent will not, and will not permit any of their
respective Subsidiaries to, liquidate or dissolve, consolidate or
amalgamate with, or merge into or with, any other Person, or
purchase or otherwise acquire all or any substantial part of the
assets or stock of any Person (or of any division thereof) except
(a) any such Subsidiary may liquidate or dissolve voluntarily
into, and may merge with and into, the Borrower or any other
Subsidiary so long as all of the outstanding stock of the
surviving corporation of any such merger has been pledged to the
Administrative Agent prior to any such merger and (b) pursuant to
the Merger, the Parent may merge with and into the Borrower with
the Borrower being the survivor of such Merger; provided that
concurrently with the Merger (i) no Indebtedness shall exist at
the Parent,(ii) a pledge agreement, substantially in the form of
the Parent Pledge Agreement shall be executed by the Stockholders
of the Parent so that following the Merger, at least the same
percentage of shares pledged by the Parent of its ownership
interests in the Borrower are pledged by the Stockholders of
their ownership interests in the survivor of the Merger, (iii) a
limited recourse guaranty, substantially in the form of the
Parent guaranty contained in Article IX shall be executed by the
Stockholders on terms satisfactory to the Administrative
Agent,(iv) no Default shall be continuing prior to, concurrently
with, or as a result of, such payments on a pro forma basis after
giving effect to the Merger and (v) the Managing Agents shall be
satisfied with all of the terms of the Merger (including, without
limitation, the merger agreement and the related opinions).
SECTION VII.2.11. Asset Dispositions, etc. The Borrower
and the Parent will not, and will not permit any of their
respective Subsidiaries to, sell, transfer, lease, contribute or
otherwise convey or dispose of, or grant options, warrants or
other rights with respect to (a "Disposition"), all or any part
of its assets (including accounts receivable and capital stock of
Subsidiaries) to any Person (other than the Borrower), except
(a) if such sale, transfer, lease, contribution or
conveyance is of Inventory in the ordinary course of its
business;
(b) if such Disposition is a Permitted Disposition;
(c) if such Disposition is of (i) the Instrumentation
Segment or of operations currently classified as
discontinued under GAAP, (ii) the Delroyd operations to
Ameridrives International, L.P., a Delaware limited
partnership, (iii) the sale of Roltra Morse, or (iv) any
assets of a Subsidiary of the Borrower to the Borrower; or
(d) if such assets are worn or obsolete and the net
book value of such assets, together with the net book value
of all other assets sold, transferred, leased, contributed
or conveyed by the Borrower, the Parent or any of their
respective Subsidiaries pursuant to this clause during the
Fiscal Year in which such assets are to be sold,
transferred, leased, contributed or conveyed, does not
exceed $500,000 in the aggregate; provided, however, that
so long as any such assets sold, transferred, leased,
contributed or conveyed by the Borrower, the Parent or any
of their respective Subsidiaries pursuant to this clause are
used by the Borrower, the Parent or any of their
Subsidiaries for the replacement thereof within 180 days,
such amount shall not count toward the $500,000 ceiling.
SECTION VII.2.12. Modification of Certain Agreements.
Neither the Borrower nor the Parent will consent to any
amendment, supplement or other modification of any of the terms
or provisions contained in, or applicable to, any Organic
Document, the Borrower Preferred Stock, the Parent Subscription
Agreement, the Borrower Subscription Agreement, the Subordinated
Notes, other than any such amendment, supplement or other
modification which is immaterial and which could not adversely
affect the Administrative Agent or any Lender (it being
understood and agreed that, in any event, that any modification
to the subordination provisions of, and any of the defined terms
therein, including, but not limited to, the definition of
"Specified Senior Indebtedness" of the Subordinated Notes shall
be deemed to be material).
SECTION VII.2.13. Transactions with Affiliates. The
Borrower and the Parent will not, and will not permit any of
their respective Subsidiaries to, enter into, or cause, suffer or
permit to exist any arrangement or contract with, any of its
other Affiliates unless such arrangement or contract is on fair
and reasonable terms and is an arrangement or contract of the
kind which would be entered into by a prudent Person in the
position of the Borrower or such Subsidiary with a Person which
is not one of its Affiliates.
SECTION VII.2.14. Negative Pledges, Restrictive Agreements,
etc. The Borrower and the Parent will not, and will not permit
any of their respective U.S. Subsidiaries and Non-U.S.
Subsidiaries (to the extent not a party to such an agreement on
the Effective Date) to, enter into any agreement (excluding this
Agreement, any other Loan Document, the Subordinated Note
Indenture or any loan or financing document related to refinanced
Non-U.S. Subsidiary Indebtedness existing on the Effective Date
provided that such refinanced Indebtedness is not guaranteed by
the Borrower) prohibiting:
(a) the creation or assumption of any Lien upon its
properties, revenues or assets, whether now owned or
hereafter acquired (other than pursuant to an agreement
governing Indebtedness permitted by clause (h) of Section
7.2.2 to the extent such agreement relates solely to the
assets financed with the proceeds of such Indebtedness), or
the ability of the Borrower or any other Obligor to amend or
otherwise modify this Agreement or any other Loan Document;
or
(b) the ability of any Subsidiary of the Borrower to
make any payments, directly or indirectly, to the Borrower
by way of dividends, advances, repayments of loans or
advances, reimbursements of management and other
intercompany charges, expenses and accruals or other returns
on investments, or any other agreement or arrangement which
restricts the ability of any such Subsidiary to make any
payment, directly or indirectly, to the Borrower.
In addition, the Borrower and the Parent will not, and will
not permit any of their respective Subsidiaries to, enter into
any tax sharing agreement or similar arrangement unless the same
shall have been reviewed by and consented to by the
Administrative Agent (such consent not to be unreasonably
withheld).
SECTION VII.2.15. Management and Director Fees, Expenses,
etc. The Borrower and the Parent will not, and will not permit
any of their respective Subsidiaries to:
(a) pay management, advisory, consulting or other
similar fees, other than (i) fees payable to the Lenders or
any of their affiliates, (ii) fees payable on the date of
the initial Credit Extension and disclosed to the
Administrative Agent,(iii) fees payable to consultants
engaged on arm's-length basis,(iv) reasonable and customary
fees and expenses payable to independent directors, or
(v) fees and other corporate and management expenses payable
by Subsidiaries of the Borrower to the Borrower; or
(b) reimburse any Affiliates for any expenses unless
the same shall be otherwise permitted hereunder and shall be
reasonable and documented in reasonable detail.
SECTION VII.2.16. Environmental Liens. The Borrower and
the Parent will not, and will not permit any of their respective
Subsidiaries to, allow any Lien imposed pursuant to any law,
rule, regulation or order relating to any Hazardous Material
(including the disposal thereof) to be imposed or to remain on
any real property owned or operated by the Borrower, the Parent
or any of their respective Subsidiaries, except as contested in
good faith by appropriate proceedings for which adequate reserves
have been established and are being maintained on its books.
SECTION VII.2.17. Fiscal Year End. The Borrower shall not
change its Fiscal Year to end on any date other than on the 31st
day of December.
SECTION VII.2.18. Stock of Subsidiaries. The Borrower will
not permit any Subsidiary to issue any capital stock (whether for
value or otherwise) to any Person other than the Borrower or
another wholly-owned U.S. Subsidiary.
