<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
FOR QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-18339
SYLVAN INC.
(Exact name of registrant as specified in its charter)
NEVADA 25-1603408
------ ----------
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or organization)
828 SOUTH PIKE ROAD, SARVER, PA 16055
------------------------------- -----
(Address of principal executive offices) (Zip Code)
(412) 295-3910
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
CLASS OUTSTANDING AT JUNE 28, 1996
----- ----------------------------
Common Stock - $.001 Par Value 6,355,230
<PAGE> 2
SYLVAN INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Part I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance Sheets
June 30, 1996 and December 31, 1995..................................... 3
Condensed Consolidated Statements of Income, Three Months
Ended June 30, 1996 and July 2, 1995.................................... 5
Condensed Consolidated Statements of Income, Six Months
Ended June 30, 1996 and July 2, 1995.................................... 6
Condensed Consolidated Statements of Cash Flows, Six
Months Ended June 30, 1996 and July 2, 1995............................. 7
Notes to Condensed Consolidated Financial Statements
June 30, 1996........................................................... 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........................... 11
Part II - OTHER INFORMATION
Item 1. Legal Proceedings ...................................................... 15
Item 4. Submission of Matters to a Vote of Security Holders..................... 15
Item 6. Exhibits and Reports on Form 8-K........................................ 15
</TABLE>
<PAGE> 3
Item 1. - Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
Sylvan Inc. and Subsidiaries
(In Thousands)
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,199 $ 5,375
Trade accounts receivable, net of allowance
for doubtful accounts of $944 and $1,088, respectively 8,648 9,025
Inventories 7,519 6,849
Deferred income tax benefit 493 493
Prepaid expenses and other current assets 1,994 1,410
- - - -----------------------------------------------------------------------------------------------------------------
Total current assets 23,853 23,152
Property, plant and equipment, net 43,835 42,492
Intangible assets, net of accumulated amortization
of $2,049 and $1,794, respectively 10,158 10,754
Other assets, net of accumulated amortization
of $1,087 and $997, respectively 5,480 5,386
- - - -----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $83,326 $81,784
=================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
CONDENSED CONSOLIDATED BALANCE SHEETS
Sylvan Inc. and Subsidiaries
(In Thousands Except Share Data)
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade $ 2,527 $ 4,197
Current portion of long-term debt 211 1,559
Accrued salaries, wages and other employee benefits 3,550 4,030
Accrued interest 438 289
Other accrued liabilities 2,230 2,477
- - - ----------------------------------------------------------------------------------------------------------------
Total current liabilities 8,956 12,552
- - - ----------------------------------------------------------------------------------------------------------------
Long-term and revolving term debt 30,144 26,842
- - - ----------------------------------------------------------------------------------------------------------------
Other long-term liabilities:
Postretirement medical benefits 5,440 5,755
Other employee benefits 551 955
Other 1,793 2,045
- - - ----------------------------------------------------------------------------------------------------------------
Total other long-term liabilities 7,784 8,755
- - - ----------------------------------------------------------------------------------------------------------------
CONTINGENT LIABILITIES (See Note 2)
SHAREHOLDERS' EQUITY:
Common Stock, voting, par value $.001, 10,000,000 shares authorized,
6,451,455 and 6,354,792 shares issued and 6,355,230 and 6,258,567
shares outstanding at June 30, 1996 and December 31, 1995,
respectively 6 6
Common capital contributed in excess of par 14,101 13,070
Retained earnings 24,424 21,019
Less: Treasury Stock, at cost, 96,225 shares
at June 30, 1996 and December 31, 1995 (281) (281)
Cumulative translation adjustment 1,171 2,800
Pension adjustment (2,979) (2,979)
- - - ----------------------------------------------------------------------------------------------------------------
Total shareholders' equity 36,442 33,635
- - - ----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $83,326 $81,784
================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Sylvan Inc. and Subsidiaries
(Unaudited, In Thousands Except Share Data)
<TABLE>
<CAPTION>
-------- Three Months Ended ---------
JUNE 30, 1996 JULY 2, 1995
------------- ------------
<S> <C> <C>
NET SALES $18,730 $18,085
- - - --------------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES:
Cost of sales 10,636 10,099
Noncash interest cost of employee benefits 51 120
Selling, administration, research and development 4,480 4,157
Depreciation 1,038 1,013
- - - --------------------------------------------------------------------------------------------------------------
16,205 15,389
- - - --------------------------------------------------------------------------------------------------------------
OPERATING INCOME 2,525 2,696
INTEREST EXPENSE, NET, INCLUDING
AMORTIZATION OF DEBT ISSUANCE COST 585 697
OTHER INCOME 14 119
- - - --------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 1,954 2,118
PROVISION FOR INCOME TAXES 411 681
- - - --------------------------------------------------------------------------------------------------------------
NET INCOME $ 1,543 $ 1,437
- - - --------------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE $ 0.24 $ 0.23
- - - --------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF SHARES (See Note 1) 6,465,735 6,336,662
==============================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Sylvan Inc. and Subsidiaries
(Unaudited, In Thousands Except Share Data)
<TABLE>
<CAPTION>
---------- Six Months Ended ---------
JUNE 30, 1996 JULY 2, 1995
------------- ------------
<S> <C> <C>
NET SALES $38,867 $37,140
- - - --------------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES:
Cost of sales 21,874 20,785
Noncash interest cost of employee benefits 151 201
Selling, administration, research and development 9,112 8,402
Depreciation 2,074 1,965
- - - --------------------------------------------------------------------------------------------------------------
33,211 31,353
- - - --------------------------------------------------------------------------------------------------------------
OPERATING INCOME 5,656 5,787
INTEREST EXPENSE, NET, INCLUDING
AMORTIZATION OF DEBT ISSUANCE COST 1,158 1,352
OTHER INCOME 129 171
- - - --------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 4,627 4,606
PROVISION FOR INCOME TAXES 1,222 1,520
- - - --------------------------------------------------------------------------------------------------------------
NET INCOME $ 3,405 $ 3,086
- - - --------------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE $ 0.53 $ 0.49
- - - --------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF SHARES (See Note 1) 6,433,759 6,274,876
==============================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Sylvan Inc. and Subsidiaries
(Unaudited, In Thousands)
<TABLE>
<CAPTION>
---------- Six Months Ended ---------
JUNE 30, 1996 JULY 2, 1995
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,405 $ 3,086
Adjustments to reconcile net income to net cash provided
from operating activities:
Depreciation and amortization 2,419 2,280
Deferred income taxes 73 363
Noncash interest cost of employee benefits 151 201
Net gain on sale of assets 7 (40)
Stock option compensation expense 158 158
Trade accounts receivable 377 1,415
Inventories (670) (687)
Prepaid expenses and other assets (427) (1,519)
Accounts payable and accrued liabilities (1,913) 1,010
Postretirement medical and other employee benefits (1,349) (2,900)
- - - -------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,231 3,367
- - - -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net expenditures for property, plant and equipment (4,146) (3,921)
- - - -------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (4,146) (3,921)
- - - -------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from European bank loans 0 7,353
Principal payments on long-term debt (5,755) (1,511)
Net borrowings under revolving credit line 8,096 1,425
Net proceeds from exercise of stock options 693 120
- - - -------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 3,034 7,387
- - - -------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATES ON CASH (1,295) 1,763
- - - -------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (176) 8,596
CASH AND CASH EQUIVALENTS, beginning of period 5,375 5,555
- - - -------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 5,199 $14,151
=============================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:
Interest paid $ 1,001 $ 1,527
Income taxes paid $ 1,408 $ 677
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Sylvan Inc. and Subsidiaries
June 30, 1996
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
GENERAL
These condensed consolidated financial statements of Sylvan Inc.
