<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended June 30, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from ______________ to _______________
Commission File Number: 1-11091
SYBRON INTERNATIONAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 22-2849508
-------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
- ----------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(414) 274-6600
----------------------------------------------------
(Registrant's telephone number, including area code)
---------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
At August 10, 1998 there were 100,998,656 shares of the Registrant's
Common Stock, par value $0.01 per share, outstanding.
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SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Index Page
- ------------------------------------------------------------- ----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets, June 30,1998 (unaudited)
and September 30, 1997 2
Consolidated Statements of Income, for the three and nine months
ended June 30, 1998 (unaudited) and 1997 (unaudited) 3
Consolidated Statements of Shareholders' Equity for the year ended September 30,
1997 and the nine months ended June 30, 1998 (unaudited) 4
Consolidated Statements of Cash Flows, for the nine months ended
June 30, 1998 (unaudited) and 1997 (unaudited) 6
Notes to Unaudited Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 28
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 28
ITEM 5. OTHER INFORMATION 28
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 29
SIGNATURES 30
</TABLE>
1
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
June 30, September 30,
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................................ $ 27,726 $ 18,582
Accounts receivable (less allowance for doubtful
receivables of $5,113 and $3,963) ...................................... 180,412 174,155
Inventories (note 2) ..................................................... 166,467 152,775
Deferred income taxes .................................................... 25,586 19,058
Prepaid expenses and other current assets ................................ 19,414 16,177
----------- -----------
Total current assets .................................................. 419,605 380,747
----------- -----------
Property, plant and equipment net of depreciation of $167,934
and $144,553 ............................................................. 206,402 199,825
Intangible assets ......................................................... 753,891 662,792
Deferred income taxes ..................................................... 13,919 16,468
Other assets .............................................................. 7,956 8,325
----------- -----------
Total assets ........................................................... $ 1,401,773 $ 1,268,157
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ......................................................... $ 41,436 $ 43,253
Current portion of long-term debt ........................................ 36,719 41,224
Income taxes payable ..................................................... 1,925 1,696
Accrued payroll and employee benefits .................................... 33,149 34,466
Restructuring reserve .................................................... 11,356 --
Deferred income taxes .................................................... 7,679 5,007
Other current liabilities ................................................ 26,413 27,415
----------- -----------
Total current liabilities ............................................. 158,677 153,061
----------- -----------
Long-term debt ............................................................ 741,880 676,072
Deferred income taxes ..................................................... 51,541 51,761
Other liabilities ......................................................... 10,338 12,781
Commitments and contingent liabilities:
Shareholders' equity:
Preferred Stock, $.01 par value; authorized 20,000,000 shares ............ -- --
Common Stock, $.01 par value; authorized 250,000,000
shares, issued 100,814,728 and 99,562,038 shares, respectively ........... 1,008 995
Equity Rights, 50 and 250 rights at $1.09 per right respectively ......... -- --
Additional paid-in capital ............................................... 229,376 210,920
Retained earnings ........................................................ 236,408 187,536
Cumulative foreign currency translation adjustment ....................... (27,455) (24,968)
Treasury common stock, 220 and 1,090 shares at cost
respectively ............................................................ -- (1)
----------- -----------
Total shareholders' equity ............................................ 439,337 374,482
----------- -----------
Total liabilities and shareholders' equity ............................ $ 1,401,773 $ 1,268,157
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
2
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SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales ............................................. $ 235,502 $ 221,264 $ 695,638 $ 605,433
Cost of sales:
Cost of product sold ............................... 112,709 105,811 336,065 294,233
Restructuring charges .............................. 6,417 -- 6,417 --
Depreciation of purchase accounting adjustments .... 162 954 492 2,869
---------- ---------- ---------- ----------
Total cost of sales ................................... 119,288 106,765 342,974 297,102
---------- ---------- ---------- ----------
Gross profit .......................................... 116,214 114,499 352,664 308,331
Selling, general and administrative expenses .......... 57,944 57,875 177,074 158,083
Merger, transaction and integration expenses .......... 9,886 -- 9,886 --
Restructuring charges ................................. 16,924 -- 16,924 --
Depreciation and amortization of purchase
accounting adjustments ............................... 6,654 6,312 19,535 16,202
---------- ---------- ---------- ----------
Operating income ...................................... 24,806 50,312 129,245 134,046
---------- ---------- ---------- ----------
Other income (expense):
Interest expense ................................... (14,105) (12,929) (42,272) (33,313)
Amortization of deferred financing fees ............ (64) (58) (172) (200)
Other, net ......................................... 122 (49) 20 (351)
---------- ---------- ---------- ----------
Income before income taxes and extraordinary
item ................................................. 10,759 37,276 86,821 100,182
Income taxes .......................................... 6,944 14,737 37,468 39,821
---------- ---------- ---------- ----------
Income before extraordinary item ...................... 3,815 22,539 49,353 60,361
Extraordinary item - Write-off of unamortized
Deferred financing fees (net of income tax benefits
of $413) ............................................. -- (673) -- (673)
---------- ---------- ---------- ----------
Net income ............................................ $ 3,815 $ 21,866 $ 49,353 $ 59,688
========== ========== ========== ==========
Basic earnings per common share prior to
extraordinary item ................................... $ .04 $ .23 $ .49 $ .62
Extraordinary item .................................... -- (.01) -- (.01)
---------- ---------- ---------- ----------
Basic earnings per share .............................. $ .04 $ .22 $ .49 $ .61
========== ========== ========== ==========
Diluted earnings per common share prior to
extraordinary item ................................... $ .04 $ .22 $ .47 $ .59
Extraordinary item .................................... -- (.01) -- (.01)
---------- ---------- ---------- ----------
Diluted earnings per common share ..................... $ .04 $ .21 $ .47 $ .58
========== ========== ========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
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SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 1997
AND THE NINE MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
ADDITIONAL CURRENCY TREASURY TOTAL
COMMON EQUITY PAID-IN RETAINED TRANSLATION COMMON SHAREHOLDERS'
STOCK RIGHTS CAPITAL EARNINGS ADJUSTMENT STOCK EQUITY
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1996 ............ $ 970 $ 1 $ 192,555 $ 104,109 $ (9,050) $ (3) $ 288,582
Shares issued in connection with
the exercise of 1,451,392
stock options ........................... 15 -- 11,465 (8) -- -- 11,472
Conversion of 448 equity rights to 1,960
shares of common stock .................. -- (1) -- (1) -- 2 --
Tax benefits related to stock options .... -- -- 6,385 -- -- -- 6,385
1,047,236 shares of common stock issued
in connection with National Scientific
Company merger .......................... 10 -- (5) 2,745 -- -- 2,750
Dividends paid by National Scientific
Company prior to the merger ............. -- -- -- (1,604) -- -- (1,604)
Dividends paid by "A" Company
prior to the merger ..................... -- -- 520 (845) -- -- (325)
Net income ............................... -- -- -- 83,140 -- -- 83,140
Cumulative foreign currency
translation adjustment .................. -- -- -- -- (15,918) -- (15,918)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance at September 30, 1997 ............ $ 995 $ -- $ 210,920 $ 187,536 $ (24,968) $ (1) $ 374,482
========== ========== ========== ========== ========== ========== ==========
Shares issued in connection
with the exercise of 1,270,650
stock options ........................... 13 -- 10,707 (1) -- -- 10,719
Conversion of 200 equity rights to 872
shares of common stock .................. -- -- -- (1) -- 1 --
Tax benefits related to stock options .... -- -- 6,605 -- -- -- 6,605
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
(continued)
4
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SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED SEPTEMBER 30, 1997
AND THE NINE MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
(CONTINUED)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
ADDITIONAL CURRENCY TREASURY TOTAL
COMMON EQUITY PAID-IN RETAINED TRANSLATION COMMON SHAREHOLDERS'
STOCK RIGHTS CAPITAL EARNINGS ADJUSTMENT STOCK EQUITY
--------- --------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends paid by "A" Company
prior to the merger ................ -- -- 314 (479) -- -- (165)
Shares issued related to a deferred
compensation plan of "A" Company ... -- -- 830 -- -- -- 830
Net income (Unaudited) .............. -- -- -- 49,353 -- -- 49,353
Cumulative foreign currency
translation adjustment ............. -- -- -- -- (2,487) -- (2,487)
--------- --------- --------- --------- --------- --------- ---------
Balance at June 30, 1998
(Unaudited) ........................ $ 1,008 $ -- $ 229,376 $ 236,408 $ (27,455) $ -- $ 439,337
========= ========= ========= ========= ========= ========= =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE> 7
SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................. $ 49,353 $ 59,688
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation ........................................................... 22,830 21,422
Amortization ........................................................... 19,994 16,168
Provision for losses on doubtful accounts .............................. 1,140 298
Inventory provisions ................................................... (870) 1,672
Deferred income taxes .................................................. 3,743 (8,996)
Extraordinary item ..................................................... -- 673
Changes in assets and liabilities:
Decrease (increase) in accounts receivable ............................. 293 (20,168)
Increase in inventories ................................................ (5,329) (22,040)
Increase in prepaid expenses and other current assets .................. (10,692) (7,660)
Increase (decrease) in accounts payable ................................ (2,459) 3,947
Decrease in income taxes payable ....................................... (731) (3,060)
Decrease in accrued payroll and employee benefits ...................... (1,753) (31)
Increase in restructuring reserve ...................................... 11,356 --
Decrease in other current liabilities .................................. (4,003) (5,872)
Net change in other assets and liabilities ............................. 11,243 12,734
---------- ----------
Net cash provided by operating activities .............................. 94,115 48,775
Cash flows from investing activities:
Capital expenditures ................................................... (26,919) (23,777)
Proceeds from sales of property, plant, and equipment .................. 4,473 307
Net payments for businesses acquired ................................... (166,083) (207,149)
---------- ----------
Net cash used in investing activities .................................. (188,529) (230,619)
Cash flows from financing activities:
Increase in the revolving credit facility .............................. 121,300 154,900
Proceeds from long term debt ........................................... -- 53,087
Principal payments on long-term debt ................................... (26,564) (21,495)
Proceeds from the exercise of common stock options ..................... 10,720 4,741
Deferred financing fees ................................................ (276) (1,188)
Other .................................................................. 629 (1,894)
---------- ----------
Net cash provided by financing activities .............................. 105,809 188,151
Effect of exchange rate changes on cash ................................. (2,251) (2,028)
Net increase in cash and cash equivalents ............................... 9,144 4,279
Cash and cash equivalents at beginning of year .......................... 18,582 13,750
---------- ----------
Cash and cash equivalents at end of period .............................. $ 27,726 $ 18,029
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest ............................... $ 40,255 $ 32,256
Cash paid during the period for income taxes ........................... 30,376 40,696
Capital lease obligations incurred ..................................... 249 1,104
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
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SYBRON INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. In these financial statements, the terms "Company" or "Sybron" mean Sybron
International Corporation and its subsidiaries on a consolidated basis,
unless the context otherwise indicates. In the opinion of management, all
adjustments which are necessary for a fair statement of the results for the
interim periods presented have been included. All such adjustments were of
a normal recurring nature. The results for the nine month period ended June
30, 1998 are not necessarily indicative of the results to be expected for
the full year. Certain amounts from the three and nine month periods ended
June 30, 1997, as originally reported, have been reclassified to conform
with the three and nine month periods ended June 30, 1998 presentation.
All prior period data has been adjusted to reflect the results of National
Scientific Company ("National") and LRS Acquisition Corp. ("LRS"), the
parent of "A" Company Orthodontics ('"A" Company'), acquired May 23, 1997
and April 9, 1998, respectively. The results of National and LRS, each of
which joined Sybron as the result of a merger and were accounted for as a
pooling of interests, were combined with the Company's previously reported
results as if the mergers occurred as of the beginning of all reported
periods.
2. Inventories at June 30, 1998 consist of the following:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Raw materials $ 53,058
Work-in-process 27,271
Finished goods 90,441
LIFO Reserve (4,303)
---------
$ 166,467
=========
</TABLE>
3. Acquisitions completed in the third quarter of fiscal 1998 are as follows:
(a) On April 2, 1998, a subsidiary of Sybron Laboratory Products
Corporation ("SLPC") completed the acquisition of Criterion Sciences
("Criterion"), a manufacturer of hematology stains, reagents and other
solutions used for laboratory analysis and testing. Criterion's annual
sales are approximately $6.0 million.
(b) On April 3, 1998, a subsidiary of SLPC completed the acquisition of
Custom Laboratories ("Custom"), a manufacturer of a glucose tolerance
test beverage. Custom's annual sales are approximately $1.6 million.
(c) On April 9, 1998, Sybron completed the merger of LRS, the parent of "A"
Company, and a subsidiary of Sybron International Corporation formed
for that purpose, with the
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result that LRS became a wholly owned subsidiary of Sybron. "A" Company
is a manufacturer and developer of orthodontic products, supplying
orthodontic professionals with brackets, archwires, and related
products. For the year ended December 31, 1997, "A" Company generated
net sales of approximately $45.0 million.
Under the terms of the merger agreement LRS shareholders received
3,215,982 shares of the Company's common stock (valued at approximately
$88.2 million based on the Company's closing price on April 9, 1998)
for all of the outstanding shares of LRS. In addition, the Company paid
certain outstanding debt obligations of LRS in the amount of $32.3
million.
The merger was structured as a tax-free reorganization and has been
accounted for as a pooling of interests. Accordingly, the Company's
historical financial information has been restated to include the
financial results of LRS.
Results of the Company and LRS before and after giving effect to the
merger are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, 1998 June 30, 1998
------------ ------------
(In thousands)
(unaudited)
<S> <C> <C>
Total net sales:
The Company $ 225,505 $ 661,696
LRS 9,997 33,942
------------ ------------
The Company, giving effect to the merger $ 235,502 $ 695,638
============ ============
Net income:
The Company $ 6,347 $ 50,437
LRS (2,532) (1,084)
------------ ------------
The Company, giving effect to the merger $ 3,815 $ 49,353
============ ============
</TABLE>
(d) On April 13, 1998, a subsidiary of SLPC acquired DiMed Corporation
("DiMed"). DiMed is a manufacturer and distributor of culture media
products. DiMed's annual sales are approximately $1.7 million.
(e) On April 24, 1998, a subsidiary of SLPC purchased the assets of SciCan
Scientific ("SciCan"), a Toronto based manufacturer of laboratory
glassware. SciCan's annual sales are approximately $5.5 million.
8
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(f) On May 14, 1998, a subsidiary of SLPC purchased the assets of Summit
Biotechnology, Inc., a business located in Fort Collins, Colorado,
which processes and sells fetal bovine serum for cell culture and
diagnostic purposes. Annual sales are approximately $2.0 million.
(g) On May 22, 1998, a subsidiary of SLPC purchased Marks Polarized
Corporation ("Marks"). Marks, with annual sales of approximately $1.0
million, is a manufacturer of laminated filters, polarizers, polarized
filters, and other optical products.
Acquisitions completed after the third quarter of fiscal 1998 are as
follows:
(a) On July 3, 1998, a subsidiary of SLPC purchased Electrothermal
Engineering Ltd. ("Electrothermal"), located in Southend-on-Sea,
England. Electrothermal is a manufacturer of laboratory equipment,
including heating mantles and controls. Electorthermal's annual sales
are approximately $5.4 million.
(b) On July 3, 1998, a subsidiary of Sybron Dental Specialties, Inc.
("SDS") purchased certain assets of Tycom Corporation and its
affiliate Tycom Dental Corporation ("Tycom"). Tycom, with annual sales
of approximately $8.0 million, manufactures a line of endodontic
instrumentation.
(c) On July 22, 1998, a subsidiary of SDS completed the acquisition of the
high level disinfectant/sterilant business of Cottrell Ltd.
("Cottrell"), based in Englewood, Colorado. Annual sales for the
acquired product lines are approximately $7.5 million.
(d) On July 31, 1998, a subsidiary of SLPC acquired Lab-Line Instruments,
Inc. ("Lab-Line"). Lab-Line offers a broad line of constant temperature
laboratory apparatus, including shakers, refrigerators/freezers, ovens,
water baths, environmental chambers, and furnaces. Lab-Line is located
in Melrose Park, Illinois and has annual sales of approximately $20
million.
(e) On August 3, 1998, a subsidiary of SLPC acquired Applied Biotech Inc.
("ABI"), a manufacturer of products for the rapid detection of
pregnancy, drugs of abuse, and infectious diseases. ABI is located in
San Diego, California and has annual sales of approximately $20
million.
(f) On August 3, 1998, a subsidiary of SLPC acquired the operating assets
of Scherf Prazision GmbH ("Scherf"), a manufacturer of volumetric
glassware, tubes, and vials. Scherf is located in Urspringen, Germany
and has annual sales of approximately DM 4.6 million ($2.6 million).
(g) On August 6, 1998, a subsidiary of SLPC acquired the diagnostic
products business of Seradyn, Inc., based in Indianapolis, Indiana. The
acquired products, which include
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infectious disease diagnostic reagents and test kits, as well as
uniform latex particles used in the production of diagnostic reagents,
have annual sales of approximately $12 million.
All of the acquisitions, except for the merger with LRS, were made for cash
and are being accounted for as purchases with the results of the acquired
entity being included in the Company's financial statements from the date
of the acquisition.
4. In the quarter ended December 31, 1997, the Company adopted Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share"
("EPS"). SFAS 128 replaces the requirement for a presentation of primary
and fully diluted EPS with a presentation of basic and diluted EPS, both of
which are required to be presented on the face of the statement of income
for all entities with complex capital structures. SFAS 128 was effective
for financial statements issued for periods ending after December 15, 1997,
and requires restatement of all prior period EPS data presented. The
adoption of this statement is not expected to materially affect either
future or prior period EPS.
5. On January 30, 1998 the Company announced a two-for-one stock split in the
form of a 100 percent stock dividend (one share of stock for each
outstanding share of stock), which was distributed on February 20, 1998, to
shareholders of record at the close of business on February 12, 1998. The
financial results for all periods presented have been restated to reflect
this change.
6. In June 1998, the Company recorded a restructuring charge of $24,024
($16,703 after tax or $.16 per share on a diluted basis) for the
rationalization of certain acquired companies, combination of certain
production facilities, movement of certain customer service and marketing
functions, and the exiting of several product lines. The restructuring
charge has been classified as components of cost of sales ($6,417),
selling, general and administrative expenses ($16,924) and income tax
expense ($683). Principal items included in the reserve were severance and
termination costs for approximately 165 notified employees (primarily
production, sales and marketing personnel) (approximately $8,477), the
non-cash write-off of certain fixed assets and inventory associated with
exited product lines (approximately $8,710), the non cash write-off of
goodwill associated with discontinued product lines (approximately $2,061),
remaining lease payments and shut down costs on exited facilities and other
contractual obligations (approximately $1,991), a statutory tax penalty
(approximately $683), and other related restructuring costs (approximately
$2,102). As of June 30, 1998, the Company has made cash payments of
approximately $2,878 and has written off approximately $10,771 of fixed
assets, inventory, goodwill and other miscellaneous items relating to the
restructuring reserve. The remaining amount of approximately $10,375
relates to obligations expected to be paid in the next twelve months.
7. In the quarter ended June 30, 1998, the Company incurred approximately
$9,886 ($6,129 after tax or $.06 per share on a diluted basis) of costs
associated with the merger, transition and integration of the "A" Company.
The majority of these expenses were adjustments to the merger
consideration. The Company expects to incur an estimated additional $1.5
million
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before taxes in the fourth quarter of fiscal 1998 and $1.0 million before
taxes in the first quarter of fiscal 1999 in connection with further
integration costs.
11
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The subsidiaries of the Company are leading manufacturers of
value-added products for the laboratory and professional dental and orthodontic
markets in the United States and abroad. In May 1998, the Company's
laboratory subsidiaries were realigned under Sybron Laboratory Products
Corporation ("SLPC"). The primary laboratory subsidiaries under SLPC are Nalge
Nunc International Corporation ("NNI"), Erie Scientific Company ("Erie") and
Barnstead Thermolyne Corporation ("Barnstead/Thermolyne"). NNI develops,
manufactures, and markets labware, life sciences and process technologies
products. Offerings include reusable and disposable plastic labware, cell and
tissue culture products, high quality bio-pharmaceutical packaging, filtration
products, and industrial products used in fluid processing such as plastic
tubing, sanitary tubing and fittings. Erie develops, manufactures, and markets
products for diagnostics and research, histology, microbiology, and clinical
and industrial applications. These products include liquid standards and
reagents, stains, diagnostic tests, microscope slides and other glass products.
Barnstead/Thermolyne develops, manufactures and markets precision laboratory
equipment consisting of heating, stirring, measuring, sterilizing, analytical
and temperature control apparatus, and water purification systems.
Sybron's primary dental and orthodontic subsidiaries are "A" Company,
as well as Kerr Corporation ("Kerr") and Ormco Corporation ("Ormco") which are
subsidiaries of Sybron Dental Specialties, Inc. ("Sybron Dental Specialties").
Kerr develops, manufactures and markets a broad range of consumable products for
use in restorative, prosthetic, and endodontic dentistry. Ormco and "A" Company
develop, manufacture and market a broad line of orthodontic appliances including
bands, brackets, wire, adhesives, and ancillary equipment used during the course
of orthodontic treatment.
Over the past several years the Company has been pursuing a growth
strategy designed to increase sales and enhance operating margins. Elements of
that strategy include emphasis on acquisitions, product line extensions, new
product introductions and international growth.
When we use the terms "we" or "our" in this report, we are referring to
Sybron International Corporation and its subsidiaries. Our fiscal year ends on
September 30.
Our results for the third quarter and first nine months of fiscal 1998
ended June 30, 1998, contain charges with respect to the restructuring of our
laboratory businesses, the restructuring of certain operations of Sybron Dental
Specialties relating primarily to the consolidation of Ormco and "A" Company,
and merger, transaction and integration charges associated with the merger with
LRS Acquisition Company ("LRS")(the "Merger"), the parent of "A" Company. These
charges are collectively referred to herein as the "Special Charges". In
addition, because the Merger is accounted for as a pooling-of-interests, all
prior period data have been adjusted to reflect the historical results of LRS
and "A" Company as if the Merger took place on the first day of the reporting
period.
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The Special Charges, which total $33.9 million ($22.8 million after
tax), consist of the following items (see also Notes 6 and 7 of the Notes to the
Unaudited Consolidated Financial Statements):
(a) $9.4 million ($5.9 million after tax) relates to the realignment of our
laboratory subsidiaries under SLPC. This restructuring charge consists
primarily of severance expenditures associated with the consolidation
of certain functions, the restructuring of sales and marketing
activities, and costs associated with exiting certain product lines.
Approximately $4.6 million of these charges are cash expenditures.
The savings from these actions are expected to be approximately $6.1
million per year.
(b) $14.6 million ($10.7 million after tax) relates to the consolidation of
Ormco and "A" Company activities after the Merger, and the exiting of
certain product lines on the dental side of the business. The charge
primarily includes severance costs, costs associated with the closure
of Ormco's sales office in Zurich, Switzerland, and costs associated
with the exiting of redundant products lines. Approximately $8.0
million of these charges are cash expenditures.
The savings from these actions are expected to be approximately $11.0
million per year.
(c) $9.9 million ($6.2 million after tax) consists of transaction and
merger and integration costs associated with the Merger. We anticipate
additional merger and integration costs of $1.5 million before taxes in
the 1998 fourth fiscal quarter and $1.0 million before taxes in the
first fiscal quarter of 1999.
ALL OF THE FINANCIAL DATA IN THIS MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ARE PRIOR TO THE SPECIAL
CHARGES AND PRIOR TO THE RESTATEMENT OF PRIOR PERIOD DATA DUE TO THE MERGER,
UNLESS OTHERWISE SPECIFIED.