SECTION VII.2.19. Activities of the Parent. Prior to the
Merger, and notwithstanding any other provisions of this
Agreement, the Parent will not engage in any business activity
other than its continuing ownership of the Shares of capital
stock of the Borrower and its compliance with the obligations
applicable to it under the Loan Documents. Without limiting the
generality of the immediately preceding sentence, the Parent will
not (a) create, incur, assume or suffer to exist any Indebtedness
(other than Indebtedness in respect of the guaranty contained in
Article IX and the Indebtedness described in Section 7.2.2), (b)
create, assume, or suffer to exist any Lien upon, or grant any
options or other rights with respect to, any of its revenues,
property or other assets, whether now owned or hereafter acquired
(other than pursuant to the Loan Documents), (c) wind-up,
liquidate or dissolve itself (or suffer to exist any of the
foregoing), consolidate or amalgamate with or merge into or with
any other Person, issue stock, or convey, sell, transfer, lease
or otherwise dispose of all or any part of its assets, in one
transaction or a series of transactions, to any Person or
Persons, (d) create, incur, assume or suffer to exist any
Investment in any Person other than (i) as provided in clause (a)
of Section 7.2.5 and (ii) in respect of any additional equity
Investments in the Borrower or (e) permit to be taken any action
that would result in a Change in Control. The Parent agrees not
to commence or cause the commencement of any of the actions
described in clause (b), (c) or (d) of Section 8.1.9 of this
Agreement with respect to any of its Subsidiaries.
SECTION VII.2.20. No Investments, etc. in Certain
Subsidiaries. Notwithstanding anything to the contrary in this
Agreement, in no event shall the aggregate amount of Investments
by the Borrower and its U.S. Subsidiaries in, or transfers of
cash or property by the Borrower or its U.S. Subsidiaries to, any
U.S. Subsidiaries not a party to the Subsidiary Guaranty and not
pledged by the Borrower pursuant to the Borrower Pledge
Agreement, in the aggregate exceed $50,000 in any Fiscal Year.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION VIII.1. Listing of Events of Default. Each of the
following events or occurrences described in this Section 8.1
shall constitute an "Event of Default".
SECTION VIII.1.1. Non-Payment of Obligations. The Borrower
shall default
(a) in the payment or prepayment when due of any
principal of any Loan;
(b) in the payment when due of any interest or fees
and such default shall remain unremedied for a period in
excess of three Business Days; and
(c) in the payment when due of any other Obligation
and such default shall continue unremedied for a period of 5
Business Days.
SECTION VIII.1.2. Breach of Warranty. Any representation
or warranty of the Borrower or any other Obligor made or deemed
to be made hereunder or in any other Loan Document executed by it
or any other writing or certificate furnished by or on behalf of
the Borrower or any other Obligor to the Administrative Agent or
any Lender pursuant to this Agreement or any such other Loan
Document (including any certificates delivered pursuant to
Article V) is or shall be incorrect when made in any material
respect. Any representation or warranty of the Borrower under
the Purchase Agreement shall have been incorrect when made which
could reasonably be expected to have a material adverse effect on
the financial condition, operations, assets, business,
properties, revenues or prospects of the Borrower and its
Subsidiaries taken as a whole or the Parent and its Subsidiaries
taken as a whole.
SECTION VIII.1.3. Non-Performance of Certain Covenants and
Obligations. The Borrower or the Parent shall default in the due
performance and observance of any of their obligations under
clause (c) of Section 7.1.1, Section 7.1.6, Section 7.1.8,
Section 7.1.10, Section 7.1.11, Section 7.1.17, Section 4.10 or
Section 7.2 or any other Obligor shall default in the performance
of any of its obligations in respect of such Sections as such
Sections are incorporated by reference or otherwise in any Loan
Document to which such Obligor is a party.
SECTION VIII.1.4. Non-Performance of Other Covenants and
Obligations. Any Obligor shall default in the due performance
and observance of (a) any agreement contained in Section 7.1.1
not covered in Section 8.1.3 and such default shall continue
unremedied for a period of 10 days from the earlier of the date
an Authorized Officer of an Obligor has actual knowledge thereof
and the receipt by an Obligor of written notice thereof from the
Administrative Agent, or (b) any other agreement contained herein
or in any other Loan Document (other than items covered by
Section 8.1.3) executed by it, and such default shall continue
unremedied for a period of 30 days from the earlier of the date
an Authorized Officer of an Obligor has actual knowledge thereof
and the receipt by an Obligor of written notice thereof from the
Administrative Agent.
SECTION VIII.1.5. Default on Other Indebtedness. A default
shall occur in the payment when due (subject to any applicable
grace period), whether by acceleration or otherwise, of any
Indebtedness (other than Indebtedness described in Section 8.1.1)
of the Borrower or any of its Subsidiaries or any other Obligor
having a principal amount, individually or in the aggregate, in
excess of $5,000,000 or a default shall occur in the performance
or observance of any obligation or condition with respect to such
Indebtedness if the effect of such default is to accelerate the
maturity of any such Indebtedness or such default shall continue
unremedied for any applicable period of time sufficient to permit
the holder or holders of such Indebtedness, or any trustee or
Administrative Agent for such holders, to cause such Indebtedness
to become due and payable prior to its expressed maturity.
SECTION VIII.1.6. Judgments. Any judgment or order for the
payment of money in excess of $5,000,000 shall be rendered
against the Borrower or any of its Subsidiaries or any other
Obligors and either
(a) enforcement proceedings shall have been commenced
by any creditor upon such judgment or order; or
(b) there shall be any period of 45 consecutive days
during which a stay of enforcement of such judgment or
order, by reason of a pending appeal, bond or otherwise,
shall not be in effect.
SECTION VIII.1.7. Pension Plans. Any of the following
events shall occur with respect to any Pension Plan
(a) the institution of any steps by the Borrower any member of its
Controlled Group, any other Obligor, or any other Person to terminate a
Pension Plan if, as a result of such termination, the Borrower or any
such member could be required to make a contribution to such Pension
Plan, or could reasonably expect to incur a liability or obligation to
such Pension Plan, in excess of $1,000,000; or
(b) a contribution failure occurs with respect to any
Pension Plan sufficient to give rise to a Lien on property
of the Borrower or any of its Controlled Group under Section
302(f) of ERISA.
SECTION VIII.1.8. Change in Control. Any Change in Control
shall occur.
SECTION VIII.1.9. Bankruptcy, Insolvency, etc. The
Borrower or any of its Subsidiaries or any other Obligor shall
(a) generally fail to pay debts as they become due, or
admit in writing its inability to pay debts as they become
due;
(b) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, sequestrator, or other
custodian for the Borrower or any of its Subsidiaries or any
other Obligor or any property of any thereof, or make a
general assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the involuntary
appointment of a trustee, receiver, sequestrator or other
custodian for the Borrower or any of its Subsidiaries or any
other Obligor or for a substantial part of the property of
any thereof, and such trustee, receiver, sequestrator or
other custodian shall not be discharged within sixty days;
(d) permit or suffer to exist the involuntary
commencement of, or voluntarily commence, any bankruptcy,
reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency laws, or
permit or suffer to exist the involuntary commencement of,
or voluntarily commence, any dissolution, winding up or
liquidation proceeding, in each case, by or against the
Borrower or any of its Subsidiaries or any other Obligor,
provided that if not commenced by the Borrower or such
Subsidiary or any other Obligor such proceeding shall be
consented to or acquiesced in by the Borrower or such
Subsidiary or any other Obligor, or shall result in the
entry of an order for relief or shall remain for sixty days
undismissed; or
(e) take any corporate action authorizing, or in
furtherance of, any of the foregoing.
