<PAGE> 1
Page 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended October 31, 1996
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from _____________________ to _____________________
Commission File Number: 0-22798
------------------------------------------------------
SPECIALTY EQUIPMENT COMPANIES, INC.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3337593
- -----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1245 Corporate Blvd., Suite 401, Aurora, IL 60504
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(630) 585-5111
- -----------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all and 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 requirement for the past 90 days. Yes X No .
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. 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.
Class Outstanding at December 11, 1996
- ----------------------------- ---------------------------------
Common Stock, $0.01 par value 17,903,018 shares
The exhibit index is on page 15.
<PAGE> 2
Page 2
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
SPECIALTY EQUIPMENT COMPANIES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
1995 1996 1995 1996
------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue ............................................. $ 97,847 $ 102,775 $ 308,794 $ 313,110
Cost of sales ....................................... 67,589 71,951 212,040 217,036
--------- --------- --------- ---------
Gross margin ................................ 30,258 30,824 96,754 96,074
Selling, general and administrative expenses ........ 14,932 15,435 47,923 47,405
Amortization ........................................ 3,787 489 20,228 1,369
Other expense ( income), net ........................ (7) (21) 6 (352)
--------- --------- --------- ---------
Earnings from operations before interest and
income taxes ...................................... 11,546 14,921 28,597 47,652
Interest expense, net ............................... 5,205 4,515 16,219 14,407
--------- --------- --------- ---------
Earnings from operations before income taxes ........ 6,341 10,406 12,378 33,245
Income taxes ........................................ 3,104 4,049 11,561 12,932
--------- --------- -------- ---------
Net earnings before extraordinary item........... 3,237 6,357 817 20,313
Extraordinary item (net of taxes) ................... - (1,784) (218) (1,784)
--------- --------- ---------- ---------
Net earnings..................................... $ 3,237 $ 4,573 $ 599 $ 18,529
========= ========= ========= =========
Net earnings per common and dilutive common
equivalent share before extraordinary item......... $ 0.15 $ 0.29 $ 0.04 $ 0.95
Extraordinary item (net of taxes) ................... - (0.08) (0.01) (0.08)
--------- --------- --------- ---------
Net earnings per common and dilutive
common equivalent share ........................... $ 0.15 $ 0.21 $ 0.03 $ 0.87
========= ========= ========= =========
Average number of common and dilutive common
equivalent shares outstanding ..................... 21,311.0 21,356.4 $21,265.0 $21,371.3
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
<PAGE> 3
Page 3
SPECIALTY EQUIPMENT COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
<TABLE>
<CAPTION>
January 31, October 31,
1996 1996
-------- --------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................. $ 28,447 $ 6,416
Accounts receivable, net .............................. 44,969 66,650
Inventories ........................................... 51,514 53,135
Other current assets .................................. 10,777 7,636
-------- --------
Total current assets ............................... 135,707 133,837
Net property, plant and equipment ....................... 29,451 32,151
Restricted cash equivalents ............................. 5,873 3,034
Intangible assets, net .................................. 7,667 5,635
Other assets ............................................ 1,537 920
-------- --------
Total assets........................................ $180,235 $175,577
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current installments of long-term debt ................ $ 174 $ 174
Accounts payable ...................................... 21,340 26,843
Accrued expenses ...................................... 67,167 73,168
Accrued income taxes .................................. 4,199 7,315
-------- --------
Total current liabilities .......................... 92,880 107,500
Long-term debt, excluding current installments .......... 193,041 155,450
Other non-current liabilities ........................... 1,935 1,881
Stockholders' equity (deficit):
Common stock .......................................... 173 175
Additional paid-in capital ............................ 50,895 50,678
Accumulated deficit ................................... (157,921) (139,392)
Other ................................................. (768) (715)
-------- --------
Total stockholders' deficit ........................ (107,621) (89,254)
Commitments and contingent liabilities (note 7) .........
Total liabilities and stockholders' equity (deficit)..... $180,235 $175,577
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 4
Page 4
SPECIALTY EQUIPMENT COMPANIES, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
October 31,
1995 1996
------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings ................................................... $ 599 $ 18,529
Items not affecting cash:
Depreciation and amortization ................................. 3,315 3,404
Amortization .................................................. 20,357 2,019
Utilization of NOL carry forward .............................. 819 819
(Gain) loss from asset sales .................................. 6 (25)
------- ---------
Total ....................................................... 25,096 24,746
------- ---------
Changes in current assets and liabilities:
Accounts receivable, net ....................................... (7,197) (21,191)
Inventories .................................................... 5,873 (1,165)
Other current assets ........................................... (834) 3,147
Accounts payable and other current
liabilities, excluding current installments of long-term debt.. 14,819 14,209
------- ---------
Total ...................................................... 12,661 (5,000)
------- ---------
Net cash flows from operations ................................... 37,757 19,746
Cash flows from investing activities:
Additions to property, plant and equipment ..................... (4,155) (5,903)
Disposals of property, plant and equipment ..................... 36 31
Cash equivalents restricted for capital additions .............. (2,894) 2,839
Net assets of business acquired ................................ - (1,321)
------- ---------
Net cash used in investing activities ......................... (7,013) (4,354)
------- ---------
Cash flows from financing activities:
Net decrease in revolving credit facility ...................... (6,967) -
Repayments of long-term debt ................................... (5,214) (37,591)
Proceeds from long-term debt ................................... 6,400 -
Proceeds from stock options exercised .......................... 3,547 323
Cancellation of stock options .................................. - (780)
Refinancing costs .............................................. (111) -
------- ---------
Net cash used in financing activities ......................... (2,345) (38,048)
------- ---------
Other ............................................................ (605) 625
------- ---------
Net increase in cash and cash equivalents......................... 27,794 (22,031)
Cash and cash equivalents:
Beginning of period............................................. 3,244 28,447
------- ---------
End of period................................................... $31,038 $ 6,416
======= =========
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
<PAGE> 5
Page 5
SPECIALTY EQUIPMENT COMPANIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. General
These financial statements should be read with the financial statements and the
notes thereto for the fiscal year ended January 31, 1996 included in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission ("Commission") on March 26, 1996.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
operations for the three and nine month periods ended October 31, 1995 and
1996, (b) the financial position at January 31, 1996 and October 31, 1996 and
(c) the statements of cash flows for the nine month periods ended October 31,
1995 and 1996, have been made. The financial results for the three and nine
months ended October 31, 1996 are not necessarily indicative of the financial
results for the entire 1997 fiscal year. Certain reclassifications have been
made to the prior period financial statements to conform with the current
period presentation.
Net earnings per common and dilutive common equivalent share is computed based
on the weighted average number of common and dilutive common equivalent shares
outstanding during the period. The outstanding warrants and options to
purchase common stock are not included in common shares outstanding for the
nine month period ended October 31, 1995 because the Company reported a net
loss for that period; such options and warrants are included for the periods
ended October 31, 1996 for which the Company reported net earnings.
2. Accounts Receivable
Accounts receivable at the following dates consisted of the following:
<TABLE>
<CAPTION>
January 31, October 31,
Description 1996 1996
----------- -----------
(in thousands)
<S> <C> <C>
Accounts receivable ................................. $50,498 $ 71,889
Less: allowance for doubtful accounts ............... 5,529 5,239
------- --------
Total ....................................... $44,969 $ 66,650
======= ========
</TABLE>
3. Inventories
Inventories at the following dates consisted of the following:
<TABLE>
<CAPTION>
January 31, October 31,
1996 1996
----------- -----------
(in thousands)
<S> <C> <C>
Raw materials....................................... $26,052 $27,391
Work in progress ................................... 6,976 6,649
18,486 19,095
------- -------
51,514 53,135
Less: excess of FIFO cost over LIFO cost - -
------- -------
Total ...................................... $51,514 $53,135
======= =======
</TABLE>
The Company uses the LIFO method of valuing inventories. LIFO had a de
minimis effect on the cost of sales for the three and nine month periods ended
October 31, 1995 and 1996.
<PAGE> 6
Page 6
SPECIALTY EQUIPMENT COMPANIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
4. Intangibles:
<TABLE>
<CAPTION>
January 31, October 31,
1996 1996
----------- -----------
(in thousands)
<S> <C> <C>
Intangibles consisted of the following:
Patents................................................. $ 1,568 $ 1,568
Other intangibles ...................................... 48,206 48,770
Deferred pension costs ................................. 1,904 1,904
Less: accumulated amortization ......................... 44,011 46,607
------- --------
Net intangibles ........................................ $ 7,667 $ 5,635
======= ========
</TABLE>
Other intangibles primarily include deferred financing fees, engineering
drawings, distribution networks and skilled workforce.
5. Income Taxes
The Company follows the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes"("Statement 109"). At January 31, 1996, the Company had a net deferred
tax asset of $35.7 million less a valuation allowance of $30.6 million. The
Company has approximately $18.9 million in NOL carry forwards. However, a
number of issues regarding the treatment of certain changes in ownership of the
Company pursuant to certain provisions of the Internal Revenue Code of 1986, as
amended ("IRC"), may arise which, if determined adversely, could limit the
amount and/or use of the NOL carry forwards. The NOL carry forwards are
available through fiscal 2008.
6. Long-Term Debt
Long-term debt at the following dates consisted of the following:
<TABLE>
<CAPTION>
January 31, October 31,
Description 1996 1996
----------- -----------
(in thousands)
<S> <C> <C>
Revolving line of credit ............................. $ - $ -
11-3/8% senior subordinated notes due 2003 ........... 180,000 149,040
Industrial project revenue bonds due 2008 and 2009 ... 12,900 6,400
Capitalized leases ................................... 315 184
-------- --------
193,215 155,624
Less: current installments .......................... 174 174
-------- --------
Total long-term debt, less current installments. $193,041 $155,450
======== ========
</TABLE>
In August 1996 the Company redeemed its $6.5 million Village of Rockton,
Illinois Industrial Project Revenue Bonds due 2008 and acquired in the open
market $31.0 million of its 11-3/8% Senior Subordinated Notes due 2003. Both
purchases were funded with available cash and cash equivalents.
<PAGE> 7
Page 7
SPECIALTY EQUIPMENT COMPANIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
7. Commitments and Contingent Liabilities
The Company is involved in litigation and claims incidental to its business.
The ultimate outcome of these matters cannot presently be determined because of
the uncertainties inherent in litigation. However, such claims are being
vigorously contested and management does not believe that it is probable that
the ultimate outcome of the loss contingencies relating to such litigation and
claims will have, individually or in the aggregate, a material adverse impact
upon the financial condition or results of operations of the Company.
The following is a summary of the more significant litigation and claims.
Litigation
The Company is a defendant along with other defendants in an action filed on
July 20, 1995 entitled "Thermodyne Food Service Products, Inc. and AFTEC, Inc.
v. McDonald's Corporation, et al." in the United States District Court,
Northern District of Illinois, Eastern Division. Plaintiffs allege that the
Company and other defendants misappropriated trade secrets in connection with
the Company's development of an oven for McDonald's and OSI. As a result of a
ruling on a motion to dismiss, the only claim remaining against the Company is
the trade secret claim. The defendants' motion for summary judgment on the
trade secret claim was denied and the case is subject to go to trial at any
time. Although the complaint does not specify a dollar amount for claimed
damages, plaintiffs have filed documents with the court seeking up to $90
million in damages. The Company believes it has strong defenses to this claim
and intends to contest it vigorously. In addition the Company believes that,
were it found liable, it would be entitled to seek contribution from the
co-defendants with respect to any such liability. The Company has not
established a reserve in its financial statements relating to this case.
The Company was a defendant, along with a number of its current and former
officers and directors, its former lender, General Electric Capital Corporation
("GECC"), and the underwriters with respect to the Company's 1988 offering of
debentures, in a securities class action filed by Melvin C. Nielsen (the
"Nielsen Case") alleging that the Company's prospectus and registration
statement with respect to such debentures contained material misrepresentations
and omissions, and seeking rescission of the sale of all $150 million of
debentures, and other compensatory and exemplary damages, and costs and
expenses. Although the claim was discharged against the Company pursuant to
the Company's plan of reorganization ("POR") and the Company was subsequently
dismissed from this case, the Company has continuing indemnification
obligations with respect to any liabilities incurred with regard to this claim
by all of the current and certain of the former officers and directors who are
defendants in the case, and has also agreed to indemnify GECC and one
underwriter, Kidder, Peabody & Co. ( a GECC affiliate at such time) for all
costs incurred by them in a successful defense. On October 27, 1994 the
Company paid GECC $80,000 with respect to GECC's costs incurred in connection
with the Nielsen case. Further, Piper Jaffray & Hopwood, another underwriter,
made a claim under the terms of its underwriting agreement for indemnification
for its costs and expenses in litigating this claim, which claim was denied by
the Bankruptcy Court. The Company's ultimate indemnification liability with
respect to this case, if any, should be limited to the extent that in
connection with the POR, persons holding approximately $115 million in
principal amount of debentures at February 5, 1992 granted releases to, among
others, each defendant in this case. However, because of the possibility that
the debentures were traded among members of the plaintiff class, there can be
no assurance that the Company's indemnification obligation with respect to the
Nielsen Case is limited to $35 million; additionally, the Company has not
established a reserve in its financial statements relating to its possible
indemnification obligation in the Nielsen case. On February 26, 1993, the
Court dismissed plaintiff's claims under Rule 10b-5 and common law fraud. In
October of 1996, the Court certified a class under Section 11 of the Securities
Act and then entered summary judgment in favor of all defendants as to all
pending claims. Although the class representative has indicated that he will
not appeal this decision, a member of the class could (i) opt-out of the class
and bring a separate action or (ii) move to intervene and appeal the ruling.
Any class member which does not exercise one of these options will be
bound by the summary judgment ruling and such class member's claims will be
barred.
<PAGE> 8
Page 8
SPECIALTY EQUIPMENT COMPANIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The Company and certain of its current and former directors are named as
defendants in an action filed by Virginia A. Noerr, who claims to be a
stockholder of the Company's common stock. The action "Noerr v. Greenwood et
al.," C.A. No. 14320, is pending in the Court of Chancery for the State of
Delaware in and for New Castle County, Delaware. Plaintiff purports to
bring this action both as a class action on behalf of all stockholders of
record on April 2, 1993 and derivatively for the benefit of the Company. The
amended complaint alleges that the named individual defendants breached
fiduciary duties of care and loyalty owed to the Company with regard to stock
options granted to the named individual defendants and with regard to the
accuracy of the disclosures in the proxy statement which sought stockholder
approval. Plaintiff also alleges, among other things, that implementation of
the Company's stock option plan constituted self-dealing transactions not
entirely fair to the Company in that the exercise price of the options was so
unreasonably low that the issuance of Common Stock pursuant to the options
constitute waste. The amended complaint seeks, among other things, entry of
judgment against defendants permanently enjoining them from exercising the
stock options; imposing a constructive trust for the benefit of the Company
upon any profits the individual named defendants may have made through exercise
of their options, and monetary damages, costs and expenses. In May 1996
plaintiff filed an amended complaint. The amended complaint, among other
things, corrects certain errors in the original filing and expands the
complaint to include the Company's Executive Long-Term Incentive Plan. The
individual defendants have made demand upon the Company for indemnification.
The Company believes that if the Company were liable to the individual
defendants for indemnification, the uninsured portion of such liability would
not be material to the Company. The Company and the individual defendants
believe that the plaintiff's allegations are without merit and are factually
incorrect and the Company intends to contest these allegations vigorously.
Environmental and Related Matters
On May 5, 1994, the Company (doing business as Taylor Freezer Company) was
among more than 80 parties notified as potential third-party defendants in an
action involving the clean up of the MIG/Dewane Landfill near Belvidere,
Illinois. A third-party complaint has been filed by the principal owners and
operators of the landfill. Those owners and operators were sued by the
principal users of the landfill who in turn had been sued by the Environmental
Protection Agency ("EPA") in April, 1992. The complaint seeks contribution for
the proposed clean up of the site. The Company has not received settlement
offers from the EPA, but it settled its alleged liability with the private
plaintiffs for $54,000 for the costs associated with the remedial investigation
of the site. The Company has not settled its alleged liability for clean up
costs at the site. Beatrice Company (ConAgra) has assumed defense of the
matter and has agreed to defend and indemnify the Company for claims related to
the MIG/Dewane site to the extent they are related to Taylor and the events
giving rise to the claims occurring during the Beatrice Company (ConAgra)
period of ownership. Based upon presently available information, management
does not believe this matter will have a material effect on the Company's
results of operation or financial condition.
The Company has also received notice of potential environmental actions from
(i) the South Carolina Department of Health and Environmental Control
("SCDHEC") and the EPA with respect to drums of hazardous waste materials
disposed of in South Carolina, (ii) the SCDHEC with respect to the clean up of
the Unisphere Hazardous Waste Site in Spartanburg County, South Carolina, and
(iii) the Nevada Department of Conservation and Natural Resources, Division of
Environmental Protection ("NDEP"), which issued a finding of alleged violation
and order relating to alleged soil and ground water contamination. With
respect to the SCDHEC matter discussed in (i) above, management is unable to
determine the existence or amount of its potential liabilities because no
formal proceedings have been commenced and no notifications have been received
regarding this matter since December, 1992. The Company has reason to believe
that this site will be the subject of no further action by the EPA. With
respect to the SCDHEC matter discussed in (ii) above, management is unable to
determine the existence or amount of its potential liability, if any, because
the use of the site by Beverage-Air occurred prior to the purchase of the
Beverage-Air assets by the Company from
<PAGE> 9
Page 9
SPECIALTY EQUIPMENT COMPANIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Gerlach Industries in November, 1986. With respect to the NDEP matter
discussed in (iii) above, the Company has spent approximately $311,000 to
conduct tests and to implement a remediation program, but given the pendency of
the Company's appeal and its uncertain outcome, management cannot estimate
what, if any, additional expenditures might be required.
Letters of Credit
As of October 31, 1996, the Company had letters of credit outstanding totaling
$11.2 million, which guarantee various business activities, including $6.5
million of letters of credit which guarantee the Industrial Project Revenue
Bonds (see note 6 above).
8. Stock Option Plan and Stock Warrants
On May 6, 1993 the stockholders approved long-term incentive plans for both
non-employee directors and employees. Pursuant to the Non-Employee Directors
Long-Term Incentive Plan ("Director Plan") each non-employee director was
granted an option to purchase 175,241 shares of the Company's common stock at a
price of $1.00 per share (which was not less than management's determination of
the fair market value of the underlying shares on the date of grant). The
aggregate grants under the Director Plan totaled 876,205 shares.
The Executive Long-Term Incentive Plan, as amended, ("Employee Plan") allows
for the issue of a total of 4,004,814 shares of the Company's common stock. All
of the options granted are at an exercise price which was not less than
management's determination of the fair market value of the underlying shares at
the respective dates of grant.
The options under the Director Plan all vested and became exercisable on May 6,
1995, as on such date all of the conditions to vesting were satisfied. All
options awarded pursuant to the Director Plan expire on May 6, 2000.
The following sets forth information with respect to options issued and
outstanding:
<TABLE>
<CAPTION>
Average option
Shares price per share
------ ---------------
<S> <C> <C>
Options outstanding at January 31, 1996 3,703,732 $2.02
Options exercised (64,829) (1.00)
Options canceled (2,171) (1.00)
--------- -----
Options outstanding at April 30, 1996
(3,356,732 exercisable) 3,636,732 2.03
Options exercised (104,944) (1.00)
Options canceled (30,556) (1.00)
--------- -----
Options outstanding at July 31, 1996 3,501,232 2.07
(3,376,232 exercisable)
Options exercised (62,719) (1.33)
Options canceled (27,281) (1.33)
Options granted 50,000 12.00
--------- -----
Options outstanding at October 31, 1996 3,461,232 $2.25
(3,336,232 exercisable) ========= =====
</TABLE>
Options canceled represent options which are withheld by the Company, upon
exercise by the grantee, to satisfy the grantee's withholding tax liability.
The options canceled cannot be reissued.
A non-employee director has stock warrants currently exercisable to purchase
approximately 1,129,856 shares of Common Stock at approximately $2.00 per
share.