Both our sales and operating income for the quarter and the nine months
ended June 30, 1998 grew over the corresponding prior year periods. Net sales
for the quarter and nine months ended June 30, 1998 increased by 12.3% and
17.5%, respectively, over the corresponding fiscal 1997 periods. After
restatement of the prior period data for the Merger, net sales for the quarter
and nine months ended June 30, 1998 increased by 6.4% and 14.9%, respectively,
over the corresponding fiscal 1997 periods. Operating income for the quarter and
nine months increased by 20.4% and 22.8%, respectively, over the corresponding
fiscal 1997 periods. After restatement of the prior years financials for the
Merger, operating income for the quarter and nine months ended June 30, 1998
increased by 15.3% and 21.2%, respectively, over the corresponding 1997 period.
Sales growth in the quarter and nine months ended June 30, 1998 was
strong both domestically and internationally. Domestic and international sales
increased by 14.6% and 7.4%,
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respectively, for the quarter, and by 21.5% and 9.5%, respectively, for the nine
months, over the corresponding fiscal 1997 periods. International sales were
negatively impacted by the strengthening of the U.S. dollar and economic
weakness in the Asian region. If currency effects were removed from sales, the
international increase over 1997 would have been 11.2% for the quarter and 14.1%
for the nine month period ended June 30, 1998. Sales to the Asian region
decreased by approximately $2.9 million for both the quarter and nine month
periods ended June 30, 1998, respectively, when compared to the corresponding
fiscal 1997 periods.
Acquisitions aided sales growth significantly during both the quarter
and nine month periods, accounting for $22.4 million and $8.7 million of the
domestic and international sales increases in the quarter, and $77.4 million
and $21.3 million for the nine month period, respectively. This quarter showed
no internal sales growth and instead showed a shrinkage of 2.0%. For the nine
months to date, internal sales growth amounted to 0.7%. For the quarter internal
growth was negatively impacted by the strengthened U.S. dollar, weak sales in
the Asian region, distributor inventory re-balancing impacting
Barnstead/Thermolyne in April and May of this quarter, reduced sales at Nalge
Process Technologies Corporation, and a disruption in Ormco and "A" Company
sales caused by the redistribution of sales territories in connection with the
Merger. Kerr's sales, which were negatively impacted by dealer inventory
consolidation in the second quarter, showed growth in the third quarter.
Inventory consolidation is, however, expected to continue to impact sales, as
the dealer network continues to consolidate. Without currency effects, internal
growth was approximately negative 0.9% for the quarter and positive 2.2% for
the nine month period ended June 30, 1998. Barnstead/Thermolyne was negatively
impacted in the first two months of this quarter by inventory re-balancing at
its major distributor, Fisher Scientific, however end user purchases of
Barnstead/Thermolyne products exceeded levels purchased by Fisher Scientific.
We continue to maintain an active program of developing and marketing
both new products and product line extensions, as well as pursuing growth
through acquisitions. We completed seven acquisitions in the third quarter of
fiscal 1998, four in July 1998 and three through August 12, 1998. (See Note 3 to
the Unaudited Consolidated Financial Statements).
Our results of operations include goodwill amortization, other
amortization, and depreciation. These non-cash charges totaled $14.6 million and
$13.1 million for the quarters ended June 30, 1998 and 1997, respectively and
$41.7 million and $36.4 million for the nine month periods ended June 30, 1998
and 1997, respectively. Our earnings before interest, taxes, depreciation and
amortization ("EBITDA") which, as discussed below in "Liquidity and Capital
Resources", we believe is the appropriate measure of our ability to internally
fund our liquidity requirements, amounted to $72.7 million and $61.2 million for
the quarters ended June 30, 1998 and 1997, respectively, and $199.5 million and
$164.5 million for the nine months ended June 30, 1998 and 1997, respectively.
EBITDA represents, for any relevant period, net income plus (i) interest
expense, (ii) provision for income taxes, (iii) Special Charges, (iv)
extraordinary items and (v) depreciation and amortization, all determined on a
consolidated basis and in accordance with generally accepted accounting
principles.
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Substantial portions of our sales, income and cash flows are derived
internationally. The financial position and the results of operations from
substantially all of our international operations, other than most U.S. export
sales, are measured using the local currency of the countries in which such
operations are conducted and are then translated into U.S. dollars. While the
reported income of foreign subsidiaries will be impacted by a weakening or
strengthening of the U.S. dollar in relation to a particular local currency, the
effects of foreign currency fluctuations are partially mitigated by the fact
that manufacturing costs and other expenses of foreign subsidiaries are
generally incurred in the same currencies in which sales are generated. Such
effects of foreign currency fluctuations are also mitigated by the fact that
such subsidiaries' operations are conducted in numerous foreign countries and,
therefore, in numerous foreign currencies. In addition, our U.S. export sales
may be impacted by foreign currency fluctuations relative to the value of the
U.S. dollar as foreign customers may adjust their level of purchases upward or
downward according to the weakness or strength of their respective currencies
versus the U.S. dollar.
From time to time we may employ currency hedges to mitigate the impact
of foreign currency fluctuations. If currency hedges are not employed, we may be
exposed to earnings volatility as a result of foreign currency fluctuations. In
October 1997, we decided to employ a series of foreign currency options with a
U.S. dollar notional amount of approximately $13.6 million at a cost of
approximately $0.4 million. Two of these options were sold in the third quarter
of fiscal 1998 at a gain of $0.2 million. The remaining options will expire in
the fourth quarter of fiscal 1998 and are designed to protect Sybron from
potential detrimental effects of currency movements associated with the U.S.
dollar versus the German mark and the French franc as compared to the fourth
quarter of fiscal 1997.
As previously reported, on May 2, 1996, Combustion Engineering, Inc.
("CE") commenced legal proceedings in the New York Supreme Court, County of
Monroe (the "CE Litigation"), against the Company with respect to the former
Taylor Instruments facility in Rochester, New York (the "Rochester Site" or
"Site"), a discontinued operation. CE's complaint seeks indemnification from
the Company with respect to the costs to remediate certain environmental
contamination at the Rochester Site. CE claims its costs to date have amounted
to approximately $7.0 million. The CE Litigation has not yet advanced beyond
the filing of the complaint. CE entered into a voluntary cleanup agreement
("VCA") concerning the Site with the New York State Department of Environmental
Conservation ("NYSDEC"). In connection with the VCA, CE and NYSDEC have reached
an agreement on the cleanup goals and remedial methods for soil and groundwater
contamination at the Site. CE has estimated that the costs to achieve the
agreed-upon cleanup goals using the agreed-upon remedial methods would be
approximately $7.9 million. Potential offsite issues have not yet been
addressed, and CE is presently preparing a work plan for an offsite monitoring
program. The Company believes the cost estimates developed by CE for the soil
and groundwater remediation are not reliable or meaningful cost estimates as
they are based on insufficient data and information. Because the extent of the
Company's liability, if any, is uncertain, the Company cannot estimate with any
reasonable certainty the cost to it of CE's claims. The Company has provided
notice to its third party liability insurance carriers. To date, the carriers
have denied coverage.
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<PAGE> 17
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1998 COMPARED TO THE QUARTER ENDED JUNE 30, 1997
NET SALES. Net sales for the third quarter of 1998 were $235.5 million,
an increase of $25.7 million (12.3%) over the corresponding 1997 quarter. After
restating the prior year's quarter for the Merger, net sales for the three
months ended June 30, 1998 increased by $14.2 million (6.4%) from net sales in
the three months ended June 30, 1997. Sales in the laboratory segment were
$150.1 million for the three months ended June 30, 1998, an increase of 13.1%
from the corresponding 1997 fiscal period. Increased sales in the laboratory
segment resulted primarily from (i) sales of products of acquired companies, net
of a divested product line (approximately $19.3 million), (ii) price increases
(approximately $2.5 million) and (iii) increased volume from sales of new
products (approximately $1.6 million). Increased sales in the laboratory segment
were partially offset by (i) reduced volume from sales of existing products
(approximately $3.1 million) and (ii) unfavorable foreign currency impacts
(approximately $2.9 million). In the dental segment, net sales were $85.4
million for the three months ended June 30, 1998, an increase of 10.8% from the
corresponding fiscal 1997 period. Increased sales in the dental segment resulted
primarily from (i) sales of products of acquired companies, net of
discontinued product lines (approximately $11.8 million) and (ii) increased
volume from sales of new products (approximately $3.0 million). Increased
sales in the dental segment were partially offset by (i) a reduction in volume
of sales of existing products (approximately $4.9 million) and (ii) unfavorable
foreign currency impacts (approximately $1.6 million).
GROSS PROFIT. Gross profit for the third quarter of fiscal 1998 was
$122.6 million, an increase of 14.0% from gross profit of $107.6 million for the
corresponding fiscal 1997 period. After restating the third quarter of 1997 for
the Merger, gross profit increased over the corresponding 1997 quarter by $8.1
million (7.1%). Gross profit in the laboratory segment was $73.3 million (48.8%
of net segment sales) in the third quarter of fiscal 1998, an increase of 16.4%
from gross profit of $63.0 million (47.4% of net segment sales) during the
corresponding fiscal 1997 period. Gross profit in the laboratory segment
increased primarily as a result of (i) the effects of acquired companies
(approximately $10.0 million), (ii) price increases (approximately $2.5
million), (iii) inventory adjustments (approximately $1.1 million), (iv) a
reduction in depreciation expense of certain assets that became fully
depreciated in the prior fiscal year (approximately $0.5 million) and (v)
increased volume (approximately $0.4 million). Increased gross profit in the
laboratory segment was partially offset by (i) an unfavorable product mix
(approximately $2.1 million), (ii) an unfavorable foreign currency impact
(approximately $1.3 million) and (iii) unfavorable overhead application
(approximately $1.0 million). In the dental segment, gross profit was $49.3
million (57.8% of net segment sales) in the third quarter of fiscal 1998, an
increase of 10.5% from gross profit of $44.6 million (57.9% of net segment
sales) during the corresponding fiscal 1997 period. Increased gross profit in
the dental segment resulted primarily from (i) the effects of acquired companies
(approximately $8.5 million) and (ii) a reduction in depreciation expense of
certain assets that became fully depreciated in the prior fiscal year
(approximately $0.3 million). Increased gross profit in the dental segment was
partially offset by (i) unfavorable foreign currency impacts (approximately $1.6
million), (ii) reduced volume
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(approximately $1.1 million), (iii) unfavorable overhead application
(approximately $0.9 million) and (iv) inventory factors (approximately $0.5
million).
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the third quarter of fiscal 1998 were $64.6 million
(27.4% of net sales) as compared to $59.4 million (28.3% of net sales) in the
corresponding fiscal 1997 period. After restating the third quarter of 1997 for
the Merger, selling, general and administrative expenses increased over the
corresponding 1997 quarter by $0.4 million (0.6%). General and administrative
expenses at the corporate level, including amortization of purchase accounting
adjustments and goodwill associated with acquisitions, were $5.6 million in the
third quarter of fiscal 1998, representing a decrease of 14.4% from $6.5 million
in the corresponding fiscal 1997 period. The decrease at the corporate level was
primarily due to (i) a reduction in employee benefits expense (approximately
$0.5 million) and (ii) reduced depreciation and amortization expense of certain
tangible and intangible assets that became fully amortized and depreciated in
the prior fiscal year (approximately $0.4 million). Selling, general and
administrative expenses at the subsidiary level, including amortization of
intangibles, were $59.0 million (25.1% of net sales), representing an increase
of 11.5% from $52.9 million (25.2% of net sales) in the corresponding fiscal
1997 period. Increases at the subsidiary level were primarily due to (i)
expenses related to newly acquired businesses (approximately $6.8 million), (ii)
increased amortization of intangible assets related to acquired businesses
(approximately $0.9 million) and (iii) increased marketing expense
(approximately $0.3 million), partially offset by (i) favorable foreign currency
impacts (approximately $1.3 million) and (ii) a reduction in research and
development expenditures (approximately $0.3 million).
SPECIAL CHARGES. The third quarter results include the Special Charges
which total $33.9 million ($22.8 million after tax), as follows:
(a) In June 1998, the Company recorded a restructuring charge of $24.0
million ($16.7 million after tax or $.16 per share on a diluted
basis) for the rationalization of certain acquired companies,
combination of certain production facilities, movement of certain
customer service and marketing functions, and the exiting of several
product lines. The restructuring charge has been classified as
components of cost of sales ($6.4 million), selling, general and
administrative expenses ($16.9 million) and income tax expense ($0.7
million). Principal items included in the reserve were severance and
termination costs for approximately 165 notified employees (primarily
production, sales and marketing personnel) (approximately $8.4
million), the non-cash write-off of certain fixed assets and inventory
associated with exited product lines (approximately $8.7 million), the
non cash write-off of goodwill associated with discontinued product
lines (approximately $2.1 million), remaining lease payments and shut
down costs on exited facilities and other contractual obligations
(approximately $2.0 million), a statutory tax penalty (approximately
$0.7 million), and other related restructuring costs (approximately
$2.1 million). As of June 30, 1998, the Company has made cash payments
of approximately $2.9 million and has written off approximately $10.8
million of fixed assets, inventory, goodwill and other miscellaneous
items relating to the restructuring reserve. The remaining amount of
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approximately $10.3 million relates to obligations expected to be paid
in the next twelve months.
(b) In the quarter ended June 30, 1998, the Company incurred approximately
$9.9 million ($6.1 million after tax or $.06 per share on a diluted
basis) of costs associated with the merger, transition and integration
of the "A" Company. The majority of these expenses were adjustments to
the Merger consideration. The Company expects to incur an additional
$1.5 million before taxes in the fourth quarter of fiscal 1998, and
$1.0 million before taxes in the first quarter of fiscal 1999 in
connection with further integration costs.
See the description of the Special Charges under "General", above,
and Notes 6 and 7 to the Unaudited Consolidated Financial Statements.
OPERATING INCOME. As a result of the foregoing, operating income was
$58.0 million (24.6% of net sales) in the third quarter of fiscal 1998 compared
to $48.2 million (23.0% of net sales) in the corresponding fiscal 1997 period.
After restating the third quarter of 1997 for the Merger, operating income
increased over the corresponding 1997 quarter by $7.7 million (15.3%). Operating
income in the laboratory segment was $38.6 million (25.7% of net segment sales)
in the third quarter of fiscal 1998 compared to $30.9 million (23.3% of net
segment sales) in the corresponding fiscal 1997 period. Operating income in the
dental segment was $19.4 million (22.7% of net segment sales) in the third
quarter of fiscal 1998 compared to $17.3 million (22.4% of net segment sales)
in the corresponding fiscal 1997 period.
INTEREST EXPENSE. Interest expense was $14.1 million in the third
quarter of fiscal 1998 compared to $12.0 million in the corresponding fiscal
1997 period. After restating the third quarter of 1997 for the Merger, interest
expense increased over the corresponding 1997 quarter by $1.2 million. The
increase resulted from a higher debt balance primarily from our acquisition
activity. Interest expense during the quarters ended June 30, 1998 and 1997
included additional non-cash interest expense of $0.3 million resulting from the
adoption of SFAS No. 106.
INCOME TAXES. Taxes on income (after restating for the Merger)
decreased $7.8 million in the third quarter of fiscal 1998 when compared to the
1997 period primarily as a result of a tax benefit of $10.4 million from the
Special Charges, partially offset by an increase in income excluding the Special
Charges.
NET INCOME. As a result of the foregoing, we had net income of $3.8
million in the third quarter of fiscal 1998 (inclusive of the Special Charges
and restatement for the Merger) compared to $21.9 million in the corresponding
1997 period (after restatement for the Merger and inclusion of an extraordinary
item of $0.7 million related to the write off of deferred financing fees).
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense is
allocated among cost of sales, selling, general and administrative expenses and
other expense. Depreciation and amortization increased $1.1 million, after
restating for the Merger, when compared to the prior year quarter. This increase
was primarily due to the amortization of intangible assets and depreciation of
property, plant and equipment related to acquired companies, partially offset by
reduction in depreciation and amortization expense of certain tangible and
intangible assets that became fully amortized and depreciated in the prior
fiscal year.
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\NINE MONTHS ENDED JUNE 30, 1998 COMPARED TO THE NINE MONTHS ENDED JUNE 30, 1997
NET SALES. Net sales for the nine months ended June 30, 1998 were
$671.7 million, an increase of $100.0 million (17.5%) from net sales of $571.7
million for the corresponding nine months ended June 30, 1997. After restating
for the Merger, net sales for the nine months ended June 30, 1998 were $695.6
million, an increase of $90.2 million (14.9%) from net sales of $605.4 million
for the corresponding nine months ended June 30, 1997. Sales in the laboratory
segment were $434.0 million for the nine months ended June 30, 1998, an increase
of 24.9% from the corresponding 1997 fiscal period. Increased sales in the
laboratory segment resulted primarily from (i) sales of products of acquired
companies, net of a divested product line (approximately $82.7 million), (ii)
price increases (approximately $3.5 million), (iii) increased volume from sales
of new products (approximately $3.3 million) and (iv) increased volume from
sales of existing products (approximately $1.6 million). Increased sales in the
laboratory segment were partially offset by unfavorable foreign currency impacts
(approximately $4.6 million). In the dental segment, net sales were $237.7
million for the nine months ended June 30, 1998, an increase of 6.0% from the
corresponding fiscal 1997 period. Increased sales in the dental segment resulted
primarily from (i) sales of products of acquired companies, net of discontinued
product lines (approximately $16.0 million) and (ii) increased volume from sales
of new products (approximately $3.8 million). Increased sales in the dental
segment were partially offset by (i) unfavorable foreign currency impacts
(approximately $6.0 million) and (ii) reduced volume from sales of existing
products (approximately $0.5 million).
GROSS PROFIT. Gross profit for the nine months ended June 30, 1998 was
$344.7 million, an increase of 19.6% from gross profit of $288.2 million for the
corresponding fiscal 1997 period. After restating for the Merger, gross profit,
before the Special Charges, for the nine months ended June 30, 1998 was $359.1
million, an increase of 16.5% from gross profit of $308.3 million for the
corresponding fiscal 1997 period. Gross profit in the laboratory segment was
$208.0 million (47.9% of net segment sales), an increase of 28.7% from gross
profit of $161.6 million (46.5% of net segment sales) during the corresponding
fiscal 1997 period. Gross profit in the laboratory segment increased primarily
as a result of (i) the effects of acquired companies (approximately $42.4
million), (ii) increased volume (approximately $5.7 million), (iii) price
increases (approximately $3.5 million), (iv) a reduction in depreciation expense
of certain assets that became fully depreciated in the prior fiscal year
(approximately $1.6 million) and (v) favorable overhead application
(approximately $0.4 million). Increased gross profit in the laboratory segment
was partially offset by (i) an unfavorable product mix (approximately $3.0
million), (ii) unfavorable foreign currency impacts (approximately $2.8 million)
and (iii) inventory adjustments (approximately $0.9 million). In the dental
segment, gross profit was $136.8 million (57.5% of net segment sales) for the
nine months ended June 30, 1998, an increase of 8.0% from gross profit of $126.7
million (56.5% of net segment sales) during the corresponding fiscal 1997
period. Increased gross profit in the dental segment resulted primarily from (i)
the effects of acquired companies (approximately $9.9 million), (ii) increased
volume (approximately $2.1 million), (iii) inventory adjustments (approximately
$1.2 million), (iv) an improved product mix (approximately $1.2 million) and (v)
a reduction in depreciation expense of certain assets that became fully
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depreciated in the prior fiscal year (approximately $0.7 million), partially
offset by (i) unfavorable foreign currency impacts (approximately $4.3 million)
and (ii) unfavorable overhead application (approximately $0.2 million).
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the nine months ended June 30, 1998 were $186.8
million (27.8% of net sales) as compared to $159.6 million (27.9% of net sales)
in the corresponding fiscal 1997 period. After restating for the Merger,
selling, general and administrative expenses increased over the corresponding
1997 period by $22.3 million (12.8%). General and administrative expenses at the
corporate level, including amortization of purchase accounting adjustments and
goodwill associated with acquisitions, were $16.0 million, representing a
decrease of 10.0% from $17.7 million in the corresponding fiscal 1997 period.
The decrease at the corporate level was primarily due to (i) reduced
depreciation and amortization expense of certain tangible and intangible assets
that became fully amortized and depreciated in the prior fiscal year
(approximately $1.4 million) and (ii) a reduction in employee benefits expense
(approximately $0.4 million). Selling, general and administrative expenses at
the subsidiary level, including amortization of intangibles, were $170.9 million
(25.4% of net sales), representing an increase of 20.4% from $141.9 million
(24.8% of net sales) in the corresponding fiscal 1997 period. Increases at the
subsidiary level were primarily due to (i) expenses related to newly acquired
businesses (approximately $21.4 million), (ii) increased amortization of
intangible assets related to acquired businesses (approximately $4.7 million),
(iii) increased marketing expense (approximately $3.3 million) and (iv)
increased general and administrative expense (approximately $1.8 million),
partially offset by (i) favorable foreign currency impacts (approximately $2.3
million) and (ii) a reduction in research and development expenditures
(approximately $0.2 million).
SPECIAL CHARGES. The nine month results include the Special Charges,
which total $33.9 million ($22.8 million after tax). See the description of the
Special Charges above under "General" and the "Results of Operations - Quarter
ended June 30, 1998 Compared to the Quarter ended June 30, 1997" above, and
Notes 6 and 7 to the Unaudited Consolidated Financial Statements.
OPERATING INCOME. Operating income was $157.9 million (23.5% of net
sales) for the nine months ended June 30, 1998 compared to $128.6 million (22.5%
of net sales) in the corresponding fiscal 1997 period. After restating for the
Merger, operating income increased over the corresponding 1997 period by $28.4
million (21.2%). Operating income in the laboratory segment was $104.4 million
(24.1% of net segment sales) compared to $79.4 million (22.8% of net segment
sales) in the corresponding fiscal 1997 period. Operating income in the dental
segment was $53.5 million (22.5% of net segment sales) compared to $49.2 million
(21.9% of net segment sales) in the corresponding fiscal 1997 period.
INTEREST EXPENSE. Interest expense was $40.3 million for the nine
months ended June 30, 1998 compared to $30.3 million in the corresponding fiscal
1997 period. After restating for the Merger, interest expense increased over the
corresponding 1997 period by $9.0 million. The increase resulted from a higher
debt balance primarily from our acquisition activity. Interest
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expense for the nine months ended June 30, 1998 and 1997 included additional
non-cash interest expense of $0.9 million resulting from the adoption of SFAS
No. 106.
INCOME TAXES. Taxes on income (after restating for the Merger)
decreased $2.4 million when compared to the 1997 period primarily as a result of
a tax benefit of $10.4 million from the Special Charges, partially offset by an
increase in income excluding the Special Charges.
NET INCOME. As a result of the foregoing, we had net income of $49.4
million for the nine months ended June 30, 1998 (inclusive of the Special
Charges and restatement for the Merger) compared to $59.7 million in the
corresponding fiscal 1997 period (after restatement for the Merger and inclusion
of an extraordinary item of $0.7 million related to the write off of deferred
financing fees).
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense is
allocated among cost of sales, selling, general and administrative expenses and
other expense. Depreciation and amortization increased $5.2 million, after
restating for the Merger, when compared to the prior year nine month period.
This increase was primarily due to the amortization of intangible assets and
depreciation of property, plant and equipment related to acquired companies
partially offset by reduction in depreciation and amortization expense of
certain tangible and intangible assets that became fully amortized and
depreciated in the prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
As a result of the 1987 leveraged buyout transaction ("the
Acquisition") and the acquisitions we completed since 1987, we have increased
the carrying value of certain tangible and intangible assets consistent with
generally accepted accounting principles. Accordingly, our results of operations
include a significant level of non-cash expenses related to the depreciation of
fixed assets and the amortization of intangible assets, including goodwill.