SECTION VIII.1.10. Impairment of Security, Senior
Subordinated Notes, etc. Without the consent of the Lenders, any
Loan Document, or any Lien granted thereunder, shall (except in
accordance with its terms), in whole or in part, terminate, cease
to be effective or cease to be the legally valid, binding and
enforceable obligation of the Borrower or any Obligor party
thereto; the Borrower, any other Obligor or any other party
shall, directly or indirectly, contest in any manner such
effectiveness, validity, binding nature or enforceability; or any
Lien securing any Obligation shall, in whole or in part, cease to
be a perfected first registered priority Lien, subject only to
those exceptions expressly permitted by such Loan Documents. The
subordination provisions relating to the Senior Subordinated
Notes or the Subordinated Note Indenture (the "Subordination
Provisions") shall fail to be enforceable by the Lenders (which
have not effectively waived the benefits thereof) in accordance
with the terms thereof, or the principal or interest on any Loan,
Reimbursement Obligation or other Obligations shall fail to
constitute Specified Senior Indebtedness (as defined in the
Subordinated Note Indenture); or the Borrower, or any of its
Subsidiaries shall, directly or indirectly, disavow or contest in
any manner (i) the effectiveness, validity or enforceability of
any of the Subordination Provisions, or (ii) that any of such
Subordination Provisions exist for the benefit of the
Administrative Agent, the Issuer and the Lenders.
SECTION VIII.2. Action if Bankruptcy. If any Event of
Default described in clauses (b) through (d) of Section 8.1.9
shall occur, the Commitments (if not theretofore terminated)
shall automatically terminate and the outstanding principal
amount of all outstanding Loans and all other Obligations shall
automatically be and become immediately due and payable, without
notice or demand.
SECTION VIII.3. Action if Other Event of Default. If any
Event of Default (other than any Event of Default described in
clauses (b) through (d) of Section 8.1.9) shall occur for any
reason, whether voluntary or involuntary, and be continuing, the
Administrative Agent, upon the direction of the Required Lenders,
shall by notice to the Borrower declare all or any portion of the
outstanding principal amount of the Loans and other Obligations
to be due and payable and/or the Commitments (if not theretofore
terminated) to be terminated, whereupon the full unpaid amount of
such Loans and other Obligations which shall be so declared due
and payable shall be and become immediately due and payable,
without further notice, demand or presentment, and/or, as the
case may be, the Commitments shall terminate.
ARTICLE IX
GUARANTY
SECTION IX.1. The Guaranty. The Parent hereby
unconditionally and irrevocably guarantees the full and prompt
payment when due, whether at the Stated Maturity, by acceleration
or otherwise (including all amounts which would have become due
but for the operation of the automatic stay under Section 362(a)
of the Federal Bankruptcy Code, 11 U.S.C. 362(a), and the
operation of Sections 502(b) and 506(b) of the United States
Bankruptcy Code, 11 U.S.C. 502(b) and 506(b)), of the following
(collectively, the "Guaranteed Obligations"),
(a) all Obligations of the Borrower and each other
Obligor to the Administrative Agent and each of the Lenders
now or hereafter existing under this Agreement and each
other Loan Document, whether for principal, interest, fees,
expenses or otherwise; and
(b) all other Obligations to the Administrative Agent
and each of the Lenders now or hereafter existing under any
of the Loan Documents, whether for principal, interest,
fees, expenses or otherwise.
The obligations of the Parent under this Article IX constitute a
guaranty of payment when due and not of collection, and the
Parent specifically agrees that it shall not be necessary or
required that the Administrative Agent, any Lender or any holder
of any Note exercise any right, assert any claim or demand or
enforce any remedy whatsoever against the Borrower or any other
Obligor (or any other Person) before or as a condition to the
obligations of the Parent under this Article IX.
SECTION IX.2. Guaranty Unconditional. The obligations of
the Parent under this Article IX shall be construed as a
continuing, absolute, unconditional and irrevocable guaranty of
payment and shall remain in full force and effect until all the
Guaranteed Obligations have been indefeasibly paid in full in
cash and all Commitments shall have permanently terminated. The
Parent guarantees that the Guaranteed Obligations will be paid
strictly in accordance with the terms of the agreement,
instrument or document under which they arise, regardless of any
law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the
Administrative Agent or any of the Lenders with respect thereto.
The liability of the Parent hereunder shall be absolute and
unconditional irrespective of:
(a) any lack of validity, legality or enforceability
of this Agreement, the Notes, any Rate Protection Agreement
with a Lender or any other Loan Document or any other
agreement or instrument relating to any thereof;
(b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Guaranteed
Obligations, or any compromise, renewal, extension,
acceleration or release with respect thereto, or any other
amendment or waiver of or any consent to departure from this
Agreement, the Notes, any Rate Protection Agreement with a
Lender or any other Loan Document;
(c) any addition, exchange, release or non-perfection
of any collateral, or any release or amendment or waiver of
or consent to departure from any other guaranty, for all or
any of the Guaranteed Obligations;
(d) the failure of the Administrative Agent or any
Lender
(i) to assert any claim or demand or to enforce
any right or remedy against the Borrower, any other
Obligor or any other Person (including any other
guarantor) under the provisions of this Agreement, any
Note, any Rate Protection Agreement with a Lender or
any other Loan Document or otherwise, or
(ii) to exercise any right or remedy against any
other guarantor of, or collateral securing, any of the
Guaranteed Obligations;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of
the terms of this Agreement, any Note, any Rate Protection
Agreement with a Lender or any other Loan Document;
(f) any defense, set-off or counter-claim which may at
any time be available to or be asserted by the Borrower or
any other Obligor against the Administrative Agent or any
Lender;
(g) any reduction, limitation, impairment or
termination of the Guaranteed Obligations for any reason,
including any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to (and
the Parent hereby waives any right to or claim of) any
defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality,
nongenuineness, irregularity, compromise, unenforceability
of, or any other event or occurrence affecting, the
Guaranteed Obligations or otherwise; or
(h) any other circumstance which might otherwise
constitute a defense available to, or a legal or equitable
discharge of, the Borrower, any other Obligor or any surety
or guarantor.
SECTION IX.3. Reinstatement in Certain Circumstances. If
at any time any payment in whole or in part of any of the
Guaranteed Obligations is rescinded or must be otherwise restored
or returned upon the insolvency, bankruptcy or reorganization of
the Borrower, any other Obligor or otherwise, the Parent's
obligations under this Article IX with respect to such payment
shall be reinstated as though such payment had been due but not
made at such time.
SECTION IX.4. Waiver by the Parent. The Parent irrevocably
waives promptness, diligence, notice of acceptance hereof,
presentment, demand, protest and any other notice with respect to
any of the Guaranteed Obligations, as well as any requirement
that at any time any action be taken by any Person against the
Borrower or any other Person.
SECTION IX.5. Postponement of Subrogation, etc. The Parent
will not exercise any rights which it may acquire by way of
rights of subrogation by any payment made hereunder or otherwise,
until the prior payment, in full and in cash, of all Guaranteed
Obligations. Any amount paid to the Parent on account of any
such subrogation rights prior to the payment in full of all
Guaranteed Obligations shall be held in trust for the benefit of
the Lenders and each holder of a Note and shall immediately be
paid to the Administrative Agent and credited and applied against
the Guaranteed Obligations, whether matured or unmatured, in
accordance with the terms of this Agreement; provided, however,
that if
(a) the Parent has made payment to the Lenders and
each holder of a Note of all or any part of the Guaranteed
Obligations, and
(b) all Guaranteed Obligations have been paid in full
and all Commitments have been permanently terminated,
each Lender and each holder of a Note agrees that, at the
Parent's request, the Administrative Agent, on behalf of the
Lenders and the holders of the Notes, will execute and deliver to
the Parent appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by
subrogation to the Parent of an interest in the Guaranteed
Obligations resulting from such payment by the Parent. In
furtherance of the foregoing, for so long as any Guaranteed
Obligations or Commitments remain outstanding, the Parent shall
refrain from taking any action or commencing any proceeding
against the Borrower (or its successors or assigns, whether in
connection with a bankruptcy proceeding or otherwise) to recover
any amounts in the respect of payments to any Lender or any
holder of a Note; provided, however, that the Parent may make any
necessary filings solely to preserve its claims against the
Borrower.