<PAGE> 10
Page 10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF THE OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
The following table sets forth selected operating data as a percentage of
Company net revenue:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, October 31,
1995 1996 1995 1996
------ ------ ------ -------
<S> <C> <C> <C> <C>
Net revenue:
Beverage-Air.............................................. 38.0% 44.4% 40.6% 39.7%
Taylor Company............................................ 42.9 38.3 42.3 43.8
Wells Manufacturing/Bloomfield ........................... 15.7 14.1 14.1 13.6
World Dryer............................................... 3.4 3.2 3.0 2.9
------ ------ ------ -------
Net revenue............................................... 100.0 100.0 100.0 100.0
Gross margin.............................................. 30.9 30.0 31.3 30.7
Selling, general and administrative expenses.............. 15.3 15.0 15.5 15.1
Amortization.............................................. 3.8 0.5 6.5 0.5
Other expense (income), net .............................. - - - (0.1)
------ ------ ------ -------
Earnings from operations before
interest expense and income taxes ...................... 11.8 14.5 9.3 15.2
Interest expense ......................................... 5.3 4.4 5.3 4.6
------ ------ ------ -------
Earnings from operations
before income taxes..................................... 6.5 10.1 4.0 10.6
Income taxes.............................................. 3.2 3.9 3.7 4.1
------ ------ ------ -------
Net earnings before extraordinary item.................... 3.3% 6.2% 0.3% 6.5%
====== ====== ====== =======
</TABLE>
Three and Nine Month Periods Ended October 31, 1996 (Fiscal 1997) Compared to
Three and Nine Month Periods Ended October 31, 1995 (Fiscal 1996).
Revenue. Revenue for the three months ended October 31, 1996 increased 5.0% to
$102.8 million compared with $97.8 million for the comparable period in fiscal
1996. Revenue for the nine months ended October 31, 1996 increased 1.4% to
$313.1 million compared with $308.8 million for the comparable period in fiscal
1996. The revenue increase for the three months was primarily attributable to
increased sales of refrigeration and glass door merchandising equipment to the
soft drink bottler industry, specifically sales of products for use outside the
United States offset by lower sales of cooking grill equipment. In the nine
month period increased sales of ice cream freezer equipment was nearly offset
entirely by lower sales of cooking grills. Revenue attributable to sales of
products for use outside the United States increased by 19.1% in the first nine
months of fiscal 1997, as compared with the comparable period in fiscal 1996.
For the three month period ended October 31, 1996 such sales increased by more
than 70%. The increase is primarily attributable to higher sales of
refrigeration and glass door merchandising equipment to the bottler market.
For the first nine months of fiscal 1997, revenue from sales of products for
use outside the United States was 30.8% of revenue as compared with 26.2% for
the same period in fiscal 1996.
<PAGE> 11
Page 11
Gross Margin. Gross margin for the three months ended October 31, 1996
increased 1.9% to $30.8 million, compared with $30.3 million for the comparable
period in fiscal 1996. Gross margin for the nine months ended October 31, 1996
decreased 0.7% to $96.1 million, compared with $96.8 million for the comparable
period in fiscal 1996. As a percent of revenue, gross margin decreased from
30.9% and 31.3% of revenue for the three and nine month periods ended October
31, 1995, respectively, to 30.0% and 30.7% of revenue in the three and nine
month periods ended October 31, 1996. The decline in gross margin as a percent
of revenue for the three and nine month periods ended October 31, 1996 compared
to the prior year periods was primarily due to a higher percentage of sales to
the soft drink bottler market which carries lower gross margins, costs
associated with the new Beverage-Air plant in South Carolina and increased
price competition in the soft drink bottler market.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expense for the three months ended October 31, 1996
increased 3.4% to $15.4 million. SG&A expense for the nine months ended
October 31, 1996 decreased 1.1% to $47.4 million compared with $47.9 million
for the comparable period in fiscal 1996. As a percent of revenue, SG&A
declined from 15.3% to 15.0% in the three months ended October 31, 1996 and
from 15.5% to 15.1%, in the nine months ended October 31, 1996, compared to the
comparable periods in fiscal 1996. Included in the nine month period ended
October 31, 1995 was a $1.9 million expense provision associated with the
implementation of Demand Flow Technology, an inventory program designed to
reduce the inventory component of working capital. The nine month period ended
October 31, 1996 included sales promotion expense of $1.1 million reflecting
credits given under a freezer trade-in program and $0.2 million to promote the
sale of a counter top refrigerator model. The freezers sold under the
trade-in program were reported as sales at their normal selling price. These
expenses were offset by favorable medical and casualty insurance experience of
$1.1 million.
Amortization. Amortization for the three months ended October 31, 1996
decreased to $489,000 compared with $3.8 million for the comparable period in
fiscal 1996. Amortization for the nine months ended October 31, 1996 decreased
to $1.4 million compared with $20.2 million for the comparable period in fiscal
1996. The decrease for the three month period is attributable to the fact
that a majority of the Company's other intangible assets were fully amortized
as of January 31, 1996. The decrease for the nine month period is primarily
attributable to the fact that the reorganization value in excess of amounts
allocable to identifiable assets (which was recorded as a result of the
Company's 1992 reorganization) was fully amortized as of March 31, 1995.
Other Expense (Income). Other income for the nine month periods ended October
31, 1996 increased by $0.3 million versus the comparable prior year periods,
reflecting a net recovery of $0.3 million of Canadian federal sales taxes
applicable to prior years.
Interest Expense. Interest expense for the three months ended October 31, 1996
decreased 13.3% to $4.5 million compared with $5.2 million for the comparable
period in fiscal 1996. Interest expense for the nine months ended October 31,
1996 decreased 11.2% to $14.4 million compared with $16.2 million for the
comparable period in fiscal 1996. The decrease is principally due to a decrease
in average amounts borrowed pursuant to the Company's Bank Credit Agreement
dated December 1, 1993, as amended (the "Bank Credit Agreement"), the
acquisition by the Company in July 1995 of $5.0 million of its 11-3/8% senior
subordinated notes and of $31.0 million of its 11-3/8% senior subordinated
notes in August 1996 and an increase in interest income earned from short-term
cash investments.
Liquidity and Capital Resources
Net cash flows from operations were $19.7 million for the nine months ended
October 31, 1996 compared with $37.8 million for the nine months ended October
31, 1995. The decline is primarily the result of a $14.9 million increase in
accounts receivable, primarily foreign receivables, compared to the prior year.
See -- "Results of Operations -- Revenue."
<PAGE> 12
Page 12
Net cash used in investing activities amounted to $4.4 million for the
nine months ended October 31, 1996 compared with $7.0 million for the nine
months ended October 31, 1995. Through the first nine months of fiscal 1997,
total capital expenditures have been $5.9 million. In addition, the Company
acquired the net assets of Taylor Distributors, Inc. for approximately $1.3
million. The Company anticipates that capital expenditures for fiscal 1997 will
be approximately $10.0 million. The Company's capital spending for the balance
of fiscal 1997 is expected to be related to the acquisition, installation,
improvement and equipping of its Beverage-Air and Taylor production facilities
and the construction of a service and sales technical training center in
Rockton, Illinois which is expected to cost approximately $3.4 million and has
been included in the projected capital spending for the year.
As of October 31, 1996, the Company had net working capital of $26.3 million.
The Company's average operating working capital (defined as average monthly
gross accounts receivable and net inventory less accounts payable) as a
percentage of sales declined from 22% during fiscal year 1996 to 21% for the
nine months ended October 31, 1996. The Company's earnings from operations
were sufficient to cover fixed charges for the nine months ended October 31,
1996.
As of October 31, 1996, the Company had no borrowings under the Revolving
Credit Facility of its Bank Credit Agreement. However, it had outstanding
letters of credit in the amount of $11.2 million, including $6.5 million of
letters of credit which guarantee the Industrial Project Revenue Bonds
(referenced in note 6 to the financial statements included as item 1 hereto).
Under the Revolving Credit Facility, the Company had $36.2 million available
for additional borrowings. In addition, the Company had cash and cash
equivalents of $6.4 million as of October 31, 1996.
In August 1996 the Company redeemed its $6.5 million Village of Rockton,
Illinois Industrial Project Revenue Bonds and acquired in the open market $31.0
million of its 11-3/8% senior subordinated notes due 2003. The purchases were
funded with available cash and cash equivalents. The Company recorded an
extraordinary loss of $1.8 million (net of taxes) for the premium paid on the
early extinguishment of the senior subordinated notes. The redemption of the
Industrial Project Revenue Bonds was made due to the Company increasing its
planned capital expenditures to include a service and sales training center in
Rockton, Illinois. The redemption was made to comply with the IRC.
The Company had four financial covenants to meet at October 31, 1996 under the
Bank Credit Agreement -- a current ratio covenant at October 31, 1996 of at
least 1.15:1.00; a leverage ratio covenant for the twelve months ended October
31, 1996 of not greater than 5.75:1.00; an interest coverage covenant ratio for
the twelve months ended October 31, 1996 of at least 1.50:1.00 and a cash flow
to fixed charges covenant ratio of at least 1.2125:1.00. The Company met each
of these covenants as it had a current ratio of 1.25:1.00 at October 31, 1996;
a leverage ratio of 2.35:1.00 for the twelve months ended October 31, 1996; an
interest coverage ratio for the twelve months ended October 31, 1996 of
3.15:1.00 and a cash flow to fixed charges ratio for the twelve months ended
October 31, 1996 of 2.13:1.00.
As of December 1, 1996, the Company entered into a credit agreement with
several banks and Bank of America, Illinois, as agent for the banks (the "BA
Credit Agreement"). The BA Credit Agreement provides for a $60 million credit
facility, which includes an unsecured line of credit of $45 million and a $15
million facility for letters of credit. The BA Credit Agreement was used to
refinance the Company's Bank Credit Agreement. A copy of the BA Credit
Agreement is being filed as Exhibit 10.1.
Management believes that the BA Credit Agreement and the other sources of
capital described above, with internally generated funds, will be adequate to
meet the Company's anticipated capital and cash requirements for at least the
next twelve months, including debt service and corporate income taxes.
Impact of Inflation
Management does not believe that inflation has had a material impact on the
Company's operations during the first nine months of fiscal 1997. Management
believes that the Company may face increasing costs during the
<PAGE> 13
Page 13
balance of the fiscal year as a result of inflation which the Company may not
fully be able to offset with increased productivity or pass on to its customers
due to competitive factors within the industry.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See note 7 of "Notes to Unaudited Consolidated Financial Statements" included
in Part I. Item 1. of this Form 10-Q.
Item 4. Submissions of Matters to a Vote of Security Holders
There were no matters submitted to a vote of stockholders for the quarter ended
October 31, 1996.
Item 5. Other Information
On December 1, 1996 the Company entered into the BA Credit Agreement which
provides for, among other things, a $60 million credit facility, which includes
a $45 million unsecured line of credit and a $15 million facility for letters
of credit. The BA Credit Agreement replaces the Company's Bank Credit
Agreement. (See "Management's Discussion and Analysis of Results of the
Operations and Financial Condition -- Liquidity and Capital Resources.")
Item 6. Exhibits and Reports on Form 8-K
1. Exhibits
10.1 Credit Agreement dated as of December 1, 1996, among
Specialty Equipment Companies, Inc., the several financial
institutions from time to time party to the Agreement, and
Bank of America Illinois, as agent for the Banks.
27.1 Financial Data Schedule
2. Reports on Form 8-K.
None.
<PAGE> 14
Page 14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Specialty Equipment Companies, Inc.
(Registrant)
Date: December 13, 1996 /s/ William E. Dotterweich
-----------------------------------------------
William E. Dotterweich, Chief Executive Officer
(Principal Executive Officer)
Date: December 13, 1996 /s/ Donald K. McKay
----------------------------------------------
Donald K. McKay, Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE> 15
Page 15
Exhibit Index
Exhibit
No. Description Page
- ------- ----------- ----
10.1 Credit Agreement entered into as of December 1, 1996, among 16
Specialty Equipment Companies, Inc., the several financial
institutions from time to time party to this Agreement and
Bank of America Illinois, as agent for the Banks.
27.1 Financial data schedule. 85
<PAGE> 1
Exhibit 10.1
CREDIT AGREEMENT
DATED AS OF DECEMBER 1, 1996
AMONG
SPECIALTY EQUIPMENT COMPANIES, INC.
BANK OF AMERICA ILLINOIS,
AS AGENT,
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
ARTICLE 1
<S> <C> <C>
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Interpretive Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
1.3 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 2
THE CREDITS . . . . . . . . . . . . . . . . . . . . . . 16
2.1 Amounts and Terms of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.2 Loan Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.3 Procedure for Borrowing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.4 Conversion and Continuation Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.5 Voluntary Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . . . . . 19
2.6 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.7 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.8 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.9 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.10 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(a) Agency Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(b) Unused Loan Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(c) L/C Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.11 Computation of Fees and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.12 Payments by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.13 Payments by the Banks to the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.14 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 3
TAXES, YIELD PROTECTION AND ILLEGALITY . . . . . . . . . . . . . . . 27
3.1 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.2 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.3 Increased Costs and Reduction of Return . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.4 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.5 Inability to Determine Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.6 Reserves on Offshore Rate Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.7 Certificates of Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.8 Substitution of Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.9 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE 4
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . 32
4.1 Conditions of Initial Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(a) Credit Agreement and Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(b) Resolutions; Incumbency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(c) Organization Documents; Good Standing . . . . . . . . . . . . . . . . . . . . . . 32
(d) Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(e) Payment of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(f) Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(g) Other Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.2 Conditions to All Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(a) Notice of Borrowing or Conversion/Continuation . . . . . . . . . . . . . . . . . . 33
(b) Continuation of Representations and Warranties . . . . . . . . . . . . . . . . . . 33
(c) No Existing Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 5
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 34
5.1 Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.2 Corporate Authorization; No Contravention . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.3 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.6 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.7 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.8 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.9 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.11 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.13 Regulated Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.14 No Burdensome Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.15 Copyrights, Patents, Trademarks and Licenses, etc. . . . . . . . . . . . . . . . . . . . . 37
5.16 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.18 Swap Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.19 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE 6
AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 38
6.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
ii
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<TABLE>
<CAPTION>
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<S> <C> <C>
6.2 Certificates; Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.4 Preservation of Corporate Existence, Etc . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.5 Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
6.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.7 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.9 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.10 Inspection of Property and Books and Records . . . . . . . . . . . . . . . . . . . . . . . 41
6.11 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
6.12 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 7
NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 42
7.1 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.2 Negative Pledge Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.3 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.4 Consolidations and Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.5 Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7.6 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.7 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.8 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.9 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.10 Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.11 Lease Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.12 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.14 Change in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.15 Accounting Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.16 Amendment of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.17 Consolidated Liquidity Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.18 Consolidated Senior Funded Debt to Cash Flow Ratio . . . . . . . . . . . . . . . . . . . . 47
7.19 Consolidated Total Funded Debt to Cash Flow Ratio . . . . . . . . . . . . . . . . . . . . . 47
7.20 Consolidated Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 8
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . 48
8.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(a) Non-Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(b) Representation or Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
(c) Specific Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(d) Other Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(e) Cross-Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
(f) Insolvency; Voluntary Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 49
(g) Involuntary Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(h) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(i) Monetary Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(j) Non-Monetary Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(k) Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(l) Loss of Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
(m) Invalidity of Subordination Provisions . . . . . . . . . . . . . . . . . . . . . . 50
8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.3 Rights Not Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 9
THE AGENT . . . . . . . . . . . . . . . . . . . . . . 50
9.1 Appointment and Authorization; "Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.3 Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.4 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.6 Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.7 Indemnification of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.8 Agent in Individual Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.9 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.10 Withholding Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE 10
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 55
10.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.4 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.5 Company Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.6 Payments Set Aside . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.7 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.8 Assignments, Participations, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.9 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.10 Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.11 Automatic Debits of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
10.12 Notification of Addresses, Lending Offices, Etc. . . . . . . . . . . . . . . . . . . . . . 60
10.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.15 No Third Parties Benefited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.16 Designed Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
10.17 Governing Law and Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.18 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.19 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule 2.1 Commitments
Schedule 5.5 Litigation
Schedule 5.7 ERISA
Schedule 5.11 Permitted Liabilities
Schedule 5.12 Environmental Matters
Schedule 5.16 Subsidiaries and Minority Interests
Schedule 5.17 Insurance Matters
Schedule 7.1 Permitted Liens
Schedule 7.6 Permitted Indebtedness
Schedule 7.7 Transactions With Affiliates
Schedule 7.9 Contingent Obligations
Schedule 10.2 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Legal Opinion of Company's Counsel
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Promissory Note
</TABLE>
vi
<PAGE> 8
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of December 1, 1996, among
SPECIALTY EQUIPMENT COMPANIES, INC., a Delaware corporation (the "Company"),
the several financial institutions from time to time party to this Agreement
(collectively, the "Banks"; individually, a "Bank"), and BANK OF AMERICA
ILLINOIS, as agent for the Banks.
WHEREAS, the Banks have agreed to make available to the Company a
revolving credit facility and a letter of credit facility upon the terms and
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. The following terms have the following
meanings:
"ACQUISITION" means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly,
in (a) the acquisition of all or substantially all of the assets of a
Person, or of any business or division of a Person, (b) the
acquisition of in excess of 50% of the capital stock, partnership
interests, membership interests or equity of any Person, or otherwise
causing any Person to become a Subsidiary, or (c) a merger or
consolidation or any other combination with another Person (other than
a Person that is a Subsidiary) provided that the Company or the
Subsidiary is the surviving entity.
"AFFILIATE" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is
under common control with, such Person. A Person shall be deemed to
control another Person if the controlling Person possesses, directly
or indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the
ownership of voting securities, membership interests, by contract, or
otherwise.
"AGENT" means BAI in its capacity as agent for the Banks
hereunder, and any successor agent arising under Section 9.9.
"AGENT-RELATED PERSONS" means BAI and any successor agent
arising under Section 9.9, together with their respective Affiliates,
and the officers, directors, employees, agents and attorneys-in-fact
of such Persons and Affiliates.
"AGENT'S PAYMENT OFFICE" means the address for payments set
forth on Schedule
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<PAGE> 9
10.2 or such other address as the Agent may from time to time specify.
"AGREEMENT" means this Credit Agreement.
"APPLICABLE MARGIN" means
(i) with respect to Reference Rate Loans, 0%;
(ii) with respect to Fixed Rate Loans, 0.40%; and
(iii) with respect to Offshore Rate Loans, 0.40%.
The Applicable Margin with respect to Fixed Rate Loans and with
respect to Offshore Rate Loans will be increased to 0.625% for each
day during which the outstanding principal amount of the Revolving
Loan is greater than $25,000,000, unless and until Revolving Loan
proceeds in an amount equal to $25,000,000 or more have been applied
by the Company to repurchase Senior Subordinated Notes.
"ASSIGNEE" has the meaning specified in subsection 10.8(a).
"ATTORNEY COSTS" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the allocated
cost of internal legal services and all disbursements of internal
counsel.
"BAI" means Bank of America Illinois, an Illinois banking
corporation.
"BANK" has the meaning specified in the introductory clause
hereto.
"BANKRUPTCY CODE" means the Federal Bankruptcy Reform Act of
1978 (11 U.S.C. Section 101, et seq.).
"BORROWING" means a borrowing hereunder consisting of Loans of
the same Type made to the Company on the same day by the Banks under
Article 2, and, other than in the case of Reference Rate Loans, having
the same Interest Period.
"BORROWING DATE" means any date on which a Borrowing occurs
under Section 2.3.
"BUSINESS DAY" means any day other than a Saturday, Sunday or
other day on which commercial banks in Chicago, Illinois are
authorized or required by law to close and, if the applicable Business
Day relates to any Offshore Rate Loan, means such a day on which
dealings are carried on in the applicable offshore dollar interbank
market.
"CAPITAL ADEQUACY REGULATION" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
2
<PAGE> 10
corporation controlling a bank.
"CAPITAL EXPENDITURES" means all payments, including, without
limitation, payments for Capital Lease Obligations, for any fixed
assets or improvements, or replacements, substitutions or additions
thereto, that have a useful life of more than one year and which are
required to be capitalized under GAAP.
"CAPITAL LEASE" shall mean any lease of (or other arrangement
conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified
and accounted for as capital leases on a balance sheet of such Person
under GAAP and, for the purposes of this Agreement, the amount of such
obligations at any time shall be the capitalized amount thereof at
such time determined in accordance with GAAP.
"CAPITAL LEASE OBLIGATIONS" of any Person shall mean the
obligations of such Person to pay rent or other amounts under any
Capital Lease.
"CHANGE IN CONTROL" means (a) the acquisition by any Person,
or two or more Persons acting in concert, including, without
limitation, any acquisition effected by means of a merger or
consolidation, of beneficial ownership (within the meaning of Rule
13d-3 of the SEC under the Exchange Act) of 50% or more of the
outstanding shares of voting stock of the Company, or (b) during any
period of 25 consecutive calendar months, commencing on November 1,
1996, the ceasing of those individuals (the "Continuing Directors")
who (i) were directors of the Company on the first day of each such
period or (ii) subsequently became directors of the Company and whose
initial election or initial nomination for election subsequent to that
date was approved by a majority of the Continuing Directors then on
the board of directors of the Company, to constitute a majority of the
board of directors of the Company.
"CLOSING DATE" means the date on which all conditions
precedent set forth in Section 4.1 are satisfied or waived by all
Banks (or, in the case of subsection 4.1(f), waived by the Person
entitled to receive such payment).
"CODE" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"COMMITMENT", as to each Bank, has the meaning specified in
Section 2.1.
"COMPLIANCE CERTIFICATE" means a certificate substantially in
the form of Exhibit C.