Goodwill and intangible assets increased by approximately $42.6 million and
$110.9 million in the third quarter and year to date, respectively, primarily as
a result of continued acquisition activity. We believe, therefore, that EBITDA
represents the more appropriate measure of our ability to internally fund our
capital requirements.
Our capital requirements arise principally from indebtedness incurred
in connection with the permanent financing for the Acquisition and our
subsequent refinancings, our working capital needs, primarily related to
inventory and accounts receivable, our capital expenditures, primarily related
to purchases of machinery and molds, the purchase of various businesses and
product lines in execution of our acquisition strategy, payments to be made in
connection with our restructuring and the periodic expansion of physical
facilities. In addition, in the event we should be held liable for CE's claims
in the CE Litigation (described above), liability for which we deny, we could
require capital to satisfy such liabilities, depending upon their magnitude. It
is currently our intent to continue to pursue our acquisition strategy. If
acquisitions continue at our historical pace, of which there can be no
assurance, we may require financing beyond the capacity of our Credit Facilities
(as defined below). In addition, certain acquisitions previously completed
contain
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"earnout provisions" requiring further payments in the future if certain
financial results are achieved by the acquired companies. With respect to
restructuring charge of approximately $24.0 million, as of June 30, 1998 (See
Note 6 to the Unaudited Consolidated Financial Statements), the Company has made
cash payments of approximately $2.9 million. $10.3 million remains to be paid
over the next twelve months.
The statement contained in the immediately preceding paragraph
concerning our intent to continue to pursue our acquisition strategy is a
forward-looking statement. Our ability to continue our acquisition strategy is
subject to a number of uncertainties, including, but not limited to, our ability
to raise capital beyond the capacity of our Credit Facilities and the
availability of suitable acquisition candidates at reasonable prices. See
"Cautionary Factors" below.
On July 31, 1995, we entered into a credit agreement (as amended, the
"Credit Agreement") with Chemical Bank (now known as The Chase Manhattan Bank
("Chase")) and certain other lenders providing for a term loan facility of $300
million (the "Term Loan Facility"), and a revolving credit facility of $250
million (the "Revolving Credit Facility") (collectively the "Credit
Facilities"). On the same day, we borrowed $300 million under the Term Loan
Facility and approximately $122.5 million under the Revolving Credit Facility.
Approximately $158.5 million of the borrowed funds were used to finance the
acquisition of the Nunc group of companies (approximately $9.1 million of the
acquisition price for Nunc was borrowed under our previous credit facilities).
The remaining borrowed funds of approximately $264.0 million were used to repay
outstanding amounts, including accrued interest, under our previous credit
facilities and to pay certain fees in connection with such refinancing. On July
9, 1996, under the First Amendment to the Credit Agreement (the "First
Amendment"), the capacity of the Revolving Credit Facility was increased to $300
million, and a competitive bid process was established as an additional option
for us in setting interest rates. On April 25, 1997, we entered into the Second
Amended and Restated Credit Agreement (the "Second Amendment"). The Second
Amendment was an expansion of the Credit Facilities. The Term Loan Facility was
restored to $300 million by increasing it by $52.5 million (equal to the amount
previously repaid through April 24, 1997) and the Revolving Credit Facility was
expanded from $300 million to $600 million. On April 25, 1997, we borrowed a
total of $622.9 million under the Credit Facilities. The proceeds were used to
repay $466.3 million of previously existing LIBOR and ABR loans (as defined
below) (including accrued interest and certain fees and expenses) under the
Credit Facilities and to pay $156.6 million with respect to the purchase of
Remel Limited Partnership which includes both the purchase price and payment of
assumed debt. The $72 million of CAF borrowings (as defined below) remained in
place. On July 1, 1998, we completed the First Amendment to the Second Amended
Credit Agreement (the "Additional Amendment"). The Additional Amendment provided
for an increase in the Term Loan Facility of $100 million. On July 1, 1998, we
used the $100 million of proceeds from the Additional Amendment to pay $100
million of existing debt balances under the Revolving Credit Facility. The
Additional Amendment also provides us with the ability to use proceeds from the
issuance of additional unsecured indebtedness of up to $300 million to pay
amounts outstanding under the Revolving Credit Facility without reducing our
ability to borrow under the Revolving Credit Facility in the future.
22
<PAGE> 24
Payment of principal and interest with respect to the Credit Facilities
and the Sale/Leaseback (as defined later herein) is anticipated to be our
largest use of operating funds in the future. The Credit Facilities provide for
an annual interest rate, at our option, equal to (a) the higher of (i) the rate
from time to time publicly announced by Chase in New York City as its prime
rate, (ii) the federal funds rate plus 1/2 of 1%, and (iii) the base CD rate
plus 1%, (collectively referred to as "ABR") or (b) the London interbank offered
rate ("LIBOR") plus 1/2% to 7/8% (the "LIBOR Margin") depending upon the ratio
of our total debt to EBITDA , or (c) with respect to the Revolving Credit
Facility, the rate set by the competitive bid process among the parties to the
Revolving Credit Facility established in the First Amendment ("CAF"). The
average interest rate on the Term Loan Facility (inclusive of the swap
agreements described below) for both the quarter and nine months ended June 30,
1998 was 6.7% and the average interest rate on the Revolving Credit Facility for
the quarter and nine months ended June 30, 1998 was 6.6%.
As a result of the terms of the Credit Agreement, we are sensitive to a
rise in interest rates. In order to reduce our sensitivity to interest rate
increases, from time to time we enter into interest rate swap agreements. At
June 30, 1998, swap agreements aggregating a notional amount of $375 million
were in place to hedge against a rise in interest rates. The net interest rate
paid by us is approximately equal to the sum of the swap agreement rate plus the
applicable LIBOR Margin. During the third quarter and year to date fiscal 1998,
the LIBOR Margin was .75%. The swap agreement rates and durations are as
follows:
<TABLE>
<CAPTION>
SWAP AGREEMENT SWAP AGREEMENT
EXPIRATION DATE NOTIONAL AMOUNT DATE RATE
<S> <C> <C> <C>
July 7, 1998................ $50 million July 7, 1993 5.17%
August 9, 1999.............. $50 million August 7, 1997 6.077%
August 13, 1999............. $50 million August 13, 1993 5.54%
September 8, 2000........... $50 million December 8, 1995 5.56%
February 7, 2001............ $50 million August 7, 1997 5.91%
May 7, 2001................. $75 million May 7, 1997 6.5875%
September 10, 2001.......... $50 million December 8, 1995 5.623%
</TABLE>
Also as part of the permanent financing for the Acquisition, on
December 22, 1988, we entered into the sale and leaseback of our principal
domestic facilities (the "Sale/Leaseback"). In January 1994, the annual
obligation under the Sale/Leaseback increased from $2.9 million to $3.3 million,
payable monthly. On the fifth anniversary of the leases and every five years
thereafter (including renewal terms), the rent will be increased by the
percentage equal to 75% of the percentage increase in the Consumer Price Index
over the preceding five years. The percentage increase to the rent in any
five-year period is capped at 15%. The next adjustment will occur on January 1,
1999.
We intend to fund our acquisitions, working capital requirements,
capital expenditure requirements, principal and interest payments, obligations
under the Sale/Leaseback, restructuring
23
<PAGE> 25
expenditures, other liabilities and periodic expansion of facilities, to the
extent available, with funds provided by operations and short-term borrowings
under the Revolving Credit Facility. To the extent that funds are not available,
particularly with respect to our acquisition strategy, we intend to raise
additional capital.
As set forth above, after the Second Amendment, the Revolving Credit
Facility provides up to $600 million in available credit. At June 30, 1998,
there was approximately $113.7 million of available credit under the Revolving
Credit Facility. On July 6, 1998, the available amount under the Revolving
Credit Facility increased by $100 million as a result of the funding of the
Additional Amendment. Under the Term Loan Facility, on July 31, 1997 we began to
repay principal in 21 consecutive quarterly installments by paying the $8.75
million due in 1997 and $8.75 million due in each of the first, second and third
quarters of fiscal 1998. Annual payments, in the remainder of fiscal 1998 and
succeeding fiscal years 1999-2002, are due as follows: $8.75 million, $36.25
million, $42.5 million, $53.75 million and, as a result of the Additional
Amendment, $223.75 million.
The Credit Agreement contains numerous financial and operating
covenants, including, among other things, restrictions on investments;
requirements that we maintain certain financial ratios; restrictions on our
ability to incur indebtedness or to create or permit liens or to pay cash
dividends in excess of $50.0 million plus 50% of our consolidated net income for
each fiscal quarter ending after June 30, 1995, less any dividends paid after
June 22, 1994; and limitations on incurrence of additional indebtedness. The
Credit Agreement permits us to make acquisitions provided we continue to satisfy
all financial covenants upon any such acquisition. Our ability to meet our debt
service requirements and to comply with such covenants is dependent upon our
future performance, which is subject to financial, economic, competitive and
other factors affecting us, many of which are beyond our control.
YEAR 2000
Computer software that uses two digits rather than four to identify the
applicable year may be unable to interpret appropriately the calendar Year 2000,
and thus could cause disruption of normal businesses activities. We use software
in various aspects of our businesses, including manufacturing, accounting,
product development and many administrative functions. Some of this software
will be unable to interpret the calendar Year 2000 appropriately unless it is
modified or replaced. Many of our suppliers, vendors and customers face this
issue as well.
We are addressing this Year 2000 issue with a corporate-wide initiative
sponsored by Sybron's Vice President-Finance and Chief Financial Officer and its
Vice President-General Counsel and Secretary, and led at the subsidiary level by
the Vice President and Chief Financial officer at SLPC and the Vice President
and Chief Information Officer at Sybron Dental Specialties. The objective of
the initiative is to mitigate the risk to the Company of Year 2000 issues by
minimizing the number and seriousness of any technical failures and by quickly
indentifying and repairing any such failures if they do occur. The various
phases of the initiative (which are being conducted simultaneously) include the
identification of affected mission critical software utilized by both
information and non-information technology systems, the assessment of risk
associated with such affected software, the development of a plan for modifying
the software, the implementation of
24
<PAGE> 26
solutions under the plan, and the testing of the solutions. The initiative also
includes communications with our significant suppliers, vendors and customers
to determine the extent to which we are vulnerable to any failures by
them to address the Year 2000 issue. The program contemplates the development
of contingency plans where needed to deal with Company systems and third party
issues.
We have completed most of the identification, risk-assessment and
plan development phases of our initiative with respect to our internal systems,
although we recognize that, because of the nature of the Year 2000 problem, work
in these areas will continue until the Year 2000. Our work in those phases has
included both information technology and non-information technology systems. We
have also commenced the implementation phase. In most cases, we are
upgrading existing software to versions which are Year 2000 compliant. In other
cases entire software platforms are being replaced with more current, compliant
systems, internally developed software is being reprogrammed, and hardware is
being replaced. Testing has been conducted, we are in the early stages of our
testing phase with respect to both information and non-information technology
systems.
We are in the process of communicating with our suppliers, vendors and
customers concerning the state of their readiness for Year 2000. Although the
information we have gathered to date does not permit us to complete our
assessment of risk related to the Year 2000 issues these third parties may
present, we have been informed by our major distributors in both the laboratory
and dental segments that they have Year 2000 programs in place. Because of the
reliance by SLPC and Sybron Dental Specialties on distributors in the United
States and abroad, a significant Year 2000 failure by these distributors could
seriously disrupt the Company's flow of products to end users.
Our Year 2000 initiative contemplates the development of contingency
plans as we test our software solutions and complete our risk assessments with
respect to third parties. Our contingency planning is therefore in the early
stages of development. The Company's current goal is to substantially complete
all phases of its initiative, including the development of plans for identified
contingencies, by March 31, 1999. This statement is a forward looking
statement. Our ability to meet our Year 2000 initiative objectives is subject
to a number of uncertainties, including the actions and status of third
parties, many of which are beyond our control. The Year 2000 problem has many
elements and potential consequences, some of which can not be reasonably
foreseeable, and there can be no assurance that unforeseen consequences will
not arise.
The historical and estimated future costs to the Company of Year 2000
are contained in the following table. The reported costs exclude internal
costs, and exclude costs related to manufacturing equipment for Sybron Dental
Specialties because the Company has not completed its analysis with respect to
such items. Our Year 2000 remediation efforts are funded from the Company's
cash flow and from borrowings under the Revolving Credit Facility. The
Company has not deferred any significant information technology projects due to
its Year 2000 efforts.
25
<PAGE> 27
<TABLE>
<CAPTION>
1998
YEAR 2000 1997 1st Nine Months 4th Quarter(est.) 1999(est.)
(In thousands)
====================================================================================================================
<S> <C> <C> <C> <C>
Capital Costs 12 1,324 642 880
- --------------------------------------------------------------------------------------------------------------------
Expenses 179 391 81 179
- --------------------------------------------------------------------------------------------------------------------
Total 191 1,715 723 1,059
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
CAUTIONARY FACTORS
This report contains various forward-looking statements concerning our
prospects that are based on the current expectations and beliefs of management.
Forward-looking statements may also be made by us from time to time in other
reports and documents as well as oral presentations. When used in written
documents or oral statements, the words "anticipate", "believe", "estimate",
"expect", "objective" and similar expressions are intended to identify
forward-looking statements. The statements contained herein and such future
statements involve or may involve certain assumptions, risks and uncertainties,
many of which are beyond our control, that could cause our actual results and
performance to differ materially from what is expected. In addition to the
assumptions and other factors referenced specifically in connection with such
statements, the following factors could impact our business and financial
prospects:
o Factors affecting our international operations, including relevant
foreign currency exchange rates, which can affect the cost to produce
our products or the ability to sell our products in foreign markets,
and the value in U.S. dollars of sales made in foreign currencies.
Other factors include our ability to obtain effective hedges against
fluctuations in currency exchange rates; foreign trade, monetary and
fiscal policies; laws, regulations and other activities of foreign
governments, agencies and similar organizations; and risks associated
with having major manufacturing facilities located in countries, such
as Mexico, Hungary and Italy, which have historically been less stable
than the United States in several respects, including fiscal and
political stability.
o Factors affecting our ability to continue pursuing our current
acquisition strategy, including our ability to raise capital beyond the
capacity of our existing Credit Facilities or to use our stock for
acquisitions, the cost of the capital required to effect our
acquisition strategy, the availability of suitable acquisition
candidates at reasonable prices, our ability to realize the synergies
expected to result from acquisitions, and the ability of our existing
personnel to efficiently handle increased transitional responsibilities
resulting from acquisitions.
o Factors affecting our ability to profitably distribute and sell our
products, including any changes in our business relationships with our
principal distributors, primarily in the
26
<PAGE> 28
laboratory segment, competitive factors such as the entrance of
additional competitors into our markets, pricing and technological
competition, and risks associated with the development and marketing
of new products in order to remain competitive by keeping pace with
advancing dental, orthodontic and laboratory technologies.
o With respect to Erie, factors affecting its Erie Electroverre S.A.
subsidiary's ability to manufacture the glass used by Erie's worldwide
manufacturing operations, including delays encountered in connection
with the periodic rebuild of the sheet glass furnace and furnace
malfunctions at a time when inventory levels are not sufficient to
sustain Erie's flat glass operations.
o Factors affecting our ability to hire and retain competent employees,
including unionization of our non-union employees and changes in
relationships with our unionized employees.
o The risk of strikes or other labor disputes at those locations which
are unionized which could affect our operations.
o Factors affecting our ability to continue manufacturing and selling
those of our products that are subject to regulation by the United
States Food and Drug Administration or other domestic or foreign
governments or agencies, including the promulgation of stricter laws or
regulations, reclassification of our products into categories subject
to more stringent requirements, or the withdrawal of the approval
needed to sell one or more of our products.
o Factors affecting the economy generally, including a rise in interest
rates, the financial and business conditions of our customers and the
demand for customers' products and services that utilize Company
products.
o Factors relating to the impact of changing public and private health
care budgets which could affect demand for or pricing of our products.
o Factors affecting our financial performance or condition, including
tax legislation, unanticipated restrictions on our ability to transfer
funds from our subsidiaries and changes in applicable accounting
principles or environmental laws and regulations.
o The cost and other effects of claims involving our products and other
legal and administrative proceedings, including the expense of
investigating, litigating and settling any claims.
o Factors affecting our ability to produce products on a competitive
basis, including the availability of raw materials at reasonable
prices.
27
<PAGE> 29
o Unanticipated technological developments that result in competitive
disadvantages and create the potential for impairment of existing
assets.
o Unanticipated developments while implementing the modifications
necessary to mitigate Year 2000 compliance problems, including the
availability and cost of personnel trained in this area, the ability to
locate and correct all relevant computer codes, the indirect impacts of
third parties with whom we do business and who do not mitigate their
Year 2000 compliance problems, and similar uncertainties, and
unforeseen consequences of the Year 2000 problem.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See the last paragraph under Item 2, "Management's Discussion and
Analysis of Financial Condition and Results of Operations-General" in Part I of
this Report for information regarding developments with respect to the CE
Litigation previously reported in Item 7 of the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1997 and in Item 2 in Part I of the
Registrant's Quarterly Report on Form 10-Q for the quarterly period ended March
31, 1998.
ITEM 5. OTHER INFORMATION
DEADLINE FOR SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-5(e) under the Securities Exchange Act of 1934, as
amended effective June 29, 1998:
(1) The deadline for submitting shareholder proposals to be considered for
inclusion in the Company's proxy statement and form of proxy for the
Company's 1999 annual meeting of shareholders pursuant to Rule 14a-8
is August 25, 1998.
(2) The date after which notice of a shareholder proposal submitted
outside the processes of Rule 14a-8 is considered untimely is November
30, 1998. Under the Company's Bylaws, written notice of such a
proposal, containing the information specified in the Bylaws, must be
received by the Company no earlier than November 1, 1998 and no later
than November 30, 1998.
28
<PAGE> 30
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
See the Exhibit Index following the Signature page in this report,
which is incorporated herein by reference.
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the quarter for which this
report is filed. However, subsequent to the end of the quarter the
following reports were filed:
A Form 8-K, dated and filed with the Securities and Exchange
Commission on July 13, 1998, containing in Item 5 thereof the updated
description of the Company's capital stock.
A Form 8-K dated July 20, 1998 and filed with the Securities and
Exchange Commission on July 21, 1998, incorporating in Item 5 the
Company's Press Release dated July 20, 1998 filed as an exhibit.
29
<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYBRON INTERNATIONAL CORPORATION
(Registrant)
Date August 14, 1998 /s/ Dennis Brown
--------------- -----------------------------------
Dennis Brown
Vice President - Finance, Chief
Financial Officer & Treasurer*
* executing as both the principal financial
officer and the duly authorized officer
of the Company.
30
<PAGE> 32
SYBRON INTERNATIONAL CORPORATION
(THE "REGISTRANT")
(COMMISSION FILE NO. 1-11091)
EXHIBIT INDEX
TO
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
INCORPORATED
EXHIBIT HEREIN BY FILED
NUMBER DESCRIPTION REFERENCE TO HEREWITH
<S> <C> <C> <C>
4.1 First Amendment, dated as of July 1, X
1998, to the Second Amended and
Restated Credit Agreement, dated as
of April 25, 1997 (as amended,
supplemented or otherwise modified
from time to time, the "Credit
Agreement"), among the Registrant
and certain of its subsidiaries, the
several Lenders from time to time
parties thereto, Chase Securities Inc.,
as Arranger, and The Chase Manhattan
Bank, as Administrative Agent for the
Lenders
4.2 Form of Third Amended and Restated X
Parent Pledge Agreement, dated as of
July 1, 1998, executed pursuant to the
Credit Agreement
4.3 Form of Third Amended and Restated X
Subsidiaries Guarantee, dated as of
July 1, 1998, executed pursuant to the
Credit Agreement
4.4 Form of Third Amended and Restated X
Subsidiaries Pledge Agreement, dated
as of July 1, 1998, executed pursuant
to the Credit Agreement
4.5 Second Amendment, dated as of X
August 13, 1998, to the Credit Agreement
27.1 Financial Data Schedule X
27.2 Restated Financial Data Schedule (nine X
month period ended June 30, 1997)
</TABLE>
E1-1
<PAGE> 1
EXHIBIT 4.1
FIRST AMENDMENT, dated as of July 1, 1998 (this "Amendment"),
to the Second Amended and Restated Credit Agreement, dated as of April 25, 1997
(the "Credit Agreement"), among Sybron International Corporation, a Wisconsin
corporation (the "Parent"), Ormco Corporation, a Delaware corporation
("Ormco"), Kerr Corporation, a Delaware corporation ("Kerr"), Nalge Nunc
International Corporation, a Delaware corporation ("NNI"), Erie Scientific
Company, a Delaware corporation ("Erie"), Barnstead Thermolyne Corporation, a
Delaware corporation ("Barnstead"; Ormco, Kerr, NNI, Erie and Barnstead are
collectively referred to herein as the "Subsidiary Borrowers"), the several
banks and other financial institutions from time to time parties thereto (the
"Lenders"), Chase Securities Inc., as Arranger, and The Chase Manhattan Bank, a
New York banking corporation, as administrative agent for the Lenders
thereunder (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have
agreed to make, and have made, certain loans and other extensions of credit to
the Parent and the Subsidiary Borrowers; and
WHEREAS, the Parent and the Subsidiary Borrowers have
requested, and, upon this Amendment becoming effective, the Lenders have
agreed, that (i) additional term loan commitments of the Lenders shall be
extended by $100,000,000 in the aggregate and (ii) certain provisions of the
Credit Agreement be amended in the manner provided for in this Amendment.
NOW, THEREFORE, the parties hereto hereby agree as follows:
I. Defined Terms. Terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.
II. Amendments to Credit Agreement.
1. Amendments to Section 1. (a) Subsection 1.1 of the
Credit Agreement is hereby amended by deleting the definitions of "Aggregate
Commitment", "Amendment Effective Date", "Commitment Percentage",
"Commitments", "Excepted Indebtedness," "Notes" contained therein in their
entirety and adding the following definitions in alphabetical order:
"`Additional Term Loans': as defined in subsection 2.28.
`Additional Term Loan Commitment': with respect to each
Lender, the amount set forth under the heading "Additional Term Loan
Commitment" opposite such Lender's name on Schedule I, as such amount
may be reduced from time to time pursuant to this Agreement.
<PAGE> 2
2
`Additional Term Loan Commitment Percentage': as to any
Lender at any time, the percentage which such Lender's Additional Term
Loan Commitment then constitutes of the Aggregate Additional Term Loan
Commitment.
`Additional Term Notes': as defined in subsection 2.29.
`Aggregate Additional Term Loan Commitment': shall mean
$100,000,000, as such amount may be reduced from time to time
pursuant to the terms of this Agreement.
`Aggregate Commitment': shall mean the amount equal to (a)
prior to the Amendment Effective Date, the sum of the aggregate
principal amount of the Term Loans outstanding, the Aggregate
Additional Term Loan Commitment and the Aggregate Revolving Credit
Commitment, and (b) following the Amendment Effective Date, the sum of
the aggregate principal amount of the TA Loans outstanding and the
Aggregate Revolving Credit Commitment, or if the Aggregate Revolving
Credit Commitment has been terminated, the sum of the Aggregate
Outstanding Extensions of Credit of each Lender.
`Amendment Effective Date': the date on which the First
Amendment dated as of July 1, 1998 to the Credit Agreement became
effective pursuant to the terms thereof.
`Commitment Percentage': as to any Lender at any time, such
Lender's Term Loan Commitment Percentage, Additional Term Loan
Commitment Percentage or Revolving Credit Commitment Percentage, as
the context may require.