("Sylvan") (the "Company") are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the results
of operations for the interim period. These statements should be read in
conjunction with the consolidated financial statements and notes thereto
contained in the Company's Annual Report to Shareholders and its Form
10-K for the year ended December 31, 1995.
CASH
The Company maintains cash balances of approximately $3.0 million with a
U.S. bank in support of a letter of credit issued to a European bank.
INVENTORIES
Inventories at June 30, 1996 and December 31, 1995 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
------------- -----------------
<S> <C> <C>
Growing crops and compost material $3,760 $3,532
Stores and other supplies 1,717 1,690
Mushrooms and spawn on hand 2,042 1,627
------ ------
$7,519 $6,849
====== ======
</TABLE>
EARNINGS PER COMMON SHARE
Earnings per Common share for the three months and six months ended June
30, 1996 were calculated using the weighted average number of Common
shares outstanding during the period and included the effect of stock
options outstanding. Pursuant to the Company's 1990 and 1993 Stock Option
Plans, options for a total of 910,417 shares of the Company's Common
Stock have been granted and options for a total of 306,662 of these
shares have been exercised as of June 30, 1996.
8
<PAGE> 9
2. CONTINGENT LIABILITIES:
Certain of the Company's subsidiaries are self-insured for employee
medical benefits claims up to a limit of $50,000 per occurrence and also
for claims filed under Pennsylvania workers' compensation laws. Workers'
compensation claims for medical and lost wages in excess of $350,000 are
covered by an insurance policy.
3. FOREIGN CURRENCY TRANSLATION:
Assets and liabilities of non-U.S. operations are translated into U.S.
dollars using period-end exchange rates, while revenues and expenses are
translated at average exchange rates throughout the quarter. The
resulting net translation adjustments are recorded as a separate
component of shareholders' equity.
4. LONG-TERM DEBT AND BORROWING ARRANGEMENTS:
On June 1, 1996 the Company entered into a successor Revolving Credit
Agreement ("New Agreement") with two commercial banks. The New Agreement
amends and restates the Amended and Restated Revolving Credit and Term
Loan Agreement dated as of March 19, 1991 and last amended as of August
1, 1995 ("Old Agreement"). It provides for revolving credit loans on
which the aggregate outstanding balance available to the Company may not
initially exceed $45.0 million, but this aggregate outstanding balance
will decline over the life of the New Agreement as follows:
<TABLE>
<CAPTION>
MAXIMUM AGGREGATE
YEAR BEGINNING OUTSTANDING BALANCE
-------------- -------------------
<S> <C>
June 1, 1996 $45.0 million
June 1, 1998 40.0 million
June 1, 1999 35.0 million
June 1, 2001 25.0 million
June 1, 2002 20.0 million
</TABLE>
Outstanding borrowings under the New Agreement bear interest at either
the Prime Rate or LIBOR (plus an applicable margin), at the Company's
option.
The revolving credit loans mature on May 31, 2003. Within and under the
same terms and conditions as the revolving credit loan facility, the
Company may also borrow up to the U.S. dollar equivalent of $6.0 million,
denominated in Dutch guilders. Such borrowings may only be made outside
the United States.
In addition to certain other restrictions, the New Agreement provides for
the maintenance of various financial covenants, including limitations as
to incurring additional indebtedness, granting security interests to
third parties, spending for capital projects and paying dividends. The
Company has pledged to the lending banks a security interest in the
capital stock of its subsidiaries.
9
<PAGE> 10
The Company utilized monies under the New Agreement to repay term loans
outstanding under the Old Agreement and has allocated $2.0 million of its
credit capacity to support stand-by letters of credit which the Company
was required to obtain in connection with the self-insurance of its
subsidiaries' workers' compensation claims. On June 30, 1996, the Company
had outstanding borrowings under the New Agreement of $18.3 million.
The Company has two interest rate swap agreements which apply to $10.0
million of the Company's total long-term debt. The Company is required to
pay a weighted interest rate over the life of the agreements of 7.61%
plus the applicable margin. The balance of long-term debt continues to be
subject to variable interest rate pricing.
The Company has an agreement with a French bank which enables it to
borrow 15 million French francs at an interest rate based on a Paris
Interbank Offered Rate plus the applicable margin with repayment due
January 1998.
The Company's majority-owned Dutch subsidiary has a long-term plant and
equipment and overdraft facility with a Dutch bank. At June 30, 1996,
term loans amounting to 5.6 million Dutch guilders (approximately $3.3
million) were outstanding under this agreement.
10
<PAGE> 11
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sylvan Inc. and Subsidiaries
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations for the six months ended June 30, 1996 was $1.1
million, or 34%, below net cash provided for the comparable period in 1995,
despite a net income increase of $0.3 million or 10%. Trade working capital
(inventories, net trade receivables and trade payables) decreased by $2.2
million in the first six months of 1996, compared with an increase of $1.7
million in the comparable period of 1995. The movement in trade receivables in
1996 is consistent with underlying trends in product sales and other seasonal
factors. Year-end trade receivables in 1994 were distorted by factors relating
to the start-up of the Company's Australian subsidiary. As a result, the 1995
decrease was unusually large. Trade payables decreased $1.9 million following
payments related to capital projects that were in progress in 1995 and completed
in 1996. Inventory levels increased in both periods. Straw inventories at the
Quincy Farms unit increased, due in part to the production cutback and to
expected seasonal purchasing patterns. Spawn inventories increased in line with
the additional production capacity brought on line in late 1995 and early 1996
in Europe. The change in prepaid expenses and other assets, which are largely
denominated in French francs, was caused by currency fluctuations as the U.S.
dollar strengthened during 1996. Postretirement medical and other employee
benefit expenditures amounted to $1.3 million during the first six months of
1996, compared with $2.9 million in the 1995 period. The Company expects that
payments to settle the remaining outstanding workers' compensation cases will
decrease to approximately $1.0 million for 1996, compared with a total
expenditure of $2.5 million in 1995.