SECTION IX.6. Stay of Acceleration. If acceleration of the
time for payment of any amount payable by the Borrower under this
Agreement or any Note is stayed upon the occurrence of any event
referred to in Section 8.1.9 with respect to the Borrower, all
such amounts otherwise subject to acceleration under the terms of
this Agreement shall nonetheless be payable by the Parent
hereunder forthwith.
SECTION IX.7. Non-Recourse, etc. The Guarantor shall not be
liable for any Indebtedness, liabilities or Obligations in
connection with this Agreement or any of the other Loan
Documents, and neither the Managing Agents nor any Lender shall
have any recourse against the Guarantor or its properties other
than pursuant to the "Collateral" as defined in, and pursuant to
the Parent Pledge Agreement to satisfy any such Indebtedness,
liabilities or Obligations; provided, however, that nothing
herein shall constitute a waiver of the Managing Agents' or any
Lender's ability to exercise any right or remedy which any such
party may have against the Parent on account of any claim for
fraud, deceit or other material misrepresentation or omission by
and relating to the Parent (including the assets and operations
of the Parent but excluding the Borrower, any Subsidiaries of the
Borrower or any of their assets or operations).
ARTICLE X
THE ADMINISTRATIVE AGENT
SECTION X.1. Actions. Each Lender hereby appoints
Scotiabank as Administrative Agent under and for purposes of this
Agreement, the Notes and each other Loan Document. Each Lender
authorizes the Administrative Agent to act on behalf of such
Lender under this Agreement, the Notes and each other Loan
Document and, in the absence of other written instructions from
the Required Lenders received from time to time by the
Administrative Agent (with respect to which the Administrative
Agent agrees that it will comply, except as otherwise provided in
this Section or as otherwise advised by counsel), to exercise
such powers hereunder and thereunder as are specifically
delegated to or required of the Administrative Agent by the terms
hereof and thereof, together with such powers as may be
reasonably incidental thereto. Without limiting the effect of
the preceding sentences of this Section 10.1, each Lender
authorizes the Administrative Agent to act as collateral
Administrative Agent and to hold and accept title to all liens
and security interests granted to the Administrative Agent by the
Borrower, the Parent or any other Obligor for the ratable benefit
of the Administrative Agent and the Lenders, in order to exercise
remedies on behalf of the Lenders in connection with the
enforcement of such liens and security interests in accordance
with the provisions of the Loan Documents. Each Lender hereby
indemnifies (which indemnity shall survive any termination of
this Agreement) the Administrative Agent, pro rata according to
such Lender's Percentage, from and against any and all
liabilities, obligations, losses, damages, claims, costs or
expenses of any kind or nature whatsoever which may at any time
be imposed on, incurred by, or asserted against, the
Administrative Agent in any way relating to or arising out of
this Agreement, the Notes and any other Loan Document, including
reasonable attorneys' fees, and as to which the Administrative
Agent is not reimbursed by the Borrower; provided, however, that
no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, claims, costs or
expenses which are determined by a court of competent
jurisdiction in a final proceeding to have resulted solely from
the gross negligence or wilful misconduct of the Administrative
Agent. The Administrative Agent shall not be required to take
any action hereunder, under the Notes or under any other Loan
Document, or to prosecute or defend any suit in respect of this
Agreement, the Notes or any other Loan Document, unless it is
indemnified hereunder to its satisfaction. If any indemnity in
favor of the Administrative Agent shall be or become, in the
determination of the Administrative Agent, inadequate, the
Administrative Agent may call for additional indemnification from
the Lenders and cease to do the acts indemnified against
hereunder until such additional indemnity is given; provided,
however, that no Lender shall be required to indemnify the
Administrative Agent, with respect to any obligation, loss,
damage, claim, cost or expense for which the Administrative Agent
would be entitled to indemnification hereunder, in an amount
which would be greater than such Lender's Percentage of the
aggregate amount of such obligation, loss, damage, claim, cost or
expense.
SECTION X.2. Funding Reliance, etc. Unless the
Administrative Agent shall have been notified by telephone,
confirmed in writing, by any Lender by 5:00 p.m. (New York City
time), on the day prior to a Borrowing that such Lender will not
make available the amount which would constitute its Percentage
of such Borrowing on the date specified therefor, the
Administrative Agent may assume that such Lender has made such
amount available to the Administrative Agent and, in reliance
upon such assumption, make available to the Borrower a
corresponding amount. If and to the extent that such Lender
shall not have made such amount available to the Administrative
Agent, such Lender and the Borrower severally agree to repay the
Administrative Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date
the Administrative Agent made such amount available to the
Borrower to the date such amount is repaid to the Administrative
Agent at the interest rate applicable at the time to Loans
comprising such Borrowing.
SECTION X.3. Exculpation. Neither the Administrative Agent
nor any of its directors, officers, employees or agents shall be
liable to any Lender for any action taken or omitted to be taken
by it under this Agreement or any other Loan Document, or in
connection herewith or therewith, except for its own wilful
misconduct or gross negligence, nor responsible for any recitals
or warranties herein or therein, nor for the effectiveness,
enforceability, validity or due execution of this Agreement or
any other Loan Document, nor for the creation, perfection or
priority of any Liens purported to be created by any of the Loan
Documents, or the validity, genuineness, enforceability,
existence, value or sufficiency of any collateral security, nor
to make any inquiry respecting the performance by the Borrower of
its obligations hereunder or under any other Loan Document. Any
such inquiry which may be made by the Administrative Agent shall
not obligate it to make any further inquiry or to take any
action. The Administrative Agent shall be entitled to rely upon
advice of counsel concerning legal matters and upon any notice,
consent, certificate, statement or writing which the
Administrative Agent believes to be genuine and to have been
presented by a proper Person.
SECTION X.4. Successor. The Syndication Agent and the
Documentation Agent may resign at any time upon notice to the
Administrative Agent and the Borrower. The Administrative Agent
may resign as such at any time upon at least 30 days' prior
notice to the Borrower and all Lenders. If no successor
Administrative Agent shall have been appointed by the Required
Lenders with the prior consent of the Borrower (such consent not
to be unreasonably withheld) unless an Event of Default has
occurred and is continuing, and shall have accepted such
appointment, within 30 days after the retiring Administrative
Agent's giving notice of resignation, then the retiring
Administrative Agent may, on behalf of the Lenders, with the
prior consent of the Borrower (such consent not to be
unreasonably withheld) unless an Event of Default has occurred
and is continuing, appoint a successor, Administrative Agent,
which shall be one of the Lenders, or if no Lender accepts such
appointment, a commercial banking institution organized under the
laws of the U.S. (or any State thereof) or a U.S. branch or
agency of a commercial banking institution, and having a combined
capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder
by a successor, Administrative Agent, such Administrative Agent
shall be entitled to receive from the retiring Administrative
Agent such documents of transfer and assignment as such
successor, Administrative Agent may reasonably request, and shall
thereupon succeed to and become vested with all rights, powers,
privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its
duties and obligations under this Agreement. After any retiring
Administrative Agent's resignation hereunder as the
Administrative Agent, the provisions of
(a) this Article X shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was
the Administrative Agent under this Agreement; and
(b) Section 11.3 and Section 11.4 shall continue to
inure to its benefit.