`Commitments': the collective reference to the Term Loan
Commitments, the Additional Term Loan Commitments and the Revolving
Credit Commitments; each as the context may require, a "Commitment".
`Consolidated Senior Debt': as of the date of determination,
the sum of (a) all Indebtedness of the Parent and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP (including
the Loans) minus (b) the aggregate principal amount of all outstanding
Subordinated Indebtedness and all outstanding Permitted Indebtedness.
`Excepted Indebtedness': the Indebtedness of the Parent or
any of its Subsidiaries permitted to exist pursuant to subsection 7.2
(other than subsection 7.2(h) thereof).
`Notes': the collective reference to the Revolving Credit
Notes, the CAF Advance Notes, the Swing Line Notes, the Term Notes and
the Additional Term Notes.
`Permitted Indebtedness': any unsecured Indebtedness of the
Parent or any of its Subsidiaries (a) no part of the principal of
which is stated to be payable or is required to be paid (whether by
way of mandatory sinking fund, mandatory redemption, mandatory
prepayment or otherwise) prior to the Termination Date, and the
payment of the principal of and any interest on which and other
obligations of the Parent and the Subsidiary Borrowers in respect
thereof are subordinated to the prior payment in full of the principal
<PAGE> 3
3
of and interest (including post-petition interest) on the Notes and
all other obligations and liabilities of the Parent and the Subsidiary
Borrowers to the Administrative Agent and the Lenders hereunder on
terms and conditions first approved (such approval not to be
unreasonably withheld) in writing by the Administrative Agent and (b)
otherwise containing terms, covenants and conditions reasonably
satisfactory in form and substance to the Administrative Agent, as
evidenced by its prior written approval.
`Senior Debt Ratio': on the date of any determination
thereof, the ratio of Consolidated Senior Debt on such date to
Consolidated Adjusted Operating Profit for the four full fiscal
quarters ending on such date; provided that for purposes of
calculating Consolidated Adjusted Operating Profit for any period of
four full fiscal quarters, the Consolidated Adjusted Operating Profit
of any Person acquired during such period shall be included on a pro
forma basis for such period of four full fiscal quarters (assuming the
consummation of each such acquisition and the incurrence or assumption
of any Indebtedness in connection therewith occurred on the first day
of such period of four full fiscal quarters and assuming only such
cost reductions as are related to such acquisition and are immediately
realizable as of the date of such acquisition). For purposes of this
calculation, Consolidated Adjusted Operating Profit of any such Person
acquired during such period shall be derived from a certificate, in
form and substance satisfactory to the Administrative Agent, of a duly
authorized financial officer of the Parent setting forth such
Consolidated Adjusted Operating Profit.
`TA Loan': the collective reference to the Term Loans and the
Additional Term Loans.
(b) Subsection 1.1 of the Credit Agreement is
hereby amended by deleting paragraph (2) in the definition of "Interest
Period" in its entirety and substituting in lieu thereof the following:
"(2) any Interest Period in respect of Revolving Credit
Loans that would otherwise extend beyond the Termination Date, and any
Interest Period in respect of the Term Loans or the Additional Term
Loans that would otherwise extend beyond the date final payment is due
on the Term Loans or the Additional Term Loans, shall end on the
Termination Date or such date of final payment, as the case may be;"
2. Amendments to Section 2. Section 2 is hereby amended
as follows:
(a) by deleting subsection 2.13 thereof in its entirety and
substituting in lieu thereof the following:
"2.13. Procedure for Additional Term Loan Borrowing.
The Parent shall give the Administrative Agent irrevocable
notice (which notice must be received by the Administrative
Agent prior to 10:00 A.M., New York City time, one Business
Day prior to the proposed Borrowing Date, if the Additional
Term Loans are to be initially ABR Loans, or three Business
Days prior to the proposed Borrowing Date, if the Additional
Term Loans
<PAGE> 4
4
are to be initially Eurodollar Loans, in whole or in part)
requesting that the Lenders make their portions of the
Additional Term Loans on the proposed Borrowing Date. Upon
receipt of such notice the Administrative Agent shall promptly
notify each Lender thereof. Not later than 11:00 A.M. on the
proposed Borrowing Date each Lender shall make available to
the Administrative Agent at its office specified in subsection
11.2 the amount of its relevant portion of its Additional Term
Loans in immediately available funds. The Administrative
Agent shall on such date credit the account of NNI on the
books of such office of the Administrative Agent with the
aggregate of the amounts made available to the Administrative
Agent for NNI by the Lenders and in like funds as received by
the Administrative Agent."
(b) by deleting each of the references to "Term Loans" in
subsection 2.14 and substituting in lieu thereof references to "Term Loans or
Additional Term Loans."
(c) by deleting in its entirety paragraph (c) of subsection
2.15 thereof and substituting in lieu thereof the following:
"(c) Any prepayment required by the terms of this
subsection 2.15 shall be applied first to the reduction of the
TA Loans in accordance with the following sentence until such
TA Loans shall have been satisfied in full and second to the
permanent reduction of the Aggregate Revolving Credit
Commitment. Prepayments of the TA Loans shall be made pro
rata between Term Loans and the Additional Term Loans based on
the outstanding aggregate principal amount thereof, and
prepayment of the Term Loans pursuant to this subsection 2.15
shall be applied equally between (i) the outstanding
installments of principal scheduled to be paid pursuant to
subsection 2.12 immediately succeeding the date of such
prepayment and (ii) the last outstanding scheduled
installments of principal pursuant to subsection 2.12.
Amounts prepaid on account of the TA Loans may not be
reborrowed."
(d) by deleting subsection 2.15(e) in its entirety and
substituting in lieu thereof the following:
"(e) The Parent may allocate any prepayment of the
Term Loans and the Additional Term Loans pursuant to this
subsection 2.15 among the Term Notes and the Additional Term
Notes, as the case may be, of the Subsidiary Borrowers as the
Parent may determine; provided that the Parent shall give the
Administrative Agent prior written notice of such allocation
not less than three Business Days prior to such prepayment;
and provided, further, that in the event that the Parent does
not so notify the Administrative Agent, the Administrative
Agent shall allocate such payments as it determines in its
sole discretion."
(e) by deleting each of the references in subsections 2.17
and 2.18 to "Term Loans" and substituting in lieu thereof references to "TA
Loans."
<PAGE> 5
5
(f) by adding the following subsections at the end of
Section 2:
"2.28 Additional Term Loans. Subject to the terms
and conditions hereof, each Lender severally agrees to make
term loans to NNI on the Amendment Effective Date in an
aggregate principal amount equal to such Lender's Additional
Term Loan Commitment Percentage of the Aggregate Additional
Term Loan Commitment (an "Additional Term Loan"). The
Additional Term Loans may from time to time be (i) Eurodollar
Loans, (ii) ABR Loans or (iii) a combination thereof, as
determined by the Parent and notified to the Administrative
Agent in accordance with subsections 2.13 and 2.17. The
Additional Term Loans shall mature on the Termination Date.
2.29 Additional Term Notes. NNI, upon the request
of an applicable Lender, shall issue a promissory note to
evidence the Additional Term Loans made by each Lender,
substantially in the form of Exhibit B-1 to this Agreement (an
"Additional Term Note"), with appropriate insertions therein
as to payee, date and principal amount, payable to the order
of such Lender and in a principal amount equal to the lesser
of such Lender's Additional Term Loan Commitment Percentage of
the Aggregate Additional Term Loan Commitment and the
aggregate amount of the Additional Term Loan (or portions
thereof) made by such Lender. An Additional Term Note and the
Obligation evidenced thereby may be assigned or otherwise
transferred in whole or in part only by registration of such
assignment or transfer of such Additional Term Note and the
Obligation evidenced thereby in the Register (and each
Additional Term Note shall expressly so provide). Any
assignment or transfer of all or part of an Obligation
evidenced by an Additional Term Note shall be registered in
the Register only upon surrender for registration of
assignment or transfer of the Additional Term Note evidencing
such Obligation, accompanied by an Assignment and Acceptance
substantially in the form of Exhibit I duly executed by the
Assignor thereof, and thereupon one or more new Additional
Term Notes shall be issued to the designated Assignee and the
old Additional Term Note shall be returned by the
Administrative Agent to the Borrower marked "cancelled." No
assignment of an Additional Term Note and the Obligation
evidenced thereby shall be effective unless it shall have been
recorded in the Register by the Administrative Agent as
provided in this subsection 2.29. Each Lender is hereby
authorized to record the date and amount of each payment or
prepayment of principal of its Additional Term Loan, each
continuation thereof, each conversion of all or a portion
thereof to another Type and, in the case of Eurodollar Loans,
the length of each Interest Period with respect thereto, on
the appropriate schedule annexed to and constituting a part of
its Additional Term Note (or any continuation thereof), and
any such recordation shall constitute prima facie evidence of
the accuracy of the information so recorded. The Additional
Term Note of each Lender shall (a) be dated the Amendment
Effective Date, (b) be stated to mature on the Termination
Date, and (c) provide for the payment of interest in
accordance with subsection 2.19."
<PAGE> 6
6
3. Amendments to Section 4. Section 4 of the Credit
Agreement is hereby amended as follows:
(a) by deleting subsection 4.16 thereof in its entirety and
substituting in lieu thereof the following:
"4.16 Purpose of Loans. (i) The proceeds of the
Term Loans shall be used to finance the general corporate
purposes of the Parent and its Subsidiaries, including
acquisitions (including the Remel Acquisition) permitted
hereunder and to refinance existing indebtedness (as set forth
on Schedule 4.16 to this Agreement) and to pay fees and other
expenses related thereto, (ii) the proceeds of the Additional
Term Loans shall be used to repay outstanding Revolving Credit
Loans and (iii) the proceeds of the Revolving Credit Loans,
the Swing Line Loans and the CAF Advances shall be used to
finance the working capital needs of the Parent and its
Subsidiaries and for general corporate purposes, including
acquisitions (including the Remel Acquisition) permitted
hereunder; provided that no more than $160,000,000 (subject to
any post-closing purchase price adjustments in accordance with
the Acquisition Documents) of the proceeds of the Loans may be
used to finance the Remel Acquisition."
(b) by adding the following subsection 4.26 at the end of
Section 4:
"4.26 Year 2000 Matters. The Borrowers have
conducted a review of their computer systems and equipment
containing embedded microchips to determine whether any
reprogramming is required to permit proper functioning of
these systems and equipment in and following the year 2000.
In respect of the year 2000, the Borrowers have plans in place
to complete system upgrades or reprogramming, and testing
thereof, by the end of March 1999, and are in the process of
communicating with vendors, suppliers and customers to
identify any potential issues which may affect the Borrowers.
Based upon the information the Borrowers have developed to
date, the cost to the Borrowers of such reprogramming,
upgrading and testing, and the reasonably foreseeable
consequences of year 2000 computer system issues relevant to
the Borrowers, will not result in a Default or a Material
Adverse Effect. Except for such of the reprogramming and
upgrading referred to in the preceding sentence as may be
necessary, the computer and management information systems of
the Borrowers are, and with ordinary course upgrading and
maintenance will continue for the term of the Agreement to be,
sufficient to permit the Borrowers to conduct their business
without Material Adverse Effect.
4. Amendments to Section 7. Section 7 is hereby amended
as follows:
(a) deleting paragraph (c) of subsection 7.1 thereof in its
entirety and substituting in lieu thereof the following:
<PAGE> 7
7
"(c) Leverage Ratio. Permit the Leverage Ratio for any
period of four consecutive fiscal quarters ending during any period
set forth below to be greater than the ratio set forth opposite such
period below:
<TABLE>
<CAPTION>
Date Ratio
---- -----
Amendment Effective Date -
<S> <C>
9/29/99 4.00
9/30/99 - 9/29/00 3.50
9/30/00 - 9/29/01 3.25
9/30/01 - thereafter 3.00."
</TABLE>
(b) by adding the following at the end of subsection 7.1
thereof:
"(d) Senior Debt Ratio. Permit the Senior Debt
Ratio for any period of four consecutive fiscal quarters
ending during any period set forth below to be greater than
the ratio set forth opposite such period below:
<TABLE>
<CAPTION>
Date Ratio
---- -----
Amendment Effective Date -
<S> <C>
9/29/98 3.75
9/30/98 - 9/29/99 3.50
9/30/99 - 9/29/00 3.00
9/30/00 - 9/29/01 2.75
9/30/01 - thereafter 2.50."
</TABLE>
(c) by adding the following paragraph (i) to subsection 7.2
thereof and relettering the current paragraph (i) as paragraph (j):
"(i) additional Permitted Indebtedness in an
aggregate principal amount not to exceed $300,000,000, so
long as at the time of incurrence of such Permitted
Indebtedness no Default or Event of Default shall have
occurred or would result therefrom; and"
5. Amendments to Section 11. (a) Section 11 of the
Credit Agreement is hereby amended as follows:
(a) by deleting subsection 11.6(c) thereof in its entirety
and substituting in lieu thereof the following:
"(c) Any Lender may, in the ordinary course of its
commercial banking business and in accordance with applicable
law, at any time and from time to time assign to any Lender
or any Affiliate thereof or, with the consent of the
Administrative Agent and the Borrower (which shall not be
unreasonably withheld), to an additional bank or financial
institution ("an Assignee") all or any part of its rights and
obligations under this Agreement and any Note (provided
<PAGE> 8
8
that any such assignment (i) must be in a minimum amount of
the lesser of (A) $10,000,000 and (B) the full amount of the
assigning Lender's applicable Commitment and (ii) with
respect to assignments of Term Loans or Revolving Credit
Commitments (other than assignments to an Affiliate of the
assigning Lender), shall be a sale of all or a ratable
portion of each of the Term Loans or Revolving Credit Loans
of the Subsidiary Borrowers, as the case may be, held by such
assigning Lender and its Affiliates) pursuant to an
Assignment and Acceptance, substantially in the form of
Exhibit I, executed by such Assignee, such assigning Lender
(and, in the case of an Assignee that is not then a Lender or
an Affiliate thereof, by the Administrative Agent and the
Borrower) and delivered to the Administrative Agent for its
acceptance and recording in the Register. Upon such
execution, delivery, acceptance and recording, from and after
the effective date determined pursuant to such Assignment and
Acceptance, (x) the Assignee thereunder shall be a party
hereto and, to the extent provided in such Assignment and
Acceptance, have the rights and obligations of a Lender
hereunder with a Commitment as set forth therein, and (y) the
assigning Lender thereunder shall, to the extent provided in
such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under
this Agreement, such assigning Lender shall cease to be a
party hereto)."
(b) by deleting subsection 11.6(e) thereof in its entirety
and substituting in lieu thereof the following:
<PAGE> 9
9
"(e) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an Assignee (and, in the
case of an Assignee that is not then a Lender or an Affiliate
thereof, by the Administrative Agent and the Borrower)
together with payment to the Administrative Agent by the
assigning Lender or such Assignee of a registration and
processing fee of $4,000 (or $1,000 in the case of an
Assignee that is already a Lender), the Administrative Agent
shall (i) promptly accept such Assignment and Acceptance and
(ii) on the effective date determined pursuant thereto record
the information contained therein in the Register and give
notice of such acceptance and recordation to the Lenders and
the Parent. On or prior to such effective date, each of the
Borrowers, at its own expense, shall execute and deliver to
the Administrative Agent (in exchange for the Revolving
Credit Note, CAF Advance Note, Term Note or Additional Term
Note of the assigning Lender) a new Revolving Credit Note,
CAF Advance Note, Term Note or Additional Term Note, as the
case may be, to the order of such Assignee in amounts
reflecting the Revolving Credit Commitment, Term Loan or
Additional Term Loan, as the case may be, assumed by it
pursuant to such Assignment and Acceptance and, if the
assigning Lender has retained a Revolving Credit Commitment
or Term Loan or Additional Term Loan hereunder, a new
Revolving Credit Note, CAF Advance Note, Term Note or
Additional Term Note, as the case may be, to the order of the
assigning Lender in amounts reflecting the Revolving Credit
Commitment, Term Loan or Additional Term Loan, as the case
may be, retained by it hereunder. Such new Notes shall be
dated the Amendment Effective Date, and shall otherwise be in
the form of the Note replaced thereby";
(c) by deleting the reference to "Term Loans" in subsection
11.7(a) and substituting in lieu thereof a reference to "Term Loans, Additional
Term Loan".
6. Amendment to Schedules to the Credit
Agreement. Schedules I, IV, 4.15A, 4.15B and 4.19 to the Credit Agreement are
hereby amended by deleting such Schedules in their entirety and substituting in
lieu thereof the Schedules attached hereto as Annex A.
7. Exhibits to the Credit Agreement. Exhibits
D, E, F and I to the Credit Agreement are hereby amended by deleting such
Exhibits in their entirety and substituting in lieu thereof Exhibits A, B, C
and D hereto. Exhibit B-1 to the Credit Agreement is hereby added thereto in
the form of Exhibit E hereto.
III. Conditions to Effectiveness. This Amendment shall
become effective on the date (the "Amendment Effective Date") on which all of
the following conditions precedent have been satisfied or waived:
1. The Parent, the Subsidiary Borrowers, the Administrative
Agent and the Lenders (as required by the Credit Agreement) shall have executed
and delivered to the Administrative Agent this Amendment.
<PAGE> 10
10
2. The Administrative Agent shall have received a copy of
the resolutions, in form and substance satisfactory to the Administrative
Agent, of the Board of Directors of each of the Parent and the Subsidiary
Borrowers authorizing the execution, delivery and performance of this
Amendment, certified by the Secretary or an Assistant Secretary of such party
as of the Amendment Effective Date, which certificate shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded as of the date of such certificate.
3. The Administrative Agent shall have received, to the
extent that it has not theretofore received, a certificate of the Secretary or
Assistant Secretary of the Parent and the Subsidiary Borrowers, dated the
Amendment Effective Date, as to the incumbency and signature of each of the
officers signing this Amendment, and any other instrument or document delivered
by such party in connection herewith, together with evidence of the incumbency
of such Secretary or Assistant Secretary.
4. The Administrative Agent shall have received a written
legal opinion of counsel to the Parent and the Subsidiary Borrowers in form and
substance satisfactory to the Administrative Agent and its counsel.
5. The Administrative Agent and the Lenders shall have
received all fees due from the Parent.
IV. General.
1. Representation and Warranties. To induce the
Administrative Agent and the Lenders parties hereto to enter into this
Amendment, the Parent and the Subsidiary Borrowers hereby represent and warrant
to the Administrative Agent and all of the Lenders as of the Amendment
Effective Date that the representations and warranties made by the Loan Parties
in the Loan Documents are true and correct in all material respects on and as
of the Amendment Effective Date, before and after giving effect to the
effectiveness of this Amendment, as if made on and as of the Amendment
Effective Date and no Default or Event of Default shall have occurred and be
continuing.
2. Payment of Expenses. The Parent and the Subsidiary
Borrowers agree to pay or reimburse the Administrative Agent for all of its
out-of-pocket costs and reasonable expenses incurred in connection with this
Amendment, any other documents prepared in connection herewith and the
transactions contemplated hereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Administrative Agent.
3. No Other Amendments; Confirmation. Except as
expressly amended, modified and supplemented hereby, the provisions of the
Credit Agreement and the Notes are and shall remain in full force and effect.
This Amendment shall constitute a Loan Document.
4. Governing Law; Counterparts. (a) This Amendment and
the rights and obligations of the parties hereto shall be governed by, and
construed and interpreted in accordance with, the laws of the State of New
York.
<PAGE> 11
11
(b) This Amendment may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. This Amendment may be delivered by facsimile transmission of the
relevant signature pages hereof.
5. Confirmation of Guarantees and Security Documents.
The Loan Parties hereby confirm and agree that the obligations of NNI in
respect to the Additional Term Loans are guaranteed and secured as Obligations
to the fullest extent permitted by the Guarantees and Security Documents.
<PAGE> 12
12
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.
SYBRON INTERNATIONAL CORPORATION
By:
-------------------------------
Title:
ORMCO CORPORATION
By:
-------------------------------
Title:
KERR CORPORATION
By:
-------------------------------
Title:
NALGE NUNC INTERNATIONAL
CORPORATION
By:
-------------------------------
Title:
ERIE SCIENTIFIC COMPANY
By:
-------------------------------
Title:
<PAGE> 13
13
BARNSTEAD THERMOLYNE CORPORATION
By:
-------------------------------
Title:
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a
Lender
By:
-------------------------------
Title:
ABN AMRO BANK N.V.
By:
-------------------------------
Title:
By:
-------------------------------
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
-------------------------------
Title:
BANK OF MONTREAL
By:
-------------------------------
Title:
<PAGE> 14
14
BANK ONE, WISCONSIN
By:
-------------------------------
Title:
THE BANK OF NOVA SCOTIA
By:
-------------------------------
Title:
BANK OF SCOTLAND
By:
-------------------------------
Title:
NATEXIS BANQUE/BFCE
By:
-------------------------------
Title:
By:
-------------------------------
Title:
<PAGE> 15
15
PARIBAS
By:
-------------------------------
Title:
By:
-------------------------------
Title:
CREDIT AGRICOLE INDOSUEZ
By:
-------------------------------
Title:
COMERICA BANK
By:
-------------------------------
Title:
CREDIT LYONNAIS CHICAGO BRANCH
By:
-------------------------------
Title:
<PAGE> 16
16
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
CAYMAN ISLAND BRANCH
By:
-------------------------------
Title:
By:
-------------------------------
Title:
U.S. BANK NATIONAL ASSOCIATION
By:
-------------------------------
Title:
FLEET NATIONAL BANK
By:
-------------------------------
Title:
THE FUJI BANK, LIMITED
By:
-------------------------------
Title:
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD.
By:
-------------------------------
Title:
<PAGE> 17
17
MELLON BANK, N.A.
By:
-------------------------------
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH
By:
-------------------------------
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By:
-------------------------------
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By:
-------------------------------
Title:
THE SAKURA BANK, LIMITED
By:
-------------------------------
Title:
<PAGE> 18
18
SOCIETE GENERALE
By:
-------------------------------
Title:
By:
-------------------------------
Title:
THE SUMITOMO BANK, LTD. CHICAGO
BRANCH
By:
-------------------------------
Title:
THE BANK OF NEW YORK
By:
-------------------------------
Title:
THE SANWA BANK, LIMITED
By:
-------------------------------
Title:
<PAGE> 19
19
BANQUE NATIONALE DE PARIS CHICAGO
BRANCH
By:
-------------------------------
Title:
BHF BANK AKTIENGESELLSCHAFT GRAND
CAYMAN BRANCH
By:
-------------------------------
Title:
By:
-------------------------------
Title:
FIRST UNION NATIONAL BANK
By:
-------------------------------
Title:
FIRSTAR BANK MILWAUKEE, N.A.
By:
-------------------------------
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED CHICAGO BRANCH
By:
-------------------------------
Title:
<PAGE> 20
20
BANCA COMMERCIALE ITALIANA
CHICAGO BRANCH
By:
-------------------------------
Title:
By:
-------------------------------
Title:
BANK HAPOALIM, B.M. PHILADELPHIA
BRANCH
By:
-------------------------------
Title:
By:
-------------------------------
Title:
<PAGE> 21
21
Acknowledged and Agreed:
BARNSTEAD THERMOLYNE CORPORATION
ERIE SCIENTIFIC COMPANY
ERIE SCIENTIFIC COMPANY OF
PUERTO RICO
EVER READY THERMOMETER CO., INC.
RICHARD-ALLAN SCIENTIFIC COMPANY
NEW ENGLAND REAGENT LABORATORY, INC.
CASCO STANDARDS, INC.