"CONSOLIDATED CASH FLOW FROM OPERATIONS" shall mean, for any
period, Consolidated Net Income for such period plus the aggregate
amount deducted in determining such Consolidated Net Income in respect
of the following, each determined in accordance with GAAP: (i)
Consolidated Interest Expense, (ii) income taxes, (iii) depreciation,
depletion and amortization, (iv) non-cash charges for non-recurring or
extraordinary items, and (v) repurchase premiums incurred in
connection with purchases of the Senior Subordinated
3
<PAGE> 11
Notes.
"CONSOLIDATED CURRENT ASSETS" means, at any date of
determination thereof, the aggregate amount of all cash, accounts
receivable and inventory of the Company and its Subsidiaries.
"CONSOLIDATED CURRENT ASSETS TO SENIOR FUNDED DEBT RATIO"
means the ratio of (i) Consolidated Current Assets, to (ii) the
aggregate Funded Debt of the Company and its Subsidiaries, excluding
Subordinated Debt, computed on a consolidated basis.
"CONSOLIDATED INTEREST COVERAGE RATIO" shall mean the ratio of
(i) Consolidated Cash Flow from Operations to (ii) Consolidated
Interest Expense.
"CONSOLIDATED INTEREST EXPENSE" shall mean gross interest
expense of the Company and its Subsidiaries computed on a consolidated
basis in accordance with GAAP, including, without limitation,
amortization of debt discounts and the portion of any Capital Lease
Obligation allocable to interest expense.
"CONSOLIDATED LIQUIDITY RATIO" shall mean the ratio of (i)
Consolidated Current Assets, to (ii) the aggregate Funded Debt of the
Company and its Subsidiaries, excluding Subordinated Debt, computed on
a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" shall mean, for any period, the
aggregate net income (or net deficit) of the Company and the
Subsidiaries for such period computed on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED SENIOR FUNDED DEBT TO CASH FLOW RATIO" means the
ratio of (i) the aggregate Funded Debt of the Company and its
Subsidiaries, excluding Subordinated Debt, computed on a consolidated
basis in accordance with GAAP, to (ii) Consolidated Cash Flow From
Operations for the four immediately preceding fiscal quarters.
"CONSOLIDATED TOTAL FUNDED DEBT TO CASH FLOW RATIO" means the
ratio of (i) the aggregate Funded Debt of the Company and its
Subsidiaries computed on a consolidated basis in accordance with GAAP,
to (ii) Consolidated Cash Flow From Operations for the four
immediately preceding fiscal quarters.
"CONTINGENT OBLIGATION" means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or
without recourse, (a) with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary
obligations") of another Person (the "primary obligor"), including any
obligation of that Person (i) to purchase, repurchase or otherwise
acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such
primary obligation, or to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial
condition of the primary obligor, (iii) to purchase property,
securities or services primarily for
4
<PAGE> 12
the purpose of assuring the owner of any such primary obligation of
the ability of the primary obligor to make payment of such primary
obligation, or (iv) otherwise to assure or hold harmless the holder of
any such primary obligation against loss in respect thereof (each, a
"Guaranty Obligation"); (b) with respect to any Surety Instrument
issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings or payments; (c) to
purchase any materials, supplies or other property from, or to obtain
the services of, another Person if the relevant contract or other
related document or obligation requires that payment for such
materials, supplies or other property, or for such services, shall be
made regardless of whether delivery of such materials, supplies or
other property is ever made or tendered, or such services are ever
performed or tendered, or (d) in respect of any Swap Contract. The
amount of any Contingent Obligation shall, in the case of Guaranty
Obligations, be deemed equal to the stated or determinable amount of
the primary obligation in respect of which such Guaranty Obligation is
made or, if not stated or if indeterminable, the maximum reasonably
anticipated liability in respect thereof, and in the case of other
Contingent Obligations other than in respect of Swap Contracts, shall
be equal to the maximum reasonably anticipated liability in respect
thereof and, in the case of Contingent Obligations in respect of Swap
Contracts, shall be equal to the Swap Termination Value.
"CONTRACTUAL OBLIGATION" means, as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other
instrument, document or agreement to which such Person is a party or
by which it or any of its property is bound.
"CONVERSION/CONTINUATION DATE" means any date on which, under
Section 2.4, the Company (a) converts Loans of one Type to another
Type, or (b) continues as Loans of the same Type, but with a new
Interest Period, Loans having Interest Periods expiring on such date.
"DEFAULT" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or
otherwise remedied during such time) constitute an Event of Default.
"DOLLARS", "dollars" and "$" each mean lawful money of the
United States.
"ELIGIBLE ASSIGNEE" means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having
a combined capital and surplus of at least $100,000,000; (b) a
commercial bank organized under the laws of any other country which is
a member of the Organization for Economic Cooperation and Development
(the "OECD"), or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000,
provided that such bank is acting through a branch or agency located
in the United States; and (c) a Person that is primarily engaged in
the business of commercial banking and that is (i) a Subsidiary of a
Bank, (ii) a Subsidiary of a Person of which a Bank is a Subsidiary,
or (iii) a Person of which a Bank is a Subsidiary.
"ENVIRONMENTAL CLAIMS" means all claims, however asserted, by
any Governmental
5
<PAGE> 13
Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release
or injury to the environment.
"ENVIRONMENTAL LAWS" means all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental,
health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) under common control with the Company within the meaning
of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of
the Code for purposes of provisions relating to Section 412 of the
Code).
"ERISA EVENT" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate
from a Pension Plan subject to Section 4063 of ERISA during a plan
year in which it was a substantial employer (as defined in Section
4001(a)(2) of ERISA) or a cessation of operations which is treated as
such a withdrawal under Section 4062(e) of ERISA; (c) a complete or
partial withdrawal by the Company or any ERISA Affiliate from a
Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or
4041A of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Pension Plan or Multiemployer Plan; or
(f) the imposition of any liability under Title IV of ERISA, other
than PBGC premiums due but not delinquent under Section 4007 of ERISA,
upon the Company or any ERISA Affiliate.
"EURODOLLAR RESERVE PERCENTAGE" has the meaning specified in
the definition of "Offshore Rate".
"EVENT OF DEFAULT" means any of the events or circumstances
specified in Section 8.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal
functions.
"FEDERAL FUNDS RATE" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal
6
<PAGE> 14
Reserve Bank of New York (including any such successor, "H.15(519)")
on the preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day
will be the arithmetic mean as determined by the Agent of the rates
for the last transaction in overnight Federal funds arranged prior to
9:00 a.m. (New York City time) on that day by each of three leading
brokers of Federal funds transactions in New York City selected by the
Agent.
"FEE LETTER" has the meaning specified in subsection 2.10(a).
"FIXED RATE" means the fixed interest rate per annum,
determined solely by the Agent the first day of the applicable
Interest Period for any Fixed Rate Loan, as the rate at which the
Agent would be able to borrow funds in the Money Market in the amount
of such Fixed Rate Loan and for a term equal to the applicable
Interest Period. The Fixed Rate shall include adjustments for reserve
requirements, federal deposit insurance and any other similar
adjustment which the Agent deems appropriate. The Fixed Rate is the
Agent's estimate only and neither the Agent nor the Banks are under
any obligation to purchase or actually match funds for any
transaction.
"FIXED RATE LOAN" means a Loan that bears interest based on
the Fixed Rate.
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
"FUNDED DEBT" means, at any date of determination thereof, the
total of (a) all Indebtedness, that has a final maturity, or that is
extendible or renewable at the option of the obligor to a date, one
year or more after the date on which such Indebtedness is incurred,
excluding all principal payments in respect thereof required to be
made within one year from the date as of which Funded Debt is being
determined, (b) all Guaranty Obligations with respect to such
Indebtedness of others, and (c) in the case of the Company, the
aggregate outstanding principal amount of all Revolving Loan
borrowings to the extent not included in clause (a) above.
"FURTHER TAXES" means any and all present or future taxes,
levies, assessments, imposts, duties, deductions, fees, withholdings
or similar charges (including, without limitation, net income taxes
and franchise taxes), and all liabilities with respect thereto,
imposed by any jurisdiction on account of amounts payable or paid
pursuant to Section 3.1.
"GAAP" means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified
Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the
Closing Date.
7
<PAGE> 15
"GOVERNMENTAL AUTHORITY" means any nation or
government, any state or other political subdivision thereof,
any central bank (or similar monetary or regulatory authority)
thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock
or capital ownership or otherwise, by any of the foregoing.
"GUARANTY OBLIGATION" has the meaning specified in the
definition of "Contingent Obligation".
"INDEBTEDNESS" of any Person means, without duplication, (a)
all indebtedness for borrowed money; (b) all obligations issued,
undertaken or assumed as the deferred purchase price of property or
services (other than trade payables entered into in the ordinary
course of business on ordinary terms); (c) all non-contingent
reimbursement or payment obligations with respect to Surety
Instruments; (d) all obligations evidenced by notes, bonds, debentures
or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses; (e)
all indebtedness created or arising under any conditional sale or
other title retention agreement, or incurred as financing, in either
case with respect to property acquired by the Person (even though the
rights and remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of such
property); (f) all obligations with respect to capital leases; (g) all
indebtedness referred to in clauses (a) through (f) above secured by
(or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in
property (including accounts and contracts rights) owned by such
Person, even though such Person has not assumed or become liable for
the payment of such Indebtedness; and (h) all Guaranty Obligations in
respect of indebtedness or obligations of others of the kinds referred
to in clauses (a) through (g) above. For all purposes of this
Agreement, the Indebtedness of any Person shall include all recourse
Indebtedness of any partnership or joint venture or limited liability
company in which such Person is a general partner or a joint venturer
or a member.
"INDEMNIFIED LIABILITIES" has the meaning specified in Section
10.5.
"INDEMNIFIED PERSON" has the meaning specified in Section
10.5.
"INDEPENDENT AUDITOR" has the meaning specified in subsection
6.1(a).
"INDENTURE" means the Indenture, dated as of December 1, 1993,
between the Company and Harris Trust and Savings Bank, as Trustee, as
amended by a Supplemental Indenture, dated as of December 1, 1993,
among the Company, Bloomfield Industries Canada Limited and Harris
Trust and Savings Bank, as Trustee.
"INSOLVENCY PROCEEDING" means, with respect to any Person, (a)
any case, action or proceeding with respect to such Person before any
court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the
benefit of creditors, composition, marshalling of assets for
creditors, or other, similar arrangement in respect of
8
<PAGE> 16
its creditors generally or any substantial portion of its creditors;
undertaken under U.S. Federal, state or foreign law, including the
Bankruptcy Code.
"INTEREST PAYMENT DATE" means, as to any Loan other than a
Reference Rate Loan, the last day of each Interest Period applicable
to such Loan and, as to any Reference Rate Loan, the last Business Day
of each calendar quarter and each date such Loan is converted into
another Type of Loan, provided, however, that if any Interest Period
for an Offshore Rate Loan exceeds three months, the date that falls
three months after the beginning of such Interest Period and after
each Interest Payment Date thereafter is also an Interest Payment
Date.
"INTEREST PERIOD" means, (a) as to any Offshore Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date one, two,
three or six months thereafter as selected by the Company in its
Notice of Borrowing or Notice of Conversion/Continuation; and (b) as
to any Fixed Rate Loan, the period commencing on the Borrowing Date of
such Loan or on the Conversion/Continuation Date on which the Loan is
converted into or continued as a Fixed Rate Loan, and ending on the
day one through 30 consecutive days thereafter, as selected by the
Company in its Notice of Borrowing or Notice of Conversion/
Continuation;
provided that:
(i) if any Interest Period would otherwise end on
a day that is not a Business Day, that Interest Period shall
be extended to the following Business Day unless, in the case
of an Offshore Rate Loan, the result of such extension would
be to carry such Interest Period into another calendar month,
in which event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period pertaining to an Offshore
Rate Loan that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and
(iii) no Interest Period for any Loan shall extend
beyond the Termination Date.
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
"ISSUING BANK" means BAI in its capacity as issuer of Letters
of Credit pursuant to Section 2.7.
"JOINT VENTURE" means a single-purpose corporation,
partnership, limited liability company, joint venture or other similar
legal arrangement (whether created by contract or
9
<PAGE> 17
conducted through a separate legal entity) now or hereafter formed by
the Company or any of its Subsidiaries with another Person in order to
conduct a common venture or enterprise with such Person.
"LC DISBURSEMENT" shall mean any payment or disbursement made
by the Issuing Bank under or pursuant to a Letter of Credit.
"LC EXPOSURE" shall mean, at any time, the sum of (a) the
aggregate undrawn amount of all Letters of Credit outstanding at such
time plus (b) the aggregate amount which has been drawn under Letters
of Credit but for which the Issuing Bank or the Banks, as the case may
be, have not been reimbursed by the Company at such time.
"LC FACILITY COMMITMENT" shall have the meaning given such
term in Section 2.7.
"LC ISSUANCE FEE" shall have the meaning given such term in
subsection 2.10(c).
"LENDING OFFICE" means, as to any Bank, the office or offices
of such Bank specified as its "Lending Office" or "Domestic Lending
Office" or "Offshore Lending Office", as the case may be, on Schedule
10.2, or such other office or offices as such Bank may from time to
time notify the Company and the Agent.
"LETTERS OF CREDIT" means letters of credit issued by the
Issuing Bank for the account of the Company pursuant to Section 2.7.
"LETTER OF CREDIT FACILITY" means the letter of credit
facility established for Letters of Credit pursuant to Section 2.7.
"LIEN" means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional sale
or other title retention agreement, the interest of a lessor under a
capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any
financing statement naming the owner of the asset to which such lien
relates as debtor, under the Uniform Commercial Code or any comparable
law) and any contingent or other agreement to provide any of the
foregoing, but not including the interest of a lessor under an
operating lease.
"LOAN" means an extension of credit by a Bank to the Company
under Article 2, and may be a Reference Rate Loan, Fixed Rate Loan or
an Offshore Rate Loan (each, a "Type" of Loan).
"LOAN DOCUMENTS" means this Agreement, any Notes, the
Guaranty, the Fee Letter and all other documents delivered to the
Agent or any Bank in connection herewith.
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<PAGE> 18
"MAJORITY BANKS" means at any time Banks then holding at least
66-2/3% of the then aggregate unpaid principal amount of the Loans,
or, if no such principal amount is then outstanding, Banks then having
at least 66-2/3% of the Commitments.
"MARGIN STOCK" means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.
"MATERIAL ADVERSE EFFECT" means (a) a material adverse change
in, or a material adverse effect upon, the operations, business,
properties, condition (financial or otherwise) or prospects of the
Company or the Company and its Subsidiaries taken as a whole; (b) a
material impairment of the ability of the Company or any Subsidiary to
perform under any Loan Document and to avoid any Event of Default; or
(c) a material adverse effect upon the legality, validity, binding
effect or enforceability against the Company or any Subsidiary of any
Loan Document.
"MONEY MARKET" means one or more wholesale funding markets
available to the Agent including domestic negotiable certificates of
deposit, eurodollar deposits, bank deposits notes or appropriate money
market instruments selected by the Agent.
"MULTIEMPLOYER PLAN" means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, to which the Company or any
ERISA Affiliate makes, is making, or is obligated to make
contributions or, during the preceding three calendar years, has made,
or been obligated to make, contributions.
"NOTE" means a promissory note executed by the Company in
favor of a Bank pursuant to Section 2.2, in substantially the form of
Exhibit F.
"NOTICE OF BORROWING" means a notice in substantially the form
of Exhibit A.
"NOTICE OF CONVERSION/CONTINUATION" means a notice in
substantially the form of Exhibit B.
"OBLIGATIONS" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document
owing by the Company to any Bank, the Agent, or any Indemnified
Person, whether direct or indirect (including those acquired by
assignment), absolute or contingent, due or to become due, now
existing or hereafter arising.
"OFFSHORE RATE" means, for any Interest Period, with respect
to Offshore Rate Loans comprising part of the same Borrowing, the rate
of interest per annum (rounded upward to the next 1/16th of 1%)
determined by the Agent as follows:
<TABLE>
<S> <C>
Offshore Rate = LIBOR
----------------------------------
1.00 - Eurodollar Reserve Percentage
</TABLE>
Where,
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<PAGE> 19
"EURODOLLAR RESERVE PERCENTAGE" means for any day for any Interest
Period the maximum reserve percentage (expressed as a decimal, rounded upward
to the next 1/100th of 1%) in effect on such day (whether or not applicable to
any Bank) under regulations issued from time to time by the FRB for determining
the maximum reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency funding (currently
referred to as "Eurocurrency liabilities"); and
"LIBOR" means the rate of interest per annum determined by the Agent to
be the rate of interest per annum quoted by BAI (rounded upward, if necessary,
to the next 1/16th of 1%) as the rate of interest at which dollar deposits in
the approximate amount of the amount of the Loan to be made or continued as, or
converted into, an Offshore Rate Loan by BAI and having a maturity comparable
to such Interest Period would be offered to major banks in the London interbank
market at their request at approximately 11:00 a.m. (London time) two Business
Days prior to the commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as to all Offshore
Rate Loans then outstanding as of the effective date of any change in the
Eurodollar Reserve Percentage.
"OFFSHORE RATE LOAN" means a Loan that bears interest based on
the Offshore Rate.
"ORGANIZATION DOCUMENTS" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate
of determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement,
and all applicable resolutions of the board of directors (or any
committee thereof) of such corporation.
"OTHER TAXES" means any present or future stamp, court or
documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery, performance, enforcement or registration of, or
otherwise with respect to, this Agreement or any other Loan Documents.
"PARTICIPANT" has the meaning specified in subsection 10.8(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
"PENSION PLAN" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which the Company
sponsors, maintains, or to which it makes, is making, or is obligated
to make contributions, or in the case of a multiple employer plan (as
described in Section 4064(a) of ERISA) has made contributions at any
time during the immediately preceding five (5) plan years.
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<PAGE> 20
"PERMITTED LIENS" has the meaning specified in
Section 7.1.
"PLAN" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Company sponsors or maintains or to which the
Company makes, is making, or is obligated to make contributions and
includes any Pension Plan.
"PRO RATA SHARE" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth
decimal place) at such time of such Bank's Commitment divided by the
combined Commitments of all Banks.
"REFERENCE RATE" means the publicly announced reference rate
of interest of BAI or any Bank acting as successor agent pursuant to
Section 9.9 hereof, as in effect from time to time, which rate is not
intended to be the lowest or most favorable rate offered by BAI or
such Bank in effect at any time.
"REFERENCE RATE LOAN" means a Loan that bears interest based
on the Reference Rate.
"REPLACEMENT BANK" has the meaning specified in Section 3.8.
"REPORTABLE EVENT" means, any of the events set forth in
Section 4043(c) of ERISA or the regulations thereunder, other than any
such event for which the 30-day notice requirement under ERISA has
been waived in regulations issued by the PBGC.
"REQUIREMENT OF LAW" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of
an arbitrator or of a Governmental Authority, in each case applicable
to or binding upon the Person or any of its property or to which the
Person or any of its property is subject.
"RESPONSIBLE OFFICER" means the chief executive officer or the
president of the Company, or any other officer having substantially
the same authority and responsibility; or, with respect to compliance
with financial covenants, the chief financial officer or the treasurer
of the Company, or any other officer having substantially the same
authority and responsibility.
"REVOLVING LOAN" has the meaning specified in Section 2.1.
"SEC" means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
"SENIOR SUBORDINATED NOTES" means the Company's 11-3/8% Senior
Subordinated Notes due 2003 issued pursuant to the Indenture which are
outstanding on the Closing Date.
"SUBORDINATED DEBT" means that portion of the Indebtedness of
the Company and
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<PAGE> 21
its Subsidiaries which is subordinated in a manner satisfactory in
form and substance to the Banks as to right and time of payment of
principal and interest thereon to any and all of the Obligations.
"SUBSIDIARY" of a Person means any corporation, association,
partnership, limited liability company, joint venture or other
business entity of which more than 50% of the voting stock, membership
interests or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the
Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the
Company.
"SURETY INSTRUMENTS" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
"SWAP CONTRACT" means any agreement, whether or not in
writing, relating to any transaction that is a rate swap, basis swap,
forward rate transaction, commodity swap, commodity option, equity or
equity index swap or option, bond, note or bill option, interest rate
option, forward foreign exchange transaction, cap, collar or floor
transaction, currency swap, cross-currency rate swap, swaption,
currency option or any other, similar transaction (including any
option to enter into any of the foregoing) or any combination of the
foregoing, and, unless the context otherwise clearly requires, any
master agreement relating to or governing any or all of the foregoing.
"SWAP TERMINATION VALUE" means, in respect of any one or more
Swap Contracts, after taking into account the effect of any legally
enforceable netting agreement relating to such Swap Contracts, (a) for
any date on or after the date such Swap Contracts have been closed out
and termination value(s) determined in accordance therewith, such
termination value(s), and (b) for any date prior to the date
referenced in clause (a) the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined by the
Company based upon one or more mid-market or other readily available
quotations provided by any recognized dealer in such Swap Contracts
(which may include any Bank).