SECTION X.5. Credit Extensions by Managing Agents. Each
Managing Agent shall have the same rights and powers with respect
to (x) the Loans made by it or any of its Affiliates, and (y) the
Notes held by it or any of its Affiliates as any other Lender and
may exercise the same as if it were not the Administrative Agent,
the Syndication Agent or the Documentation Agent hereunder. Each
Managing Agent and each of its Affiliates may accept deposits
from, lend money to, and generally engage in any kind of business
with the Borrower or any Subsidiary or Affiliate of the Borrower
as if it were not the Administrative Agent, the Syndication Agent
or the Documentation Agent hereunder, as the case may be.
SECTION X.6. Credit Decisions. Each Lender acknowledges
that it has, independently of each Managing Agent and each other
Lender, and based on such Lender's review of the financial
information of the Borrower, this Agreement, the other Loan
Documents (the terms and provisions of which being satisfactory
to such Lender) and such other documents, information and
investigations as such Lender has deemed appropriate, made its
own credit decision to extend its Commitments. Each Lender also
acknowledges that it will, independently of the Managing Agents
and each other Lender, and based on such other documents,
information and investigations as it shall deem appropriate at
any time, continue to make its own credit decisions as to
exercising or not exercising from time to time any rights and
privileges available to it under this Agreement or any other Loan
Document.
SECTION X.7. Loan Documents, etc. Each Lender hereby
authorizes the Administrative Agent to enter into the applicable
Loan Documents and to take all action contemplated thereby. Each
Lender agrees that no Lender shall have any right individually to
seek to realize upon the security granted by any Loan Document,
it being understood and agreed that such rights and remedies may
be exercised solely by the Administrative Agent for the benefit
of the Lenders and the Administrative Agent upon the terms of the
Loan Documents. The Administrative Agent shall determine (after
consultation with the Required Lenders (provided that, in the
case there are only two Lenders at the time of such
determination, such consultation will be with each such Lender))
the manner in which proceeds of Collateral will be applied to the
Obligations (after the payment of fees and expenses as set forth
in the Loan Documents).
SECTION X.8. Copies, etc. The Administrative Agent shall
give prompt notice to each Lender of each notice or request given
to the Administrative Agent by the Borrower or the Parent and
required to be delivered to the Lenders pursuant to the terms of
this Agreement (unless concurrently delivered to the Lenders by
the Borrower or the Parent). The Administrative Agent will
distribute to each Lender each document or instrument received
for its account and copies of all other communications received
by the Administrative Agent from the Borrower for distribution to
the Lenders by the Administrative Agent in accordance with the
terms of this Agreement.
SECTION X.9. Limitation on Duties. Notwithstanding
anything else to the contrary contained in this Agreement or any
other Loan Document, neither the Syndication Agent nor the
Documentation Agent, in such capacity, shall have any obligations
hereunder or under any other Loan Document, or any fiduciary
relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or otherwise exist against
either the Syndication Agent or the Documentation Agent.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION XI.1. Waivers, Amendments, etc. The provisions of
this Agreement and of each other Loan Document may from time to
time be amended, modified or waived, if such amendment,
modification or waiver is in writing and consented to by the
Borrower and the Administrative Agent (acting only at the
direction or with the authority of the Required Lenders);
provided, however, that no such amendment, modification or waiver
which would:
(a) modify any requirement hereunder that any
particular action be taken by all the Lenders or by the
Required Lenders shall be effective unless consented to by
each Lender;
(b) modify this Section 11.1, change the definition of
"Required Lenders", increase any Commitment Amount or the
Percentage of any Lender, reduce any fees described in
Article III, change the time for payment of fees to the
Lenders described in Article III, or release all or any
substantial part of the collateral security, except as
otherwise specifically provided in any Loan Document, shall
be made without the consent of each Lender affected thereby;
(c) extend the due date for, or reduce the amount of,
any scheduled repayment under Section 3.1.2(b) of principal
of, or interest on, any Loan or Reimbursement Obligation (or
reduce the principal amount of or rate of interest on any
Loan or Reimbursement Obligation) or extend any Commitment
Termination Date without the consent of the holder of that
Note evidencing such Loan;
(d) increase the Stated Amount of any Letter of Credit
unless consented to by each Issuer; or
(e) affect adversely the interests, rights or
obligations of the Administrative Agent in its capacity as
Administrative Agent or the Issuer in its capacity as
Issuer, without the consent of the Administrative Agent or
the Issuer, as the case may be.
No failure or delay on the part of the Administrative Agent, any
Lender or the holder of any Note in exercising any power or right
under this Agreement or any other Loan Document shall operate as
a waiver thereof, nor shall any single or partial exercise of any
such power or right preclude any other or further exercise
thereof or the exercise of any other power or right. No notice
to or demand on the Borrower in any case shall entitle it to any
notice or demand in similar or other circumstances. No waiver or
approval by the Administrative Agent, any Lender or the holder of
any Note under this Agreement or any other Loan Document shall,
except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval
hereunder shall require any similar or dissimilar waiver or
approval thereafter to be granted hereunder. The remedies
provided in this Agreement are cumulative, and not exclusive of
remedies provided by law.
SECTION XI.2. Notices. All notices and other
communications provided to any party hereto under this Agreement
or any other Loan Document shall be in writing and addressed,
delivered or transmitted to such party at its address or telecopy
number set forth on Schedule III hereto (or set forth in a Lender
Assignment Agreement) or at such other address or telecopy number
as may be designated by such party in a notice to the other
parties given in accordance with this Section. Any notice, if
mailed and properly addressed and sent return receipt requested
with postage prepaid, shall be deemed given three Business Days
after posting; any notice, if sent by prepaid overnight express
shall be deemed delivered on the next Business Day; any notice,
if transmitted by telecopy, shall be deemed given when sent, with
confirmation of receipt; any notice, if transmitted by hand,
shall be deemed received when delivered.
SECTION XI.3. Payment of Costs and Expenses. The Borrower
and the Parent jointly and severally agree to pay on demand all
reasonable expenses of the Administrative Agent (including the
reasonable fees and out-of-pocket expenses of counsel to the
Administrative Agent, including any legal counsel and
consultants, if any, who may be retained in connection with the
transactions contemplated hereby by the Administrative Agent) in
connection with
(a) the negotiation, preparation, execution and
delivery of this Agreement and of each other Loan Document,
including schedules and exhibits, and any amendments,
waivers, consents, supplements or other modifications to
this Agreement or any other Loan Document as may from time
to time hereafter be required, and the Lenders' and the
Administrative Agent's consideration of their rights and
remedies hereunder or in connection herewith from time to
time whether or not the transactions contemplated hereby or
thereby are consummated;
(b) the filing, recording, refiling or rerecording of
the Pledge Agreements, the Mortgages, the Security
Agreements (and any supplements thereto) and any other
security instruments executed in connection with the
transactions contemplated hereby and/or U.C.C. financing
statements relating thereto and all amendments, supplements
and modifications to any thereof and any and all other
documents or instruments of further assurance required to be
filed or recorded or refiled or rerecorded by the terms
hereof or of the Pledge Agreements, the Mortgages or the
Security Agreements or such other documents; and
(c) the preparation and review of the form of any
document or instrument relevant to this Agreement or any
other Loan Document.
The Borrower and the Parent jointly and severally further agree
to pay, and to save the Administrative Agent and the Lenders
harmless from all liability for, any stamp or other taxes which
may be payable in connection with the execution or delivery of
this Agreement, the borrowings hereunder, or the issuance of the
Notes or any other Loan Documents. The Borrower and the Parent
jointly and severally also agree to reimburse the Administrative
Agent and each Lender upon demand for all reasonable out-of-
pocket expenses (including attorneys' fees and legal expenses,
including allocated fees and expenses of internal counsel)
incurred by the Administrative Agent or such Lender in connection
with (x) the negotiation of any restructuring or "work-out",
whether or not consummated, of any Obligations and (y) the
enforcement of any Obligations (including the Obligations of the
Parent under Article IX). The Borrower and the Parent jointly
and severally further agree to reimburse the Administrative Agent
on demand for all other administration, audit and monitoring
expenses incurred after the occurrence of an Event of Default in
connection with this Agreement and the other Loan Documents.