THE NAUGATUCK GLASS COMPANY
NALGE NUNC INTERNATIONAL CORPORATION
SYBRON DENTAL SPECIALTIES INC.
SAC/ORMCO, INC.
ORMCO CORPORATION
ALLESEE ORTHODONTIC APPLIANCES, INC.
SAC/KERR, INC.
KERR CORPORATION
METREX RESEARCH CORPORATION
BELLE DE ST. CLAIRE, INC.
SAC/COMMONWEALTH, INC.
SYBRON COMMONWEALTH HOLDINGS, INC.
SYBRON TRANSITION CORP.
MEXOSERV COMPANY
REMEL INC.
DIAGNOSTIC REGENTS, INC.
SYBRON LABORATORY PRODUCTS CORPORATION
OWL SEPARATION SYSTEMS, INC.
ALEXON-TREND, INC.
VIRO RESEARCH INTERNATIONAL, INC.
CARR-SCARBOROUGH MICROBIOLOGICALS, INC.
CLINICAL STANDARDS LABS, INC.
LIDA MANUFACTURING CORPORATION
LRS ACQUISITION CORP.
"A" COMPANY ORTHODONTICS
NALGE PROCESS TECHNOLOGIES GROUP, INC.
CHASE SCIENTIFIC GLASS, INC.
NATIONAL SCIENTIFIC COMPANY
SUMMIT BIOTECHNOLOGY, INC.
- -----------------------------
By: John J. Buono, Assistant
Treasurer
<PAGE> 22
EXHIBIT I
TO THE CREDIT AGREEMENT
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of April 25, 1997
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Sybron International Corporation, a Wisconsin corporation
(the "Parent"), Ormco Corporation, a Delaware corporation, Kerr Corporation, a
Delaware corporation, Nalge Nunc International Corporation, a Delaware
corporation, Erie Scientific Company, a Delaware corporation, Barnstead
Thermolyne Corporation, a Delaware corporation, the Lenders named therein, Chase
Securities Inc., as arranger, and The Chase Manhattan Bank, as administrative
agent for the Lenders (in such capacity, the "Administrative Agent"). Unless
otherwise defined herein, terms defined in the Credit Agreement and use herein
shall have the meanings given to them in the Credit Agreement.
________ (the "Assignor") and ________ (the "Assignee") agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably
purchases and assumes from the Assignor without recourse to the
Assignor, as of the Effective Date (as defined below), a ____%
interest (the "Assigned Interest") in and to the Assignor's rights
and obligations under the Credit Agreement with respect to those
credit facilities contained in the Credit Agreement as are set forth
on SCHEDULE 1 (individually, an "Assigned Facility"; collectively,
the "Assigned Facilities"), in a principal amount for each Assigned
Facility as set forth on SCHEDULE 1.
2. The Assignor (A) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or
the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement, any other Loan Document
or any other instrument or document furnished pursuant thereto, other
than that it has not created any adverse claim upon the interest
being assigned by it hereunder and that such interest is free and
clear of any such adverse claim; (B) makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Parent, any of its Subsidiaries or any other obligor
or the performance or observance by the Parent, any of its
Subsidiaries or any other obligor of any of their respective
obligations under the Credit Agreement or any other Loan Document or
any other instrument or document furnished pursuant hereto or
thereto; and (C) attaches the Note(s) held by it evidencing the
Assigned Facilities and requests that the Administrative Agent
exchange such Note(s) for a new Note or Notes payable to the Assignee
and (if the Assignor has retained any interest in the Assigned
Facility) a new Note or Notes payable to the Assignor in the
respective amounts which reflect the assignment being made hereby
(and after giving effect to any other assignments
<PAGE> 23
2
which have become effective on the Effective Date).
3. The Assignee (A) represents and warrants that it is legally authorized to
enter into this Assignment and Acceptance; (B) confirms that it has
received a copy of the Credit Agreement, together with copies of the
financial statements delivered pursuant to subjection 4.1 thereof and such
other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into this Assignment and
Acceptance; (C) agrees that it will, independently and without reliance
upon the Assignor, the Administrative Agent or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under the Credit Agreement, the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto; (D) appoints
and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers and discretion under the Credit
Agreement, the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto as are delegated to the Administrative
Agent by the terms thereof, together with such powers as are incidental
thereto; and (E) agrees that it will be bound by the provisions of the
Credit Agreement and will perform in accordance with its terms all the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender including, if it is a Foreign Lender, its
obligation pursuant to paragraph 2.20(b) of the Credit Agreement.
4. The effective date of this Assignment and Acceptance shall be ________ ,
19___ (the "Effective Date"). Following the execution of this Assignment
and Acceptance, it will be delivered to the Administrative Agent for
acceptance by it and recording by the Administrative Agent pursuant to
subsection 11.6 of the Credit Agreement, effective as of the Effective Date
(which shall not, unless otherwise agreed to by the Administrative Agent,
be earlier than five Business Days after the date of such acceptance and
recording by the Administrative Agent).
5. Upon such acceptance and recording, from and after the Effective Date, the
Administrative Agent shall make all payments in respect of the Assigned
Interest (including payments of principal, interest, fees and other
amounts) to the Assignee whether such amounts have accrued prior to the
Effective Date or accrue subsequent to the Effective Date. The Assignor and
the Assignee shall make all appropriate adjustments in payments by the
Administrative Agent for periods prior to the Effective Date or with
respect to the making of this assignment directly between themselves.
6. From and after the Effective Date, (A) the Assignee shall be a party to the
Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and
under the other Loan Documents and shall be bound by the provisions thereof
and (B) the Assignor shall, to the extent provided in this Assignment and
Acceptance, relinquish its
<PAGE> 24
3
rights and be released from its obligations under the Credit
Agreement.
7. This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their
respective duly authorized officers on Schedule 1 hereto.
<PAGE> 25
3
TO ASSIGNMENT AND ACCEPTANCE
RELATING TO THE CREDIT AGREEMENT, DATED AS OF APRIL 25, 1997,
AMONG
SYBRON INTERNATIONAL CORPORATION, ORMCO CORPORATION, KERR CORPORATION,
NALGE NUNC INTERNATIONAL CORPORATION, ERIE SCIENTIFIC COMPANY,
BARNSTEAD THERMOLYNE CORPORATION,
THE LENDERS NAMED THEREIN,
CHASE SECURITIES INC., AS ARRANGER,
AND
THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT
FOR THE LENDERS
Name of Assignor:
Name of Assignee:
Effective Date of Assignment:
Credit Principal Term Loan
Facility Assigned ERROR! Amount Assigned Commitment Percentage and/or
ERROR! Revolving Credit Commitment Percent
Assigned(1) ERROR!
$________ ________%
[Name of Assignee] [Name of Assignor]
By By
Name: Name:
Title: Title:
Accepted:
THE CHASE MANHATTAN BANK, SYBRON INTERNATIONAL
as Administrative Agent CORPORATION
By By
Name: Name:
Title:
<PAGE> 26
4
Title:
Calculate the relevant Commitment Percentage that is assigned to at least
15 decimal places and show percentage of the aggregate revolving credit
commitments and/or term loan commitments of all the Lenders.
<PAGE> 1
EXHIBIT 4.2
THIRD AMENDED AND RESTATED PARENT PLEDGE AGREEMENT
THIRD AMENDED AND RESTATED PLEDGE AGREEMENT, dated as of July 1,
1998, made by Sybron International Corporation, a Wisconsin corporation (the
"Parent"), in favor of The Chase Manhattan Bank, as Administrative Agent (in
such capacity, the "Administrative Agent"), for the banks and other financial
institutions (the "Lenders") from time to time parties to the Second Amended
and Restated Credit Agreement, dated as of April 25, 1997 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among the Parent, Ormco Corporation, a Delaware corporation ("Ormco"), Kerr
Corporation, a Delaware corporation ("Kerr"), Nalge Nunc International
Corporation, a Delaware corporation ("NNI"), Erie Scientific Company, a
Delaware corporation ("Erie"), Barnstead Thermolyne Corporation, a Delaware
corporation ("Barnstead"; Ormco, Kerr, NNI, Erie and Barnstead are collectively
referred to herein as the "Subsidiary Borrowers"), the Lenders, the
Administrative Agent and Chase Securities Inc., as arranger.
W I T N E S S E T H :
WHEREAS, the Parent is the legal and beneficial owner of the
shares of Pledged Stock (as hereinafter defined) hereby pledged by the Parent;
WHEREAS, the Parent is the legal and beneficial owner of each of
the Pledged Notes (as hereinafter defined) hereby pledged by the Parent; and
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement
and to induce the Lenders to make their respective extensions of credit to the
Parent and Subsidiary Borrowers under the Credit Agreement, the Parent hereby
agrees with the Administrative Agent, for the ratable benefit of the Lenders,
as follows:
1. Defined Terms. (a) Unless otherwise defined herein,
terms defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement.
<PAGE> 2
2
(b) The following terms shall have the following meanings:
"Agreement": this Third Amended and Restated Pledge Agreement,
as the same may be amended, modified or otherwise supplemented from time
to time.
"Code": the Uniform Commercial Code from time to time in effect
in the State of New York.
"Collateral": the Pledged Stock, the Pledged Notes and all
Proceeds.
"Issuers": the collective reference to the companies identified
on Schedule 1 hereto as the issuers of the Pledged Stock.
"Obligations": (a) the unpaid principal amount of, and interest
on (including, without limitation, interest accruing after the maturity
of the Loans and interest accruing after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding, relating to the Parent, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding) the
Notes and all other obligations and liabilities of the Parent to the
Administrative Agent or to the Lenders, whether direct or indirect,
absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection
with, the Credit Agreement (including, without limitation, all
obligations and liabilities of the Parent under Section 9 of the Credit
Agreement), the Notes, the other Loan Documents and any other document
made, delivered or given in connection therewith or herewith, whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses (including, without limitation, all fees
and disbursements of counsel to the Administrative Agent or to the
Lenders that are required to be paid by the Parent pursuant to the terms
of the Credit Agreement) or otherwise and (b) all obligations of the
Parent to any Lender or an Affiliate of any Lender under or in
connection with any Interest Rate Agreement or foreign exchange
contract.
"Obligors": the collective reference to the companies identified
on Schedule 2 hereto, as such Schedule may be amended from time to time.
"Pledged Notes": the promissory note or notes of the Obligors
identified on Schedule 2, together with all substitutes, replacements or
refinancings thereto that may be issued by any Obligor to the Parent
while this Agreement is in effect.
"Pledged Stock": the shares of capital stock listed on Schedule
1 hereto, together with all stock certificates, options or rights of any
nature whatsoever that may be issued or granted by any Issuer to the
Parent in respect of the Pledged Stock while this Agreement is in
effect.
"Proceeds": all "proceeds" as such term is defined in Section 9-
306(1) of the Uniform Commercial Code in effect in the State of New York
on the date hereof and, in any event, shall include, without limitation,
all dividends or other income from the Pledged Stock and the Pledged
Notes, collections thereon or distributions with respect thereto.
<PAGE> 3
3
"Securities Act": the Securities Act of 1933, as amended.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and Section and
paragraph references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Pledge; Grant of Security Interest. The Parent hereby
delivers to the Administrative Agent, for the ratable benefit of the Lenders,
all the Pledged Stock and the Pledged Notes and hereby grants to the
Administrative Agent, for the ratable benefit of the Lenders, a first security
interest in the Collateral, as collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations.
3. Stock Powers and Allonges. (a) Concurrently with the
delivery to the Administrative Agent of each certificate representing one or
more shares of Pledged Stock to the Administrative Agent, the Parent shall
deliver an undated stock power covering such certificate, duly executed in
blank by the Parent with, if the Administrative Agent so requests, signature
guaranteed.
(b) Concurrently with the delivery to the Administrative Agent
of each note representing one of the Pledged Notes, the Parent shall deliver
executed allonges endorsing such notes to "Bearer" with, if the Administrative
Agent so requests, signature guaranteed.
4. Representations and Warranties. The Parent represents and
warrants that:
(a) except as set forth on Schedule 1, the shares of Pledged
Stock constitute all the issued and outstanding shares of all classes of
the capital stock of each Issuer;
(b) the Pledged Notes listed on Schedule 2, as such Schedule
may be amended from time to time in accordance with the terms hereof,
constitute all of the issued and outstanding promissory notes payable by
the Subsidiaries of the Parent to the Parent;
(c) all the shares of the Pledged Stock have been duly and
validly issued and are fully paid and nonassessable; and each of the
Pledged Notes has been duly and validly issued and is the legal, valid
and binding obligation of the maker thereof, enforceable in accordance
with its terms, except as affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and
an implied covenant of good faith and fair dealing;
(d) the Parent is the record and beneficial owner of, and has
good and marketable title to, the Pledged Stock and the Pledged Notes,
free of any and all Liens or
<PAGE> 4
4
options in favor of, or claims of, any other Person, except the security
interest created by this Agreement;
(e) upon delivery to the Administrative Agent of the stock
certificates evidencing the Pledged Stock and upon delivery to the
Administrative Agent of the Pledged Notes, the security interest created
by this Agreement will constitute a valid, perfected first priority
security interest in the Collateral, enforceable in accordance with its
terms against all creditors of the Parent and any Persons purporting to
purchase any Collateral from the Parent, except as affected by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good faith
and fair dealing;
(f) on the Closing Date, all of the stock owned by the Parent
or any of its Subsidiaries in any of their respective Subsidiaries will
be pledged pursuant to one of the Pledge Agreements, other than 35% of
the stock of any Controlled Foreign Corporation (or other than all of
the stock of any Controlled Foreign Corporation which is owned directly
by another Controlled Foreign Corporation) or other than the stock of an
inactive corporation or a corporation in the process of liquidation;
(g) the Parent has obtained from each Issuer and has delivered
to the Administrative Agent an Acknowledgement and Consent,
substantially in the form attached hereto as Annex A, executed by each
such Issuer; and
(h) no consent or authorization of, filing with or other act
by or in respect of any Person is required in connection with the
execution, delivery, performance, validity or enforceability of the
Pledged Notes, and the Parent has fully performed all its obligations
under the Pledged Notes.
5. Covenants. The Parent covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Agreement until the Obligations are paid in full and the Commitments are
terminated:
(a) If the Parent shall, as a result of its ownership of the
Pledged Stock, become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate representing
a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights, whether
in addition to, in substitution of, as a conversion of, or in exchange
for any shares of the Pledged Stock, or otherwise in respect thereof,
the Parent shall accept the same as the agent of the Administrative
Agent and the Lenders, hold the same in trust for the Administrative
Agent and the Lenders and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed by the
Parent to the Administrative Agent, if required, together with an
undated stock power covering such certificate duly executed in blank by
the Parent and with, if the Administrative Agent so requests, signature
guaranteed, to be held by the Administrative Agent, subject to the terms
hereof, as additional collateral security for the Obligations. Any sums
paid upon or in respect of the Pledged Stock or the Pledged Notes upon
the
<PAGE> 5
5
liquidation or dissolution of any Issuer or any Obligor, as the case may
be, shall be paid over to the Administrative Agent to be held by it
hereunder as additional collateral security for the Obligations, and in
case any distribution of capital or payment of principal shall be made
on or in respect of the Pledged Stock or the Pledged Notes or any
property shall be distributed upon or with respect to the Pledged Stock
or the Pledged Notes pursuant to the recapitalization or
reclassification of the capital of any Issuer or any Obligor, as the
case may be, or pursuant to the reorganization thereof, the property so
distributed shall be delivered to the Administrative Agent to be held by
it hereunder as additional collateral security for the Obligations. If
any sums of money or property so paid or distributed in respect of the
Pledged Stock or the Pledged Notes shall be received by the Parent, the
Parent shall, until such money or property is paid or delivered to the
Administrative Agent, hold such money or property in trust for the
Lenders, segregated from other funds of the Parent, as additional
collateral security for the Obligations. Notwithstanding the foregoing,
in no event shall more than 65% of the issued and outstanding shares of
stock, or any property distributed in respect thereof, of any Issuer
which is a Controlled Foreign Corporation constitute collateral security
for the Obligations of the Parent.
(b) Without the prior written consent of the Administrative
Agent, the Parent will not (1) vote to enable, or take any other action
to permit, any Issuer to issue any stock or other equity securities of
any nature or to issue any other securities convertible into or granting
the right to purchase or exchange for any stock or other equity
securities of any nature of such Issuer, (2) sell, assign, transfer,
exchange, or otherwise dispose of, or grant any option with respect to,
the Collateral, or (3) create, incur or permit to exist any Lien or
option in favor of, or any claim of any Person with respect to, any of
the Collateral, or any interest therein, except for the security
interests created by this Agreement and Liens permitted by the Credit
Agreement. The Parent will defend the right, title and interest of the
Administrative Agent and the Lenders in and to the Collateral against
the claims and demands of all Persons whomsoever.
(c) At any time and from time to time, upon the written
request of the Administrative Agent, and at the sole expense of the
Parent, the Parent will promptly and duly execute and deliver such
further instruments and documents and take such further actions as the
Administrative Agent may reasonably request for the purposes of
obtaining or preserving the full benefits of this Agreement and of the
rights and powers herein granted. If any amount payable under or in
connection with any of the Collateral shall be or become evidenced by
any promissory note, other instrument or chattel paper, such note,
instrument or chattel paper shall be immediately delivered to the
Administrative Agent, duly endorsed in a manner satisfactory to the
Administrative Agent, to be held as Collateral pursuant to this
Agreement.
(d) The Parent shall pay, and save the Administrative Agent and
the Lenders harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or
other taxes which may be payable or determined to be payable with
respect to any of the Collateral or in connection with any of the
transactions contemplated by this Agreement.
(e) The Parent will not (i) amend, modify, terminate or waive
any provision of
<PAGE> 6
6
any Pledged Note in any manner materially adverse to the interests of
the Administrative Agent or the Lenders, (ii) fail to exercise promptly
and diligently each and every material right which it may have under any
Pledged Note where such failure could reasonably be expected to have an
adverse affect on the interests of the Administrative Agent or the
Lenders or (iii) fail to deliver to the Administrative Agent a copy of
each material demand, notice or document received by it relating in any
way to any Pledged Note.
(f) Without the prior written consent of the Administrative
Agent, the Parent will not grant any extension (other than, so long as
no Default or Event of Default shall exist, extensions granted in
accordance with prudent business judgment) of the time of payment of any
Pledged Note, compromise, compound or settle the same for less than the
full amount thereof, release, wholly or partially, any Person liable for
the payment thereof, or allow any credit or discount whatsoever thereon.
(g) The Parent shall deliver to the Administrative Agent, in
the exact form received, to be held by the Administrative Agent, subject
to the terms hereof, as additional collateral security for the
Obligations any additional promissory notes made by any Obligor for the
benefit of the Parent or other securities, options or rights received by
it in substitution or exchange for, or as a conversion of, or in
addition to, any of the Pledged Notes, or otherwise in respect thereof,
together with an undated endorsement or power, as the case may be, duly
executed to the order of "Bearer" or in blank, as the case may be, by
the Parent and with, if the Administrative Agent reasonably requests,
signature guaranteed.
6. Cash Dividends; Voting Rights; Interest and Principal
Payments. (a) Unless an Event of Default shall have occurred and be
continuing and the Administrative Agent shall have given notice to the Parent
of the Administrative Agent's intent to exercise its corresponding rights
pursuant to Section 7 below, the Parent shall be permitted to receive all cash
dividends paid in the normal course of business and consistent with past
practice, to the extent permitted in the Credit Agreement, in respect of the
Pledged Stock and to exercise all voting and corporate rights with respect to
the Pledged Stock; provided, however, that no vote shall be cast or corporate
right exercised or other action taken which, in the Administrative Agent's
reasonable judgment, would impair the Collateral or which would be inconsistent
with or result in any violation of any provision of the Credit Agreement, the
Notes, this Agreement or any other Loan Document.
(b) Unless an Event of Default shall have occurred and be
continuing and the Administrative Agent shall have given notice to the Parent
of the Administrative Agent's intent to exercise its corresponding rights
pursuant to Section 7 hereof, the Parent shall be permitted to receive and
retain all scheduled interest and principal payments on account of the Pledged
Notes.
7. Rights of the Lenders and the Administrative Agent. (a)
If an Event of Default shall occur and be continuing and the Administrative
Agent shall give notice of its intent to exercise such rights to the Parent,
(1) the Administrative Agent shall have the right to receive any and all cash
dividends paid in respect of the Pledged Stock and any and all interest,
principal or other payments paid in respect of the Pledged Notes and make
application thereof to the Obligations in such order as the Administrative
Agent may determine, (2) all shares of the Pledged Stock shall be registered in
the name of the Administrative Agent or its nominee, and the
<PAGE> 7
7
Administrative Agent or its nominee may thereafter exercise (A) all voting,
corporate and other rights pertaining to such shares of the Pledged Stock at
any meeting of shareholders of any Issuer or otherwise and (B) any and all
rights of conversion, exchange, subscription and any other rights, privileges
or options pertaining to such shares of the Pledged Stock as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Pledged Stock upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of any Issuer, or upon the exercise by the Parent or the
Administrative Agent of any right, privilege or option pertaining to such
shares of the Pledged Stock, and in connection therewith, the right to deposit
and deliver any and all of the Pledged Stock with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as the Administrative Agent may determine) and (3) the
Administrative Agent or its nominee may thereafter exercise all rights
pertaining to the Pledged Notes (including without limitation, any and all
rights of conversion, exchange, subscription and any other rights, privileges
or options pertaining thereto) as if it were the absolute owner thereof, all
without liability except to account for property actually received by it, but
the Administrative Agent shall have no duty to the Parent to exercise any such
right, privilege or option and shall not be responsible for any failure to do
so or delay in so doing.
(b) Anything herein to the contrary notwithstanding, the
Parent shall remain liable under the Pledged Notes to observe and perform all
the conditions and obligations to be observed and performed by it thereunder
all in accordance with the terms and provisions of the Pledged Notes. Neither
the Administrative Agent nor the Lenders shall have any obligation or liability
under any Pledged Note by reason of or arising out of this Agreement or the
receipt by the Administrative Agent or the Lenders of any payment relating to
such Pledged Note pursuant hereto (other than to account for monies actually
received by it), nor shall the Administrative Agent or any of the Lenders be
obligated in any manner to perform any of the obligations of the Parent under
or pursuant to any Pledged Note, to make any payment, to make any inquiry as to
the nature or the sufficiency of any payment received by it or as to the
sufficiency of any performance by any party under any Pledged Note, to present
or file any claim, to take any action to enforce any performance or to collect
the payment of any amounts which may have been assigned to it or to which it
may be entitled at any time or times.
(c) The rights of the Administrative Agent and the Lenders
hereunder shall not be conditioned or contingent upon the pursuit by the
Administrative Agent or any Lender of any right or remedy against any Issuer or
any Obligor or against any other Person which may be or become liable in
respect of all or any part of the Obligations or against any collateral
security therefor, guarantee thereof or right of offset with respect thereto.
Neither the Administrative Agent nor any Lender shall be liable for any failure
to demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so, nor shall the Administrative Agent be under any obligation
to sell or otherwise dispose of any Collateral upon the request of the Parent
or any other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof.
8. Remedies. If an Event of Default shall occur and be
continuing, the Administrative Agent, on behalf of the Lenders, may exercise,
in addition to all other rights and remedies granted in this Agreement and in
any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code.
Without limiting the generality of the foregoing, the Administrative Agent,
without demand of performance
<PAGE> 8
8
or other demand, presentment, protest, advertisement or notice of any kind
(except any notice required by law referred to below) to or upon the Parent,
any Issuer, any Obligor or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, assign, give option
or options to purchase or otherwise dispose of and deliver the Collateral or
any part thereof (or contract to do any of the foregoing), in one or more
parcels at public or private sale or sales, in the over-the-counter market, at
any exchange, broker's board or office of the Administrative Agent or any
Lender or elsewhere upon such terms and conditions as it may deem advisable and
at such prices as it may deem best, for cash or on credit or for future
delivery without assumption of any credit risk. The Administrative Agent or
any Lender shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption in the Parent, which right or equity is hereby waived or released.