"TAXES" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or
similar charges, and all liabilities with respect thereto, excluding,
in the case of each Bank and the Agent, respectively, taxes imposed on
or measured by its net income by the jurisdiction (or any political
subdivision thereof) under the laws of which such Bank or the Agent,
as the case may be, is organized or maintains a lending office.
"TERMINATION DATE" means the earlier to occur of:
(a) November 30, 1998; and
(b) the date on which the Commitments terminate in
accordance with the provisions of this Agreement.
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<PAGE> 22
"TYPE" has the meaning specified in the definition of "Loan."
"UNFUNDED PENSION LIABILITY" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Plan's assets, determined in accordance with the
assumptions used for funding the Pension Plan pursuant to Section 412
of the Code for the applicable plan year.
"UNITED STATES" and "U.S." each means the United States of
America.
"UNUSED LOAN FEE" has the meaning specified in subsection
2.10(b).
"UNIFORM CUSTOMS" has the meaning specified in subsection
2.7(d).
"WHOLLY-OWNED SUBSIDIARY" means any corporation in which
(other than directors' qualifying shares required by law) 100% of the
capital stock of each class having ordinary voting power, and 100% of
the capital stock of every other class, in each case, at the time as
of which any determination is being made, is owned, beneficially and
of record, by the Company, or by one or more of the other Wholly-Owned
Subsidiaries, or both.
1.2 OTHER INTERPRETIVE PROVISIONS.
(a) The meanings of defined terms are equally applicable
to the singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices
and other writings, however evidenced.
(ii) The term "including" is not limiting and
means "including without limitation".
(iii) In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from
and including"; the words "to" and "until" each mean "to but
excluding", and the word "through" means "to and including".
(d) Unless otherwise expressly provided herein, (i)
references to agreements (including this Agreement) and other contractual
instruments shall be deemed to include all subsequent amendments and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and (ii)
references to any statute or regulation are to be construed as including all
statutory and regulatory provisions consolidating, amending, replacing,
supplementing or interpreting the statute or regulation.
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<PAGE> 23
(e) The captions and headings of this Agreement
are for convenience of reference only and shall not affect the
interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use
several different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are cumulative
and shall each be performed in accordance with their terms. Unless otherwise
expressly provided, any reference to any action of the Agent or the Banks by
way of consent, approval or waiver shall be deemed modified by the phrase "in
its/their sole discretion."
(g) This Agreement and the other Loan Documents are the
result of negotiations among and have been reviewed by counsel to the Agent,
the Company and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Banks or the Agent merely
because of the Agent's or Banks' involvement in their preparation.
1.3 ACCOUNTING PRINCIPLES.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal
quarter" refer to such fiscal periods of the Company.
ARTICLE 2
THE CREDITS
2.1 AMOUNTS AND TERMS OF COMMITMENTS. Each Bank severally agrees,
on the terms and conditions set forth herein, to make loans to the Company
(each such loan, a "Revolving Loan") from time to time on any Business Day
during the period from the Closing Date to the Termination Date, in an
aggregate amount not to exceed at any time outstanding, together with the
Bank's Pro Rata Share of the L/C Facility Commitment, the amount set forth on
Schedule 2.1 (such amount as the same may be reduced under Section 2.5 or as a
result of one or more assignments under Section 10.8, the Bank's "Commitment");
provided, however, that, after giving effect to any Borrowing of Revolving
Loans, the aggregate principal amount of all outstanding Revolving Loans,
together with the L/C Facility Commitment, shall not at any time exceed the
combined Commitments. Within the limits of each Bank's Commitment, and subject
to the other terms and conditions hereof, the Company may borrow under this
subsection 2.1, prepay under Section 2.6 and reborrow under this subsection
2.1.
2.2 LOAN ACCOUNTS. The Loans made by each Bank shall be evidenced
by one or more loan accounts or records maintained by such Bank in the ordinary
course of business. The loan accounts or records maintained by the Agent and
each Bank shall be of the amount of the Loans made by the Banks to the Company
and the interest and payments thereon. Any failure so to record or any
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<PAGE> 24
error in doing so shall not, however, limit or otherwise affect the obligation
of the Company hereunder to pay any amount owing with respect to the Loans.
Upon the request of any Bank made through the Agent, the Loans made by such
Bank may be evidenced by one or more Notes, instead of or in addition to loan
accounts.
2.3 PROCEDURE FOR BORROWING.
(a) Each Borrowing shall be made upon the Company's
irrevocable written notice delivered to the Agent in the form of a Notice of
Borrowing (which notice must be received by the Agent prior to 10:00 a.m.
(Chicago time) (i) three Business Days prior to the requested Borrowing Date,
in the case of Offshore Rate Loans; (ii) on the requested Borrowing Date, in
the case of Fixed Rate Loans, and (iii) on the requested Borrowing Date, in the
case of Reference Rate Loans, specifying:
(A) the amount of the Borrowing, which
shall be in an aggregate minimum amount of $1,000,000 or any
multiple of $500,000 in excess thereof;
(B) the requested Borrowing Date, which
shall be a Business Day;
(C) the Type of Loans comprising the
Borrowing; provided that if the Notice of Borrowing fails to
specify the type of Loan, the Loan shall be a Reference Rate
Loan; and
(D) the duration of the Interest Period
applicable to such Loans included in such notice. If the
Notice of Borrowing fails to specify the duration of the
Interest Period for any Borrowing comprised of Fixed Rate
Loans or Offshore Rate Loans, such Interest Period shall be
one day or one month, respectively.
provided, however, that with respect to the Borrowing to be made on the Closing
Date, the Notice of Borrowing shall be delivered to the Agent not later than
10:00 a.m. (Chicago time) one Business Day before the Closing Date and such
Borrowing will consist of Reference Rate Loans only.
(b) The Agent will promptly notify each Bank of its
receipt of any Notice of Borrowing and of the amount of such Bank's Pro Rata
Share of that Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share
of each Borrowing available to the Agent for the account of the Company at the
Agent's Payment Office by 2:00 p.m. (Chicago time) on the Borrowing Date
requested by the Company in funds immediately available to the Agent. The
proceeds of all such Loans will then be made available to the Company by the
Agent at such office by crediting the account of the Company on the books of
BAI (or the commercial banking Affiliate of any successor agent appointed
pursuant to Section 9.9 hereof, as applicable) with the aggregate of the
amounts made available to the Agent by the Banks and in like funds as received
by the Agent.
(d) After giving effect to any Borrowing, unless the
Agent shall otherwise consent,
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<PAGE> 25
there may not be more than five different Interest Periods in effect.
2.4 CONVERSION AND CONTINUATION ELECTIONS.
(a) The Company may, upon irrevocable written notice to
the Agent in accordance with subsection 2.4(b):
(i) elect, as of any Business Day, in the case of
Reference Rate Loans, or as of the last day of the applicable Interest
Period, in the case of any other Type of Loans, to convert any such
Loans (or any part thereof in an amount not less than $1,000,000 or
that is in an integral multiple of $500,000 in excess thereof) into
Loans of any other Type; or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any Loans having Interest Periods
expiring on such day (or any part thereof in an amount not less than
$1,000,000, or that is in an integral multiple of $500,000 in excess
thereof);
provided, that if at any time the aggregate amount of Fixed Rate Loans or
Offshore Rate Loans in respect of any Borrowing is reduced, by payment,
prepayment, or conversion of part thereof to be less than $1,000,000, such
Fixed Rate Loans or Offshore Rate Loans shall automatically convert into
Reference Rate Loans, and on and after such date the right of the Company to
continue such Loans as, and convert such Loans into, Offshore Rate Loans or
Fixed Rate Loans, as the case may be, shall terminate.
(b) The Company shall deliver a Notice of
Conversion/Continuation to be received by the Agent not later than 10:00 a.m.
(Chicago time) at least (i) three Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or
continued as Offshore Rate Loans; (ii) on the Conversion/Continuation Date, if
the Loans are to be converted into or continued as Fixed Rate Loans; and (iii)
on the Conversion/Continuation Date, if the Loans are to be converted into
Reference Rate Loans, specifying:
(A) the proposed Conversion/Continuation
Date;
(B) the aggregate amount of Loans to be
converted or continued;
(C) the Type of Loans resulting from the
proposed conversion or continuation; and
(D) other than in the case of
conversions into Reference Rate Loans, the duration of the
requested Interest Period.
(c) If upon the expiration of any Interest Period
applicable to Fixed Rate Loans or Offshore Rate Loans, the Company has failed
to select timely a new Interest Period to be applicable to such Fixed Rate
Loans or Offshore Rate Loans, as the case may be, or if any Default or Event of
Default then exists, the Company shall be deemed to have elected to convert
such Fixed Rate Loans or Offshore Rate Loans into Reference Rate Loans
effective as of the expiration date of
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<PAGE> 26
such Interest Period.
(d) The Agent will promptly notify each Bank of its
receipt of a Notice of Conversion/Continuation, or, if no timely notice is
provided by the Company, the Agent will promptly notify each Bank of the
details of any automatic conversion. All conversions and continuations shall
be made ratably according to the respective outstanding principal amounts of
the Loans with respect to which the notice was given held by each Bank.
(e) Unless the Majority Banks otherwise consent, during
the existence of a Default or Event of Default, the Company may not elect to
have a Loan converted into or continued as an Offshore Rate Loan or a Fixed
Rate Loan.
(f) After giving effect to any conversion or continuation
of Loans, unless the Agent shall otherwise consent, there may not be more than
five different Interest Periods in effect.
2.5 VOLUNTARY TERMINATION OR REDUCTION OF COMMITMENTS. The Company
may, upon not less than five Business Days' prior notice to the Agent,
terminate the Commitments and this Agreement, or permanently reduce the
Commitments by an aggregate minimum amount of $1,000,000 or any multiple of
$500,000 in excess thereof; unless, after giving effect thereto and to any
prepayments of Loans made on the effective date thereof, the sum of the
then-outstanding principal amount of the Loans, plus the L/C Facility
Commitment would exceed the amount of the combined Commitments then in effect.
Once reduced in accordance with this Section, the Commitments may not be
increased. Any reduction of the Commitments shall be applied to each Bank
according to its Pro Rata Share. All accrued commitment fees to, but not
including the effective date of any reduction or termination of Commitments,
shall be paid on the effective date of such reduction or termination. Upon the
termination of the Commitments, this Agreement shall terminate, except for the
provisions of Article 3, Section 10.5 and such other provisions hereof which
are specified as surviving the payment of the Obligations.
2.6 OPTIONAL PREPAYMENTS. Subject to Section 3.4, the Company may,
at any time or from time to time, upon irrevocable notice to the Agent, prepay
outstanding Loans in whole or in part, in minimum amounts of $1,000,000 or any
multiple of $500,000 in excess thereof, with such notice to be received by the
Agent not later than 10:00 a.m. (Chicago time) one Business Day prior to any
such prepayment. Such notice of prepayment shall specify the date and amount
of such prepayment and the Loans to be prepaid. The Agent will promptly notify
each Bank of its receipt of any such notice, and of such Bank's Pro Rata Share
of such prepayment. If such notice is given by the Company, the Company shall
make such prepayment and the payment amount specified in such notice shall be
due and payable on the date specified therein, together with accrued interest
to each such date on the amount prepaid and any amounts required pursuant to
Section 3.4. Reference Rate Loans may be prepaid without prior notice. Unless
the Agent is instructed otherwise by the Company in writing, any prepayments
pursuant to this Section 2.6 shall be applied first to any Reference Rate
Loans. The Company may from time to time (upon notice and procedures stated in
Section 2.3 hereof) reborrow amounts which have been paid by the Company as
optional prepayments.
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<PAGE> 27
2.7 LETTERS OF CREDIT.
(a) Subject to the terms and conditions and relying upon
the representations and warranties herein set forth, the Issuing Bank agrees,
at any time and from time to time on or after the Closing Date until the
Termination Date, to issue and deliver or to extend the expiry of Letters of
Credit for the account of the Company in an aggregate undrawn amount at any one
time outstanding which does not exceed $15,000,000 (the "L/C Facility
Commitment"); provided, however, that the Issuing Bank shall not issue or
extend the expiry of any Letter of Credit if, immediately after giving effect
to such issuance or extension the aggregate outstanding principal balance of
the Revolving Loans and the LC Exposure would exceed the aggregate Commitments.
Each Letter of Credit (x) shall be in a form approved in writing by the
Company, the Agent and the Issuing Bank, (y) shall be in a minimum principal
amount of $5,000 and (z) shall permit drawings upon the presentation of one or
more sight drafts and such other documents as shall be specified by the Company
in the applicable notice and Application delivered pursuant to subsection
2.7(c) below.
(b) Each Letter of Credit shall by its terms expire not
later than the earlier of (i) the first anniversary of the date of issuance or
extension (subject to extension for additional one-year periods by the Issuing
Bank as contemplated by paragraph (a) above) and (ii) the Termination Date.
Each Letter of Credit shall by its terms provide for payment of drawings in
dollars.
(c) The Company shall give the Issuing Bank written or
telecopy notice not later than 10:00 a.m., Chicago time, two Business Days (or
such shorter period as shall be acceptable to the Issuing Bank and the Agent)
prior to any proposed issuance of a Letter of Credit. Each such notice shall
refer to this Agreement and shall specify (i) the date on which such Letter of
Credit is to be issued (which shall be a Business Day), the face amount of such
Letter of Credit (which shall be an amount in dollars), (ii) the name and
address of the beneficiary, (iii) whether such Letter of Credit shall permit a
single drawing or multiple drawings, (iv) the form of the sight draft and any
other documents required to be presented at the time of any drawing (together
with the exact wording of such documents or copies thereof) and (v) the expiry
date of such Letter of Credit (which shall conform to the provisions of
paragraph (b) above). At the time of each request by the Company that a Letter
of Credit be issued, the Issuing Bank, at its option, may require the Company
to execute and deliver to the Issuing Bank an application for such Letter of
Credit in the form customarily prescribed by the Issuing Bank to issue Letters
of Credit (the "Applications"). This Agreement supersedes any terms of the
Applications which are inconsistent with the terms hereof. The Issuing Bank
shall give the Agent, which shall in turn give to each Bank, prompt written or
telecopy advice of any notice received from the Company pursuant to this
subsection.
(d) By the issuance of a Letter of Credit and without any
further action on the part of the Issuing Bank or the Banks in respect thereof,
the Issuing Bank hereby grants to each Bank, and each Bank hereby agrees to and
does acquire from the Issuing Bank, a participation in such Letter of Credit
equal to such Bank's pro rata share, of the face amount of such Letter of
Credit, effective upon the issuance of such Letter of Credit; provided,
however, that no Bank shall be required to acquire participations in Letters of
Credit that would result in its Pro Rata Share, based upon its Commitment, of
the LC Exposure exceeding its Commitment. In consideration and in
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<PAGE> 28
furtherance of the foregoing, each Bank hereby absolutely and unconditionally
agrees to pay to the Agent, on behalf of the Issuing Bank, in accordance with
subsection (f) below, such Bank's Pro Rata Share, of each unreimbursed LC
Disbursement made by the Issuing Bank; provided, however, that the Banks shall
not be obligated to make any such payment with respect to any wrongful payment
or disbursement made under any Letter of Credit as a result of the failure in
any material respect of the Issuing Bank or any confirming bank to comply with
the obligations imposed on it with respect to such Letter of Credit by the
Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce, Publication No. 500 and subsequent revisions
(the "Uniform Customs") or applicable law.
(e) Each Bank acknowledges and agrees that its acquisition
of participations pursuant to subsection (d) above in respect of Letters of
Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including the occurrence and continuance of any
Default or Event of Default hereunder, and that each such payment shall be made
without any offset, abatement, withholding or reduction whatsoever.
(f) Promptly after it shall have ascertained that any draft
and any accompanying documents presented under a Letter of Credit appear to be
in conformity with the terms and conditions of such Letter of Credit, the
Issuing Bank shall give written or telecopy notice to the Company and the Agent
of the receipt and amount of such draft and the date on which payment thereon
will be made. If the Agent shall not have received from the Company the
payment required pursuant to subsection (g) below by 12:00 noon, Chicago time,
one Business Day after the date on which payment of a draft presented under any
Letter of Credit has been made, the Agent shall promptly so notify the Issuing
Bank and each Bank, specifying in the notice to each Bank such Bank's Pro Rata
Share of such LC Disbursement. Each Bank shall pay to the Agent, not later
than 2:00 p.m., Chicago time, on such date, such Bank's percentage of such LC
Disbursement, which the Agent shall promptly pay to the Issuing Bank. The
Agent will promptly remit to each Bank such Bank's percentage of any amounts
subsequently received by the Agent from the Company in respect of such LC
Disbursement; provided that (i) amounts so received for the account of any Bank
prior to payment by such Bank of amounts required to be paid by it hereunder in
respect of any LC Disbursement and (ii) amounts representing interest on any LC
Disbursement for the period prior to the payment by such Bank of such amounts
shall in each case be remitted to the Issuing Bank.
(g) If the Issuing Bank shall pay any draft presented under
a Letter of Credit under circumstances entitling it to reimbursement under
succeeding provisions of this subsection (g), the Company shall pay to the
Issuing Bank or to the Agent for the account of the Issuing Bank or, if the
Agent shall have received the payments provided in subsection (f) above with
respect to such drawing, for the accounts of the Banks, an amount equal to the
amount of such draft before 12:00 noon, Chicago time, on the Business Day
immediately following the date of payment of such draft, together with interest
on such amount at a rate per annum equal to the interest rate in effect for
Reference Rate Loans from (and including) the date of payment of such draft to
(but excluding) the date of such payment by the Company. The obligation of the
Company to pay the amounts referred to above in this subsection (g) shall be
absolute, unconditional and irrevocable and shall be satisfied strictly in
accordance with their terms irrespective of:
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(i) any lack of validity or enforceability of any Letter
of Credit;
(ii) the existence of any claim, setoff, defense or other
right which the Company or any other Person may at any time have
against the beneficiary under any Letter of Credit, the Agent, the
Issuing Bank, any confirming bank or any Bank (other than the defense
of payment in accordance with the terms of this Agreement or a defense
based on the failure in any material respect of the Issuing Bank or
confirming bank to comply with the obligations imposed on it with
respect to such Letter of Credit by the Uniform Customs or applicable
law) or any other Person in connection with this Agreement or any
other transaction;
(iii) any draft or other document presented under a Letter
of Credit proving to be forged, fraudulent or invalid in any respect
or any statement therein being untrue or inaccurate in any respect;
provided that payment by the Issuing Bank or confirming bank under
such Letter of Credit against presentation of such draft or document
shall not have constituted a failure in any material respect by the
Issuing Bank or confirming bank to comply with the obligations imposed
on it with respect to such Letter of Credit by the Uniform Customs or
applicable law.
(iv) payment by the Issuing Bank under a Letter of Credit
against presentation of a draft or other document which does not
comply in any immaterial respect with the terms of such Letter of
Credit; provided that such payment shall not have constituted gross
negligence or wilful misconduct; or
(v) any other circumstance or event whatsoever, whether
or not similar to any of the foregoing; provided that such other
circumstance or event shall not have been the result of gross
negligence or wilful misconduct of the Issuing Bank.
It is understood that in making any payment under a Letter of Credit
(x) the Issuing Bank's exclusive reliance on the documents presented to it
under such Letter of Credit as to any and all matters set forth therein,
including, without limitation, reliance on the amount of any draft presented
under such Letter of Credit, whether or not the amount due to the beneficiary
equals the amount of such draft and whether or not any document presented
pursuant to such Letter of Credit proves to be forged, fraudulent or invalid in
any respect, if such document on its face appears to be in order, and whether
or not any other statement or any other document presented pursuant to such
Letter of Credit proves to be forged or invalid or any statement therein proves
to be inaccurate or untrue in any respect whatsoever, and (y) any noncompliance
in any immaterial respect of the documents presented under a Letter of Credit
with the terms thereof shall, in either case, not be deemed a failure in any
material respect by the Issuing Bank or confirming bank to comply with the
obligations imposed on it with respect to such Letter of Credit by the Uniform
Customs or applicable law.