During the first six months of 1996, the U.S. dollar has strengthened against
most foreign currencies. The Company translates the foreign
currency-denominated balance sheets of its subsidiaries at the spot exchange
rate in effect on the last day of the applicable reporting date. The effect of
a stronger U.S. dollar reduces the U.S. dollar equivalent value of foreign
currency-denominated assets and liabilities. The effect of these currency
translation-related value changes are reflected in the $1.6 million reduction
in the cumulative translation account component of shareholders' equity.
Capital expenditures in the first six months of 1996 amounted to $4.1 million,
compared with $3.9 million in the first six months of 1995. Major capital
projects completed during 1996 include the spawn inoculum production facility
in Pennsylvania and the spawn production plant in Australia. In addition, a
spawn production plant is under construction in Hungary and it is expected to
be completed in 1997. Funding for this and other capital projects will be
provided by a combination of existing cash balances, internal cash flows and
credit facilities. The Company maintains more than 75% of its cash balances in
foreign currencies in non-U.S. financial institutions to support offshore
capital projects.
As discussed in Note 4 of the Notes to Condensed Consolidated Financial
Statements, Long-Term Debt and Borrowing Arrangements, the Company modified its
existing credit facilities to provide increased credit resources with longer
repayment terms, improved pricing and favorable changes in security and
covenant requirements.
11
<PAGE> 12
The Company did not make a federal income tax deposit in the six months ended
June 30, 1996. It is expected that such deposits will be required during the
remainder of the fiscal year.
RESULTS OF OPERATIONS (Three Months Ended June 30, 1996 and July 2, 1995)
NET SALES
Net sales for the three months ended June 30, 1996 increased 4%, but included a
mix shift between products. Fresh mushroom revenues declined 11%, due to a 14%
reduction in units sold. The planned reduction announced at the end of the first
quarter was in full effect for the second quarter. Average price per pound sold
increased to $1.21 per pound from $1.15 per pound in the prior-year quarter.
This increase in average realized price resulted from an increase in the
proportion of mushrooms sold through fresh distribution channels. This
percentage increased to 94% for the quarter ended June 30, 1996 from 86% in
1995. Net sales from spawn and spawn-related products increased 13% in the
current quarter, as compared with the prior year on a 15% increase in units
shipped. Unit sales were higher in all market areas. Average U.S. dollar selling
price per unit declined slightly, due to foreign currency translation effects
and a higher volume discount utilization rate in North America. Outside of North
America, average selling prices as measured in local selling currencies were
stable to up slightly in nearly all market areas. Sales of chemicals and
nutritional supplements increased 12% period over period.
OPERATING COSTS AND EXPENSES
Cost of sales increased $537,000, or 5%, due in large part to the production
cutback at Quincy. The reduced production levels in the short-term cannot
be matched by offsetting cost reductions, as several components of production
cost do not increase or decrease directly with production levels. On a
consolidated basis, cost of sales was 56.8%, as compared with 55.8% in the
comparable 1995 quarter. The noncash interest cost of employee benefits
declined approximately $70,000 from the prior-year quarter, reflecting the
overall reduction in the liabilities outstanding for these benefits, and is
likely to continue at approximately this level in the absence of further
liability reductions. Selling, administration and research and development
expenses increased $323,000, and are 23.9% of net sales, as compared with 23.0%
for the prior-year quarter. The higher level of spending has been primarily in
market development efforts in eastern Europe and Asia. Research and development
spending has been consistent in the comparable quarters and remains focused on
efforts to improve the integrity of the genetic material used to produce spawn
and casing inoculum. Depreciation expense increased over the comparable quarter,
reflecting the continuing investment program in spawn production facilities.
INTEREST EXPENSE
Net interest expense was $585,000 in the second quarter of 1996, compared with
$697,000 in the 1995 period. The Company benefited from lower average
borrowings in this year's quarter compared with the comparable 1995 quarter,
together with a decline in the average cost of funds to 8.1% in 1996 from 9.2%
in 1995, due to lower interest rates.
12
<PAGE> 13
INCOME TAX EXPENSE
The effective income tax rate in the second quarter of 1996 was 21%, compared
with 32% in the comparable quarter of 1995. The weighting of net income between
domestic and overseas operations changed in the quarter due to a significant
decline in net income reported by the Company's Quincy fresh mushroom
operation. This increased the proportion of the Company's total net income
contributed by operations located in lower tax rate jurisdictions.
RESULTS OF OPERATIONS (Six Months Ended June 30, 1996 and July 2, 1995)
NET SALES
Net sales for the six months ended June 30, 1996 were 5% higher than the
six-month period for the prior year, as net sales from spawn products increased
12%, offsetting the 5% decline in fresh mushroom sales. Revenues from outside
the Unites States were 43% of total revenues. Unit shipments of spawn products
increased 13% for the six-month period, as compared with the prior year period,
with higher shipments recorded in each major market area. Foreign currency
translation rates and higher utilization rates of volume-discount programs
resulted in a small reduction in average selling price, even though local
selling currency prices were stable to slightly higher. Sales of nutritional
supplements and chemicals increased 8%. The Company expects that revenues from
spawn products will continue to increase as a proportion of its total sales due
both to its continuing investment in spawn-related production capacity and its
cutback in fresh mushroom production.
During the six months ended June 30, 1996, the Company experienced a change in
operating income produced by its principal products. Operating income from
fresh mushroom products at Quincy declined by nearly one-third from its
1995 level, while operating income from spawn products increased nearly enough
to offset the Quincy decline. The Company initiated a production cutback at the
end of its current first quarter as part of a quality improvement program. The
Company has experienced a labor-organizing effort at its Quincy unit,
which resulted in a partial-day work stoppage in the first quarter. No such
events have subsequently occurred, but organizers have picketed retail stores
and called for a boycott of Quincy's products. Quincy has not experienced loss
of sales due to these efforts, which, although diminished, are continuing in
the Tallahassee, Florida, area. The Company is evaluating a number of options
to restore and possibly improve future contributions from this business. The
results of implementing these options may not begin to have a positive effect
on the results of the business before 1997. The Company's longer-term plans
call for continued emphasis on its spawn product business, with expectations
for increasing proportions of its operating income to be derived from spawn
products.
OPERATING COSTS AND EXPENSES
Cost of sales for the six-month period was 56.3% of sales, as compared with
56.0% for the comparable prior period. Gross margins for fresh mushrooms
decreased significantly for the period, while spawn product gross margins
increased by 3.1%. Utilization of new European facilities and lower discard
rates were the major contributors to margin improvement in spawn products.