The Administrative Agent shall apply any Proceeds from time to time held by it
and the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of every
kind incurred in respect thereof or incidental to the care or safekeeping of
any of the Collateral or in any way relating to the Collateral or the rights of
the Administrative Agent and the Lenders hereunder, including, without
limitation, reasonable attorneys' fees and disbursements of counsel to the
Administrative Agent, to the payment in whole or in part of the Obligations, in
such order as the Administrative Agent may elect, and only after such
application and after the payment by the Administrative Agent of any other
amount required by any provision of law, including, without limitation, Section
9-504(1)(c) of the Code, need the Administrative Agent account for the surplus,
if any, to the Parent. To the extent permitted by applicable law, the Parent
waives all claims, damages and demands it may acquire against the
Administrative Agent or any Lender arising out of the exercise by them of any
rights hereunder, except such claims and damages arising out of the gross
negligence or willful misconduct of the Administrative Agent or any such
Lender. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition. The Parent shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of Collateral are insufficient to pay the Obligations and the fees
and disbursements of any attorneys employed by the Administrative Agent or any
Lender to collect such deficiency.
9. Registration Rights; Private Sales. (a) If the
Administrative Agent shall determine to exercise its right to sell any or all
of the Pledged Stock pursuant to paragraph 8 hereof, and if in the opinion of
the Administrative Agent it is necessary or advisable to have the Pledged
Stock, or that portion thereof to be sold, registered under the provisions of
the Securities Act, the Parent will cause the Issuer thereof to (1) execute and
deliver, and cause the directors and officers of such Issuer to execute and
deliver, all such instruments and documents, and do or cause to be done all
such other acts as may be, in the opinion of the Administrative Agent,
necessary or advisable to register the Pledged Stock, or that portion thereof
to be sold, under the provisions of the Securities Act, (2) to use its best
efforts to cause the registration statement relating thereto to become
effective and to remain effective for a period of one year from the date of the
first public offering of the Pledged Stock, or that portion thereof to be sold
and (3) to make all amendments thereto and/or to the related prospectus which,
in the opinion of the Administrative Agent, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto. The
Parent agrees
<PAGE> 9
9
to cause such Issuer to comply with the provisions of the securities or "Blue
Sky" laws of any and all jurisdictions which the Administrative Agent shall
designate and to make available to its security holders, as soon as
practicable, an earnings statement (which need not be audited) which will
satisfy the provisions of Section 11(a) of the Securities Act.
(b) The Parent recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. The
Parent acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The
Administrative Agent shall be under no obligation to delay a sale of any of the
Pledged Stock for the period of time necessary to permit the Issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such Issuer would agree to do so.
(c) The Parent further agrees to use its best efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Stock pursuant to this Section valid
and binding and in compliance with any and all other applicable Requirements of
Law. The Parent further agrees that a breach of any of the covenants contained
in this Section will cause irreparable injury to the Administrative Agent and
the Lenders, that the Administrative Agent and the Lenders have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 9 shall be specifically enforceable
against the Parent, and the Parent hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants except
for a defense that no Event of Default has occurred under the Credit Agreement.
10. Irrevocable Authorization and Instruction to Issuer and
Obligor. The Parent hereby authorizes and instructs each Issuer and Obligor to
comply with any instruction received by it from the Administrative Agent in
writing that (a) states that an Event of Default has occurred and (b) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from the Parent, and the Parent agrees that each Issuer
and each Obligor shall be fully protected in so complying.
11. Administrative Agent's Appointment as Attorney-in-Fact.
(a) The Parent hereby irrevocably constitutes and appoints the Administrative
Agent and any officer or agent of the Administrative Agent, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Parent and in the name of the
Parent or in the Administrative Agent's own name, from time to time in the
Administrative Agent's discretion, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to accomplish
the purposes of this Agreement, including, without limitation, any financing
statements, endorsements, assignments or other instruments of transfer.
(b) The Parent hereby ratifies all that said attorneys shall
lawfully do or cause to
<PAGE> 10
10
be done pursuant to the power of attorney granted in paragraph 11.(a). All
powers, authorizations and agencies contained in this Agreement are coupled
with an interest and are irrevocable until the Obligations are paid in full and
the Commitments are terminated.
12. Duty of Administrative Agent. The Administrative Agent's
sole duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Administrative Agent deals
with similar securities and property for its own account. Neither the
Administrative Agent, any Lender nor any of their respective directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of the Parent or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.
13. Execution of Financing Statements. Pursuant to Section 9-
402 of the Code, the Parent authorizes the Administrative Agent to file
financing statements with respect to the Collateral without the signature of
the Parent in such form and in such filing offices as the Administrative Agent
reasonably determines appropriate to perfect the security interests of the
Administrative Agent under this Agreement.
14. Authority of Administrative Agent. The Parent
acknowledges that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Agreement shall, as between the
Administrative Agent and the Lenders, be governed by the Credit Agreement and
by such other agreements with respect thereto as may exist from time to time
among them, but, as between the Administrative Agent and the Parent, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Lenders with full and valid authority so to act or refrain from acting, and
neither the Parent, any Issuer nor any Obligor shall be under any obligation,
or entitlement, to make any inquiry respecting such authority.
15. Notices. All notices, requests and demands to or upon the
Administrative Agent, the Parent, any Issuer or any Obligor to be effective
shall be in writing (or by telex, fax or similar electronic transfer confirmed
in writing) and shall be deemed to have been duly given or made (1) when
delivered by hand or (2) if given by mail, three days after being deposited in
the mail, postage prepaid, or (3) if by telex, fax or similar electronic
transfer, when sent and receipt has been confirmed, addressed to the
Administrative Agent or the Parent at its address or transmission number for
notices provided in the Credit Agreement and to each Issuer and each Obligor at
its address set forth in its Acknowledgment and Consent. The Parent, any
Issuer and any Obligor may change their addresses and transmission numbers for
notices by written notice to the Administrative Agent.
16. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
<PAGE> 11
11
17. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Parent and the Administrative Agent, provided that any provision of this
Agreement may be waived by the Administrative Agent and the Lenders in a letter
or agreement executed by the Administrative Agent or by telex or facsimile
transmission from the Administrative Agent.
(b) Neither the Administrative Agent nor any Lender shall by
any act (except by a written instrument pursuant to paragraph 17.(a) hereof),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default or in
any breach of any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of the Administrative Agent or any
Lender, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent
or any Lender of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Administrative Agent or
such Lender would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
18. Section Headings. The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof.
19. Successors and Assigns. This Agreement shall be binding
upon the successors and assigns of the Parent and shall inure to the benefit of
the Administrative Agent and the Lenders and their successors and assigns.
20. Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the law of the State of New York.
<PAGE> 12
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IN WITNESS WHEREOF, the undersigned has caused this Agreement to
be duly executed and delivered as of the date first above written.
SYBRON INTERNATIONAL CORPORATION
By:
---------------------------------
Title:
------------------------------
<PAGE> 13
SCHEDULE 1
TO PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED STOCK
<TABLE>
<CAPTION>
No. of Shares Total No. of Shares
Class of Stock Certificate Pledged Outstanding
Issuer Stock No.
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 14
SCHEDULE 2
TO PLEDGE AGREEMENT
PLEDGED NOTES
<TABLE>
<CAPTION>
Original
Date of Principal
Obligor Note Amount
------- ------- ---------
<S> <C> <C>
$
---------
</TABLE>
<PAGE> 15
ACKNOWLEDGEMENT AND CONSENT
Each of the undersigned is an Issuer referred to in the foregoing
Pledge Agreement, and each of the undersigned hereby acknowledges receipt of a
copy of the Pledge Agreement, dated July 1, 1998, made by Sybron International
Corporation for the benefit of The Chase Manhattan Bank, as Administrative
Agent (as amended, supplemented or otherwise modified from time to time, the
"Pledge Agreement"). The undersigned agrees for the benefit of the
Administrative Agent and the Lenders as follows:
1. The undersigned will be bound by the terms of the Pledge
Agreement and will comply with such terms insofar as such terms are
applicable to the undersigned.
2. The undersigned will notify the Administrative Agent promptly
in writing of the occurrence of any of the events described in paragraph
5.(a) of the Pledge Agreement.
3. The terms of paragraph 9.(c) of the Pledge Agreement shall
apply to it, mutatis mutandis, with respect to all actions that may be
required of it under or pursuant to or arising out of Section 9 of the
Pledge Agreement.
SYBRON DENTAL SPECIALTIES, INC.
SYBRON TRANSITION CORP.
MEXOSERV COMPANY
SYBRON LABORATORY PRODUCTS
CORPORATION
NATIONAL SCIENTIFIC COMPANY
LRS ACQUISITION CORP.
--------------------------------
By: John J. Buono, Assistant
Treasurer
Address for Notices:
c/o Sybron International Corporation
411 East Wisconsin Avenue, 24th Floor
Milwaukee, Wisconsin 53202
Fax: (414) 274-6561
<PAGE> 1
EXHIBIT 4.3
THIRD AMENDED AND RESTATED SUBSIDIARIES GUARANTEE
THIRD AMENDED AND RESTATED GUARANTEE, dated as of July 1, 1998,
made by each of the corporations that are signatories hereto (the
"Guarantors"), in favor of THE CHASE MANHATTAN BANK, as administrative agent
(in such capacity, the "Administrative Agent"), for the banks and other
financial institutions (the "Lenders") from time to time parties to the Second
Amended and Restated Credit Agreement, dated as of April 25, 1997 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among Sybron International Corporation, a Wisconsin corporation (the "Parent"),
Ormco Corporation, a Delaware corporation ("Ormco"), Kerr Corporation, a
Delaware corporation ("Kerr"), Nalge Nunc International Corporation, a Delaware
corporation ("NNI"), Erie Scientific Company, a Delaware corporation ("Erie"),
Barnstead Thermolyne Corporation, a Delaware corporation ("Barnstead"; Ormco,
Kerr, NNI, Erie and Barnstead are collectively referred to herein as the
"Subsidiary Borrowers"; and the Parent and the Subsidiary Borrowers are
collectively referred to herein as the "Borrowers"), the Lenders, the
Administrative Agent and Chase Securities Inc., as arranger.
W I T N E S S E T H:
WHEREAS, the Parent owns directly or indirectly all of the issued
and outstanding stock of each Guarantor;
WHEREAS, the Parent, the Subsidiary Borrowers and the Guarantors
are members of the same consolidated group of companies and engaged in related
businesses, and each Guarantor will derive substantial direct and indirect
benefit from the making of the Loans and the Letters of Credit (as defined in
the Credit Agreement); and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective extensions of credit to the Parent and the
Subsidiary Borrowers under the Credit Agreement that the Guarantors shall have
executed and delivered this Guarantee to the Administrative Agent for the
ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement and
to induce the Lenders to make their respective extensions of credit to the
Parent and the Subsidiary Borrowers under the Credit Agreement, the Guarantors
hereby agree with the Administrative Agent, for the ratable benefit of the
Lenders, as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given
to them in the Credit Agreement.
(b) As used herein "Obligations" means (i) the unpaid principal
of and interest on (including, without limitation, interest accruing after the
maturity of the Loans and interest accruing on or after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization
or like proceeding, relating to the Parent or any of the Subsidiary Borrowers,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding) the Notes and all other obligations and liabilities of the
Loan Parties to the Administrative Agent or to
<PAGE> 2
2
the Lenders, whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Credit Agreement, the Notes, any other Loan
Document and any other document made, delivered or given in connection herewith
or therewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including, without limitation,
all fees and disbursements of counsel to the Administrative Agent or to the
Lenders) or otherwise and (ii) all obligations of any of the Borrowers to any
Lender or any Affiliate of any Lender under or in connection with any Interest
Rate Agreement or foreign exchange contract.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Guarantee shall refer to this Guarantee as a
whole and not to any particular provision of this Guarantee, and Section and
paragraph references are to this Guarantee unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Guarantee. (a) Subject to the provisions of paragraph 2(b),
each of the Guarantors hereby, jointly and severally, unconditionally and
irrevocably, guarantees to the Administrative Agent, for the ratable benefit of
the Lenders and their respective successors, indorsees, transferees and
assigns, the prompt and complete payment and performance by the Borrowers when
due (whether at the stated maturity, by acceleration or otherwise) of the
Obligations (other than any obligations owing directly by such Guarantor as a
Subsidiary Borrower).
(b) Anything herein or in any other Loan Document to the
contrary notwithstanding, the maximum liability of each Guarantor hereunder and
under the other Loan Documents shall in no event exceed the amount which can be
guaranteed by such Guarantor under applicable federal and state laws relating
to the insolvency of debtors.
(c) Each Guarantor further agrees to pay any and all expenses
(including, without limitation, all fees and disbursements of counsel) which
may be paid or incurred by the Administrative Agent or any Lender in enforcing,
or obtaining advice of counsel in respect of, any rights with respect to, or
collecting, any or all of the Obligations and/or enforcing any rights with
respect to, or collecting against, such Guarantor under this Guarantee. This
Guarantee shall remain in full force and effect until the Obligations are paid
in full and the Commitments are terminated, notwithstanding that from time to
time prior thereto the Borrowers may be free from any Obligations.
(d) Each Guarantor agrees that the Obligations may at any time
and from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing this Guarantee or affecting the rights and remedies
of the Administrative Agent or any Lender hereunder.
(e) No payment or payments made by any of the Borrowers, any of
the Guarantors, any other guarantor or any other Person or received or
collected by the Administrative Agent or any Lender from any of the Borrowers,
any of the Guarantors, any other guarantor or any other Person by virtue of any
action or proceeding or any set-off or appropriation or application at any time
or from time to time in reduction of or in payment of the Obligations shall be
deemed to modify,
<PAGE> 3
3
reduce, release or otherwise affect the liability of any Guarantor hereunder
which shall, notwithstanding any such payment or payments other than payments
made by such Guarantor in respect of the Obligations or payments received or
collected from such Guarantor in respect of the Obligations, remain liable for
the Obligations up to the maximum liability of such Guarantor hereunder until
the Obligations are paid in full and the Commitments are terminated.
(f) Each Guarantor agrees that whenever, at any time, or from
time to time, it shall make any payment to the Administrative Agent or any
Lender on account of its liability hereunder, it will notify the Administrative
Agent in writing that such payment is made under this Guarantee for such
purpose.
3. Right of Contribution. Each Guarantor hereby agrees that to
the extent that a Guarantor shall have paid more than its proportionate share
of any payment made hereunder, such Guarantor shall be entitled to seek and
receive contribution from and against any other Guarantor hereunder who has not
paid its proportionate share of such payment. Each Guarantor's right of
contribution shall be subject to the terms and conditions of Section 5 hereof.
The provisions of this Section shall in no respect limit the obligations and
liabilities of any Guarantor to the Administrative Agent and the Lenders, and
each Guarantor shall remain liable to the Administrative Agent and the Lenders
for the full amount guaranteed by such Guarantor hereunder.
4. Right of Set-off. Upon the occurrence of any Event of
Default, each Guarantor hereby irrevocably authorizes each Lender at any time
and from time to time without notice to such Guarantor or any other Guarantor,
any such notice being expressly waived by each Guarantor, to set-off and
appropriate and apply any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender to
or for the credit or the account of such Guarantor, or any part thereof in such
amounts as such Lender may elect, against and on account of the obligations and
liabilities of such Guarantor to such Lender hereunder and claims of every
nature and description of such Lender against such Guarantor, in any currency,
whether arising hereunder, under the Credit Agreement, any Note, any Loan
Document or otherwise, as such Lender may elect, whether or not the
Administrative Agent or any Lender has made any demand for payment and although
such obligations, liabilities and claims may be contingent or unmatured. The
Administrative Agent and each Lender shall notify such Guarantor promptly of
any such set-off and the application made by the Administrative Agent or such
Lender, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Administrative
Agent and each Lender under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which the
Administrative Agent or such Lender may have.
5. No Subrogation. Notwithstanding any payment or payments made
by any of the Guarantors hereunder or any set-off or application of funds of
any of the Guarantors by any Lender, no Guarantor shall be entitled to be
subrogated to any of the rights of the Administrative Agent or any Lender
against any Borrower or any other Guarantor or any collateral security or
guarantee or right of offset held by any Lender for the payment of the
Obligations, nor shall any Guarantor seek or be entitled to seek any
contribution or reimbursement from any Borrower or any other Guarantor
<PAGE> 4
4
in respect of payments made by such Guarantor hereunder, until all amounts
owing to the Administrative Agent and the Lenders by the Borrowers on account
of the Obligations are paid in full and the Commitments are terminated. If any
amount shall be paid to any Guarantor on account of such subrogation rights at
any time when all of the Obligations shall not have been paid in full, such
amount shall be held by such Guarantor in trust for the Administrative Agent
and the Lenders, segregated from other funds of such Guarantor, and shall,
forthwith upon receipt by such Guarantor, be turned over to the Administrative
Agent in the exact form received by such Guarantor (duly indorsed by such
Guarantor to the Administrative Agent, if required), to be applied against the
Obligations, whether matured or unmatured, in such order as the Administrative
Agent may determine.
6. Amendments, etc. with respect to the Obligations; Waiver of
Rights. Each Guarantor shall remain obligated hereunder notwithstanding that,
without any reservation of rights against any Guarantor and without notice to
or further assent by any Guarantor, any demand for payment of any of the
Obligations made by the Administrative Agent or any Lender may be rescinded by
such party and any of the Obligations continued, and the Obligations, or the
liability of any other party upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended,
modified, accelerated, compromised, waived, surrendered or released by the
Administrative Agent or any Lender, and the Credit Agreement, the Notes and the
other Loan Documents and any other documents executed and delivered in
connection therewith may be amended, modified, supplemented or terminated, in
whole or in part, as the Administrative Agent (or the Majority Lenders, as the
case may be) may deem advisable from time to time, and any collateral security,
guarantee or right of offset at any time held by the Administrative Agent or
any Lender for the payment of the Obligations may be sold, exchanged, waived,
surrendered or released. Neither the Administrative Agent nor any Lender shall
have any obligation to protect, secure, perfect or insure any Lien at any time
held by it as security for the Obligations or for this Guarantee or any
property subject thereto. When making any demand hereunder against any of the
Guarantors, the Administrative Agent or any Lender may, but shall be under no
obligation to, make a similar demand on any Borrower or any other Guarantor or
guarantor, and any failure by the Administrative Agent or any Lender to make
any such demand or to collect any payments from any such Borrower or any such
other Guarantor or guarantor or any release of any such Borrower or such other
Guarantor or guarantor shall not relieve any of the Guarantors in respect of
which a demand or collection is not made or any of the Guarantors not so
released of their several obligations or liabilities hereunder, and shall not
impair or affect the rights and remedies, express or implied, or as a matter of
law, of the Administrative Agent or any Lender against any of the Guarantors.
For the purposes hereof "demand" shall include the commencement and continuance
of any legal proceedings.
7. Guarantee Absolute and Unconditional. Each Guarantor waives
any and all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Administrative Agent or
any Lender upon this Guarantee or acceptance of this Guarantee, the
Obligations, and any of them, shall conclusively be deemed to have been
created, contracted or incurred, or renewed, extended, amended or waived, in
reliance upon this Guarantee; and all dealings between any of the Borrowers and
any of the Guarantors, on the one hand, and the Administrative Agent and the
Lenders, on the other hand, likewise shall be conclusively presumed
<PAGE> 5
5
to have been had or consummated in reliance upon this Guarantee. Each
Guarantor waives diligence, presentment, protest, demand for payment and notice
of default or nonpayment to or upon any of the Borrowers or any of the
Guarantors with respect to the Obligations. Each Guarantor understands and
agrees that this Guarantee shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard to (a) the validity,
regularity or enforceability of the Credit Agreement, any Note or any other
Loan Document, any of the Obligations or any other collateral security therefor
or guarantee or right of offset with respect thereto at any time or from time
to time held by the Administrative Agent or any Lender, (b) any defense, set-
off or counterclaim (other than a defense of payment or performance) which may
at any time be available to or be asserted by any Borrower against the
Administrative Agent or any Lender, or (c) any other circumstance whatsoever
(with or without notice to or knowledge of any Borrower or such Guarantor)
which constitutes, or might be construed to constitute, an equitable or legal
discharge of any of the Borrowers for the Obligations, or of such Guarantor
under this Guarantee, in bankruptcy or in any other instance. When pursuing
its rights and remedies hereunder against any Guarantor, the Administrative
Agent and any Lender may, but shall be under no obligation to, pursue such
rights and remedies as it may have against the Borrower or any other Person or
against any collateral security or guarantee for the Obligations or any right
of offset with respect thereto, and any failure by the Administrative Agent or
any Lender to pursue such other rights or remedies or to collect any payments
from any Borrower or any such other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of offset, or
any release of any of the Borrowers or any such other Person or any such
collateral security, guarantee or right of offset, shall not relieve such
Guarantor of any liability hereunder, and shall not impair or affect the rights
and remedies, whether express, implied or available as a matter of law, of the
Administrative Agent and the Lenders against such Guarantor. This Guarantee
shall remain in full force and effect and be binding in accordance with and to
the extent of its terms upon each Guarantor and the successors and assigns
thereof, and shall inure to the benefit of the Administrative Agent and the
Lenders, and their respective successors, indorsees, transferees and assigns,
until all the Obligations and the obligations of each Guarantor under this
Guarantee shall have been satisfied by payment in full and the Commitments
shall be terminated, notwithstanding that from time to time during the term of
the Credit Agreement the Borrowers may be free from any Obligations.
8. Reinstatement. This Guarantee shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any of the Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of any
Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any Guarantor or any substantial part of its property, or
otherwise, all as though such payments had not been made.
9. Payments. Each Guarantor hereby guarantees that payments
hereunder will be paid to the Administrative Agent without set-off or
counterclaim in U.S. Dollars at the office of the Administrative Agent located
at 270 Park Avenue, New York, New York 10017.
10. Representations and Warranties. Each Guarantor hereby
represents and warrants that:
<PAGE> 6
6
(a) it is a corporation duly organized, validly existing and in
good standing (or similar concept under applicable law) under the laws
of the jurisdiction of its incorporation and has the corporate power and
authority and the legal right to own and operate its property, to lease
the property it operates and to conduct the business in which it is
currently engaged;
(b) it has the corporate power and authority and the legal right
to execute and deliver, and to perform its obligations under, this
Guarantee, and has taken all necessary corporate action to authorize its
execution, delivery and performance of this Guarantee;
(c) this Guarantee constitutes a legal, valid and binding
obligation of such Guarantor enforceable in accordance with its terms,
except as affected by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting the enforcement of creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing;
(d) the execution, delivery and performance of this Guarantee
will not violate any provision of any Requirement of Law or Contractual
Obligation of such Guarantor and will not result in or require the
creation or imposition of any Lien on any of the properties or revenues
of such Guarantor pursuant to any Requirement of Law or Contractual
Obligation of the Guarantor;
(e) no consent or authorization of, filing with, or other act by
or in respect of, any arbitrator or Governmental Authority and no
consent of any other Person (including, without limitation, any
stockholder or creditor of such Guarantor) is required in connection
with the execution, delivery, performance, validity or enforceability of
this Guarantee;
(f) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of
such Guarantor, threatened by or against such Guarantor or against any
of its properties or revenues (1) with respect to this Guarantee or any
of the transactions contemplated hereby or (2) which could reasonably be
expected to have a Material Adverse Effect; and
(g) it has good record and marketable title in fee simple to, or
a valid leasehold interest in, all its real property, and good title to,
or a valid leasehold interest in, all its other property, and none of
such property is subject to any Lien of any nature whatsoever except as
permitted by subsection 7.3 of the Credit Agreement.