(h) Neither the Issuing Bank nor its correspondents or
agents, or any bank(s) or financial institution(s) used by the Issuing Bank in
connection with the issuance of Letters of Credit ("Correspondent"), shall be
responsible for (i) the use which may be made of the Letters of Credit
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or for any acts or omissions of the user(s) of the Letters of Credit;
(ii) the existence, character, quality, quantity, condition, packing or value
of the property purporting to be represented by the documents required by the
terms of any Letters of Credit or presented in connection therewith
("Documents"); (iii) the time, place, manner or order in which shipment is
made; (iv) except as otherwise provided in subsection 2.7(g)(iii), the
validity, sufficiency, or genuineness of Documents, or of any endorsements
thereon, even if such Documents should in fact prove to be in any or all
respects invalid, insufficient, fraudulent, or forged; (v) partial or
incomplete shipment, or failure or omission to ship any or all of the property
referred to in the Letters of Credit or the Documents; (vi) the character,
adequacy, validity or genuineness of any insurance or solvency or
responsibility of any insurer or any other risk connected with insurance; (vii)
any deviation from instructions, delay, default or fraud by the shipper or
anyone else in connection with the property referred to in the Letters of
Credit or the Documents or the shipping thereof; (viii) the insolvency,
responsibility or relationship to the property of any party issuing any
documents in connection with the property referred to in the Letters of Credit;
(ix) delay in arrival or failure to arrive of either the property referred to
in the Letters of Credit or the Documents; (x) delay in giving or failure to
give notice of arrival or any other notice; (xi) any breach of contract between
the shipper(s) or vendor(s) and the consignee(s) or buyer(s); (xii) failure of
any instrument to bear any reference or adequate reference to the Letter of
Credit or failure of Documents to accompany any instrument at negotiation, or
failure of any person to note the amount of any instrument on the reverse of
the Letter of Credit or to send forward Documents apart from instruments as
required by the terms of the Letter of Credit or to send forward Documents
apart from instruments as required by the terms of the Letter of Credit, each
of which provisions, if contained in the Letter of Credit or itself, it is
agreed may be waived by the Issuing Bank or Correspondent; or (xiii) errors,
omissions, interruptions or delays in transmission or delivery of any messages
by mail, cable, telegraph, wireless or otherwise, whether or not they may be in
cipher. Further, the Issuing Bank shall not be responsible for any act, error,
neglect or default, omission, insolvency or failure in business of any of its
Correspondents. The occurrence of any one or more of the contingencies
referred to in the preceding sentences of this subsection 2.7(h) shall not
affect, impair or prevent the vesting of any of the Issuing Bank's rights or
powers hereunder or the Company's obligation to make reimbursement. The
Company shall promptly examine (i) the copy of the Letter of Credit (and of any
amendments thereof) sent to it by the Issuing Bank or Correspondent and (ii)
all documents and instruments delivered to it from time to time by the Issuing
Bank or Correspondent, and, in the event of any claim of noncompliance with the
Company's instructions or other irregularity, will promptly notify the Issuing
Bank and Correspondent thereof in writing, the Company being conclusively
deemed to have waived any such claim against the Issuing Bank and Correspondent
unless such notice is given within two Business Days following receipt by the
Company of such Letter of Credit, amendment, document or instrument.
(i) Upon any transfer, sale, delivery, surrender or
endorsement of any bill of lading, warehouse receipt or other Document at any
time(s) held by the Issuing Bank, or held for its account by any of its
correspondents or agents, or any bank or financial institution used by the
Issuing Bank in connection with the issuance of Letters of Credit, relative to
the Letter of Credit, the Company will indemnify and hold the Issuing Bank and
any such correspondent(s), agent(s), bank(s) and financial institution(s),
harmless from and against each and every claim, demand, action or suit which
may arise against the Issuing Bank or any correspondent(s), agent(s), bank(s)
and financial institution(s), by reason thereof.
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2.8 REPAYMENT. The Company shall repay to the Banks on the
Revolving Termination Date the aggregate principal amount of Revolving Loans
outstanding on such date.
2.9 INTEREST.
(a) Each Loan shall bear interest on the outstanding
principal amount thereof from the applicable Borrowing Date at a rate per annum
equal to the Fixed Rate, the Offshore Rate or the Reference Rate, as the case
may be (and subject to the Company's right to convert to other Types of Loans
under Section 2.4), plus the Applicable Margin.
(b) Interest on each Loan shall be paid in arrears on
each Interest Payment Date. Interest shall also be paid on the date of any
prepayment of Loans under Section 2.6 for the portion of the Loans so prepaid
and upon payment (including prepayment) in full thereof and, during the
existence of any Event of Default, interest shall be paid on demand of the
Agent at the request or with the consent of the Majority Banks.
(c) Notwithstanding subsection (a) of this Section, while
any Event of Default exists or after acceleration, the Company shall pay
interest (after as well as before entry of judgment thereon to the extent
permitted by law) on the principal amount of all outstanding Loans and other
Obligations, at a rate per annum which is determined by adding 2% per annum to
the Applicable Margin then in effect for such Loans and, in the case of
Obligations not subject to an Applicable Margin, at a rate per annum equal to
the Reference Rate plus 2%; provided, however, that, on and after the
expiration of any Interest Period applicable to any Offshore Rate Loan or Fixed
Rate Loan outstanding on the date of occurrence of such Event of Default or
acceleration, the principal amount of such Loan shall, during the continuation
of such Event of Default or after acceleration, bear interest at a rate per
annum equal to the Reference Rate plus 2%.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Company to any Bank hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by such Bank would be contrary
to the provisions of any law applicable to such Bank limiting the highest rate
of interest that may be lawfully contracted for, charged or received by such
Bank, and in such event the Company shall pay such Bank interest at the highest
rate permitted by applicable law.
2.10 FEES.
(a) AGENCY FEE. The Company shall pay an agency fee to
the Agent for the Agent's own account, as required by the letter agreement
("Fee Letter") between the Company and the Agent dated November 15, 1996.
(b) UNUSED LOAN FEE. If during any calendar quarter
prior to the Termination Date (or portion of the calendar quarter for 1996 and
the calendar quarter in which the Termination Date occurs), the average daily
balance of the Revolving Loan is less than $45,000,000, the Company shall pay
to Agent, for the ratable benefit of the Banks, in addition to any interest,
late
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charges or liquidated damages due under this Agreement, an amount ("Unused Loan
Fee") equal to the quotient of (i) an amount equal to (A) the positive
difference between $45,000,000 and the average daily balance of the Revolving
Loan during such calendar quarter in which the Termination Date occurs,
multiplied by (B) a rate equal to 0.15%, divided by (ii) four. The amount of
any Unused Revolving Loan Fee shall be payable within five days after
determination thereof by Agent and notice to the Company of the amount thereof.
(c) L/C FEES. The Company agrees to pay (i) to the
Agent, for the ratable benefit of the Banks, a per annum fee ("LC Issuance
Fee"), payable quarterly, in arrears, prorated for any period less than one
year based on the Issuing Bank's customary practices, (a) with respect to the
Letters of Credit which are cash collateralized in a manner acceptable to the
Issuing Bank, equal to 0.125% of the undrawn face amount of such Letter of
Credit from time to time, and (b) with respect to all other Letters of Credit,
equal to 0.375% of the undrawn face amount of such Letter of Credit from time
to time, and in any event the LC Issuance Fee shall not be less than $150, plus
(ii) to the Issuing Bank, for the Issuing Bank's own account and not for the
account of any Bank, in addition to the LC Issuance Fee, the Issuing Bank's
standard administrative operating fees and charges in effect from time to time
for issuing and administering any Letter of Credit. In the event the Issuing
Bank consents to the extension of the term ("Extended Term") of a Letter of
Credit beyond the term specified in subsection 2.7(b) ("Extended Letter of
Credit"), then the Company shall pay an additional LC Issuance Fee with respect
to each Extended Letter of Credit for each year or partial year the terms of
such Extended Letter of Credit extends beyond the term specified in subsection
2.7(b). With respect to the payment of any fees or expenses that become due
hereunder, the Company authorizes and directs the Agent, at its option, to
cause such payment to be paid when due by charging such payment as a Revolving
Loan advance against the Revolving Loan Commitment established pursuant to
Section 2.1 of this Agreement.
2.11 COMPUTATION OF FEES AND INTEREST.
(a) All computations of interest for Reference Rate Loans
when the Reference Rate is determined by BAI's "reference rate" shall be made
on the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed. All other computations of fees and interest shall be made on the
basis of a 360-day year and actual days elapsed (which results in more interest
being paid than if computed on the basis of a 365-day year). Interest and fees
shall accrue during each period during which interest or such fees are computed
from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent
shall be conclusive and binding on the Company and the Banks in the absence of
manifest error. The Agent will, at the request of the Company or any Bank,
deliver to the Company or the Bank, as the case may be, a statement showing the
quotations used by the Agent in determining any interest rate and the resulting
interest rate.
2.12 PAYMENTS BY THE COMPANY.
(a) All payments to be made by the Company shall be made
without set-off,
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recoupment or counterclaim. Except as otherwise expressly provided herein, all
payments by the Company shall be made to the Agent for the account of the Banks
at the Agent's Payment Office, and shall be made in dollars and in immediately
available funds, no later than 1:00 p.m. (Chicago time) on the date specified
herein. The Agent will promptly distribute to each Bank its Pro Rata Share (or
other applicable share as expressly provided herein) of such payment in like
funds as received. Any payment received by the Agent later than 1:00 p.m.
(Chicago time) shall be deemed to have been received on the following Business
Day and any applicable interest or fee shall continue to accrue.
(b) Subject to the provisions set forth in the definition
of "Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and
such extension of time shall in such case be included in the computation of
interest or fees, as the case may be.
(c) Unless the Agent receives notice from the Company
prior to the date on which any payment is due to the Banks that the Company
will not make such payment in full as and when required, the Agent may assume
that the Company has made such payment in full to the Agent on such date in
immediately available funds and the Agent may (but shall not be so required),
in reliance upon such assumption, distribute to each Bank on such due date an
amount equal to the amount then due such Bank. If and to the extent the
Company has not made such payment in full to the Agent, each Bank shall repay
to the Agent on demand such amount distributed to such Bank, together with
interest thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Bank until the date repaid.
2.13 PAYMENTS BY THE BANKS TO THE AGENT.
(a) Unless the Agent receives notice from a Bank on or
prior to the Closing Date or, with respect to any Borrowing after the Closing
Date, at least one Business Day prior to the date of such Borrowing, that such
Bank will not make available as and when required hereunder to the Agent for
the account of the Company the amount of that Bank's Pro Rata Share of the
Borrowing, the Agent may assume that each Bank has made such amount available
to the Agent in immediately available funds on the Borrowing Date and the Agent
may (but shall not be so required), in reliance upon such assumption, make
available to the Company on such date a corresponding amount. If and to the
extent any Bank shall not have made its full amount available to the Agent in
immediately available funds and the Agent in such circumstances has made
available to the Company such amount, that Bank shall on the Business Day
following such Borrowing Date make such amount available to the Agent, together
with interest at the Federal Funds Rate for each day during such period. A
notice of the Agent submitted to any Bank with respect to amounts owing under
this subsection (a) shall be conclusive, absent manifest error. If such amount
is so made available, such payment to the Agent shall constitute such Bank's
Loan on the date of Borrowing for all purposes of this Agreement. If such
amount is not made available to the Agent on the Business Day following the
Borrowing Date, the Agent will notify the Company of such failure to fund and,
upon demand by the Agent, the Company shall pay such amount to the Agent for
the Agent's account, together with interest thereon for each day elapsed since
the date of such Borrowing, at a rate per annum equal to the interest rate
applicable at the time to the Loans comprising such Borrowing.
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(b) The failure of any Bank to make any Loan on any
Borrowing Date shall not relieve any other Bank of any obligation hereunder to
make a Loan on such Borrowing Date, but no Bank shall be responsible for the
failure of any other Bank to make the Loan to be made by such other Bank on any
Borrowing Date.
2.14 SHARING OF PAYMENTS, ETC. If, other than as expressly
provided elsewhere herein, any Bank shall obtain on account of the Loans made
by it any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) in excess of its Pro Rata Share (or other share
contemplated hereunder), such Bank shall immediately (a) notify the Agent of
such fact, and (b) purchase from the other Banks such participations in the
Loans made by them as shall be necessary to cause such purchasing Bank to share
the excess payment pro rata with each of them; provided, however, that if all
or any portion of such excess payment is thereafter recovered from the
purchasing Bank, such purchase shall to that extent be rescinded and each other
Bank shall repay to the purchasing Bank the purchase price paid therefor,
together with an amount equal to such paying Bank's ratable share (according to
the proportion of (i) the amount of such paying Bank's required repayment to
(ii) the total amount so recovered from the purchasing Bank) of any interest or
other amount paid or payable by the purchasing Bank in respect of the total
amount so recovered. The Company agrees that any Bank so purchasing a
participation from another Bank may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off, but subject
to Section 10.10) with respect to such participation as fully as if such Bank
were the direct creditor of the Company in the amount of such participation.
The Agent will keep records (which shall be conclusive and binding in the
absence of manifest error) of participations purchased under this Section and
will in each case notify the Banks following any such purchases or repayments.
ARTICLE 3
TAXES, YIELD PROTECTION AND ILLEGALITY
3.1 TAXES.
(a) Any and all payments by the Company to each Bank or
the Agent under this Agreement and any other Loan Document shall be made free
and clear of, and without deduction or withholding for, any Taxes. In
addition, the Company shall pay all Other Taxes.
(b) If the Company shall be required by law to deduct or
withhold any Taxes, Other Taxes or Further Taxes from or in respect of any sum
payable hereunder to any Bank or the Agent, then:
(i) the sum payable shall be increased as
necessary so that, after making all required deductions and
withholdings (including deductions and withholdings applicable to
additional sums payable under this Section), such Bank or the Agent,
as the case may be, receives and retains an amount equal to the sum it
would have received and retained had no such deductions or
withholdings been made;
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(ii) the Company shall make such deductions and
withholdings;
(iii) the Company shall pay the full amount
deducted or withheld to the relevant taxing authority or other
authority in accordance with applicable law; and
(iv) the Company shall also pay to each Bank or
the Agent for the account of such Bank, at the time interest is paid,
Further Taxes in the amount that the respective Bank specifies as
necessary to preserve the after-tax yield the Bank would have received
if such Taxes, Other Taxes or Further Taxes had not been imposed.
(c) The Company agrees to indemnify and hold harmless
each Bank and the Agent for the full amount of i) Taxes, ii) Other Taxes, and
iii) Further Taxes in the amount that the respective Bank specifies as
necessary to preserve the after-tax yield the Bank would have received if such
Taxes, Other Taxes or Further Taxes had not been imposed, and any liability
(including penalties, interest, additions to tax and expenses) arising
therefrom or with respect thereto, whether or not such Taxes, Other Taxes or
Further Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date the Bank or the
Agent makes written demand therefor.
(d) If any Bank becomes entitled to claim any
indemnification payment pursuant to this Section 3.1, it shall notify the
Company thereof within 90 days after such Bank becomes aware of the nature and
extent of such claim and shall also notify Agent thereof. A certificate as to
any additional amounts payable pursuant to this Section 3.1 submitted by a Bank
to the Company shall be conclusive absent manifest error. Such certificate
shall outline in reasonable detail the computation of any amounts claimed by it
under this Section 3.1 and the assumptions underlying such computation. No
Bank shall, however, be required to disclose, in such certificate or otherwise,
any proprietary or confidential information. No Bank shall be entitled to any
indemnification payment under this Section 3.1 unless it shall have notified
the Company that it will demand indemnification not later than 90 days after
the date on which the Bank becomes aware of the nature and extent of the claim.
(e) Within 30 days after the date of any payment by the
Company of Taxes, Other Taxes or Further Taxes, the Company shall furnish to
each Bank or the Agent the original or a certified copy of a receipt evidencing
payment thereof, or other evidence of payment satisfactory to such Bank or the
Agent.
(f) If the Company is required to pay any amount to any
Bank or the Agent pursuant to subsection (b) or (c) of this Section, then such
Bank shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office so as to
eliminate any such additional payment by the Company which may thereafter
accrue, if such change in the sole judgment of such Bank is not otherwise
disadvantageous to such Bank.
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3.2 ILLEGALITY.
(a) If any Bank determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Bank or its applicable Lending Office to make
Offshore Rate Loans, then, on notice thereof by the Bank to the Company through
the Agent, any obligation of that Bank to make Offshore Rate Loans shall be
suspended until the Bank notifies the Agent and the Company that the
circumstances giving rise to such determination no longer exist.
(b) If a Bank determines that it is unlawful to maintain
any Offshore Rate Loan, the Company shall, upon its receipt of notice of such
fact and demand from such Bank (with a copy to the Agent), prepay in full such
Offshore Rate Loans of that Bank then outstanding, together with interest
accrued thereon and amounts required under Section 3.4, either on the last day
of the Interest Period thereof, if the Bank may lawfully continue to maintain
such Offshore Rate Loans to such day, or immediately, if the Bank may not
lawfully continue to maintain such Offshore Rate Loan. If the Company is
required to so prepay any Offshore Rate Loan, then concurrently with such
prepayment, the Company shall borrow from the affected Bank, in the amount of
such repayment, a Reference Rate Loan.
(c) If the obligation of any Bank to make or maintain
Offshore Rate Loans has been so terminated or suspended, the Company may elect,
by giving notice to the Bank through the Agent that all Loans which would
otherwise be made by the Bank as Offshore Rate Loans shall be instead Reference
Rate Loans.
(d) Before giving any notice to the Agent under this
Section, the affected Bank shall designate a different Lending Office with
respect to its Offshore Rate Loans if such designation will avoid the need for
giving such notice or making such demand and will not, in the judgment of the
Bank, be illegal or otherwise disadvantageous to the Bank.
3.3 INCREASED COSTS AND REDUCTION OF RETURN.
(a) If any Bank determines that, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance by that Bank with any guideline or request
from any central bank or other Governmental Authority (whether or not having
the force of law), there shall be any increase in the cost to such Bank of
agreeing to make or making, funding or maintaining any Offshore Rate Loans or
Fixed Rate Loans, then the Company shall be liable for, and shall from time to
time, upon demand (with a copy of such demand to be sent to the Agent), pay to
the Agent for the account of such Bank, additional amounts as are sufficient to
compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration
of any Capital Adequacy Regulation by any central bank or other Governmental
Authority charged with the interpretation or administration thereof, or (iv)
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compliance by the Bank (or its Lending Office) or any corporation controlling
the Bank with any Capital Adequacy Regulation, affects or would affect the
amount of capital required or expected to be maintained by the Bank or any
corporation controlling the Bank and (taking into consideration such Bank's or
such corporation's policies with respect to capital adequacy and such Bank's
desired return on capital) determines that the amount of such capital is
increased as a consequence of its Commitments, loans, credits or obligations
under this Agreement, then, upon demand of such Bank to the Company through the
Agent, the Company shall pay to the Bank, from time to time as specified by the
Bank, additional amounts sufficient to compensate the Bank for such increase.
(c) Upon receiving a demand to pay amounts pursuant to
subsection 3.3(a) or 3.3(b), the Company may require the applicable Bank to
provide an opinion from such Bank's legal counsel or independent accountants to
the effect that (i) events of the type described in subsection 3.3(a) or
3.3(b), as the case may be, have occurred, and (ii) as a result of the
occurrence of such events, the Bank has incurred costs of the type described in
subsection 3.3(a) or 3.3(b), as the case may be. The fees and expenses of the
legal counsel or independent accountants of the Bank shall be borne by the
Company.
3.4 FUNDING LOSSES. The Company shall reimburse each Bank and
hold each Bank harmless from any loss or expense which the Bank may sustain or
incur as a consequence of:
(a) the failure of the Company to make on a timely basis
any payment of principal of any Offshore Rate Loan or Fixed Rate Loan;
(b) the failure of the Company to borrow, continue or
convert a Loan after the Company has given (or is deemed to have given) a
Notice of Borrowing or a Notice of Conversion/ Continuation;
(c) the failure of the Company to make any prepayment in
accordance with any notice delivered under Section 2.6;
(d) the prepayment or other payment (including after
acceleration thereof) of an Offshore Rate Loan or a Fixed Rate Loan on a day
that is not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.4 of any
Offshore Rate Loan or Fixed Rate Loan to a Reference Rate Loan on a day that is
not the last day of the relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or Fixed Rate Loans
or from fees payable to terminate the deposits from which such funds were
obtained. For purposes of calculating amounts payable by the Company to the
Banks under this Section and under subsection 3.3(a), (i) each Offshore Rate
Loan made by a Bank (and each related reserve, special deposit or similar
requirement) shall be conclusively deemed to have been funded at the LIBOR used
in determining the Offshore Rate for such Offshore Rate Loan by a matching
deposit or other borrowing in the interbank eurodollar
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market for a comparable amount and for a comparable period, whether or not such
Offshore Rate Loan is in fact so funded, and (ii) each Fixed Rate Loan made by
a Bank (and each related reserve, special deposit or similar requirement) shall
be conclusively deemed to have been funded at the rate used in determining the
Fixed Rate for such Fixed Rate Loan by the issuance of Agent's certificate of
deposit in a comparable amount and for a comparable period, whether or not such
Fixed Rate Loan is in fact so funded.