Selling, general and administrative and research and development expenses
increased $710,000, or 8.5%, in
13
<PAGE> 14
part due to higher market development costs in eastern Europe and Asia. As a
percentage of sales, these costs represent 23.4% of sales, as compared with
22.6% of the comparable prior period. Although these types of expenses were
reduced in the aggregate at Quincy, they did not decrease at the same rate
as sales, therefore contributing to the higher consolidated percentage of sales
relationship. Research and development expenditures were nearly unchanged from
the comparable prior-year period. Depreciation expense increased $110,000 on a
comparable period-to-period basis, due primarily to the European plant additions
and renovations.
INTEREST EXPENSE
Interest expense for the six months ended June 30, 1996 was $1,158,000,
compared with $1,352,000 in the comparable period in 1995. This 14% decrease is
due primarily to the utilization of surplus cash balances in December 1995 to
pay down approximately $4.3 million of the revolver balance outstanding,
together with a decline in the average cost of funds to 8.3% from 9.2%,
reflecting the effects of generally lower interest rates.
INCOME TAX EXPENSE
The effective income tax rate for the six months ended June 30, 1996 was 26.4%,
compared with an effective rate of 33.0% in the comparable period of 1995. The
decrease in the effective rate was driven mainly by a shift in the proportion
of earnings towards sources in lower tax rate jurisdictions. This was detailed
in the comments made above for the three months ended June 30, 1996 and July 2,
1995.
14
<PAGE> 15
PART II - OTHER INFORMATION
Item 1. - LEGAL PROCEEDINGS
Other than ordinary routine litigation incidental to their respective
businesses, there are no material pending legal proceedings to which the
Company or any of its subsidiaries is a party or of which any of their property
is the subject.
Item 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Sylvan Inc.'s Annual Meeting of Shareholders was held on May 16, 1996. At the
meeting, the following persons, constituting the full board, were elected
directors of the Company to serve for a term of one year, expiring in 1997:
<TABLE>
<CAPTION>
---- Number of Votes ----
FOR WITHHELD
--- --------
<S> <C> <C>
William L. Bennett 5,300,818 90,365
Virgil H. Jurgensmeyer 5,300,824 90,359
Richard F. Lazzarini, Jr. 5,300,833 90,300
Donald T. Pascal 5,300,824 90,359
Dennis C. Zensen 5,300,941 90,242
</TABLE>
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(10) Revolving Credit Agreement, dated as of June 1, 1996, by and among
Sylvan Inc., Sylvan Foods (Netherlands) B.V., ABNoAMRO Bank N.V. -
Pittsburgh Branch and Mellon Bank N.A., as Agent.
(11) Statement re computation of per share earnings is not required
because the relevant computation can be clearly determined from the
material contained in the financial statements included herein.
(27) Financial Data Schedule
(b) Reports on Form 8-K
None
15
<PAGE> 16
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.
Date: AUGUST 1, 1996 SYLVAN INC.
By: /s/ WILLIAM P. MOONEY
-------------------------
William P. Mooney
Chief Financial Officer
(Principal Financial Officer
and Chief Accounting Officer)
By: /s/ FRED Y. BENNITT
-------------------------
Fred Y. Bennitt
Secretary/Treasurer
16
<PAGE> 1
Exhibit 10
===============================================================================
REVOLVING CREDIT AGREEMENT
among
SYLVAN INC.
SYLVAN FOODS (NETHERLANDS) BV
the "Banks" named herein
the "Issuing Bank" named herein
and
MELLON BANK, N.A. as "Agent"
Dated as of June 1, 1996
===============================================================================
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Section Title Page
- - - ------- ----- ----
<S> <C> <C>
ARTICLE I DEFINITIONS; CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 Certain Definitions; Construction . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II THE CREDITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.01 Revolving Credit Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) The Commitments . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) Revolving Credit . . . . . . . . . . . . . . . . . . . . . . . 2
(c) Revolving Credit Notes . . . . . . . . . . . . . . . . . . . . 2
(d) Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . 2
2.02 Making of Company Revolving Credit Loans . . . . . . . . . . . . . . . . . . 2
2.03 Making of SFNBV Revolving Credit Loans . . . . . . . . . . . . . . . . . . . 2
2.04 Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Optional Bases of Borrowing . . . . . . . . . . . . . . . . . . 3
(b) Applicable Margin . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Funding Periods . . . . . . . . . . . . . . . . . . . . . . . . 4
(d) Transactional Amounts . . . . . . . . . . . . . . . . . . . . . 5
(e) Euro-Rate Unascertainable; Impracticability . . . . . . . . . . 5
2.05 Conversion or Renewal of Interest Rate Options . . . . . . . . . . . . . . . 6
(a) Conversion or Renewal . . . . . . . . . . . . . . . . . . . . . 6
(b) Failure to Convert or Renew . . . . . . . . . . . . . . . . . . 7
2.06 Prepayments Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.07 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.08 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.09 Interest Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.10 Pro Rata Treatment and Payments . . . . . . . . . . . . . . . . . . . . . . 8
2.11 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) Letter of Credit Limit . . . . . . . . . . . . . . . . . . . . 9
(b) Dutch Letters of Credit . . . . . . . . . . . . . . . . . . . . 9
(c) Commitment Usage . . . . . . . . . . . . . . . . . . . . . . . 9
(d) Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . 9
(e) Payments with Respect to Letters of Credit . . . . . . . . . . 9
(f) Additional Understandings Regarding Letters of Credit . . . . . 10
(g) Participating Interests; Generally . . . . . . . . . . . . . . 10
(h) Payment by Banks on Account of Unreimbursed Draws . . . . . . . 10
(i) Obligations Several . . . . . . . . . . . . . . . . . . . . . . 11
(j) Obligations Absolute . . . . . . . . . . . . . . . . . . . . . 11
(k) Distributions . . . . . . . . . . . . . . . . . . . . . . . . . 11
(l) Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(m) The Issuing Bank and the Banks . . . . . . . . . . . . . . . . 11
2.12 SFNBV Revolving Credit Loan Payments . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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2.13 Additional Compensation in Certain Circumstances, etc. . . . . . . . . . . . 12
(a) Increased Costs or Reduced Return Resulting
From Taxes, Reserves, Capital Adequacy
Requirements, Expenses, Etc. . . . . . . . . . . . . . . . . . . 12
(b) Funding Breakage . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.14 Funding By Branch, Subsidiary or Affiliate . . . . . . . . . . . . . . . . . 14
(a) Notional Funding . . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) Actual Funding . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.15 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(a) Payments Net of Taxes . . . . . . . . . . . . . . . . . . . . . . . 14
(b) Other Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(c) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(d) Receipts, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(e) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(f) Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . . 15
(g) Refunds, Credits, etc. . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE III REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . 16
3.01 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . 16
3.02 Authority and Authorization . . . . . . . . . . . . . . . . . . . . . . . . 16
3.03 Execution and Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . 17
3.04 Authorizations and Filings . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.05 Absence of Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.06 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.07 No Event of Default; Compliance with Instruments . . . . . . . . . . . . . . 17
3.08 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.09 Subsidiaries and Partnerships . . . . . . . . . . . . . . . . . . . . . . . 18