SECTION XI.4. Indemnification. In consideration of the
execution and delivery of this Agreement by each Lender and the
extension of the Commitments, the Borrower and the Parent jointly
and severally hereby indemnify, exonerate and hold the Managing
Agents and each Lender and each of their respective officers,
directors, employees and agents (collectively, the "Indemnified
Parties") free and harmless from and against any and all actions,
causes of action, suits, losses, costs, liabilities and damages,
and expenses incurred in connection therewith (irrespective of
whether any such Indemnified Party is a party to the action for
which indemnification hereunder is sought), including reasonable
attorneys' fees and disbursements (including allocated fees and
expenses of internal counsel) (collectively, the "Indemnified
Liabilities"), incurred by the Indemnified Parties or any of them
as a result of, or arising out of, or relating to
(a) any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds
of any Loan or with any Letter of Credit;
(b) the entering into and performance of this
Agreement and any other Loan Document by any of the
Indemnified Parties (including any action brought by or on
behalf of the Borrower as the result of any determination by
the Required Lenders pursuant to Article V not to fund any
Borrowing);
(c) any investigation, litigation or proceeding
related to any acquisition or proposed acquisition by the
Borrower, the Parent or any of their respective Subsidiaries
of all or any portion of the stock or assets of any Person,
whether or not the Administrative Agent or such Lender is
party thereto;
(d) any investigation, litigation or proceeding
related to any environmental cleanup, audit, compliance or
other matter relating to the protection of the environment
or the Release by the Borrower, the Parent or any of their
respective Subsidiaries of any Hazardous Material;
(e) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission, discharging or
releases from, any real property owned or operated by the
Borrower, the Parent or any of their respective Subsidiaries
of any Hazardous Material (including, without limitation,
any losses, liabilities, damages, injuries, costs, expenses
or claims asserted or arising under any Environmental Law,
the costs of defending and or counterclaiming or claiming
over against third parties in respect of any action or
matter, and any cost, liability or damage arising out of a
settlement of any action entered into by the Administrative
Agent), regardless of whether caused by, or within the
control of, the Borrower, the Parent or any such Subsidiary;
(f) Environmental Laws relating to the Borrower, the
Parent or any of their respective Subsidiaries, including
the assertion of any lien thereunder;
(g) any order, consent, decree, settlement, judgement
or verdict arising from the deposit, storage, disposal,
burial, dumping, injection, spilling, leaking, or other
placement or release in, on or from the Realty of any
Hazardous Material (including without limitation any order
under the Environmental Laws to clean-up or decommission),
whether or not such deposit, storage, disposal, burial,
dumping, injecting, spillage, leaking or other placement or
release in, on or from the Realty of any Hazardous Material:
(i) results by, through or under the Borrower,
the Parent or any of their respective Subsidiaries; or
(ii) occurred with the knowledge and consent of
the Borrower, the Parent or any of their respective
Subsidiaries; or
(iii) occurred before or after the Effective
Date, whether with or without the knowledge of the
Borrower, the Parent or any of their respective
Subsidiaries; or
(h) the failure to maintain insurance coverage
required by Section 7.1.4;
except for any such Indemnified Liabilities arising for the
account of a particular Indemnified Party by reason of the
relevant Indemnified Party's gross negligence or wilful
misconduct. If and to the extent that the foregoing undertaking
may be unenforceable for any reason, the Borrower and the Parent
each hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities
which is permissible under applicable law.
SECTION XI.5. Survival. The obligations of the Borrower
under Sections 4.3, 4.4, 4.5, 4.6, 11.3 and 11.4, and the
obligations of the Lenders under Section 10.1, shall in each case
survive any termination of this Agreement, the payment in full of
all the Obligations and the termination of all the Commitments.
The representations and warranties made by each Obligor in this
Agreement and in each other Loan Document shall survive the
execution and delivery of this Agreement and each such other Loan
Document.
SECTION XI.6. Severability. Any provision of this
Agreement or any other Loan Document which is prohibited or
unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or such Loan Document or
affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION XI.7. Headings. The various headings of this
Agreement and of each other Loan Document are inserted for
convenience only and shall not affect the meaning or
interpretation of this Agreement or such other Loan Document or
any provisions hereof or thereof.
SECTION XI.8. Execution in Counterparts, Effectiveness,
etc. This Agreement may be executed by the parties hereto in
several counterparts, each of which shall be an original and all
of which shall constitute together but one and the same
agreement. This Agreement shall become effective when
counterparts hereof executed on behalf of the Borrower, the
Parent and each initial Lender (or notice thereof satisfactory to
the Administrative Agent) shall have been received by the
Administrative Agent and notice thereof shall have been given by
the Administrative Agent to the Borrower, the Parent and each
Lender.
SECTION XI.9. Governing Law; Entire Agreement. THIS
AGREEMENT AND THE NOTES SHALL EACH BE DEEMED TO BE A CONTRACT
MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
This Agreement, the Notes and the other Loan Documents constitute
the entire understanding among the parties hereto with respect to
the subject matter hereof and supersede any prior agreements,
written or oral, with respect thereto.
SECTION XI.10. Successors and Assigns. This Agreement
shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns;
provided, however, that:
(a) neither the Borrower nor the Parent may assign or
transfer its rights or obligations hereunder without the
prior written consent of the Administrative Agent and all
Lenders; and
(b) the rights of sale, assignment and transfer of the
Lenders are subject to Section 11.11.
SECTION XI.11. Sale and Transfer of Loans and Notes;
Participations in Loans and Notes. Each Lender may assign, or
sell participations in, its Loans and Commitments to one or more
other Persons in accordance with this Section 11.11.
SECTION XI.11.1. Assignments. (a) Any Lender, upon the
written consent of the Borrower (unless at such time an Event of
Default has occurred and is continuing) and Administrative Agent
(which consents shall not be unreasonably withheld or delayed),
may at any time assign and delegate all or any fraction of such
Lender's Loans, Commitments and Letter of Credit participations
to one or more commercial banks or other financial institutions
(each Person described in either of the foregoing clauses as the
Person to whom such assignment and delegation is to be made being
hereinafter referred to as an "Assignee Lender"), all or any
fraction of such Lender's total Loans, Commitments and Letter of
Credit participations (which assignment and delegation shall be
of a constant, and not a varying, percentage of all the assigning
Lender's Loans and Commitments) in a minimum aggregate amount of
$5,000,000 (or, if less, the total of such Lender's Commitment
Amount); provided, however, that the Borrower, each other Obligor
and the Administrative Agent shall be entitled to continue to
deal solely and directly with such Lender in connection with the
interests so assigned and delegated to an Assignee Lender until
(i) written notice of such assignment and delegation,
together with payment instructions, addresses and related
information with respect to such Assignee Lender, shall have
been given to the Borrower and the Administrative Agent by
such Lender and such Assignee Lender;
(ii) such Assignee Lender shall have executed and
delivered to the Borrower and the Administrative Agent a
Lender Assignment Agreement, accepted by the Administrative
Agent; and
(iii) the processing fees described below shall have
been paid.