3.5 INABILITY TO DETERMINE RATES. If the Agent determines that
for any reason adequate and reasonable means do not exist for determining the
Offshore Rate or the Fixed Rate for any requested Interest Period with respect
to a proposed Offshore Rate Loan or Fixed Rate Loan, or that the Offshore Rate
or the Fixed Rate applicable pursuant to subsection 2.9(a) for any requested
Interest Period with respect to a proposed Offshore Rate Loan or Fixed Rate
Loan does not adequately and fairly reflect the cost to the Banks of funding
such Loan, the Agent will promptly so notify the Company and each Bank.
Thereafter, the obligation of the Banks to make or maintain Fixed Rate Loans or
Offshore Rate Loans, as the case may be, hereunder shall be suspended until the
Agent upon the instruction of the Majority Banks revokes such notice in
writing. Upon receipt of such notice, the Company may revoke any Notice of
Borrowing or Notice of Conversion/Continuation then submitted by it. If the
Company does not revoke such Notice, the Banks shall make, convert or continue
the Loans, as proposed by the Company, in the amount specified in the
applicable notice submitted by the Company, but such Loans shall be made,
converted or continued as Reference Rate Loans instead of Fixed Rate Loans or
Offshore Rate Loans, as the case may be.
3.6 RESERVES ON OFFSHORE RATE LOANS. The Company shall pay to
each Bank, as long as such Bank shall be required under regulations of the FRB
to maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency funds or deposits (currently known as "Eurocurrency
liabilities"), additional costs on the unpaid principal amount of each Offshore
Rate Loan equal to the actual costs of such reserves allocated to such Loan by
the Bank (as determined by the Bank in good faith, which determination shall be
conclusive), payable on each date on which interest is payable on such Loan,
provided the Company shall have received at least 15 days' prior written notice
(with a copy to the Agent) of such additional interest from the Bank. If a
Bank fails to give notice 15 days prior to the relevant Interest Payment Date,
such additional interest shall be payable 15 days from receipt of such notice.
3.7 CERTIFICATES OF BANKS. Any Bank claiming reimbursement or
compensation under this Article 3 shall deliver to the Company (with a copy to
the Agent) a certificate setting forth in reasonable detail the amount payable
to the Bank hereunder and such certificate shall be conclusive and binding on
the Company in the absence of manifest error.
3.8 SUBSTITUTION OF BANKS. Upon the receipt by the Company from
any Bank (an "Affected Bank") of a claim for compensation under Section 3.3,
the Company may: (i) request the Affected Bank to use its best efforts to
obtain a replacement bank or financial institution satisfactory to the Company
to acquire and assume all or a ratable part of all of such Affected Bank's
Loans and Commitment (a "Replacement Bank"); (ii) request one more of the other
Banks to acquire and assume all or part of such Affected Bank's Loans and
Commitment; or (iii) designate a Replacement
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Bank. Any such designation of a Replacement Bank under clause (i) or (iii)
shall be subject to the prior written consent of the Agent (which consent shall
not be unreasonably withheld).
3.9 SURVIVAL. The agreements and obligations of the Company in
this Article 3 shall survive the payment of all other Obligations.
ARTICLE 4
CONDITIONS PRECEDENT
4.1 CONDITIONS OF INITIAL LOANS. The obligation of each Bank to
make its initial Loan hereunder is subject to the condition that the Agent
shall have received on or before the Closing Date all of the following, in form
and substance reasonably satisfactory to the Agent and each Bank, and in
sufficient copies for each Bank:
(a) CREDIT AGREEMENT AND NOTES. This Agreement and the
Notes executed by each party thereto;
(b) RESOLUTIONS; INCUMBENCY.
(i) Copies of the resolutions of the board of
directors of the Company and each Subsidiary that may become party to
a Loan Document authorizing the transactions contemplated hereby,
certified as of the Closing Date by the Secretary or an Assistant
Secretary of such Person; and
(ii) A certificate of the Secretary or Assistant
Secretary of the Company, and each Subsidiary that may become party to
a Loan Document certifying the names and true signatures of the
officers of the Company or such Subsidiary authorized to execute,
deliver and perform, as applicable, this Agreement, and all other Loan
Documents to be delivered by it hereunder;
(c) ORGANIZATION DOCUMENTS; GOOD STANDING. Each of the
following documents:
(i) the articles or certificate of incorporation
and the bylaws of the Company and each Subsidiary party to any Loan
Document as in effect on the Closing Date, certified by the Secretary
or Assistant Secretary of the Company or such Subsidiary as of the
Closing Date; and
(ii) a good standing certificate for the Company
and each Subsidiary party to any Loan Document from the Secretary of
State (or similar, applicable Governmental Authority) of its state of
incorporation and each state where the Company or such Subsidiary is
qualified to do business as a foreign corporation as of a recent date,
together with a bring-down certificate by facsimile, dated the Closing
Date;
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(d) LEGAL OPINION. An opinion of Sonnenschein, Nath &
Rosenthal, counsel to the Company and addressed to the Agent and the Banks,
substantially in the form of Exhibit D;
(e) PAYMENT OF FEES. Evidence of payment by the Company
of all accrued and unpaid fees, costs and expenses to the extent then due and
payable on the Closing Date, together with Attorney Costs of BAI to the extent
invoiced prior to or on the Closing Date, plus such additional amounts of
Attorney Costs as shall constitute BAI's reasonable estimate of Attorney Costs
incurred or to be incurred by it through the closing proceedings (provided that
such estimate shall not thereafter preclude final settling of accounts between
the Company and BAI); including any such costs, fees and expenses arising under
or referenced in Sections 2.10 and 10.04;
(f) CERTIFICATE. A certificate signed by a Responsible
Officer, dated as of the Closing Date, stating that:
(i) the representations and warranties contained
in Article 5 are true and correct on and as of such date, as though
made on and as of such date;
(ii) no Default or Event of Default exists or
would result from the initial Borrowing; and
(iii) there has occurred since July 31, 1996 no
event or circumstance that has resulted or could reasonably be
expected to result in a Material Adverse Effect; and
(g) OTHER DOCUMENTS. Such other approvals, opinions,
documents or materials as the Agent or any Bank may reasonably request.
4.2 CONDITIONS TO ALL BORROWINGS. The obligation of each Bank to
make any Loan to be made by it (including its initial Loan) or to continue or
convert any Loan under Section 2.4 is subject to the satisfaction of the
following conditions precedent on the relevant Borrowing Date or
Conversion/Continuation Date:
(a) NOTICE OF BORROWING OR CONVERSION/CONTINUATION. The
Agent shall have received (with, in the case of the initial Loan only, a copy
for each Bank) a Notice of Borrowing or a Notice of Conversion/Continuation, as
applicable;
(b) CONTINUATION OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties in Article 5 shall be true and correct on and as
of such Borrowing Date or Conversion/Continuation Date with the same effect as
if made on and as of such Borrowing Date or Conversion/Continuation Date
(except to the extent such representations and warranties expressly refer to an
earlier date, in which case they shall be true and correct as of such earlier
date); provided, however, that the Company may from time to time update the
information set forth in the Schedules referred to in Article 5 for changes
occurring subsequent to the Closing Date so long as the new matters set forth
in the updated Schedules have not resulted in, and cannot reasonably be
expected to result in, a Material Adverse Effect; and
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(c) NO EXISTING DEFAULT. No Default or Event of Default
shall exist or shall result from such Borrowing or continuation or
conversion.
Each Notice of Borrowing and Notice of Conversion/Continuation submitted by the
Company hereunder shall constitute a representation and warranty by the Company
hereunder, as of the date of each such notice and as of each Borrowing Date or
Conversion/Continuation Date, as applicable, that the conditions in this
Section 4.2 are satisfied.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and each Bank that:
5.1 CORPORATE EXISTENCE AND POWER. The Company and each of its
Subsidiaries:
(a) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation;
(b) has the power and authority and all governmental
licenses, authorizations, consents and approvals to own its assets, carry on
its business and to execute, deliver, and perform its obligations under the
Loan Documents;
(c) is duly qualified as a foreign corporation and is
licensed and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification or license; and
(d) is in compliance with all Requirements of Law;
except, in each case referred to in clause (c) or clause (d), to the extent
that the failure to do so could not reasonably be expected to have a Material
Adverse Effect.
5.2 CORPORATE AUTHORIZATION; NO CONTRAVENTION. The execution,
delivery and performance by the Company and its Subsidiaries of this Agreement
and each other Loan Document to which such Person is party, have been duly
authorized by all necessary corporate action, and do not and will not:
(a) contravene the terms of any of that Person's
Organization Documents;
(b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any document evidencing
any Contractual Obligation to which such Person is a party or any order,
injunction, writ or decree of any Governmental Authority to which such Person
or its property is subject; or
(c) violate any Requirement of Law.
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5.3 GOVERNMENTAL AUTHORIZATION. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company or
any of its Subsidiaries of the Agreement or any other Loan Document.
5.4 BINDING EFFECT. This Agreement and each other Loan Document
to which the Company or any of its Subsidiaries is a party constitute the
legal, valid and binding obligations of the Company and any of its Subsidiaries
to the extent it is a party thereto, enforceable against such Person in
accordance with their respective terms.
5.5 LITIGATION. Except as specifically disclosed in Schedule 5.5,
there are no actions, suits, proceedings, claims or disputes pending, or to the
best knowledge of the Company, threatened or contemplated, at law, in equity,
in arbitration or before any Governmental Authority, against the Company, or
its Subsidiaries or any of their respective properties which:
(a) purport to affect or pertain to this Agreement or any
other Loan Document, or any of the transactions contemplated hereby or thereby;
or
(b) if determined adversely to the Company or its
Subsidiaries, would reasonably be expected to have a Material Adverse Effect.
No injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin
or restrain the execution, delivery or performance of this Agreement or any
other Loan Document, or directing that the transactions provided for herein or
therein not be consummated as herein or therein provided.
5.6 NO DEFAULT. No Default or Event of Default exists or would
result from the incurring of any Obligations by the Company. As of the Closing
Date, neither the Company nor any Subsidiary is in default under or with
respect to any Contractual Obligation in any respect which, individually or
together with all such defaults, could reasonably be expected to have a
Material Adverse Effect, or that would, if such default had occurred after the
Closing Date, create an Event of Default under subsection 8.1(e).
5.7 ERISA COMPLIANCE. Except as specifically disclosed in
Schedule 5.7:
(a) Each Plan is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other federal or state
law. Each Plan which is intended to qualify under Section 401(a) of the Code
has received a favorable determination letter from the IRS and to the best
knowledge of the Company, nothing has occurred which would cause the loss of
such qualification. The Company and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of
Company, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan
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which has resulted or could reasonably be expected to result in a Material
Adverse Effect. There has been no prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan which has resulted or
could reasonably be expected to result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably
expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability;
(iii) neither the Company nor any ERISA Affiliate has incurred, or reasonably
expects to incur, any liability under Title IV of ERISA with respect to any
Pension Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) neither the Company nor any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v) neither the Company nor any ERISA Affiliate has engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
5.8 USE OF PROCEEDS; MARGIN REGULATIONS. The proceeds of the
Loans are to be used solely for the purposes set forth in and permitted by
Section 6.12 and Section 7.7. Neither the Company nor any Subsidiary is
generally engaged in the business of purchasing or selling Margin Stock or
extending credit for the purpose of purchasing or carrying Margin Stock.
5.9 TITLE TO PROPERTIES. The Company and each Subsidiary have
good record and marketable title in fee simple to, or valid leasehold interests
in, all real property necessary or used in the ordinary conduct of their
respective businesses, except for such defects in title as could not,
individually or in the aggregate, have a Material Adverse Effect. As of the
Closing Date, the property of the Company and its Subsidiaries is subject to no
Liens, other than Permitted Liens.
5.10 TAXES. The Company and its Subsidiaries have filed all
Federal and other material tax returns and reports required to be filed, and
have paid all Federal and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties, income or
assets otherwise due and payable, except those which are being contested in
good faith by appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. There is no proposed tax assessment against
the Company or any Subsidiary that would, if made, have a Material Adverse
Effect.
5.11 FINANCIAL CONDITION.
(a) The unaudited consolidated financial statements of the
Company and its Subsidiaries dated July 31, 1996, and the related consolidated
statements of income or operations, shareholders' equity and cash flows for the
fiscal quarter ended on that date:
(i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein, subject to ordinary, good faith
year end audit adjustments;
(ii) fairly present the financial condition of the
Company and its Subsidiaries as of the date thereof and results of
operations for the period covered thereby;
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and
(iii) except as specifically disclosed in Schedule
5.11, show all material indebtedness and other liabilities, direct or
contingent, of the Company and its consolidated Subsidiaries as of the
date thereof, including liabilities for taxes, material commitments
and Contingent Obligations.
(b) Since July 31, 1996, there has been no Material
Adverse Effect.
5.12 ENVIRONMENTAL MATTERS. Except as specifically disclosed in
Schedule 5.12, the Company and its Subsidiaries are in compliance with all
applicable Environmental Laws and no Environmental Claims have been asserted
against the Company or any of its Subsidiaries which in either case could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
5.13 REGULATED ENTITIES. None of the Company, any Person
controlling the Company, or any Subsidiary, is an "Investment Company" within
the meaning of the Investment Company Act of 1940. The Company is not subject
to regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, any state public utilities code, or any
other Federal or state statute or regulation limiting its ability to incur
Indebtedness.
5.14 NO BURDENSOME RESTRICTIONS. Neither the Company nor any
Subsidiary is a party to or bound by any Contractual Obligation, or subject to
any restriction in any Organization Document, or any Requirement of Law, any of
which could reasonably be expected to have a Material Adverse Effect.
5.15 COPYRIGHTS, PATENTS, TRADEMARKS AND LICENSES, ETC. The
Company or its Subsidiaries own or are licensed or otherwise have the right to
use all of the patents, trademarks, service marks, trade names, copyrights,
contractual franchises, authorizations and other rights that are reasonably
necessary for the operation of their respective businesses, without conflict
with the rights of any other Person. To the best knowledge of the Company, no
slogan or other advertising device, product, process, method, substance, part
or other material now employed, or now contemplated to be employed, by the
Company or any Subsidiary infringes upon any rights held by any other Person.
Except as specifically disclosed in Schedule 5.5, no claim or litigation
regarding any of the foregoing is pending or threatened, and no patent,
invention, device, application, principle or any statute, law, rule,
regulation, standard or code is pending or, to the knowledge of the Company,
proposed, which, in either case, could reasonably be expected to have a
Material Adverse Effect.
5.16 SUBSIDIARIES. As of the Closing Date, the Company has no
Subsidiaries other than those specifically disclosed in part (a) of Schedule
5.16 hereto and has no equity investments in any other corporation or entity
other than those specifically disclosed in part (b) of Schedule 5.16.
5.17 INSURANCE. Except as specifically disclosed in Schedule 5.17,
the properties of the Company and its Subsidiaries are insured with financially
sound and reputable insurance companies
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not Affiliates of the Company, in such amounts, with such deductibles
and covering such risks as are customarily carried by companies engaged in
similar businesses and owning similar properties in localities where the
Company or such Subsidiary operates. Agent and each Bank acknowledge and agree
that the insurance coverages and insurers set forth in the summary of insurance
provided by the Company prior to the Closing Date satisfies the requirements of
this Section 5.17 as of the Closing Date.
5.18 SWAP OBLIGATIONS. Neither the Company nor any of its
Subsidiaries has incurred any outstanding obligations under any Swap Contracts.
5.19 FULL DISCLOSURE. None of the representations or warranties
made by the Company or any Subsidiary in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Company or any Subsidiary in connection with the Loan
Documents, contains any untrue statement of a material fact or omits any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they are made, not
misleading as of the time when made or delivered.
ARTICLE 6
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, unless the Majority
Banks waive compliance in writing:
6.1 FINANCIAL STATEMENTS. The Company shall deliver to the Agent,
in form and detail satisfactory to the Agent and the Majority Banks, with
sufficient copies for each Bank:
(a) as soon as available, but not later than 90 days
after the end of each fiscal year (commencing with the fiscal year ended
January 31, 1997), a copy of the audited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, and accompanied by the opinion of KMG Peat
Marwick LLP or another nationally-recognized independent public accounting firm
("Independent Auditor") which report shall state that such consolidated
financial statements present fairly the financial position for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years. Such opinion shall not be qualified or limited as to the scope of audit
or the financial condition of the Company and its Subsidiaries as a going
concern; and
(b) as soon as available, but not later than 45 days
after the end of each of the first three fiscal quarters of each fiscal year
(commencing with the fiscal quarter ended October 31, 1996), a copy of the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
the end of such quarter and the related consolidated statements of income,
shareholders' equity
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and cash flows for the period commencing on the first day and ending on the
last day of such quarter, and certified by a Responsible Officer as fairly
presenting, in accordance with GAAP (subject to ordinary, good faith year-end
audit adjustments), the financial position and the results of operations of the
Company and the Subsidiaries.
6.2 CERTIFICATES; OTHER INFORMATION. The Company shall furnish to
the Agent, with sufficient copies for each Bank:
(a) concurrently with the delivery of the financial
statements referred to in subsection 6.1(a), a statement of performance versus
financial covenants included in the Company's annual report;
(b) concurrently with the delivery of the financial
statements referred to in subsections 6.1(a) and (b), a Compliance Certificate
executed by a Responsible Officer;
(c) promptly, copies of all financial statements and
reports that the Company sends to its shareholders, and copies of all financial
statements and regular, periodical or special reports (including Forms 10K, 10Q
and 8K) that the Company or any Subsidiary may make to, or file with, the SEC;
(d) Within 30 days after the beginning of each fiscal
year the Company's "corporate business plan" in form and content reasonably
acceptable to Agent together with appropriate supporting details as reasonably
requested by Agent; and
(e) promptly, such additional information regarding the
business, financial or corporate affairs of the Company or any Subsidiary as
the Agent, at the request of any Bank, may from time to time reasonably
request.
6.3 NOTICES. The Company shall promptly notify the Agent and each
Bank:
(a) of the occurrence of any Default or Event of Default,
and of the occurrence or existence of any event or circumstance that
foreseeably will become a Default or Event of Default;
(b) of (i) any breach or non-performance of, or any
default under, a Contractual Obligation of the Company or any Subsidiary; (ii)
any dispute, litigation, investigation, proceeding or suspension between the
Company or any Subsidiary and any Governmental Authority; (iii) the
commencement of, or any material development in, any litigation or proceeding
affecting the Company or any Subsidiary; including pursuant to any applicable
Environmental Laws; or (iv) any change in the financial condition or operations
of the Company or any Subsidiary, which has resulted, or is likely to result,
in a Material Adverse Effect;
(c) of the occurrence of any of the following events
affecting the Company or any ERISA Affiliate (but in no event more than 10 days
after such event), and deliver to the Agent and each Bank a copy of any notice
with respect to such event that is filed with a Governmental
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Authority and any notice delivered by a Governmental Authority to the Company
or any ERISA Affiliate with respect to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension
Liability of any Pension Plan;
(iii) the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the Code by the
Company or any ERISA Affiliate; or
(iv) the adoption of any amendment to a Plan
subject to Section 412 of the Code, if such amendment results in a
material increase in contributions or Unfunded Pension Liability.
(d) of any material change in accounting policies or
financial reporting practices by the Company or any of its consolidated
Subsidiaries.
Each notice under this Section shall be accompanied by a
written statement by a Responsible Officer setting forth details of the
occurrence referred to therein, and stating what action (if any) the Company or
any affected Subsidiary proposes to take with respect thereto and at what time.
Each notice under subsection 6.3(a) shall describe with particularity any and
all clauses or provisions of this Agreement or other Loan Document that have
been (or foreseeably will be) breached or violated.
6.4 PRESERVATION OF CORPORATE EXISTENCE, ETC. The Company shall,
and shall cause each Subsidiary to:
(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its state or
jurisdiction of incorporation;
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business except
in connection with transactions permitted by Section 7.3 and sales of assets
permitted by Section 7.2;
(c) use reasonable efforts, in the ordinary course of
business, to preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation of which could
reasonably be expected to have a Material Adverse Effect.
6.5 MAINTENANCE OF PROPERTY. The Company shall maintain, and
shall cause each Subsidiary to maintain, and preserve all its property which is
used or useful in its business in good
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working order and condition, ordinary wear and tear excepted, except as
permitted by Section 7.2. The Company and each Subsidiary shall use the
standard of care typical in the industry in the operation and maintenance of
its facilities.
6.6 INSURANCE. The Company shall maintain, and shall cause each
Subsidiary to maintain, with financially sound and reputable independent
insurers, insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by Persons engaged in the same
or similar business, of such types and in such amounts as are customarily
carried under similar circumstances by such other Persons. Agent and each Bank
acknowledge and agree that the insurance coverages and insurers set forth in
the summary of insurance provided by the Company prior to the Closing Date
satisfied the requirements of this Section 6.6 as of the Closing Date.