3.10 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.11 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.13 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.14 Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.15 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.16 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.17 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.19 Solvency Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.20 Accurate and Complete Disclosure . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE V CONDITIONS OF LENDING . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.01 Conditions to Initial Loans . . . . . . . . . . . . . . . . . . . . . . . . 21
(a) Agreement; Notes; Security Documents . . . . . . . . . . . . . 21
(b) Corporate Proceedings . . . . . . . . . . . . . . . . . . . . 21
(c) Legal Opinion of Counsel to the Borrower Parties . . . . . . . 21
(d) Officers' Certificates . . . . . . . . . . . . . . . . . . . . 21
(e) Fees, Expenses, etc. . . . . . . . . . . . . . . . . . . . . . 21
(f) Additional Matters . . . . . . . . . . . . . . . . . . . . . . 21
4.02 Conditions to All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(a) Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(b) Representations and Warranties . . . . . . . . . . . . . . . . 21
(c) No Defaults . . . . . . . . . . . . . . . . . . . . . . . . . 22
(d) No Violations of Law, etc. . . . . . . . . . . . . . . . . . . 22
</TABLE>
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ARTICLE V AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.01 Reporting and Information Requirements . . . . . . . . . . . . . . . . . . . 22
(a) Annual Audit Reports . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Quarterly Reports . . . . . . . . . . . . . . . . . . . . . . . . . 22
(c) Compliance Certificates . . . . . . . . . . . . . . . . . . . . . . 23
(d) Forecast and Analysis . . . . . . . . . . . . . . . . . . . . . . . 23
(e) Other Reports and Information . . . . . . . . . . . . . . . . . . . 23
(f) Further Information . . . . . . . . . . . . . . . . . . . . . . . . 23
(g) Notice of Certain Events . . . . . . . . . . . . . . . . . . . . . 23
(h) Visitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(i) Quarterly Calculation . . . . . . . . . . . . . . . . . . . . . . . 24
5.02 Preservation of Existence and Franchises . . . . . . . . . . . . . . . . . . 24
5.03 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.04 Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.05 Payment of Taxes and Other Potential Charges and
Priority Claims; Payment of Other Current Liabilities . . . . . . . . . 24
5.06 Financial Accounting Practices . . . . . . . . . . . . . . . . . . . . . . . 25
5.07 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.08 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.09 Government Approvals and Filings . . . . . . . . . . . . . . . . . . . . . . 25
5.10 Continuation Of or Change In Business . . . . . . . . . . . . . . . . . . . 25
ARTICLE VI NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.01 Financial Maintenance Covenants . . . . . . . . . . . . . . . . . . . . . . 26
(a) Consolidated Funded Indebtedness
to Consolidated Capitalization . . . . . . . . . . . . . . . . . 26
(b) Consolidated Funded Indebtedness to
Consolidated Cash Flow . . . . . . . . . . . . . . . . . . . . . 26
(c) Consolidated Interest Coverage Ratio . . . . . . . . . . . . . . . 26
6.02 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.03 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.04 Guarantees and Contingent Liabilities . . . . . . . . . . . . . . . . . . . 27
6.05 Loans and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.06 Dividends and Related Distributions . . . . . . . . . . . . . . . . . . . . 29
6.07 Sale-Leasebacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.08 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.09 Mergers, Acquisitions, etc. . . . . . . . . . . . . . . . . . . . . . . . . 30
6.10 Dispositions of Properties . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.11 Self-Dealing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.12 Consolidated Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.13 Regulation U . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.14 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.15 Limitation on Other Restrictions on Liens . . . . . . . . . . . . . . . . . 32
6.16 Limitation on Other Restrictions on Stock
Payments, Loans and Investments . . . . . . . . . . . . . . . . . . 32
</TABLE>
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ARTICLE VII DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.02 Consequences of an Event of Default . . . . . . . . . . . . . . . . . . . . 35
7.03 Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.04 Equalization Among Banks and Participants . . . . . . . . . . . . . . . . . 36
7.05 Judgment Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VIII THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.01 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.02 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.03 Nature of Duties; Independent Credit Investigation . . . . . . . . . . . . . 37
8.04 Actions in Discretion of Agent; Instructions from Banks . . . . . . . . . . 38
8.05 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(a) Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . 38
(b) Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . 38
8.06 Reimbursement and Indemnification . . . . . . . . . . . . . . . . . . . . . 38
8.07 Reliance by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.08 Mellon Bank, N.A. in its Individual Capacity . . . . . . . . . . . . . . . . 39
8.09 Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.10 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.11 Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.12 Agent's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IV MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.01 Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.02 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.03 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.04 No Implied Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . . . . 40
9.05 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
9.06 Expenses; Taxes; Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . 41
9.07 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.08 Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . . . . . 41
9.09 Prior Understandings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.10 Duration; Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.12 Successors and Assigns; Participations; Assignments . . . . . . . . . . . . 42
(a) Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 42
(b) Participations . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(c) Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
(d) Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
(e) Financial and Other Information . . . . . . . . . . . . . . . . . . 44
9.13 Secured Hedge Agreements; Application of Security . . . . . . . . . . . . . 44
9.14 Counsel Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.15 Amendment and Restatement . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
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Annex A Definitions and Construction . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit A-1 Company Revolving Credit Note . . . . . . . . . . . . . . . . . . . . . . . -
Exhibit A-2 SFNBV Revolving Credit Note . . . . . . . . . . . . . . . . . . . . . . . . -
Exhibit B Automatic Borrowing Service Agreement . . . . . . . . . . . . . . . . . . . -
Exhibit C Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -
Exhibit D Compliance Certificate (Dividends) . . . . . . . . . . . . . . . . . . . . . -
Exhibit E Transfer Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . . . -
Exhibit F Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -
Exhibit G Secured Hedge Supplement . . . . . . . . . . . . . . . . . . . . . . . . . . -
Schedule 2.11(c) Outstanding Letters of Credit
Schedule 3.09 Subsidiaries; Partnerships and Joint Ventures
Schedule 6.02 Liens
Schedule 6.03 Indebtedness
Schedule 6.04 Guarantees
Schedule 6.05 Loans and Investments
Schedule 6.16 Restrictions on Stock Payments, Loans and Investments
Schedule 9.13 Existing Secured Hedge Agreements
</TABLE>
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<PAGE> 7
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT (this "Agreement"), dated as
of June 1, 1996, by and among SYLVAN INC., a Nevada corporation (the
"Company"), SYLVAN FOODS (NETHERLANDS) BV ("SFNBV"), a Dutch corporation, the
Banks listed on the signature page hereof (individually, a "Bank" and
collectively, the "Banks"), the Issuing Bank acting as such under this
Agreement (the "Issuing Bank") and MELLON BANK, N.A., a national banking
association, as agent for the Banks and the Issuing Bank hereunder (in such
capacity, the "Agent").