From and after the date that the Administrative Agent accepts
such Lender Assignment Agreement, (x) the Assignee Lender
thereunder shall be deemed automatically to have become a party
hereto and to the extent that rights and obligations hereunder
have been assigned and delegated to such Assignee Lender in
connection with such Lender Assignment Agreement, shall have the
rights and obligations of a Lender hereunder and under the other
Loan Documents, and (y) the assignor Lender, to the extent that
rights and obligations hereunder have been assigned and delegated
by it in connection with such Lender Assignment Agreement, shall
be released from its obligations hereunder and under the other
Loan Documents. Within five Business Days after its receipt of
notice that the Administrative Agent has received an executed
Lender Assignment Agreement, the Borrower shall execute and
deliver to the Administrative Agent (for delivery to the relevant
Assignee Lender) new Notes evidencing such Assignee Lender's
assigned Loans and Commitments and, if the assignor Lender has
retained Loans and Commitments hereunder, replacement Notes in
the principal amount of the Loans and Commitments retained by the
assignor Lender hereunder (such Notes to be in exchange for, but
not in payment of, those Notes then held by such assignor
Lender). Each such Note shall be dated the date of the
predecessor Notes. The assignor Lender shall mark the
predecessor Notes "exchanged" and deliver them to the Borrower.
Accrued interest on that part of the predecessor Notes evidenced
by the new Notes, and accrued fees, shall be paid as provided in
the Lender Assignment Agreement. Accrued interest on that part
of the predecessor Notes evidenced by the replacement Notes shall
be paid to the assignor Lender. Accrued interest and accrued
fees shall be paid at the same time or times provided in the
predecessor Notes and in this Agreement. Such assignor Lender or
such Assignee Lender must also pay a processing fee to the
Administrative Agent upon delivery of any Lender Assignment
Agreement in the amount of $3,500. Any attempted assignment and
delegation not made in accordance with this Section 11.11.1 shall
be null and void.
(b) Notwithstanding clause (a), any Lender may assign and
pledge all or any portion of its Loans and Notes and other rights
to a Federal Reserve Bank as collateral security; provided,
however, that no such assignment under this clause (b) shall
release the assignor Lender from any of its obligations
hereunder.
SECTION XI.11.2. Participations. (a) Any Lender may at
any time without the consent of the Borrower or the
Administrative Agent (but with prior written notice to the
Administrative Agent) sell to one or more commercial banks or
other Persons (each of such commercial banks and other Persons
being herein called a "Participant") participating interests in
any of the Loans, Commitments, or other interests of such Lender
hereunder; provided, however, that
(i) no participation contemplated in this
Section 11.11.2 shall relieve such Lender from its
Commitments or its other obligations hereunder or under any
other Loan Document;
(ii) such Lender shall remain solely responsible for
the performance of its Commitments and such other
obligations;
(iii) the Borrower and each other Obligor and the
Administrative Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and each of the
other Loan Documents;
(iv) no Participant, unless such Participant is an
Affiliate of such Lender, or is itself a Lender, shall be
entitled to require such Lender to take or refrain from
taking any action hereunder or under any other Loan
Document, except that such Lender may agree with any
Participant that such Lender will not, without such
Participant's consent, take any actions of the type
described in clause (b) or (c) of Section 11.1; and
(v) the Borrower shall not be required to pay any
amount under clause (b) of this Section that is greater than
the amount which it would have been required to pay had no
participating interest been sold.
(b) The Borrower acknowledges and agrees that each
Participant, for purposes of Sections 4.3, 4.4, 4.5, 4.6, 11.3
and 11.4, shall be considered a Lender, subject to clause (v)
above.
SECTION XI.11.3. Certain Other Provisions. (a) The
Borrower and the Parent authorize each Lender to disclose to any
participant or assignee (each, a "Transferee") and any
prospective Transferee, subject to the agreement of such
Transferee or prospective Transferee to comply with Section 11.14
hereof, any and all financial and other information in such
Lender's possession concerning the Borrower, the Parent or any of
their respective Subsidiaries which has been delivered to such
Lender by any such Person pursuant to or in connection with this
Agreement or which has been delivered to such Lender by any such
Person in connection with such Lender's credit evaluation of the
Borrower, the Parent or any of their respective Subsidiaries
prior to entering into this Agreement.
(b) If, pursuant to this Section, any interest in this
Agreement or any Loan or Note is transferred to any Transferee
which is organized under the laws of any jurisdiction other than
the United States or any State thereof, the transferor Lender
shall cause such Transferee (other than any Participant), and may
cause any Participant, concurrently with the effectiveness of
such transfer, (i) to represent to the transferor Lender (for the
benefit of the transferor Lender, the Administrative Agent and
the Borrower) that under applicable law and treaties, no taxes
will be required to be withheld by the Administrative Agent, the
Borrower or the transferor Lender with respect to any payments to
be made to such Transferee in respect of the Loans, (ii) to
furnish to the transferor Lender, the Administrative Agent and
the Borrower either U.S. Internal Revenue Service Form 4224 or
U.S. Internal Revenue Service Form 1001 (wherein such Transferee
claims entitlement to whole or partial exemption from U.S.
Federal withholding tax on all interest payments hereunder) and
(iii) to agree (for the benefit of the transferor Lender, the
Administrative Agent and the Borrower) to provide the transferor
Lender, the Administrative Agent and the Borrower a new Form 4224
or Form 1001 upon the obsolescence of any previously delivered
form and comparable statements in accordance with applicable U.S.
laws and regulations and amendments duly executed and completed
by such Transferee, and to comply from time to time with all
applicable U.S. laws and regulations with regard to such
withholding tax exemption.
SECTION XI.12. Other Transactions. Nothing contained
herein shall preclude either the Administrative Agent or any
other Lender from engaging in any transaction, in addition to
those contemplated by this Agreement or any other Loan Document,
with the Borrower, the Parent or any of their respective
Affiliates in which the Borrower, the Parent or such Affiliate is
not restricted hereby from engaging with any other Person.
SECTION XI.13. Certain Collateral and Other Matters. (a)
The Administrative 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 Loan Documents which may be
necessary to perfect and maintain perfected the security interest
in and Liens upon the Collateral granted pursuant to the Loan
Documents.
(b) The Lenders irrevocably authorize the Administrative
Agent, at its option and in its discretion, to release any
security interest or Lien granted to or held by the
Administrative Agent upon any Collateral (i) upon termination of
the Commitments and Letters of Credit and payment in full in cash
of all principal of and interest on the Loans, all fees payable
pursuant to Section 3.3 and 11.3, all Reimbursement Obligations
(including interest thereon) and all other fees, costs and
expenses that are payable under this Agreement or under any other
Loan Document and have been invoiced (in which case the Lenders
hereby authorize the Administrative Agent to execute, and the
Administrative Agent agrees to execute, reasonable releases in
connection with this Agreement (other than, in any event, as to
items stated to survive the termination of this Agreement));
(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 Borrower or
any Subsidiary of the Borrower owned no interest at the time the
security interest and/or Lien was granted or at any time
thereafter; (iv) constituting property leased to the Borrower or
any Subsidiary of the Borrower 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 Borrower or such Subsidiary to be, renewed 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, if required by Section 11.1,
each Lender. Upon request by the Administrative Agent at any
time, the Lenders will confirm in writing the Administrative
Agent's authority to release particular types or items of
collateral pursuant to this Section.
SECTION XI.14. Confidential Information. The
Administrative Agent and each Lender agree to hold all non-public
information (which has been identified as such by the Borrower to
the Administrative Agent and each Lender) obtained pursuant to
this Agreement and the other Loan Documents in accordance with
its customary procedures for handling confidential information,
provided that disclosure of such confidential information may be
made (a) to the Affiliates, examiners, directors, shareholders,
accountants, auditors, counsel and other professional advisors of
the Administrative Agent and each Lender, (b) in connection with
any assignment or participation to an Assignee Lender or
Participant, as the case may be, so long as such Assignee Lender
or Participant has previously agreed to these confidentiality
provisions, or (c) as required or requested by any governmental
agency, authority or representative, or pursuant to any court
order, legal process or applicable law, rule or regulation.