6.7 PAYMENT OF OBLIGATIONS. The Company shall, and shall cause
each Subsidiary to, pay and discharge as the same shall become due and payable,
all their respective obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the same are
being contested in good faith by appropriate proceedings and adequate reserves
in accordance with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law
become a Lien (other than a Permitted Lien) upon its property; and
(c) all indebtedness, as and when due and payable, but
subject to any subordination provisions contained in any instrument or
agreement evidencing such Indebtedness.
6.8 COMPLIANCE WITH LAWS. The Company shall comply, and shall
cause each Subsidiary to comply, in all material respects with all Requirements
of Law of any Governmental Authority having jurisdiction over it or its
business (including the Federal Fair Labor Standards Act), except such as may
be contested in good faith or as to which a bona fide dispute may exist.
6.9 COMPLIANCE WITH ERISA. The Company shall, and shall cause
each of its ERISA Affiliates to: (a) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
federal or state law; (b) cause each Plan which is qualified under Section
401(a) of the Code to maintain such qualification; and (c) make all required
contributions to any Plan subject to Section 412 of the Code.
6.10 INSPECTION OF PROPERTY AND BOOKS AND RECORDS. The Company
shall maintain and shall cause each Subsidiary to maintain proper books of
record and account, in conformity with GAAP consistently applied. The Company
shall permit, and shall cause each Subsidiary to permit, representatives and
independent contractors of the Agent or any Bank to visit and inspect any of
their respective properties, to examine their respective corporate, financial
and operating records, and make copies thereof or abstracts therefrom, and to
discuss their respective affairs, finances and
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accounts with their respective directors, officers, and independent public
accountants, at such reasonable times during normal business hours and as often
as may be reasonably desired, upon reasonable advance notice to the Company.
If any Default or Event of Default exists, such inspection shall be at the
expense of the Company, otherwise it shall be at the expense of the Banks. If
any Default or Event of Default exists, such inspection may be conducted at any
time during normal business hours and without advance notice.
6.11 ENVIRONMENTAL LAWS. The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
compliance with all Environmental Laws.
6.12 USE OF PROCEEDS. The Company shall use the proceeds of the
Loans for working capital and other general corporate purposes not in
contravention of any Requirement of Law or of any Loan Document.
ARTICLE 7
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, unless the Majority
Banks waive compliance in writing:
7.1 LIMITATION ON LIENS. The Company shall not, and shall not
suffer or permit any Subsidiary to, directly or indirectly, make, create,
incur, assume or suffer to exist any Lien upon or with respect to any part of
its property, whether now owned or hereafter acquired, other than the following
("Permitted Liens"):
(a) any Lien existing on property of the Company or any
Subsidiary on the Closing Date and set forth in Schedule 7.1 securing
Indebtedness outstanding on such date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other
governmental charges which are not delinquent or remain payable without
penalty, or to the extent that non-payment thereof is permitted by Section 6.7,
provided that no notice of lien has been filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary
course of business which are not delinquent or remain payable without penalty
or which are being contested in good faith and by appropriate proceedings,
which proceedings have the effect of preventing the forfeiture or sale of the
property subject thereto;
(e) Liens (other than any Lien imposed by ERISA)
consisting of pledges or deposits required in the ordinary course of business
in connection with workers' compensation,
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unemployment insurance and other social security legislation;
(f) Liens on the property of the Company or its
Subsidiary securing (i) the non-delinquent performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, (ii)
contingent obligations on surety and appeal bonds, and (iii) other
non-delinquent obligations of a like nature; in each case, incurred in the
ordinary course of business, provided all such Liens in the aggregate would not
(even if enforced) cause a Material Adverse Effect;
(g) Liens consisting of judgment or judicial attachment
liens, provided that the enforcement of such Liens is effectively stayed and
all such liens in the aggregate at any time outstanding for the Company and its
Subsidiaries do not exceed $500,000;
(h) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business which, in the
aggregate, do not interfere with the ordinary conduct of the businesses of the
Company and its Subsidiaries;
(i) purchase money security interests on any property
acquired or held by the Company or its Subsidiaries in the ordinary course of
business, securing Indebtedness incurred or assumed for the purpose of
financing all or any part of the cost of acquiring such property; provided that
(i) such Lien attaches solely to the property so acquired in such transaction,
(ii) the principal amount of the debt secured thereby does not exceed 100% of
the cost of such property, and (iii) the principal amount of the Indebtedness
secured by any and all such purchase money security interests shall not at any
time exceed, together with Indebtedness permitted under subsection 7.6(e),
$500,000;
(j) Liens securing obligations in respect of capital
leases on assets subject to such leases, provided that such capital leases are
otherwise permitted hereunder;
(k) Liens arising solely by virtue of any statutory or
common law provision relating to banker's liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; provided that, except for deposits serving as
cash collateral for Letters of Credit, (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated
by the FRB, and (ii) such deposit account is not intended by the Company or any
Subsidiary to provide collateral to the depository institution;
(l) Liens on any property securing Indebtedness permitted
to be incurred pursuant to subsections 7.6(d) and (g).
7.2 NEGATIVE PLEDGE AGREEMENTS. The Company shall not and shall
not suffer or permit any Subsidiary to, directly or indirectly, become subject
to any contractual restriction (other than restrictions set forth in this
Agreement) that would limit or preclude the Company or such Subsidiary from
granting liens on its assets to secure Indebtedness that is senior in right of
payment to the Senior Subordinated Notes.
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7.3 DISPOSITION OF ASSETS. The Company shall not, and shall not
suffer or permit any Subsidiary to, directly or indirectly, sell, assign,
lease, convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the foregoing,
except:
(a) dispositions of inventory, or used, worn-out or
surplus equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such
equipment is exchanged for credit against the purchase price of similar
replacement equipment, or the proceeds of such sale are reasonably promptly
applied to the purchase price of such replacement equipment;
(c) dispositions of inventory by the Company or any
Subsidiary to the Company or any Subsidiary pursuant to reasonable business
requirements;
(d) transfers of assets by any Subsidiary to the Company;
and
(e) dispositions not otherwise permitted hereunder which
are made for fair market value; provided, that (i) at the time of any
disposition, no Event of Default shall exist or shall result from such
disposition, (ii) the aggregate sales price from such disposition shall be paid
in cash, and (iii) the aggregate value of all assets so sold by the Company and
its Subsidiaries, together, shall not exceed in any fiscal year $500,000.
7.4 CONSOLIDATIONS AND MERGERS. The Company shall not, and shall
not suffer or permit any Subsidiary to, merge, consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) to or in favor of any Person, or to liquidate
or dissolve its business, except:
(a) any Subsidiary may merge with the Company, provided
that the Company shall be the continuing or surviving corporation, or with any
one or more Subsidiaries, provided that if any transaction shall be between a
Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be
the continuing or surviving corporation; and
(b) any Subsidiary may sell all or substantially all of
its assets (upon voluntary liquidation or otherwise), to the Company or another
Wholly-Owned Subsidiary.
7.5 LOANS AND INVESTMENTS. The Company shall not purchase or
acquire, or suffer or permit any Subsidiary to purchase or acquire, or make any
commitment therefor, any capital stock, equity interest, or any obligations or
other securities of, or any interest in, any Person, or make or commit to make
any Acquisitions, or make or commit to make any advance, loan, extension of
credit or capital contribution to or any other investment in, any Person
including any Affiliate of the Company (together, "Investments"), except for:
(a) Investments held by the Company or Subsidiary in the
form of cash
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equivalents or short term marketable securities;
(b) extensions of credit in the nature of accounts
receivable or notes receivable arising from the sale or lease of goods or
services in the ordinary course of business;
(c) extensions of credit by the Company to any of its
Wholly-Owned Subsidiaries or by any of its Wholly-Owned Subsidiaries to another
of its Wholly-Owned Subsidiaries;
(d) Investments incurred in order to consummate
Acquisitions otherwise permitted herein, provided that (i) the Company delivers
to the Agent not less than 30 days prior written notice of any such
Acquisition, (ii) the total consideration paid for any such Acquisition shall
not exceed $20,000,000 at the time of such Investment, (iii) such Acquisitions
are undertaken in accordance with all applicable Requirements of Law, and (iv)
the prior, effective written consent or approval to such Acquisition of the
board of directors or equivalent governing body of the acquiree is obtained.
7.6 LIMITATION ON INDEBTEDNESS. The Company shall not, and shall
not suffer or permit any Subsidiary to, create, incur, assume, suffer to exist,
or otherwise become or remain directly or indirectly liable with respect to,
any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness consisting of Contingent Obligations
permitted pursuant to Section 7.9;
(c) Indebtedness evidenced by the Senior Subordinated
Notes;
(d) Indebtedness existing on the Closing Date and set
forth in Schedule 7.6;
(e) Indebtedness secured by Liens permitted by subsection
7.1(i) in an aggregate amount outstanding not to exceed $500,000;
(f) Indebtedness incurred in connection with leases
permitted pursuant to Section 7.11; and
(g) Indebtedness incurred for business purposes which,
together with additional Indebtedness permitted by the foregoing subsections of
this Section 7.6 (excluding Indebtedness represented by the Senior Subordinated
Notes and Indebtedness incurred under this Agreement) does not exceed
$8,000,000 in the aggregate at any time outstanding.
7.7 TRANSACTIONS WITH AFFILIATES. The Company shall not, and
shall not suffer or permit any Subsidiary to, enter into any transaction with
any Affiliate of the Company, except upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate of the Company or such
Subsidiary; provided, however, that the provisions of this Section 7.7 shall
not preclude the loans
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to certain executive officers of the Company described on Schedule 7.7.
7.8 USE OF PROCEEDS. The Company shall not, and shall not suffer
or permit any Subsidiary to, use any portion of the Loan proceeds, directly or
indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise
refinance indebtedness of the Company or others incurred to purchase or carry
Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying
any Margin Stock, or (iv) to acquire any security in any transaction that is
subject to Section 13 or 14 of the Exchange Act.
7.9 CONTINGENT OBLIGATIONS. The Company shall not, and shall not
suffer or permit any Subsidiary to, create, incur, assume or suffer to exist
any Contingent Obligations except:
(a) endorsements for collection or deposit in the
ordinary course of business; and
(b) Contingent Obligations of the Company and its
Subsidiaries existing as of the Closing Date and listed in Schedule 7.9.
7.10 JOINT VENTURES. The Company shall not, and shall not suffer
or permit any Subsidiary to enter into any Joint Venture, other than in the
ordinary course of business and other than foreign joint ventures related to
the current lines of business of the Company and its Subsidiaries.
7.11 LEASE OBLIGATIONS. The Company shall not, and shall not
suffer or permit any Subsidiary to, create or suffer to exist any obligations
for the payment of rent for any property under lease or agreement to lease,
except for:
(a) leases of the Company and of Subsidiaries in
existence on the Closing Date and any renewal, extension or refinancing
thereof;
(b) operating leases entered into by the Company or any
Subsidiary after the Closing Date in the ordinary course of business;
(c) leases entered into by the Company or any Subsidiary
after the Closing Date pursuant to sale-leaseback transactions permitted under
subsection 7.2(d);
(d) capital leases other than those permitted under
clauses (a) and (c) of this Section, entered into by the Company or any
Subsidiary after the Closing Date to finance the acquisition of equipment;
provided that the aggregate annual rental payments for all such capital leases
shall not exceed in any fiscal year $2,000,000.
7.12 RESTRICTED PAYMENTS. The Company shall not, and shall not
suffer or permit any Subsidiary to, declare or make any dividend payment or
other distribution of assets, properties, cash, rights, obligations or
securities on account of any shares of any class of its capital stock, or
purchase, redeem or otherwise acquire for value any shares of its capital stock
or any warrants, rights or options to acquire such shares, now or hereafter
outstanding; except that:
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(a) the Company and any Wholly-Owned Subsidiary may
declare and make dividend payments or other distributions payable solely in its
common stock;
(b) the Company and any Wholly-Owned Subsidiary may
purchase, redeem or otherwise acquire shares of its common stock or warrants or
options to acquire any such shares with the proceeds received from the
substantially concurrent issue of new shares of its common stock;
(c) the Company and any Wholly-Owned Subsidiary may
declare or pay cash dividends to its stockholders solely out of net income of
the Company and its Subsidiaries arising after January 31, 1996 and computed on
a cumulative consolidated basis, provided, that, immediately after giving
effect to such proposed action, no Default or Event of Default would exist; and
(d) any Subsidiary may pay dividends to the Company.
7.13 ERISA. The Company shall not, and shall not suffer or permit
any of its ERISA Affiliates to: (a) engage in a prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably expected to result in liability of the Company
in an aggregate amount in excess of $100,000; or (b) engage in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA.
7.14 CHANGE IN BUSINESS. The Company shall not, and shall not
suffer or permit any Subsidiary to, engage in any material line of business
substantially different from those lines of business carried on by the Company
and its Subsidiaries on the date hereof.
7.15 ACCOUNTING CHANGES. The Company shall not, and shall not
suffer or permit any Subsidiary to, make any significant change in accounting
treatment or reporting practices, except as required by GAAP, or change the
fiscal year of the Company or of any Subsidiary.
7.16 AMENDMENT OF INDENTURE. The Company shall not participate in
or permit any modification of the Indenture which would in any respect amend,
modify or impair the extent and manner in which the subordination provisions of
the Indenture extend to the benefit of the Banks with respect to the
Obligations.
7.17 CONSOLIDATED LIQUIDITY RATIO. The Company shall not permit
its Consolidated Liquidity Ratio as of the end of any fiscal quarter to be less
than 1.25 to 1.0.
7.18 CONSOLIDATED SENIOR FUNDED DEBT TO CASH FLOW RATIO. The
Company shall not permit its Consolidated Senior Funded Debt to Cash Flow Ratio
as of the end of any fiscal quarter to exceed 2.0 to 1.0.
7.19 CONSOLIDATED TOTAL FUNDED DEBT TO CASH FLOW RATIO. The
Company shall not permit its Consolidated Total Funded Debt to Cash Flow Ratio
as of the end of any fiscal quarter to exceed 3.5 to 1.0.
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7.20 CONSOLIDATED INTEREST COVERAGE RATIO. The Company shall not
permit its Consolidated Interest Coverage Ratio for any period of four
consecutive fiscal quarters to be less than 2.0 to 1.0.
ARTICLE 8
EVENTS OF DEFAULT
8.1 EVENT OF DEFAULT. Any of the following shall constitute an
"Event of Default":
(a) NON-PAYMENT. The Company fails to pay, (i) when and
as required to be paid herein, any amount of principal of any Loan, or (ii)
within five days after the same becomes due, any interest, fee or any other
amount payable hereunder or under any other Loan Document; or
(b) REPRESENTATION OR WARRANTY. Any representation or
warranty by the Company or any Subsidiary made or deemed made herein, in any
other Loan Document, or which is contained in any certificate, document or
financial or other statement by the Company, any Subsidiary, or any Responsible
Officer, furnished at any time under this Agreement, or in or under any other
Loan Document, is incorrect in any material respect on or as of the date made
or deemed made; or
(c) SPECIFIC DEFAULTS. The Company fails to perform or
observe any term, covenant or agreement contained in any of Section 6.1, 6.2,
6.3 or 6.9 or in Article 7; or
(d) OTHER DEFAULTS. The Company or any Subsidiary party
thereto fails to perform or observe any other term or covenant contained in
this Agreement or any other Loan Document, and such default shall continue
unremedied for a period of 20 days after the date upon which written notice
thereof is given to the Company by the Agent or any Bank; or
(e) CROSS-DEFAULT. The Company or any Subsidiary (A)
fails to make any payment in respect of any Indebtedness or Contingent
Obligation, having an aggregate principal amount (including undrawn committed
or available amounts and including amounts owing to all creditors under any
combined or syndicated credit arrangement) of more than $3,000,000 when due
(whether by scheduled maturity, required prepayment, acceleration, demand, or
otherwise) and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such failure;
or (B) fails to perform or observe any other condition or covenant, or any
other event shall occur or condition exist, under any agreement or instrument
relating to any such Indebtedness or Contingent Obligation, and such failure
continues after the applicable grace or notice period, if any, specified in the
relevant document on the date of such failure if the effect of such failure,
event or condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee
or agent on behalf of such holder or holders or beneficiary or beneficiaries)
to cause such Indebtedness to be declared to be due and payable prior to its
stated maturity, or such Contingent Obligation to become payable or cash
collateral in respect thereof to be demanded; or
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(f) INSOLVENCY; VOLUNTARY PROCEEDINGS. The Company or
any Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject
to applicable grace periods, if any, whether at stated maturity or otherwise;
(ii) voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing; or
(g) INVOLUNTARY PROCEEDINGS. (i) Any involuntary
Insolvency Proceeding is commenced or filed against the Company or any
Subsidiary, or any writ, judgment, warrant of attachment, execution or similar
process, is issued or levied against a substantial part of the Company's or any
Subsidiary's properties, and any such proceeding or petition shall not be
dismissed, or such writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded within 60 days after
commencement, filing or levy; (ii) the Company or any Subsidiary admits the
material allegations of a petition against it in any Insolvency Proceeding, or
an order for relief (or similar order under non-U.S. law) is ordered in any
Insolvency Proceeding; or (iii) the Company or any Subsidiary acquiesces in the
appointment of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefor), or other similar Person for itself
or a substantial portion of its property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect
to a Pension Plan or Multiemployer Plan which has resulted or could reasonably
be expected to result in liability of the Company under Title IV of ERISA to
the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in
excess of $100,000, (ii) the aggregate amount of Unfunded Pension Liability
among all Pension Plans at any time exceeds $100,000; or (iii) the Company or
any ERISA Affiliate shall fail to pay when due, after the expiration of any
applicable grace period, any installment payment with respect to its withdrawal
liability under Section 4201 of ERISA under a Multiemployer Plan in an
aggregate amount in excess of $100,000; or
(i) MONETARY JUDGMENTS. One or more non-interlocutory
judgments, non-interlocutory orders, decrees or arbitration awards is entered
against the Company or any Subsidiary involving in the aggregate a liability
(to the extent not covered by independent third-party insurance as to which the
insurer does not dispute coverage) as to any single or related series of
transactions, incidents or conditions, of $500,000 or more, and the same shall
remain unsatisfied, unvacated and unstayed pending appeal for a period of 10
days after the entry thereof; or
(j) NON-MONETARY JUDGMENTS. Any non-monetary judgment,
order or decree is entered against the Company or any Subsidiary which does or
would reasonably be expected to have a Material Adverse Effect, and there shall
be any period of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; or
(k) CHANGE OF CONTROL. There occurs any Change of
Control; or
(l) LOSS OF LICENSES. Any Governmental Authority revokes
or fails to renew any material license, permit or franchise of the Company or
any Subsidiary, or the Company or any
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Subsidiary for any reason loses any material license, permit or franchise, or
the Company or any Subsidiary suffers the imposition of any restraining order,
escrow, suspension or impound of funds in connection with any proceeding
(judicial or administrative) with respect to any material license, permit or
franchise; or
(m) INVALIDITY OF SUBORDINATION PROVISIONS. The
subordination provisions of the Indenture or any agreement or instrument
governing any other Subordinated Debt is for any reason revoked or invalidated,
or otherwise cease to be in full force and effect, any Person contests in any
manner the validity or enforceability thereof or denies that it has any further
liability or obligation thereunder, or the Indebtedness hereunder is for any
reason subordinated or does not have the priority contemplated by this
Agreement or such subordination provisions.
8.2 REMEDIES. If any Event of Default occurs, the Agent shall, at
the request of, or may, with the consent of, the Required Banks,
(a) declare the commitment of each Bank to make Loans to
be terminated, whereupon such commitments shall be terminated;
(b) declare the unpaid principal amount of all
outstanding Loans, all interest accrued and unpaid thereon, and all other
amounts owing or payable hereunder or under any other Loan Document to be
immediately due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Company;
and
(c) exercise on behalf of itself and the Banks all rights
and remedies available to it and the Banks under the Loan Documents or
applicable law;
provided, however, that upon the occurrence of any event specified in
subsection (f) or (g) of Section 8.1 (in the case of clause (i) of subsection
(g) upon the expiration of the 60-day period mentioned therein), the obligation
of each Bank to make Loans shall automatically terminate and the unpaid
principal amount of all outstanding Loans and all interest and other amounts as
aforesaid shall automatically become due and payable without further act of the
Agent or any Bank.
8.3 RIGHTS NOT EXCLUSIVE. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other rights, powers, privileges or remedies provided by law or in equity,
or under any other instrument, document or agreement now existing or hereafter
arising.