WHEREAS, the Company and SFNBV have requested the Banks to
provide revolving credit to the Company and SFNBV in an initial aggregate
amount not to exceed $45,000,000 and the Banks are willing to provide such
credit on the terms and subject to the conditions herein contained.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained and intending to be legally bound hereby, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.01. CERTAIN DEFINITIONS; CONSTRUCTION. In addition to other
words and terms defined elsewhere in this Agreement, as used herein the words
and terms defined in Annex A shall have the meanings given them in Annex A and
this Agreement shall be construed in accordance with the provisions of Annex A.
ARTICLE II
THE CREDITS
2.01. REVOLVING CREDIT LOANS.
(a) THE COMMITMENTS. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Bank (i)
agrees (such agreement being herein called such Bank's "Company Revolving
Credit Commitment") to make loans to the Company at any time or from time to
time on or after the date hereof and up to but not including the Revolving
Credit Expiration Date in an aggregate principal amount not exceeding at any
one time outstanding such Bank's Commitment Amount at such time (the "Company
Revolving Credit Loans") and (ii) agrees (such agreement being herein called
such Bank's "SFNBV Revolving Credit Commitment") to make loans to SFNBV at any
time or from time to time on or after the date hereof and up to but not
including the Revolving Credit Expiration Date in an aggregate principal amount
not exceeding at any one time outstanding such Bank's SFNBV Revolving Credit
Commitment Amount at such time (the "SFNBV Revolving Credit Loans"); provided,
however, that the Company shall not request, and the Banks shall not be
obligated to make, Company Revolving Credit Loans if the principal amount
thereof, when added to the aggregate amount in respect of all outstanding
Letters of Credit constituting undrawn and unreimbursed amounts thereunder and
the principal amount of all outstanding Company Revolving Credit Loans and all
outstanding SFNBV Revolving Credit Loans, would be in excess of the Revolving
Credit Commitment Amount and neither the Company nor SFNBV shall request, and
the Banks shall not be obligated to make, SFNBV Revolving Credit Loans if the
principal amount thereof, when added to the aggregate amount in respect of all
outstanding Letters of Credit constituting undrawn and unreimbursed amounts
thereunder, all outstanding Company Revolving Credit Loans and all outstanding
SFNBV Revolving Credit Loans would be in excess of the Revolving Credit
Commitment Amount or if the principal amount thereof, when added to the
aggregate amount in respect of all outstanding SFNBV
<PAGE> 8
Revolving Credit Loans and all outstanding Dutch Letters of Credit would be in
excess of the SFNBV Revolving Credit Commitment Amount.
(b) REVOLVING CREDIT. Within the limits of time and amount
set forth in this Section 2.01, and subject to the provisions of this
Agreement, the Company and SFNBV may borrow, repay and reborrow hereunder. The
failure of any Bank to make a Revolving Credit Loan shall not relieve any other
Bank of its obligation to lend hereunder, but neither the Agent nor any Bank
shall be responsible for the failure of any other Bank to make a Revolving
Credit Loan.
(c) REVOLVING CREDIT NOTES. The obligations of the Company
to repay the unpaid principal amount of the Company Revolving Credit Loans made
to it by each Bank and to pay interest thereon shall be evidenced in part by a
single promissory note of the Company in substantially the form of Exhibit A-1
attached hereto, one to each Bank (the "Company Revolving Credit Notes"), with
the blanks appropriately filled, payable to the order of such Bank in a face
amount equal to such Bank's Commitment Amount. The obligations of SFNBV to
repay the unpaid principal amount of the SFNBV Revolving Credit Loans made to
it by each Bank shall be evidenced in part by a single promissory note of SFNBV
in substantially the form of Exhibit A-2 attached hereto, one to each Bank (the
"SFNBV Revolving Credit Notes"), with the blanks appropriately filled, payable
to the order of such Bank in a face amount equal to such Bank's SFNBV Revolving
Credit Commitment Amount.
(d) COMMITMENT FEE. The Company agrees to pay to the Agent,
as consideration for the Revolving Credit Commitments, a commitment fee equal
to 0.25% per annum (based on a year of 365 or 366 days as the case may be) on
the unborrowed amount of the Revolving Credit Commitment Amount for each day
from and including the date hereof to and including the Revolving Credit
Expiration Date (the "Commitment Fee"). Such Commitment Fee shall be due and
payable for the preceding period on the last date of each September, December,
March and June after the date hereof to the Revolving Credit Expiration Date
and on the Revolving Credit Expiration Date. For the purposes of this Section
2.01(d) the term "unborrowed amount" shall mean the Revolving Credit Commitment
Amount less the principal amount of any outstanding Revolving Credit Loans and
the aggregate amount in respect of all outstanding Letters of Credit
constituting undrawn and unborrowed amounts thereunder.
2.02. MAKING OF COMPANY REVOLVING CREDIT LOANS. Whenever the
Company desires the Banks to make Company Revolving Credit Loans, the Company
shall provide Standard Notice to the Agent setting forth (a) the date, which
shall be a Business Day, on which such proposed Loans are to be made, (b) the
aggregate principal amount of such proposed Loans, which shall be the sum of
the principal amounts selected pursuant to clause (c) of this Section 2.02, and
which shall be an integral multiple of $50,000 not less than $250,000, (c) the
interest rate Option or Options selected in accordance with Section 2.04(a)
hereof and the principal amount selected in accordance with Section 2.04(d)
hereof of the Prime Rate Portion and each Funding Segment of the Euro-Rate
Portion of such proposed Loans and (d) with respect to each such Funding
Segment of such proposed Loans, the Funding Period to apply to such Funding
Segment, selected in accordance with Section 2.04(c) hereof. The Agent shall
promptly give notice to each Bank of the information contained in such notice
and of the amount of such Bank's Loan. Unless any applicable condition
specified in Article V hereof has not been satisfied on the date specified in
such Standard Notice, each Bank shall make the proceeds of its Loan available
to the Agent at the Agent's Domestic Office, no later than 12:00 o'clock Noon,
Pittsburgh time, on the date specified in such notice, in funds immediately
available at such Office. The Agent will make the funds so received available
to the Company in funds immediately available at the Agent's Domestic Office.
Notwithstanding the provisions hereof, Revolving Credit Loans may be made to
the Company in accordance with the Automatic Borrowing Service Agreement, a
form of which is attached hereto as Exhibit B, provided such Revolving Credit
Loans are on the basis of the Prime Rate Option.