Each Guarantor agrees that the foregoing representations and
warranties shall be deemed to have been made by such Guarantor on the date of
each borrowing by any Borrower under the Credit Agreement on and as of the
relevant Borrowing Date as though made hereunder on and as of such date.
11. Authority of Administrative Agent. Each Guarantor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Guarantee with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any
option, right, request, judgment or other right or remedy provided for herein
or resulting or arising
<PAGE> 7
7
out of this Guarantee shall, as between the Administrative Agent and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Administrative Agent and such Guarantor, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and no Guarantor shall be under any
obligation, or entitlement, to make any inquiry respecting such authority.
12. Notices. All notices, requests and demands to or upon the
Administrative Agent, any Lender or any Guarantor to be effective shall be in
writing (or by telex, fax or similar electronic transfer confirmed in writing)
and shall be deemed to have been duly given or made (1) when delivered by hand
or (2) if given by mail, three days after deposited in the mails, postage
prepaid, or (3) if by telex, fax or similar electronic transfer, when sent and
receipt has been confirmed, addressed as follows:
(a) if to the Administrative Agent or any Lender, at its address
or transmission number for notices provided in or referred to in
subsection 11.2 of the Credit Agreement; and
(b) if to any Guarantor, at its address or transmission number
for notices set forth under its name below.
The Administrative Agent, each Lender and each Guarantor may
change its address and transmission numbers for notices by notice in the manner
provided in this Section.
13. Counterparts. This Guarantee may be executed by one or more
of the Guarantors on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the counterparts of this Guarantee signed by all the
Guarantors shall be lodged with the Administrative Agent.
14. Severability. Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
15. Integration. This Guarantee represents the agreement of
each Guarantor with respect to the subject matter hereof and there are no
promises or representations by the Administrative Agent or any Lender relative
to the subject matter hereof not reflected herein.
16. Amendments in Writing; No Waiver; Cumulative Remedies. (a)
None of the terms or provisions of this Guarantee may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
each Guarantor and the Administrative Agent (other than supplements, in form
and substance acceptable to the Administrative Agent, for the purpose of adding
new Guarantors), provided that any provision of this Guarantee may be waived by
the Administrative Agent and the Lenders in a letter or agreement executed by
the Administrative Agent or by telex or facsimile transmission from the
Administrative Agent.
<PAGE> 8
8
(b) Neither the Administrative Agent nor any Lender shall by any
act (except by a written instrument pursuant to paragraph 16(a) hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Default or Event of Default or in any
breach of any of the terms and conditions hereof. No failure to exercise, nor
any delay in exercising, on the part of the Administrative Agent or any Lender,
any right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Administrative Agent or any Lender
of any right or remedy hereunder on any one occasion shall not be construed as
a bar to any right or remedy which the Administrative Agent or such Lender
would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not exclusive of any other rights
or remedies provided by law.
17. Section Headings. The Section headings used in this
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof.
18. Successors and Assigns. This Guarantee shall be binding
upon the successors and assigns of each Guarantor and shall inure to the
benefit of the Administrative Agent and the Lenders and their successors and
assigns.
19. Governing Law. This Guarantee shall be governed by, and
construed and interpreted in accordance with, the law of the State of New York.
20. Submission To Jurisdiction. Each of the Guarantors hereby
irrevocable and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Guarantee and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgement
in respect thereof, to the non-exclusive general jurisdiction of the
Courts of the United States of America for the Southern District of New
York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to pleas or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such Guarantor at its address set forth under its signature
below or at such other address of which the Administrative Agent shall
have been notified pursuant to the terms of Section 12 hereof;
<PAGE> 9
9
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this subsection any special, exemplary, punitive or
consequential damages.
21. Acknowledgements. Each Guarantor hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Guarantee and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to such Guarantor arising out of or
in connection with this Guarantee or any of the other Loan Documents,
and the relationship between the Administrative Agent and the Lenders,
on one hand, and the Guarantors on the other hand, in connection
herewith or therewith is solely that of creditor and debtor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Lenders or among the Guarantors and the Lenders.
22. WAIVERS OF JURY TRIAL. THE GUARANTORS AND THE
ADMINISTRATIVE AGENT AND THE LENDERS BY THEIR ACCEPTANCE HEREOF HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS GUARANTEE OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
<PAGE> 10
10
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee to be duly executed and delivered by its duly authorized officer as
of the day and year first above written.
BARNSTEAD THERMOLYNE CORPORATION
ERIE SCIENTIFIC COMPANY
ERIE SCIENTIFIC COMPANY OF
PUERTO RICO
EVER READY THERMOMETER CO., INC.
RICHARD-ALLAN SCIENTIFIC COMPANY
NEW ENGLAND REAGENT LABORATORY, INC.
CASCO STANDARDS, INC.
THE NAUGATUCK GLASS COMPANY
NALGE NUNC INTERNATIONAL CORPORATION
SYBRON DENTAL SPECIALTIES INC.
SAC/ORMCO, INC.
ORMCO CORPORATION
ALLESEE ORTHODONTIC APPLIANCES, INC.
SAC/KERR, INC.
KERR CORPORATION
METREX RESEARCH CORPORATION
BELLE DE ST. CLAIRE, INC.
SAC/COMMONWEALTH, INC.
SYBRON COMMONWEALTH HOLDINGS, INC.
SYBRON TRANSITION CORP.
MEXOSERV COMPANY
REMEL INC.
DIAGNOSTIC REGENTS, INC.
SYBRON LABORATORY PRODUCTS
CORPORATION
OWL SEPARATION SYSTEMS, INC.
ALEXON-TREND, INC.
VIRO RESEARCH INTERNATIONAL, INC.
CARR-SCARBOROUGH MICROBIOLOGICALS,
INC.
CLINICAL STANDARDS LABS, INC.
LIDA MANUFACTURING CORPORATION
LRS ACQUISITION CORP.
"A" COMPANY ORTHODONTICS
NALGE PROCESS TECHNOLOGIES GROUP,
INC.
<PAGE> 11
11
CHASE SCIENTIFIC GLASS, INC.
NATIONAL SCIENTIFIC COMPANY
SUMMIT BIOTECHNOLOGY, INC.
-------------------------------------
By: John J. Buono, Assistant
Treasurer
Address for Notices:
c/o Sybron International Corporation
411 East Wisconsin Avenue, 24th Floor
Milwaukee, Wisconsin 53202
Fax: (414) 274-6561
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EXHIBIT 4.4
THIRD AMENDED AND RESTATED
SUBSIDIARIES PLEDGE AGREEMENT
THIRD AMENDED AND RESTATED PLEDGE AGREEMENT, dated as of July 1,
1998, made by each of the undersigned corporations (each, a "Pledgor", and
collectively, the "Pledgors") in favor of The Chase Manhattan Bank, as
Administrative Agent (in such capacity, the "Administrative Agent"), for the
banks and other financial institutions (the "Lenders") from time to time
parties to the Second Amended and Restated Credit Agreement, dated as of April
25, 1997 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among Sybron International Corporation, a Wisconsin
corporation ("the Parent"), Ormco Corporation, a Delaware corporation
("Ormco"), Kerr Corporation, a Delaware corporation ("Kerr"), Nalge Nunc
International Corporation, a Delaware corporation ("NNI"), Erie Scientific
Company, a Delaware corporation ("Erie"), Barnstead Thermolyne Corporation, a
Delaware corporation ("Barnstead"; Ormco, Kerr, NNI, Erie and Barnstead are
collectively referred to herein as the "Subsidiary Borrowers"), the Lenders,
the Administrative Agent and Chase Securities Inc., as arranger.
W I T N E S S E T H:
WHEREAS, each Pledgor is the legal and beneficial owner of the
shares of Pledged Stock (as hereinafter defined) hereby pledged by such
Pledgor;
WHEREAS, each Pledgor is the legal and beneficial owner of each
of the Pledged Notes (as hereinafter defined) hereby pledged by such Pledgor;
and
NOW, THEREFORE, in consideration of the premises and to induce
the Administrative Agent and the Lenders to enter into the Credit Agreement
and to induce the Lenders to make their respective extensions of credit to the
Parent and Subsidiary Borrowers under the Credit Agreement, each Pledgor hereby
agrees with the Administrative Agent, for the ratable benefit of the Lenders,
as follows:
1. Defined Terms. (a) Unless otherwise defined herein,
terms defined in the Credit Agreement or the Subsidiaries Guarantee and used
herein are so used as so defined.
(b) The following terms shall have the following meanings:
"Agreement": this Second Amended and Restated Pledge Agreement,
as the same may be amended, modified or otherwise supplemented from time
to time.
"Code": the Uniform Commercial Code from time to time in effect
in the State of New York.
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"Collateral": the Pledged Stock, the Pledged Notes and all
Proceeds.
"Issuers": the collective reference to the companies identified
on Schedule 1 hereto as the issuers of the Pledged Stock.
"Obligations" means (a) as to any Pledgor, all of its obligations
and liabilities (i) under the Subsidiaries Guarantee, subject to the
limitations on liability contained therein and (ii) to any Lender or an
Affiliate of any Lender under or in connection with any Interest Rate
Agreement or foreign exchange contract and (b) without duplication, as
to any Pledgor which is a Subsidiary Borrower, the unpaid principal of
and interest on (including, without limitation, interest accruing after
the maturity of the Loans made to such Pledgor and interest accruing on
or after the filing of any petition in bankruptcy, or the commencement
of any insolvency, reorganization or like proceeding, relating to such
Pledgor, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding) the Notes of such Pledgor and
all other obligations and liabilities of such Pledgor to the
Administrative Agent or to the Lenders, whether direct or indirect,
absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection
with, the Credit Agreement, the Notes, any other Loan Document and any
other document made, delivered or given in connection herewith or
therewith, whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses (including, without
limitation, all fees and disbursements of counsel to the Administrative
Agent or to the Lenders) or otherwise; where the context requires,
"Obligations" refers to the Obligations (as defined herein) of each and
every Pledgor.
"Obligors": the collective reference to the companies identified
on Schedule 2 hereto, as such Schedule may be amended from time to time.
"Pledged Notes": the promissory note or notes of the Obligors
identified on Schedule 2, together with all substitutes, replacements or
refinancings thereto that may be issued or granted by any Obligor to any
Pledgor while this Agreement is in effect.
"Pledged Stock": the shares of capital stock or other equity
interests listed on Schedule 1 hereto, together with all stock
certificates, options or rights of any nature whatsoever that may be
issued or granted by any Issuer to any Pledgor in respect of the Pledged
Stock while this Agreement is in effect.
"Proceeds": all "proceeds" as such term is defined in Section 9-
306(1) of the Uniform Commercial Code in effect in the State of New York
on the date hereof and, in any event, shall include, without limitation,
all dividends or other income from the Pledged Stock and the Pledged
Notes, collections thereon or distributions with respect thereto.
"Securities Act": the Securities Act of 1933, as amended.
(c) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular
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provision of this Agreement, and Section and paragraph references are to this
Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Pledge; Grant of Security Interest. Each Pledgor hereby
delivers to the Administrative Agent, for the ratable benefit of the Lenders,
all of the Pledged Stock (except such Pledged Stock which is not certificated)
and the Pledged Notes listed with its name on Schedule 1 or Schedule 2 hereto,
as the case may be, and hereby grants to the Administrative Agent, for the
ratable benefit of the Lenders, a first security interest in the Collateral
granted by such Pledgor, as collateral security for the prompt and complete
payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations of such Pledgor.
3. Stock Powers and Allonges. (a) Concurrently with the
delivery to the Administrative Agent of each certificate representing one or
more shares of Pledged Stock to the Administrative Agent, the relevant Pledgor
shall deliver an undated stock power covering such certificate, duly executed
in blank by such Pledgor with, if the Administrative Agent so requests,
signature guaranteed.
(b) Concurrently with the delivery to the Administrative Agent
of each note representing one of the Pledged Notes, the relevant Pledgor shall
deliver executed allonges endorsing such notes to "Bearer" with, if the
Administrative Agent so requests, signature guaranteed.
4. Representations and Warranties. Each Pledgor represents
and warrants that:
(a) except as set forth on Schedule 1 hereto, the shares of
Pledged Stock of such Pledgor constitute all the issued and outstanding
shares of all classes of the capital stock of the Issuers thereof;
provided, however, that the parties acknowledge that the capital stock
of LMD Laboratories, Inc., an indirect subsidiary of Erie with tangible
assets of less than $1,000,000 and total assets of less than $2,000,000,
and of Lab Acquisition Co., a direct subsidiary of Barnstead having no
assets, have not been pledged hereunder.
(b) the Pledged Notes of such Pledgor constitute all of the
issued and outstanding promissory notes payable by the Parent and the
direct and indirect Subsidiaries of the Parent (other than such Pledgor)
to such Pledgor;
(c) all the shares of such Pledged Stock have been duly and
validly issued and are fully paid and nonassessable; and each of such
Pledged Notes has been duly and validly issued and is the legal, valid
and binding obligation of the maker thereof, enforceable in accordance
with its terms, except as affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and
an implied covenant of good faith and fair dealing;
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(d) such Pledgor is the record and beneficial owner of, and
has good and marketable title to, such Pledged Stock and Pledged Notes,
free of any and all Liens or options in favor of, or claims of, any
other Person, except the security interest created by this Agreement;
(e) upon delivery to the Administrative Agent of the stock
certificates evidencing such Pledged Stock (or in the case of certain
Issuers organized under foreign jurisdictions, the deed or other
document evidencing such Pledged Stock) and upon delivery to the
Administrative Agent of such Pledged Notes, the security interest
created by this Agreement will constitute a valid, perfected first
priority security interest in the Collateral granted by such Pledgor,
enforceable in accordance with its terms against all creditors of such
Pledgor and any Persons purporting to purchase any Collateral from such
Pledgor, except as affected by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating
to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and
an implied covenant of good faith and fair dealing;
(f) such Pledgor has obtained from each Issuer and has
delivered to the Administrative Agent an Acknowledgement and Consent,
substantially in the form attached hereto as Annex A, executed by each
such Issuer; and
(g) no consent or authorization of, filing with or other act
by or in respect of any Person is required in connection with the
execution, delivery, performance, validity or enforceability of such
Pledged Notes, and such Pledgor has fully performed all its obligations
under such Pledged Notes.
5. Covenants. Each Pledgor covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Agreement until the Obligations are paid in full and the Commitments are
terminated:
(a) If such Pledgor shall, as a result of its ownership of any
Pledged Stock, become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate representing
a stock dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights, whether
in addition to, in substitution of, as a conversion of, or in exchange
for any shares of any Pledged Stock, or otherwise in respect thereof,
such Pledgor shall accept the same as the agent of the Administrative
Agent and the Lenders, hold the same in trust for the Administrative
Agent and the Lenders and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed by such
Pledgor to the Administrative Agent, if required, together with an
undated stock power covering such certificate duly executed in blank by
such Pledgor and with, if the Administrative Agent so requests,
signature guaranteed, to be held by the Administrative Agent, subject to
the terms hereof, as additional collateral security for the Obligations
of such Pledgor. Any sums paid to such Pledgor upon or in respect of
any Pledged Stock or
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any Pledged Notes upon the liquidation or dissolution of any Issuer or
any Obligor, as the case may be, shall be paid over to the
Administrative Agent to be held by it hereunder as additional collateral
security for the Obligations of such Pledgor, and in case any
distribution of capital or payment of principal shall be made to such
Pledgor on or in respect of any Pledged Stock or any Pledged Notes or
any property shall be distributed upon or with respect to any Pledged
Stock or any Pledged Notes pursuant to the recapitalization or
reclassification of the capital of any Issuer or any Obligor, as the
case may be, or pursuant to the reorganization thereof, the property so
distributed to such Pledgor shall be delivered to the Administrative
Agent to be held by it hereunder as additional collateral security for
the Obligations of such Pledgor. If any sums of money or property so
paid or distributed in respect of any Pledged Stock or any Pledged Notes
shall be received by such Pledgor, such Pledgor shall, until such money
or property is paid or delivered to the Administrative Agent, hold such
money or property in trust for the Lenders, segregated from other funds
of such Pledgor, as additional collateral security for the Obligations
such Pledgor. Notwithstanding the foregoing, in no event shall more
than 65% of the issued and outstanding shares of stock, or any property
distributed in respect thereof, of any Issuer which is a Controlled
Foreign Corporation constitute collateral security for the Obligations.
(b) Without the prior written consent of the Administrative
Agent, no Pledgor shall (1) vote to enable, or take any other action to
permit, any Issuer to issue any stock or other equity securities of any
nature or to issue any other securities convertible into or granting the
right to purchase or exchange for any stock or other equity securities
of any nature of such Issuer (2) sell, assign, transfer, exchange, or
otherwise dispose of, or grant any option with respect to, the
Collateral, or (3) create, incur or permit to exist any Lien or option
in favor of, or any claim of any Person with respect to, any of the
Collateral, or any interest therein, except for the security interests
created by this Agreement and Liens permitted by the Credit Agreement.
Each Pledgor will defend the right, title and interest of the
Administrative Agent and the Lenders in and to the Collateral against
the claims and demands of all Persons whomsoever.
(c) At any time and from time to time, upon the written
request of the Administrative Agent to a Pledgor, and at the sole
expense of such Pledgor, such Pledgor will promptly and duly execute and
deliver such further instruments and documents and take such further
actions as the Administrative Agent may reasonably request for the
purposes of obtaining or preserving the full benefits of this Agreement
and of the rights and powers herein granted. If any amount payable
under or in connection with any of the Collateral shall be or become
evidenced by any promissory note, other instrument or chattel paper,
such note, instrument or chattel paper shall be immediately delivered to
the Administrative Agent, duly endorsed in a manner satisfactory to the
Administrative Agent, to be held as Collateral pursuant to this
Agreement.
(d) Each Pledgor shall pay, and save the Administrative Agent
and the Lenders harmless from, any and all liabilities with respect to,
or resulting from any delay in paying, any and all stamp, excise, sales
or other taxes which may be payable or determined to be
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payable with respect to any of the Collateral granted by such Pledgor or
in connection with any of the transactions contemplated by this
Agreement.
(e) Each Pledgor will not (i) amend, modify, terminate or
waive any provision of any Pledged Note in any manner materially adverse
to the interests of the Administrative Agent or the Lenders, (ii) fail
to exercise promptly and diligently each and every material right which
it may have under any Pledged Note where such failure could reasonably
be expected to have an adverse affect on the interests of the
Administrative Agent or the Lenders or (iii) fail to deliver to the
Administrative Agent a copy of each material demand, notice or document
received by it relating in any way to any Pledged Note.
(f) Without the prior written consent of the Administrative
Agent, no Pledgor will grant any extension (other than, so long as no
Default or Event of Default shall exist, extensions granted in
accordance with prudent business judgment) of the time of payment of any
Pledged Note, compromise, compound or settle the same for less than the
full amount thereof, release, wholly or partially, any Person liable for
the payment thereof, or allow any credit or discount whatsoever thereon.
(g) Each Pledgor shall deliver to the Administrative Agent, in
the exact form received, to be held by the Administrative Agent, subject
to the terms hereof, as additional collateral security for the
Obligations of such Pledgor any additional promissory notes made by any
Obligor for the benefit of such Pledgor or other securities, options or
rights received by it in substitution or exchange for, or as a
conversion of, or in addition to, any of the Pledged Notes, or otherwise
in respect thereof, together with an undated endorsement or power, as
the case may be, duly executed to the order of "Bearer" or in blank, as
the case may be, by such Pledgor and with, if the Administrative Agent
reasonably requests, signature guaranteed.
6. Cash Dividends; Voting Rights; Interest and Principal
Payments. (a) Unless an Event of Default shall have occurred and be
continuing and the Administrative Agent shall have given notice to a Pledgor of
the Administrative Agent's intent to exercise its corresponding rights pursuant
to Section 7 below, such Pledgor shall be permitted to receive all cash
dividends paid in the normal course of business and consistent with past
practice, to the extent permitted in the Credit Agreement, in respect of the
Pledged Stock of such Pledgor and to exercise all voting and corporate rights
with respect to such Pledged Stock; provided, however, that no vote shall be
cast or corporate right exercised or other action taken which, in the
Administrative Agent's reasonable judgment, would impair the Collateral or
which would be inconsistent with or result in any violation of any provision of
the Credit Agreement, the Notes, this Agreement or any other Loan Document.
(b) Unless an Event of Default shall have occurred and be
continuing and the Administrative Agent shall have given notice to a Pledgor of
the Administrative Agent's intent to exercise its corresponding rights pursuant
to Section 7 hereof, such Pledgor shall be permitted to receive and retain all
scheduled interest and principal payments on account of the Pledged Notes of
such Pledgor.
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7. Rights of the Lenders and the Administrative Agent. (a)
If an Event of Default shall occur and be continuing and the Administrative
Agent shall give notice of its intent to exercise such rights to a Pledgor, (1)
the Administrative Agent shall have the right to receive any and all cash
dividends paid in respect of the Pledged Stock of such Pledgor and any and all
interest, principal or other payments paid in respect of the Pledged Notes of
such Pledgor and make application thereof to the Obligations of such Pledgor in
such order as the Administrative Agent may determine, and (2) all shares of
such Pledged Stock shall be registered in the name of the Administrative Agent
or its nominee, and the Administrative Agent or its nominee may thereafter
exercise (A) all voting, corporate and other rights pertaining to such Pledged
Stock at any meeting of shareholders of any Issuer or otherwise and (B) any and
all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to such Pledged Stock as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of such Pledged Stock upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate structure of any Issuer, or upon the exercise by such Pledgor or
the Administrative Agent of any right, privilege or option pertaining to such
Pledged Stock, and in connection therewith, the right to deposit and deliver
any and all of such Pledged Stock with any committee, depositary, transfer
agent, registrar or other designated agency upon such terms and conditions as
the Administrative Agent may determine) and (3) the Administrative Agent or its
nominee may thereafter exercise all rights pertaining to such Pledged Notes
(including without limitation, any and all rights of conversion, exchange,
subscription and any other rights, privileges or options pertaining thereto) as
if it were the absolute owner thereof, all without liability except to account
for property actually received by it, but the Administrative Agent shall have
no duty to such Pledgor to exercise any such right, privilege or option and
shall not be responsible for any failure to do so or delay in so doing.
(b) Anything herein to the contrary notwithstanding, each
Pledgor shall remain liable under the Pledged Notes of such Pledgor to observe
and perform all the conditions and obligations to be observed and performed by
it thereunder all in accordance with the terms and provisions of such Pledged
Notes. Neither the Administrative Agent nor the Lenders shall have any
obligation or liability under any Pledged Note by reason of or arising out of
this Agreement or the receipt by the Administrative Agent or the Lenders of any
payment relating to such Pledged Note pursuant hereto (other than to account
for monies actually received by it), nor shall the Administrative Agent or any
of the Lenders be obligated in any manner to perform any of the obligations of
any Pledgor under or pursuant to any Pledged Note, to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it
or as to the sufficiency of any performance by any party under any Pledged
Note, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
(c) The rights of the Administrative Agent and the Lenders
hereunder shall not be conditioned or contingent upon the pursuit by the
Administrative Agent or any Lender of any right or remedy against any Issuer or
any Obligor or against any other Person which may be or become liable in
respect of all or any part of the Obligations or against any collateral
security therefor, guarantee thereof or right of offset with respect thereto.