ARTICLE 9
THE AGENT
9.1 APPOINTMENT AND AUTHORIZATION; "AGENT". Each Bank hereby
irrevocably (subject to Section 9.9) appoints, designates and authorizes the
Agent to take such action on its behalf under the provisions of this Agreement
and each other Loan Document and to exercise such powers and perform such
duties as are expressly delegated to it by the terms of this Agreement or
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any other Loan Document, together with such powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary contained elsewhere in
this Agreement or in any other Loan Document, the Agent shall not have any
duties or responsibilities, except those expressly set forth herein, nor shall
the Agent have or be deemed to have any fiduciary relationship with any Bank,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with
reference to the Agent is not intended to connote any fiduciary or other
implied (or express) obligations arising under agency doctrine of any
applicable law. Instead, such term is used merely as a matter of market
custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.
9.2 DELEGATION OF DUTIES. The Agent may execute any of its duties
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
9.3 LIABILITY OF AGENT. None of the Agent-Related Persons shall
(i) be liable for any action taken or omitted to be taken by any of them under
or in connection with this Agreement or any other Loan Document or the
transactions contemplated hereby (except for its own gross negligence or
willful misconduct), or (ii) be responsible in any manner to any of the Banks
for any recital, statement, representation or warranty made by the Company or
any Subsidiary or Affiliate of the Company, or any officer thereof, contained
in this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Loan Document,
or the validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other Loan Document, or for any failure of the Company or
any other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Bank
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Company or any
of the Company's Subsidiaries or Affiliates.
9.4 RELIANCE BY AGENT.
(a) The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Company), independent accountants and other experts selected by the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Majority Banks as it deems
appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Banks against any and all liability and expense which
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may be incurred by it by reason of taking or continuing to take any such
action. The Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement or any other Loan Document in
accordance with a request or consent of the Majority Banks and such request and
any action taken or failure to act pursuant thereto shall be binding upon all
of the Banks.
(b) For purposes of determining compliance with the
conditions specified in Section 4.1, each Bank that has executed this Agreement
shall be deemed to have consented to, approved or accepted or to be satisfied
with, each document or other matter either sent by the Agent to such Bank for
consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Bank.
9.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Agent for the account of the Banks, unless the Agent
shall have received written notice from a Bank or the Company referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". The Agent will notify the Banks of its
receipt of any such notice. The Agent shall take such action with respect to
such Default or Event of Default as may be requested by the Majority Banks in
accordance with Article 8; provided, however, that unless and until the Agent
has received any such request, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable or in the best interest
of the Banks.
9.6 CREDIT DECISION. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that
no act by the Agent hereinafter taken, including any review of the affairs of
the Company and its Subsidiaries, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Bank. Each Bank
represents to the Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
credit worthiness of the Company and its Subsidiaries, and all applicable bank
regulatory laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to the Company
hereunder. Each Bank also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and credit worthiness of the Company.
Except for notices, reports and other documents expressly herein required to be
furnished to the Banks by the Agent, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or credit worthiness of the Company which may come into the
possession of any of the Agent-Related Persons.
9.7 INDEMNIFICATION OF AGENT. Whether or not the transactions
contemplated hereby
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are consummated, the Banks shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Company and
without limiting the obligation of the Company to do so), pro rata, from and
against any and all Indemnified Liabilities; provided, however, that no Bank
shall be liable for the payment to the Agent-Related Persons of any portion of
such Indemnified Liabilities resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Bank shall reimburse the Agent upon demand for its ratable share of any costs
or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any
document contemplated by or referred to herein, to the extent that the Agent is
not reimbursed for such expenses by or on behalf of the Company. The
undertaking in this Section shall survive the payment of all Obligations
hereunder and the resignation or replacement of the Agent.
9.8 AGENT IN INDIVIDUAL CAPACITY. BAI and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BAI were not the Agent hereunder and
without notice to or consent of the Banks. The Banks acknowledge that,
pursuant to such activities, BAI or its Affiliates may receive information
regarding the Company or its Affiliates (including information that may be
subject to confidentiality obligations in favor of the Company or such
Subsidiary) and acknowledge that the Agent shall be under no obligation to
provide such information to them. With respect to its Loans, BAI shall have
the same rights and powers under this Agreement as any other Bank and may
exercise the same as though it were not the Agent, and the terms "Bank" and
"Banks" include BAI in its individual capacity.
9.9 SUCCESSOR AGENT. The Agent may, and at the request of the
Majority Banks shall, resign as Agent upon 30 days' notice to the Banks. If
the Agent resigns under this Agreement, the Majority Banks shall appoint from
among the Banks a successor agent for the Banks which successor agent shall be
approved by the Company. If no successor agent is appointed prior to the
effective date of the resignation of the Agent, the Agent may appoint, after
consulting with the Banks and the Company, a successor agent from among the
Banks. Upon the acceptance of its appointment as successor agent hereunder,
such successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Article 9 and Sections 10.4 and 10.5 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as Agent by the date
which is 30 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Banks shall perform all of the duties of the Agent hereunder until such
time, if any, as the Majority Banks appoint a successor agent as provided for
above.
9.10 WITHHOLDING TAX.
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<PAGE> 61
(a) If any Bank is a "foreign corporation, partnership or
trust" within the meaning of the Code and such Bank claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code,
such Bank agrees with and in favor of the Agent, to deliver to the Agent:
(i) if such Bank claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty, two
properly completed and executed copies of IRS Form 1001 before the
payment of any interest in the first calendar year and before the
payment of any interest in each third succeeding calendar year during
which interest may be paid under this Agreement;
(ii) if such Bank claims that interest paid under
this Agreement is exempt from United States withholding tax because it
is effectively connected with a United States trade or business of
such Bank, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable year of
such Bank and in each succeeding taxable year of such Bank during
which interest may be paid under this Agreement; and
(iii) such other form or forms as may be required
under the Code or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Bank sells, assigns, grants a participation in, or otherwise transfers all
or part of the Obligations of the Company to such Bank, such Bank agrees to
notify the Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of the Company to such Bank. To the extent of
such percentage amount, the Agent will treat such Bank's IRS Form 1001 as no
longer valid.
(c) If any Bank claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of the
Company to such Bank, such Bank agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(d) If any Bank is entitled to a reduction in the
applicable withholding tax, the Agent may withhold from any interest payment to
such Bank an amount equivalent to the applicable withholding tax after taking
into account such reduction. However, if the forms or other documentation
required by subsection (a) of this Section are not delivered to the Agent, then
the Agent may withhold from any interest payment to such Bank not providing
such forms or other documentation an amount equivalent to the applicable
withholding tax imposed by Sections 1441 and 1442 of the Code, without
reduction.
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<PAGE> 62
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Agent did not
properly withhold tax from amounts paid to or for the account of any Bank
(because the appropriate form was not delivered or was not properly executed,
or because such Bank failed to notify the Agent of a change in circumstances
which rendered the exemption from, or reduction of, withholding tax
ineffective, or for any other reason) such Bank shall indemnify the Agent fully
for all amounts paid, directly or indirectly, by the Agent as tax or otherwise,
including penalties and interest, and including any taxes imposed by any
jurisdiction on the amounts payable to the Agent under this Section, together
with all costs and expenses (including Attorney Costs). The obligation of the
Banks under this subsection shall survive the payment of all Obligations and
the resignation or replacement of the Agent.
ARTICLE 10
MISCELLANEOUS
10.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by the Company or any applicable Subsidiary therefrom,
shall be effective unless the same shall be in writing and signed by the
Majority Banks (or by the Agent at the written request of the Majority Banks)
and the Company and acknowledged by the Agent, and then any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such waiver, amendment, or
consent shall, unless in writing and signed by all the Banks and the Company
and acknowledged by the Agent, do any of the following:
(a) increase or extend the Commitment of any Bank (or
reinstate any Commitment terminated pursuant to Section 8.2);
(b) postpone or delay any date fixed by this Agreement or
any other Loan Document for any payment of principal, interest, fees or other
amounts due to the Banks (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest
specified herein on any Loan, or any fees or other amounts payable hereunder or
under any other Loan Document;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the Banks
or any of them to take any action hereunder; or
(e) amend this Section, or Section 2.14, or any provision
herein providing for consent or other action by all Banks;
and, provided further, that (i) no amendment, waiver or consent shall, unless
in writing and signed by the Agent in addition to the Majority Banks or all the
Banks, as the case may be, affect the rights or duties of the Agent under this
Agreement or any other Loan Document.
55
<PAGE> 63
10.2 NOTICES.
(a) All notices, requests, consents, approvals, waivers
and other communications shall be in writing (including, unless the context
expressly otherwise provides, by facsimile transmission, provided that any
matter transmitted by the Company by facsimile (i) shall be immediately
confirmed by a telephone call to the recipient at the number specified on
Schedule 10.2, and (ii) shall be followed promptly by delivery of a hard copy
original thereof) and mailed, faxed or delivered, to the address or facsimile
number specified for notices on Schedule 10.2; or, as directed to the Company
or the Agent, to such other address as shall be designated by such party in a
written notice to the other parties, and as directed to any other party, at
such other address as shall be designated by such party in a written notice to
the Company and the Agent.
(b) All such notices, requests and communications shall,
when transmitted by overnight delivery, or faxed, be effective when delivered
for overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article 2 or 9 to the Agent shall not be effective until
actually received by the Agent.
(c) Any agreement of the Agent and the Banks herein to
receive certain notices by telephone or facsimile is solely for the convenience
and at the request of the Company. The Agent and the Banks shall be entitled
to rely on the authority of any Person purporting to be a Person authorized by
the Company to give such notice and the Agent and the Banks shall not have any
liability to the Company or other Person on account of any action taken or not
taken by the Agent or the Banks in reliance upon such telephonic or facsimile
notice. The obligation of the Company to repay the Loans shall not be affected
in any way or to any extent by any failure by the Agent and the Banks to
receive written confirmation of any telephonic or facsimile notice or the
receipt by the Agent and the Banks of a confirmation which is at variance with
the terms understood by the Agent and the Banks to be contained in the
telephonic or facsimile notice.
10.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Agent or any Bank, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.
10.4 COSTS AND EXPENSES. The Company shall:
(a) whether or not the transactions contemplated hereby
are consummated, pay or reimburse BAI (including in its capacity as Agent) and
each Bank within five Business Days after demand (subject to subsection 4.1(f))
for all reasonable costs and expenses incurred by BAI (including in its
capacity as Agent) and each Bank in connection with the development,
preparation, delivery and execution of, and any amendment, supplement, waiver
or modification to (in each case, whether or not consummated), this Agreement,
any Loan Document and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions contemplated hereby and
thereby, including reasonable Attorney Costs incurred by BAI (including
56
<PAGE> 64
in its capacity as Agent) and any Bank with respect thereto; and
(b) pay or reimburse the Agent and each Bank within five
Business Days after demand (subject to subsection 4.1(f)) for all reasonable
costs and expenses (including Attorney Costs) incurred by them in connection
with the enforcement, attempted enforcement, or preservation of any rights or
remedies under this Agreement or any other Loan Document during the existence
of an Event of Default or after acceleration of the Loans (including in
connection with any "workout" or restructuring regarding the Loans, and
including in any Insolvency Proceeding or appellate proceeding).
10.5 COMPANY INDEMNIFICATION. Whether or not the transactions
contemplated hereby are consummated, the Company shall indemnify, defend and
hold the Agent-Related Persons, and each Bank and each of its respective
officers, directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination, resignation or replacement of the
Agent or replacement of any Bank) be imposed on, incurred by or asserted
against any such Person in any way relating to or arising out of this Agreement
or any document contemplated by or referred to herein, or the transactions
contemplated hereby, or any action taken or omitted by any such Person under or
in connection with any of the foregoing, including with respect to any
investigation, litigation or proceeding (including any Insolvency Proceeding or
appellate proceeding) related to or arising out of this Agreement or the Loans
or the use of the proceeds thereof, whether or not any Indemnified Person is a
party thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided, that the Company shall have no obligation hereunder to any
Indemnified Person with respect to Indemnified Liabilities resulting solely
from the gross negligence or willful misconduct of such Indemnified Person. The
agreements in this Section shall survive payment of all other Obligations.
10.6 PAYMENTS SET ASIDE. To the extent that the Company makes a
payment to the Agent or the Banks, or the Agent or the Banks exercise their
right of set-off, and such payment or the proceeds of such set-off or any part
thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement
entered into by the Agent or such Bank in its discretion) to be repaid to a
trustee, receiver or any other party, in connection with any Insolvency
Proceeding or otherwise, then (a) to the extent of such recovery the obligation
or part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or such
set-off had not occurred, and (b) each Bank severally agrees to pay to the
Agent upon demand its pro rata share of any amount so recovered from or repaid
by the Agent.
10.7 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement without the
prior written consent of the Agent and each Bank.
57
<PAGE> 65
10.8 ASSIGNMENTS, PARTICIPATIONS, ETC.
(a) Any Bank may, with the written consent of the Agent,
which consents shall not be unreasonably withheld, at any time assign and
delegate to one or more Eligible Assignees (provided that no written consent of
the Agent shall be required in connection with any assignment and delegation by
a Bank to an Eligible Assignee that is an Affiliate of such Bank) (each an
"Assignee") all, or any ratable part of all, of the Loans, the Commitments and
the other rights and obligations of such Bank hereunder, in a minimum amount
equal to the lesser of (i) $5,000,000 or (ii) the remaining amount of such
Bank's Commitments; provided, however, that the Company and the Agent may
continue to deal solely and directly with such Bank in connection with the
interest so assigned to an Assignee until (i) written notice of such
assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the Company
and the Agent by such Bank and the Assignee; (ii) such Bank and its Assignee
shall have delivered to the Company and the Agent an Assignment and Acceptance
in the form of Exhibit E ("Assignment and Acceptance") together with any Note
or Notes subject to such assignment and (iii) the assignor Bank or Assignee has
paid to the Agent a processing fee in the amount of $2,500.
(b) From and after the date that the Agent notifies the
assignor Bank that it has received (and provided its consent with respect to)
an executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Bank under the Loan Documents, and (ii) the assignor Bank shall, to the extent
that rights and obligations hereunder and under the other Loan Documents have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under the Loan Documents.
(c) Within five Business Days after its receipt of notice
by the Agent that it has received an executed Assignment and Acceptance and
payment of the processing fee, the Company shall execute and deliver to the
Agent, new Notes evidencing such Assignee's assigned Loans and Commitment and,
if the assignor Bank has retained a portion of its Loans and its Commitment,
replacement Notes in the principal amount of the Loans retained by the assignor
Bank (such Notes to be in exchange for, but not in payment of, the Notes held
by such Bank). Immediately upon each Assignee's making its processing fee
payment under the Assignment and Acceptance, this Agreement shall be deemed to
be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments
arising therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Bank pro tanto.
(d) Any Bank may at any time sell to one or more
commercial banks or other Persons not Affiliates of the Company (a
"Participant") participating interests in any Loans, the Commitment of that
Bank and the other interests of that Bank (the "originating Bank") hereunder
and under the other Loan Documents; provided, however, that (i) the originating
Bank's obligations under this Agreement shall remain unchanged, (ii) the
originating Bank shall remain solely responsible for the performance of such
obligations, (iii) the Company and the Agent shall continue to deal solely and
directly with the originating Bank in connection with the originating Bank's
rights
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<PAGE> 66
and obligations under this Agreement and the other Loan Documents, and (iv) no
Bank shall transfer or grant any participating interest under which the
Participant has rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document, except to the
extent such amendment, consent or waiver would require unanimous consent of the
Banks as described in the first proviso to Section 10.1. In the case of any
such participation, the Participant shall be entitled to the benefit of
Sections 3.1, 3.3 and 10.5 as though it were also a Bank hereunder, and if
amounts outstanding under this Agreement are due and unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an Event
of Default, each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest were owing
directly to it as a Bank under this Agreement.
(e) Notwithstanding any other provision in this
Agreement, any Bank may at any time create a security interest in, or pledge,
all or any portion of its rights under and interest in this Agreement and the
Note held by it in favor of any Federal Reserve Bank in accordance with
Regulation A of the FRB or U.S. Treasury Regulation 31 CFR Section 203.14, and
such Federal Reserve Bank may enforce such pledge or security interest in any
manner permitted under applicable law.
10.9 CONFIDENTIALITY. Each Bank agrees to take and to cause its
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by the Company and provided to it by the Company or any Subsidiary,
or by the Agent on the Company's or such Subsidiary's behalf, under this
Agreement or any other Loan Document, and neither it nor any of its Affiliates
shall use any such information other than in connection with or in enforcement
of this Agreement and the other Loan Documents or in connection with other
business now or hereafter existing or contemplated with the Company or any
Subsidiary; except to the extent such information (i) was or becomes generally
available to the public other than as a result of disclosure by the Bank, or
(ii) was or becomes available on a non-confidential basis from a source other
than the Company, provided that such source is not bound by a confidentiality
agreement with the Company known to the Bank; provided, however, that any Bank
may disclose such information (A) at the request or pursuant to any requirement
of any Governmental Authority to which the Bank is subject or in connection
with an examination of such Bank by any such authority; (B) pursuant to
subpoena or other court process; (C) when required to do so in accordance with
the provisions of any applicable Requirement of Law; (D) to the extent
reasonably required in connection with any litigation or proceeding to which
the Agent, any Bank or their respective Affiliates may be party; (E) to the
extent reasonably required in connection with the exercise of any remedy
hereunder or under any other Loan Document; (F) to such Bank's independent
auditors and other professional advisors; (G) to any Participant or Assignee,
actual or potential, provided that such Person agrees in writing to keep such
information confidential to the same extent required of the Banks hereunder;
(H) as to any Bank or its Affiliate, as expressly permitted under the terms of
any other document or agreement regarding confidentiality to which the Company
or any Subsidiary is party or is deemed party with such Bank or such Affiliate;
and (I) to its Affiliates.
10.10 SET-OFF. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists or the Loans have been
accelerated, each Bank is authorized at any time and
59
<PAGE> 67
from time to time, without prior notice to the Company, any such notice being
waived by the Company to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held by, and other indebtedness at any time owing by, such
Bank to or for the credit or the account of the Company against any and all
Obligations owing to such Bank, now or hereafter existing, irrespective of
whether or not the Agent or such Bank shall have made demand under this
Agreement or any Loan Document and although such Obligations may be contingent
or unmatured. Each Bank agrees promptly to notify the Company and the Agent
after any such set-off and application made by such Bank; provided, however,
that the failure to give such notice shall not affect the validity of such
set-off and application.
10.11 AUTOMATIC DEBITS OF FEES. With respect to any fee, or any
other cost or expense (including Attorney Costs) due and payable to the Agent,
BAI or BAI under the Loan Documents, the Company hereby irrevocably authorizes
BAI to debit any deposit account of the Company with BAI in an amount such that
the aggregate amount debited from all such deposit accounts does not exceed
such fee or other cost or expense. If there are insufficient funds in such
deposit accounts to cover the amount of the fee or other cost or expense then
due, such debits will be reversed (in whole or in part, in BAI's sole
discretion) and such amount not debited shall be deemed to be unpaid. No such
debit under this Section shall be deemed a set-off.
10.12 NOTIFICATION OF ADDRESSES, LENDING OFFICES, ETC. Each Bank
shall notify the Agent in writing of any changes in the address to which
notices to the Bank should be directed, of addresses of any Lending Office, of
payment instructions in respect of all payments to be made to it hereunder and
of such other administrative information as the Agent shall reasonably request.
10.13 COUNTERPARTS. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
10.14 SEVERABILITY. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.
10.15 NO THIRD PARTIES BENEFITED. This Agreement is made and
entered into for the sole protection and legal benefit of the Company, the
Banks, the Agent and the Agent-Related Persons, and their permitted successors
and assigns, and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any of the other Loan Documents.
10.16 DESIGNED SENIOR INDEBTEDNESS. The Obligations are hereby
designated by the Company as "Designated Senior Indebtedness", as defined in
the Indenture.
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<PAGE> 68
10.17 GOVERNING LAW AND JURISDICTION.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF ILLINOIS; PROVIDED
THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF ILLINOIS OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT AND
THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY, THE AGENT AND
THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE
COMPANY, THE AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
ILLINOIS LAW.
10.18 WAIVER OF JURY TRIAL. THE COMPANY, THE BANKS AND THE AGENT
EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY
ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR
ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
THE COMPANY, THE BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
10.19 ENTIRE AGREEMENT. This Agreement, together with the other
Loan Documents, embodies the entire agreement and understanding among the
Company, the Banks and the Agent, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof.
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<PAGE> 69
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in Chicago, Illinois by their proper and duly
authorized officers as of the day and year first above written.
SPECIALTY EQUIPMENT COMPANIES, INC.
By:
Name:
Title:
BANK OF AMERICA ILLINOIS, as Agent
By:
Name:
Title:
BANK OF AMERICA ILLINOIS, as a Bank
By:
Name:
Title:
HARRIS TRUST AND SAVINGS BANK, as a Bank
By:
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as a Bank
By:
Name:
Title:
62
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<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 6,416
<SECURITIES> 0
<RECEIVABLES> 71,889
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<INVENTORY> 53,135
<CURRENT-ASSETS> 133,837
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0
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