2.03. MAKING OF SFNBV REVOLVING CREDIT LOANS. Whenever SFNBV
or the Company desires the Banks to make SFNBV Revolving Credit Loans, SFNBV or
the Company shall provide
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<PAGE> 9
Standard Notice to the Agent setting forth information required by Section 2.02
hereof. The Agent shall promptly give notice to each Bank of the information
contained in such notice and the amount of such Bank's Loan. Unless any
applicable condition specified in Article V hereof has not been satisfied or the
date specified in such Standard Notice, each Bank shall make the proceeds of its
Loan available to the Agent at the Agent's London Office, no later than 12:00
o'clock Noon, London time, on the date specified in such notice, in funds
immediately available to such office. The Agent will make the funds so received
available to SFNBV in funds immediately available at the Agent's London Office.
2.04. INTEREST RATES.
(a) OPTIONAL BASES OF BORROWING. The unpaid principal amount
of the Loans shall bear interest for each day until due on one or more bases
selected by a Borrower from among the interest rate Options set forth below.
Subject to the provisions of this Agreement a Borrower may select different
Options to apply simultaneously to different Portions of the Loans and may
select different Funding Segments to apply simultaneously to different parts of
the Euro-Rate Portion of the Loans. Notwithstanding the foregoing, all SFNBV
Revolving Credit Loans shall bear interest at the Euro-Rate Option, and SFNBV
shall not have the right to select the Prime Rate Option with respect to such
Loans.
(i) PRIME RATE OPTION: A rate per annum (computed on
the basis of a year of 365 or 366 days (as the case may be)
and actual days elapsed) for each day equal to the Prime Rate
for such day.
(ii) EURO-RATE OPTION: A rate per annum (based on a
year of 360 days and actual days elapsed) for each day equal
to the Euro-Rate for such day plus the Applicable Margin for
such day. "Euro-Rate" for any day, as used herein, shall mean
for each Funding Segment of the Euro-Rate Portion
corresponding to a proposed or existing Euro-Rate Funding
Period the rate per annum determined by the Agent by dividing
(the resulting quotient to be rounded upward to the nearest
1/100 of 1%) (A) the rate of interest (which shall be the same
for each day in such Euro-Rate Funding Period) determined in
good faith by the Agent in accordance with its usual
procedures (which determination shall be conclusive absent
manifest error) to be the average of the rates per annum for
deposits in the Selected Currency offered to major money
center banks in the London interbank market at approximately
11:00 a.m., London time, two London Business Days prior to the
first day of such Euro-Rate Funding Period for delivery on the
first day of such Euro-Rate Funding Period in amounts
comparable to such Funding Segment and having maturities
comparable to such Funding Period by (B) a number equal to
1.00 minus the Euro-Rate Reserve Percentage.
The "Euro-Rate" may also be expressed by the following
formula:
[average of the rates offered to major money ]
[center banks in the London interbank market ]
Euro-Rate = [determined by the Agent per subsection (A) ]
------------------------------------------------
[1.00 - Euro-Rate Reserve Percentage ]
"Euro-Rate Reserve Percentage" for any day shall mean
the percentage (expressed as a decimal, rounded upward to the
nearest 1/100 of 1%), as determined in good faith by the Agent
(which determination shall be conclusive absent manifest
error), which is in effect on such day as prescribed by the
Board of Governors of the Federal Reserve System (or any
successor) representing the maximum reserve requirement
(including, without limitation, supplemental, marginal and
emergency reserve requirements) with respect to eurocurrency
funding (currently referred to as "Eurocurrency liabilities")
of a member bank in such System. The Euro-Rate shall be
adjusted automatically as of the
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<PAGE> 10
effective date of each change in the Euro-Rate
Reserve Percentage. The Euro-Rate Option shall be calculated
in accordance with the foregoing whether or not any Bank is
actually required to hold reserves in connection with its
eurocurrency funding or, if required to hold such reserves, is
required to hold reserves at the "Euro-Rate Reserve
Percentage" as herein defined.
The Agent shall give prompt notice to the Borrower and
to the Banks of the Euro-Rate determined or adjusted in
accordance with the definition of the Euro-Rate, which
determination or adjustment shall be conclusive, absent
manifest error, if made in good faith.
(b) APPLICABLE MARGIN.
The Applicable Margin for each day shall mean the applicable
percentage set forth below, if and for so long as (x) no Event of Default or
Potential Default shall have occurred and be continuing and (y) Financial Test
A, Financial Test B or Financial Test C set forth below shall be satisfied for
such day. For purposes of determining the Applicable Margin, Financial Test A,
Financial Test B or Financial Test C, as the case may be, shall be deemed to be
satisfied effective as of the July 1 following the date on which the Agent
shall have received from the Company a certificate, duly completed and signed
by the chief financial officer of the Company, accompanied by the Company's
annual audited financial statements for the fiscal year most recently ended
demonstrating compliance with the applicable financial test, and such financial
test shall be deemed to remain satisfied until the July 1 following the date on
which the Agent shall have received from the Company a certificate
demonstrating compliance with the applicable financial tests for the following
fiscal year.
FINANCIAL TEST A: Applicable Margin = .875%
"Financial Test A " means that, as of the end of the relevant
fiscal year, (1) the ratio of Consolidated Funded Indebtedness
as of the end of such fiscal year to Consolidated
Capitalization as of the end of such fiscal year is less than
.25 and (2) the ratio of Consolidated Funded Indebtedness as
of the end of such fiscal year to Consolidated Cash Flow for
such fiscal year is less than 2.0 to 1.
FINANCIAL TEST B: Applicable Margin = 1.125%
"Financial Test B" means that, as of the end of the relevant
fiscal year, (a)(1) the ratio of Consolidated Funded
Indebtedness as of the end of such fiscal year to Consolidated
Capitalization as of the end of such fiscal year is less than
.45 and (2) the ratio of Consolidated Funded Indebtedness as
of the end of such fiscal year to Consolidated Cash Flow for
such fiscal year is less than 3.5 to 1 and greater than or
equal to 2.0 to 1 or (b)(1) the ratio of Consolidated Funded
Indebtedness as of the end of such fiscal year to Consolidated
Capitalization as of the end of such fiscal year is less than
.45 and greater than or equal to .25 and (2) the ratio of
Consolidated Funded Indebtedness as of the end of such fiscal
year to Consolidated Cash Flow for such fiscal year is less
than 3.5 to 1.