Neither the Administrative Agent
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nor any Lender shall be liable for any failure to demand, collect or realize
upon all or any part of the Collateral or for any delay in doing so, nor shall
the Administrative Agent be under any obligation to sell or otherwise dispose
of any Collateral upon the request of a Pledgor or any other Person or to take
any other action whatsoever with regard to the Collateral or any part thereof.
8. Remedies. If an Event of Default shall occur and be
continuing, the Administrative Agent, on behalf of the Lenders, may exercise,
in addition to all other rights and remedies granted in this Agreement and in
any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code.
Without limiting the generality of the foregoing, the Administrative Agent,
without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon any Pledgor, any Issuer, any Obligor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
assign, give option or options to purchase or otherwise dispose of and deliver
the Collateral or any part thereof (or contract to do any of the foregoing), in
one or more parcels at public or private sale or sales, in the over-the-counter
market, at any exchange, broker's board or office of the Administrative Agent
or any Lender or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk. The Administrative
Agent or any Lender shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in any Pledgor, which right or equity is hereby waived or
released. The Administrative Agent shall apply any Proceeds from time to time
held by it and the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred in respect thereof or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral
or the rights of the Administrative Agent and the Lenders hereunder, including,
without limitation, reasonable attorneys' fees and disbursements of counsel to
the Administrative Agent, to the payment in whole or in part of the
Obligations, in such order as the Administrative Agent may elect, and only
after such application and after the payment by the Administrative Agent of any
other amount required by any provision of law, including, without limitation,
Section 9-504(1)(c) of the Code, need the Administrative Agent account for the
surplus, if any, to any Pledgor. To the extent permitted by applicable law,
each Pledgor waives all claims, damages and demands it may acquire against the
Administrative Agent or any Lender arising out of the exercise by them of any
rights hereunder, except such claims and damages arising out of the gross
negligence or willful misconduct of the Administrative Agent or any such
Lender. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition. Each Pledgor
shall remain liable for any deficiency if the proceeds of any sale or other
disposition of Collateral are insufficient to pay the Obligations of such
Pledgor and the fees and disbursements of any attorneys employed by the
Administrative Agent or any Lender to collect such deficiency.
9. Registration Rights; Private Sales. (a) If the
Administrative Agent shall determine to exercise its right to sell any or all
of the Pledged Stock of any Pledgor pursuant to
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paragraph 8 hereof, and if in the opinion of the Administrative Agent it is
necessary or advisable to have such Pledged Stock, or that portion thereof to
be sold, registered under the provisions of the Securities Act, such Pledgor
will cause the Issuer thereof to (1) execute and deliver, and cause the
directors and officers of such Issuer to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts as
may be, in the opinion of the Administrative Agent, necessary or advisable to
register such Pledged Stock, or that portion thereof to be sold, under the
provisions of the Securities Act, (2) to use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering
of such Pledged Stock, or that portion thereof to be sold and (3) to make all
amendments thereto and/or to the related prospectus which, in the opinion of
the Administrative Agent, are necessary or advisable, all in conformity with
the requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Such Pledgor agrees to
cause such Issuer to comply with the provisions of the securities or "Blue Sky"
laws of any and all jurisdictions which the Administrative Agent shall
designate and to make available to its security holders, as soon as
practicable, an earnings statement (which need not be audited) which will
satisfy the provisions of Section 11(a) of the Securities Act.
(b) Each Pledgor recognizes that the Administrative Agent may
be unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. Such
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner. The
Administrative Agent shall be under no obligation to delay a sale of any of the
Pledged Stock for the period of time necessary to permit the Issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such Issuer would agree to do so.
(c) Each Pledgor further agrees to use its best efforts to do
or cause to be done all such other acts as may be necessary to make such sale
or sales of all or any portion of the Pledged Stock pursuant to this Section
valid and binding and in compliance with any and all other applicable
Requirements of Law. Such Pledgor further agrees that a breach of any of the
covenants contained in this Section will cause irreparable injury to the
Administrative Agent and the Lenders, that the Administrative Agent and the
Lenders have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 9 shall be
specifically enforceable against such Pledgor, and such Pledgor hereby waives
and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no Event of Default has
occurred under the Credit Agreement.
10. Irrevocable Authorization and Instruction to Issuer and
Obligor. Each Pledgor hereby authorizes and instructs each Issuer of its
Pledged Stock and each Obligor of its Pledged Notes to comply with any
instruction received by it from the Administrative Agent in writing that (a)
states that an Event of Default has occurred and (b) is otherwise in accordance
with
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the terms of this Agreement, without any other or further instructions from
such Pledgor, and such Pledgor agrees that each such Issuer and each such
Obligor shall be fully protected in so complying.
11. Administrative Agent's Appointment as Attorney-in-Fact.
(a) Each Pledgor hereby irrevocably constitutes and appoints the
Administrative Agent and any officer or agent of the Administrative Agent, with
full power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of such Pledgor and in
the name of such Pledgor or in the Administrative Agent's own name, from time
to time in the Administrative Agent's discretion, for the purpose of carrying
out the terms of this Agreement, to take any and all appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement, including, without
limitation, any financing statements, endorsements, assignments or other
instruments of transfer.
(b) Each Pledgor hereby ratifies all that said attorneys shall
lawfully do or cause to be done pursuant to the power of attorney granted in
paragraph 11.(a). All powers, authorizations and agencies contained in this
Agreement are coupled with an interest and are irrevocable until the
Obligations are paid in full and the Commitments are terminated.
12. Duty of Administrative Agent. The Administrative Agent's
sole duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Administrative Agent deals
with similar securities and property for its own account. Neither the
Administrative Agent, any Lender nor any of their respective directors,
officers, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Pledgor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.
13. Execution of Financing Statements. Pursuant to Section 9-
402 of the Code, each Pledgor authorizes the Administrative Agent to file
financing statements with respect to the Collateral without the signature of
such Pledgor in such form and in such filing offices as the Administrative
Agent reasonably determines appropriate to perfect the security interests of
the Administrative Agent under this Agreement.
14. Authority of Administrative Agent. Each Pledgor
acknowledges that the rights and responsibilities of the Administrative Agent
under this Agreement with respect to any action taken by the Administrative
Agent or the exercise or non-exercise by the Administrative Agent of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Agreement shall, as between the
Administrative Agent and the Lenders, be governed by the Credit Agreement and
by such other agreements with respect thereto as may exist from time to time
among them, but, as between the Administrative Agent and a Pledgor, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Lenders with full and valid authority so to act or refrain from acting, and
neither any Pledgor, any Issuer nor any Obligor shall be under any obligation,
or entitlement, to make any inquiry respecting such authority.
<PAGE> 11
11
15. Notices. All notices, requests and demands to or upon the
Administrative Agent, any Pledgor, any Issuer or any Obligor to be effective
shall be in writing (or by telex, fax or similar electronic transfer confirmed
in writing) and shall be deemed to have been duly given or made (1) when
delivered by hand or (2) if given by mail, three days after being deposited in
the mail, postage prepaid, or (3) if by telex, fax or similar electronic
transfer, when sent and receipt has been confirmed, addressed to the
Administrative Agent at its address or transmission number for notices provided
in the Credit Agreement, to each Pledgor at its address or transmission number
for notices provided in the Subsidiaries Guarantee and to each Issuer and each
Obligor at its address set forth in its Acknowledgment and Consent. Any
Pledgor, any Issuer and any Obligor may change their addresses and transmission
numbers for notices by written notice to the Administrative Agent.
16. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
17. Amendments in Writing; No Waiver; Cumulative Remedies.
(a) None of the terms or provisions of this Agreement as it affects any
Pledgor may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by such Pledgor and the Administrative Agent,
provided that any provision of this Agreement may be waived by the
Administrative Agent and the Lenders in a letter or agreement executed by the
Administrative Agent or by telex or facsimile transmission from the
Administrative Agent.
(b) Neither the Administrative Agent nor any Lender shall by
any act (except by a written instrument pursuant to paragraph 17.(a) hereof),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default or in
any breach of any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of the Administrative Agent or any
Lender, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent
or any Lender of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Administrative Agent or
such Lender would otherwise have on any future occasion.
(c) The rights and remedies herein provided are cumulative,
may be exercised singly or concurrently and are not exclusive of any other
rights or remedies provided by law.
18. Section Headings. The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof.
<PAGE> 12
12
19. Successors and Assigns. This Agreement shall be binding
upon the successors and assigns of each Pledgor and shall inure to the benefit
of the Administrative Agent and the Lenders and their successors and assigns.
20. Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the law of the State of New York.
<PAGE> 13
13
IN WITNESS WHEREOF, the undersigned has caused this Agreement to
be duly executed and delivered as of the date first above written.
ERIE SCIENTIFIC COMPANY
NALGE NUNC INTERNATIONAL
CORPORATION
SYBRON DENTAL SPECIALTIES, INC.
SAC/ORMCO, INC.
ORMCO CORPORATION
SAC/KERR, INC.
KERR CORPORATION
SAC/COMMONWEALTH, INC.
SYBRON COMMONWEALTH HOLDINGS, INC.
NUNC U.K. LIMITED
SYBRON LABORATORY PRODUCTS
CORPORATION
NEW ENGLAND REAGENT LABORATORY,
INC.
REMEL INC.
METREX RESEARCH CORPORATION
LRS ACQUISITION CORP.
"A" COMPANY ORTHODONTICS
--------------------------------
By: John J. Buono,
Assistant Treasurer
<PAGE> 14
SCHEDULE 1
TO PLEDGE AGREEMENT
DESCRIPTION OF PLEDGED STOCK
[NAME OF PLEDGOR]
<TABLE>
<CAPTION>
No. of Shares Total No. of Shares
Issuer Class of Stock Stock Certificate No. Pledged Outstanding
<S> <C> <C> <C> <C>
</TABLE>
<PAGE> 15
SCHEDULE 2
TO PLEDGE AGREEMENT
PLEDGED NOTES
[NAME OF PLEDGOR]
<TABLE>
<CAPTION>
Original
Date of Principal
Obligor Note Amount
- --------------------- ------------ ------------
<S> <C> <C>
$___________
</TABLE>
<PAGE> 16
ACKNOWLEDGEMENT AND CONSENT
Each of the undersigned is an Issuer referred to in the foregoing
Pledge Agreement, and each of the undersigned hereby acknowledges receipt of a
copy of the Pledge Agreement, dated as of July 1, 1998, made by the Pledgors
(as defined therein) in favor of The Chase Manhattan Bank, as Administrative
Agent (as amended, supplemented or otherwise modified from time to time, the
"Pledge Agreement"). The undersigned agree for the benefit of the
Administrative Agent and the Lenders as follows:
1. The undersigned will be bound by the terms of the Pledge
Agreement and will comply with such terms insofar as such terms are applicable
to the undersigned.
2. The undersigned will notify the Administrative Agent
promptly in writing of the occurrence of any of the events described in
paragraph 5.(a) of the Pledge Agreement.
3. The terms of paragraph 9.(c) of the Pledge Agreement shall
apply to it, mutatis mutandis, with respect to all actions that may be required
of it under or pursuant to or arising out of Section 9 of the Pledge Agreement.
BARNSTEAD THERMOLYNE
CORPORATION
ERIE SCIENTIFIC COMPANY
ERIE ELECTROVERRE S.A.
ERIE SCIENTIFIC COMPANY OF
PUERTO RICO
ERIE-WATALA GLASS COMPANY
LIMITED
ERIE SCIENTIFIC HUNGARY KFT.
EVER READY THERMOMETER CO.,
INC.
RICHARD-ALLAN SCIENTIFIC
COMPANY
NEW ENGLAND REAGENT
LABORATORY, INC.
CASCO STANDARDS, INC.
THE NAUGATUCK GLASS COMPANY
NALGE NUNC INTERNATIONAL
CORPORATION
SAC/ORMCO, INC.
ORMCO CORPORATION
ORMCO (EUROPE) A.G.
ORMEX, S.A. DE C.V.
ORMCO PTY. LTD.
ORMCO DE MEXICO SA de CV
ALLESEE ORTHODONTIC
APPLIANCES, INC.
S.D.S. DE MEXICO, SA de CV
SAC/KERR, INC.
<PAGE> 17
2
KERR CORPORATION
KERR AUSTRALIA PTY. LIMITED
KERR ITALIA S.P.A.
KERR (EUROPE) A.G.
METREX RESEARCH CORPORATION
BELLE DE ST. CLAIRE, INC.
SYBRON DEUTSCHLAND GMBH
SAC/COMMONWEALTH, INC.
SYBRON COMMONWEALTH HOLDINGS,
INC.
SYBRON CANADA LIMITED
SYBRON U.K. LIMITED
SYBRON HOLDINGS A/S
REMEL INC.
SYBRON DENTAL SPECIALTIES JAPAN,
INC.
DIAGNOSTIC REAGENTS, INC.
NALGE PROCESS TECHNOLOGIES
GROUP, INC.
ALEXON-TREND, INC.
CHASE SCIENTIFIC GLASS, INC.
OWL SEPARATION SYSTEMS INC.
CARR-SCARBOROUGH
MICROBIOLOGICALS, INC.
CLINICAL STANDARDS LABS, INC.
VIRO RESEARCH INTERNATIONAL, INC.
NALGE NUNC INTERNATIONAL K.K.
LIDA MANUFACTURING CORPORATION
SUMMIT BIOTECHNOLOGY, INC.
SOCODENT S.A.
SYBRON HOLDINGS A/S
"A" COMPANY ORTHODONTICS
MAQUILADORA ACI-MEX S.A. de C.V
"A" COMPANY GmbH
"A" ORTHONDONTICS B.V.
----------------
By: John J. Buono, Assistant
Secretary or Authorized Agent
Address for Notices:
c/o Sybron International Corporation
411 East Wisconsin Avenue, 24th Floor
Milwaukee, Wisconsin 53202
Fax: (414) 274-6561
<PAGE> 1
EXHIBIT 4.5
SECOND AMENDMENT, dated as of August 13, 1998 (this "Amendment"), to
the Second Amended and Restated Credit Agreement, dated as of April 25, 1997
(the "Credit Agreement"), among Sybron International Corporation, a Wisconsin
corporation (the "Parent"), Ormco Corporation, a Delaware corporation
("Ormco"), Kerr Corporation, a Delaware corporation ("Kerr"), Nalge Nunc
International Corporation, a Delaware corporation ("NNI"), Erie Scientific
Company, a Delaware corporation ("Erie"), Barnstead Thermolyne Corporation, a
Delaware corporation ("Barnstead"; Ormco, Kerr, NNI, Erie and Barnstead are
collectively referred to herein as the "Subsidiary Borrowers"), the several
banks and other financial institutions from time to time parties thereto (the
"Lenders"), Chase Securities Inc., as Arranger, and The Chase Manhattan Bank, a
New York banking corporation, as administrative agent for the Lenders
thereunder (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement, the Lenders have
agreed to make, and have made, certain loans and other extensions of credit to
the Parent and the Subsidiary Borrowers; and
WHEREAS, the Parent and the Subsidiary Borrowers have
requested, and, upon this Amendment becoming effective, the Lenders have
agreed, that certain provisions of the Credit Agreement be amended in the
manner provided for in this Amendment.
NOW, THEREFORE, the parties hereto hereby agree as follows:
I. Defined Terms. Terms defined in the Credit Agreement and used
herein shall have the meanings given to them in the Credit Agreement.
II. Amendments to Credit Agreement. Section 7 is hereby amended by
deleting paragraph (b) of subsection 7.1 thereof in its entirety and
substituting in lieu thereof the following:
"(b) Interest Coverage Ratio. Permit the Interest Coverage
Ratio for any period of four consecutive fiscal quarters ending during
any period set forth below to be less than the ratio set forth
opposite such period below:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
6/30/98 - 6/29/99 3.25
6/30/99 - thereafter 4.00
</TABLE>
III. Conditions to Effectiveness. This Amendment shall become
effective on the date (the "Amendment Effective Date") on which the Parent, the
Subsidiary Borrowers, the Administrative Agent and the Majority Lenders shall
have executed and delivered to the Administrative Agent this Amendment.
<PAGE> 2
2
IV. General.
1. Representation and Warranties. To induce the Administrative
Agent and the Lenders parties hereto to enter into this Amendment, the Parent
and the Subsidiary Borrowers hereby represent and warrant to the Administrative
Agent and all of the Lenders as of the Amendment Effective Date that the
representations and warranties made by the Loan Parties in the Loan Documents
are true and correct in all material respects on and as of the Amendment
Effective Date, before and after giving effect to the effectiveness of this
Amendment, as if made on and as of the Amendment Effective Date and no Default
or Event of Default shall have occurred and be continuing.
2. Payment of Expenses. The Parent and the Subsidiary Borrowers agree
to pay or reimburse the Administrative Agent for all of its out-of-pocket costs
and reasonable expenses incurred in connection with this Amendment, any other
documents prepared in connection herewith and the transactions contemplated
hereby, including, without limitation, the reasonable fees and disbursements of
counsel to the Administrative Agent.
3. No Other Amendments; Confirmation. Except as expressly
amended, modified and supplemented hereby, the provisions of the Credit
Agreement and the Notes are and shall remain in full force and effect. This
Amendment shall constitute a Loan Document. The Lenders hereby waive any
Default that shall have occurred between June 30, 1998 and the date hereof in
respect of Section 7.1(b).
4. Governing Law; Counterparts. (a) This Amendment and the rights
and obligations of the parties hereto shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York.
(b) This Amendment may be executed by one or more of the parties
to this Agreement on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. This Amendment may be delivered by facsimile transmission of the
relevant signature pages hereof.
<PAGE> 3
3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.
SYBRON INTERNATIONAL CORPORATION
By:
-------------------------------
Title:
ORMCO CORPORATION
By:
-------------------------------
Title:
KERR CORPORATION
By:
-------------------------------
Title:
NALGE NUNC INTERNATIONAL
CORPORATION
By:
-------------------------------
Title:
ERIE SCIENTIFIC COMPANY
By:
-------------------------------
Title:
<PAGE> 4
4
BARNSTEAD THERMOLYNE CORPORATION
By:
-------------------------------
Title:
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a
Lender
By:
-------------------------------
Title:
ABN AMRO BANK N.V.
By:
-------------------------------
Title:
By:
-------------------------------
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By:
-------------------------------
Title:
BANK OF MONTREAL
By:
-------------------------------
Title:
<PAGE> 5
5
BANK ONE, WISCONSIN
By:
-------------------------------
Title:
THE BANK OF NOVA SCOTIA
By:
-------------------------------
Title:
BANK OF SCOTLAND
By:
-------------------------------
Title:
NATEXIS BANQUE/BFCE
By:
-------------------------------
Title:
By:
-------------------------------
Title:
<PAGE> 6
6
PARIBAS
By:
-------------------------------
Title:
By:
-------------------------------
Title:
CREDIT AGRICOLE INDOSUEZ
By:
-------------------------------
Title:
COMERICA BANK
By:
-------------------------------
Title:
CREDIT LYONNAIS CHICAGO BRANCH
By:
-------------------------------
Title:
<PAGE> 7
7
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
CAYMAN ISLAND BRANCH
By:
-------------------------------
Title:
By:
-------------------------------
Title:
U.S. BANK NATIONAL ASSOCIATION
By:
-------------------------------
Title:
FLEET NATIONAL BANK
By:
-------------------------------
Title:
THE FUJI BANK, LIMITED
By:
-------------------------------
Title:
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD.
By:
-------------------------------
Title:
<PAGE> 8
8
MELLON BANK, N.A.
By:
-------------------------------
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD.,
CHICAGO BRANCH
By:
-------------------------------
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By:
-------------------------------
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By:
-------------------------------
Title:
THE SAKURA BANK, LIMITED
By:
-------------------------------
Title:
<PAGE> 9
9
SOCIETE GENERALE
By:
-------------------------------
Title:
By:
-------------------------------
Title:
THE SUMITOMO BANK, LTD. CHICAGO
BRANCH
By:
-------------------------------
Title:
THE BANK OF NEW YORK
By:
-------------------------------
Title:
THE SANWA BANK, LIMITED
By:
-------------------------------
Title:
<PAGE> 10
10
BANQUE NATIONALE DE PARIS CHICAGO
BRANCH
By:
-------------------------------
Title:
BHF BANK AKTIENGESELLSCHAFT GRAND
CAYMAN BRANCH
By:
-------------------------------
Title:
By:
-------------------------------
Title:
FIRST UNION NATIONAL BANK
By:
-------------------------------
Title:
FIRSTAR BANK MILWAUKEE, N.A.
By:
-------------------------------
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED CHICAGO BRANCH
By:
-------------------------------
Title:
<PAGE> 11
11
BANCA COMMERCIALE ITALIANA
CHICAGO BRANCH
By:
-------------------------------
Title:
By:
-------------------------------
Title:
BANK HAPOALIM, B.M. PHILADELPHIA
BRANCH
By:
-------------------------------
Title:
By:
-------------------------------
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF SYBRON INTERNATIONAL CORPORATION
FOR THE NINE MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 27,726
<SECURITIES> 0
<RECEIVABLES> 180,412
<ALLOWANCES> 5,113
<INVENTORY> 166,467
<CURRENT-ASSETS> 419,605
<PP&E> 206,402
<DEPRECIATION> 167,934
<TOTAL-ASSETS> 1,401,773
<CURRENT-LIABILITIES> 158,677
<BONDS> 741,880
0
0
<COMMON> 1,008
<OTHER-SE> 438,329
<TOTAL-LIABILITY-AND-EQUITY> 1,401,773
<SALES> 695,638
<TOTAL-REVENUES> 695,638
<CGS> 342,974
<TOTAL-COSTS> 223,419
<OTHER-EXPENSES> 152
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,272
<INCOME-PRETAX> 86,821
<INCOME-TAX> 37,468
<INCOME-CONTINUING> 49,353
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,353
<EPS-PRIMARY> .49<F1>
<EPS-DILUTED> .47<F1>
<FN>
<F1>(As adjusted for the two-for-one stock split effective February 20, 1998. Prior
Financial Data Schedules other than for the periods ended March 31, 1998 and
1997 and December 31, 1997 and 1996, have not been restated to reflect the
stock split.)
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF SYBRON INTERNATIONAL CORPORATION
FOR THE NINE MONTHS ENDED JUNE 30, 1997, AS RESTATED TO REFLECT THE ADOPTION OF
SFAS NO. 128 AND THE MERGER OF NATIONAL SCIENTIFIC COMPANY AND LRS ACQUISITION
CORP., BOTH ACCOUNTED FOR AS A POOLING OF INTERESTS, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 18,029
<SECURITIES> 0
<RECEIVABLES> 167,172
<ALLOWANCES> 3,362
<INVENTORY> 158,429
<CURRENT-ASSETS> 379,926
<PP&E> 196,164
<DEPRECIATION> 147,777
<TOTAL-ASSETS> 1,264,377
<CURRENT-LIABILITIES> 159,252
<BONDS> 699,683
0
0
<COMMON> 986
<OTHER-SE> 343,151
<TOTAL-LIABILITY-AND-EQUITY> 1,264,377
<SALES> 605,433
<TOTAL-REVENUES> 605,433
<CGS> 297,102
<TOTAL-COSTS> 174,285
<OTHER-EXPENSES> 551
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,313
<INCOME-PRETAX> 100,182
<INCOME-TAX> 39,821
<INCOME-CONTINUING> 60,361
<DISCONTINUED> 0
<EXTRAORDINARY> (673)
<CHANGES> 0
<NET-INCOME> 59,688
<EPS-PRIMARY> .61<F1>
<EPS-DILUTED> .58<F1>
<FN>
<F1>(As adjusted for the two-for-one stock split effective February 20, 1998.
Prior Financial Data Schedules other than for the periods ended March 31, 1997
and December 31, 1996 have not been restated to reflect the stock split.)
</FN>
</TABLE>