SECTION XI.15. Forum Selection and Consent to Jurisdiction.
TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW, ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE
LENDERS, THE BORROWER OR THE PARENT MAY BE BROUGHT AND MAINTAINED
IN THE COURTS OF THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER
PROPERTY MAY BE BROUGHT, AT THE ADMINISTRATIVE AGENT'S OPTION, IN
THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND. EACH OF THE BORROWER AND THE PARENT
HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF
THE COURTS OF THE STATE OF NEW YORK FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH
LITIGATION. EACH OF THE BORROWER AND THE PARENT FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED
MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT
THE STATE OF NEW YORK. EACH OF THE BORROWER AND THE PARENT
HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER
MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN
ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE
EXTENT THAT THE BORROWER OR THE PARENT HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT
PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE)
WITH RESPECT TO ITSELF OR ITS PROPERTY, TO THE FULLEST EXTENT
PERMITTED UNDER APPLICABLE LAW, EACH OF THE BORROWER AND THE
PARENT HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION XI.16. Waiver of Jury Trial, etc. THE
ADMINISTRATIVE AGENT, THE LENDERS, THE BORROWER AND THE PARENT
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS
THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE LENDERS, THE BORROWER
OR THE PARENT. THE BORROWER AND THE PARENT ACKNOWLEDGE AND AGREE
THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS
PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT
TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE ADMINISTRATIVE AGENT AND THE LENDERS ENTERING
INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT. IN NO
EVENT SHALL ANY LENDER OR THE ADMINISTRATIVE AGENT BE LIABLE FOR
ANY CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED IN CONNECTION
HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized as of the day and year first above written.
IMO INDUSTRIES INC., as Borrower
By:
Title:
II ACQUISITION CORP.,
as Parent/Guarantor
By:
Title:
THE BANK OF NOVA SCOTIA,
as Administrative and Documentation
Agent
By:
Title:
NATIONSBANC CAPITAL MARKETS, INC.,
as Syndication Agent
By:
Title:
LENDERS
THE BANK OF NOVA SCOTIA
By:
Title:
NATIONSBANK, N.A.
By:
Title:
SCHEDULE I
DISCLOSURE SCHEDULE
ITEM 6.5 Certain Material Liabilities.
ITEM 6.7 Litigation.
ITEM 6.8 Borrower's Subsidiaries.
ITEM 6.9 Ownership of Properties.
ITEM 6.10 Taxes.
ITEM 6.11 Employee Benefit Plans.
ITEM 6.12 Environmental Matters.
ITEM 6.14 Amendments to Purchase Agreement.
ITEM 6.16 Intellectual Property.
ITEM 6.17 Outstanding Options, Warrants and Convertible
Securities
ITEM 6.18 Absence of Defaults.
ITEM 6.22 Breach of Government Contracts.
ITEM 7.1.6 Environmental Covenant.
ITEM 7.2.2(b) Indebtedness to be Paid.
ITEM 7.2.2(c) Ongoing Indebtedness.
SCHEDULE II
PERCENTAGES
Revolving Term Loan
Lender Loan Commitment
Commitment
THE BANK OF NOVA SCOTIA 50% 50%
NATIONSBANK, N.A. 50% 50%
TOTAL 100.00% 100.00%
SCHEDULE III
ADMINISTRATIVE INFORMATION
Borrower
IMO INDUSTRIES INC.
Princeton Pike Corporate Center
1009 Lenox Drive
Building Four West
P.O. Box 6550
Lawrenceville, New Jersey 08648-0550
Attention:
Telecopier No.: 609-896-7633
Confirmation No.: 609-896-7600
Guarantor/Parent
II ACQUISITION CORP.
9211 Forest Hill Avenue
Suite 109
Ricmond, Virginia 23235
Attention: John Young
Telecopier No.: 804-560-4076
Confirmation No.: 804-560-4074
Administrative Agent and Documentation Agent
THE BANK OF NOVA SCOTIA
One Liberty Plaza
New York, New York 10006
Attention: Tilsa Cora
Telecopier No.: 212-225-
Confirmation No.: 212-225-
Syndication Agent
NATIONSBANC CAPITAL MARKETS, INC.
NC1-007-01-01
100 North Tryon Street
Charlotte, North Carolina 28255
Attention: William A. Bowen, Jr.
Telecopier No.: 704-386-3270
Confirmation No.: 704-386-3465
Lenders:
THE BANK OF NOVA SCOTIA
One Liberty Plaza
New York, New York 10006
Domestic, LIBOR and
Notice Office:
One Liberty Plaza
New York, New York 10006
Attention: Steve Johnson
Telecopier No.: 212-225-5172
Confirmation No. 212-225-5099
NATIONSBANK, N.A.
Domestic, LIBOR and
Notice Office:
NC1-001-15-06
101 North Tryon Street
Charlotte, North Carolina 28255
Attention: Patricia Turner
Telecopier No.: 704-386-8694
Confirmation No. 704-386-3933
SCHEDULE IV
REAL ESTATE DISPOSITIONS
Domestic
1. Varo-Marquis
3609 Marquis St.
Garland, TX
2. Texas Forge
6519 Liberty Rd.
Houston, TX
3. Turbomachinery
11845 Ormondy
Houston, TX
4. Enterprise Engine
Enterprise Way & 85th Ave.
Oakland, CA
5. Turbomachinery-Turbine Div.
South Plant & additional parcel
Trenton, NJ
6. Delroyd
121 First Avenue
Hamilton Township, NJ
7. Condenser Plant
801 N. Front St.
Florence, NJ
Foreign
1. Morse Controls
Singapore Plant
2. Sirsa Plant
Cassino, Italy
3. I mo Industries GmbH
Reichelsheim, Germany
4. Imo Industries GmbH
Heiligenhaus, Germany
SCHEDULE V
MORTGAGES IN FAVOR OF ADMINISTRATIVE AGENT
Location Ownership Status
3900 Westinghouse Owned by IMO
Boulevard, Mecklenburg
County
Charlotte, NC 28373
506 South Bickett Owned by IMO
Boulevard, Franklin
County
Louisburg, NC 27549
14 Hayward Street, Owned by IMO
Norfolk County
Quincy, MA 02171
121 First Avenue, Mercer Owned by IMO
County
Hamilton Township, NJ
09950
3750 East Market Street, Owned by IMO
York County
York, PA 17402
Airport Road, Union Owned by IMO
County
Monroe, NC 20111-5020
476 Industrial Park Owned by IMO
Road, Adair County
Columbia, KY 42626
82 Bridges Avenue, Owned by Warren Pumps
Worcester County Inc.
Warren, MA 01083-0969 (Subsidiary of IMO)
21 Clinton Street, Owned by IMO
Summit County
Hudson, OH 44236-2899
Hydraulic Operation Owned by IMO
1579 Barber Road,
Sarasota County
Sarasota, FL 34240
7970 U.S. 25 Dixie Leased by IMO
Highway
Florence, KY 41042
SCHEDULE VI
DISCONTINUED OPERATIONS
Subsidiaries
VHC, Inc.
Baird Corp.
Baird Atomic Ltd.
Deltex Service, Inc.
Properties within Imo Industries, Inc.
1. Varo-Marquis
3609 Marquis St.
Garland, TX
2. Texas Forge
6519 Liberty Rd.
Houston, TX
3. Turbomachinery
11845 Ormondy
Houston, TX
4. Enterprise Engine
Enterprise Way & 85th Ave.
Oakland, CA
5. Turbomachinery-Turbine Div.
South Plant & additional parcel
Trenton, NJ
6. Condenser Plant
801 N. Front St.
Florence, NJ
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