FISCAL TEST C: Applicable Margin = 1.375%
"Financial Test C" means that, as of the end of the fiscal
year, (a)(1) the ratio of Consolidated Funded Indebtedness as
of the end of such fiscal year to Consolidated Capitalization
as of the end of such fiscal year is (x) less than or equal to
.55 during the period from and after the date hereof to and
including December 30, 1996, (y) less than or equal to .50
during the period from and after December 31, 1996 to and
including December 30, 1998 and (z) less than or equal to .45
during the period from and after
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<PAGE> 11
December 31, 1998 and (2) the ratio of Consolidated Funded
Indebtedness as of the end of such fiscal year to Consolidated
Cash Flow for such fiscal year is greater than or equal to 3.5
to 1 and less than or equal to 5 to 1 or (b)(1) the ratio of
Consolidated Funded Indebtedness as of the end of such fiscal
year to Consolidated Capitalization as of the end of such
fiscal year is (x) less than or equal to .55 and greater than
or equal to .45 during the period from and after the date
hereof to and including December 30, 1996, (y) less than or
equal to .50 and greater than or equal to .45 during the
period from and after December 31, 1996 to and including
December 30, 1998 and (z) equal to .45 during the period from
and after December 31, 1998 and (2) the ratio of Consolidated
Funded Indebtedness as of the end of such fiscal year to
Consolidated Cash Flow for such fiscal year is less than or
equal to 5.0 to 1.
Notwithstanding the foregoing, for the period from and
including the Closing Date to and including June 30, 1997, the Applicable
Margin shall be 1.125%.
(c) FUNDING PERIODS. At any time when a Borrower shall
select, convert to or renew the Euro-Rate Option to apply to any part of its
Loans, the Borrower shall specify one or more periods (the "Euro-Rate Funding
Periods") during which such Option shall apply, such Euro- Rate Funding Periods
being one, two, three or six months; provided, that (i) each Euro-Rate Funding
Period shall begin on a London Business Day, and the term "month", when used in
connection with a Euro-Rate Funding Period, shall be construed in accordance
with prevailing practices in the interbank eurodollar market at the
commencement of such Euro-Rate Funding Period, as determined in good faith by
the Agent (which determination shall be conclusive absent manifest error); (ii)
such Borrower may not select a Euro-Rate Funding Period that would end after
the Revolving Credit Expiration Date; and (iii) such Borrower shall, in
selecting any Euro-Rate Funding Period, allow for scheduled mandatory payments
and foreseeable mandatory prepayments of its Loans.
(d) TRANSACTIONAL AMOUNTS. Every selection of, conversion
from, conversion to or renewal of an interest rate Option and every payment or
prepayment of any Loans shall be in a principal amount such that after giving
effect thereto the aggregate principal amount of the Prime Rate Portion of such
Loans or the aggregate principal amount of each Funding Segment of the
Euro-Rate Portion of such Loans shall be as set forth below:
Portion or Funding Segment Allowable Aggregate Principal Amounts
- - - -------------------------- -------------------------------------
Prime Rate Portion Any
Each Funding Segment $250,000 (or the equivalent thereof
of the Euro-Rate Portion in Dutch Guilders) or an integral
multiple thereof.
(e) EURO-RATE UNASCERTAINABLE; IMPRACTICABILITY. If
(i) on any date on which a Euro-Rate would otherwise be set
the Agent (in the case of clauses (A) or (B) below) or any Bank (in the
case of clause (C) below) shall have determined in good faith (which
determination shall be conclusive absent manifest error) that:
(A) adequate and reasonable means do not exist for
ascertaining such Euro-Rate,
(B) a contingency has occurred which materially and
adversely affects the interbank eurodollar market, or
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<PAGE> 12
(C) the effective cost to such Bank of funding a
proposed Funding Segment of the Euro-Rate Portion from a
Corresponding Source of Funds shall exceed the Euro-Rate
applicable to such Funding Segment, or
(ii) at any time any Bank shall have determined in good faith
(which determination shall be conclusive absent manifest error) that
the making, maintenance or funding of any part of the Euro-Rate Portion
has been made impracticable or unlawful by compliance by such Bank or a
Notional Euro-Rate Funding Office in good faith with any Law or
guideline or interpretation or administration thereof by any Official
Body charged with the interpretation or administration thereof or with
any request or directive of any such Official Body (whether or not
having the force of Law);
then, and in any such event, the Agent or such Bank, as the case may be, may
notify the Borrower of such determination (and any Bank giving such notice
shall notify the Agent). Upon such date as shall be specified in such notice
(which shall not be earlier than the date such notice is given), the obligation
of each of the Banks to allow the Borrower to select, convert to or renew the
Euro-Rate Option shall be suspended until the Agent or such Bank, as the case
may be, shall have later notified the Borrower (and any Bank giving such notice
shall notify the Agent) of the Agent's or such Bank's determination in good
faith (which determination shall be conclusive absent manifest error) that the
circumstance giving rise to such previous determination no longer exists.
If any Bank notifies the Borrower of a determination under
subsection (ii) of this Section 2.04(e), the Euro-Rate Portion of the Loans of
such Bank (the "Affected Bank") shall automatically be converted to the Prime
Rate Option as of the date specified in such notice.
If at the time the Agent or a Bank makes a determination under
subsection (i) or (ii) of this Section 2.04(e) the Borrower previously has
notified the Agent that it wishes to select, convert to or renew the Euro-Rate
Option with respect to any proposed Loans but such Loans have not yet been
made, such notification shall be deemed to provide for selection of, conversion
to or renewal of the Prime Rate Option instead of the Euro-Rate Option with
respect to such Loans or, in the case of a determination by a Bank, such Loans
of such Bank.
2.05. CONVERSION OR RENEWAL OF INTEREST RATE OPTIONS.
(a) CONVERSION OR RENEWAL. Subject to the provisions of
Section 2.13(b) hereof, a Borrower may convert any part of its Loans from any
interest rate Option or Options to one or more different interest rate Options
and may renew the Euro-Rate Option as to any Funding Segment of the Euro-Rate
Portion: (i) at any time with respect to conversion from the Prime Rate
Option; or (ii) at the expiration of any Funding Period with respect to
conversions from or renewals of the Euro-Rate Option as to the Funding Segment
corresponding to such expiring Funding Period. Whenever a Borrower desires to
convert or renew any interest rate Option or Options, the Borrower shall
provide to the Agent Standard Notice setting forth the following information:
(v) the Loans to which such conversion or renewal is to apply; (w) the date,
which shall be a Business Day, on which the proposed conversion or renewal is
to be made; (x) the principal amounts selected in accordance with Section
2.04(d) hereof of the Prime Rate Portion and each Funding Segment of the
Euro-Rate Portion to be converted from or renewed; (y) the interest rate Option
or Options selected in accordance with Section 2.04(a) hereof and the principal
amounts selected in accordance with Section 2.04(d) hereof of the Prime Rate
Portion and each Funding Segment of the Euro-Rate Portion to be converted to;
and (z) with respect to each Funding Segment to be converted to or renewed, the
Funding Period selected in accordance with Section 2.04(c) hereof to apply to
such Funding Segment. Standard Notice having been so provided, after the date
specified in such Standard Notice, interest shall be calculated upon the
principal amount of the Loans as so converted or renewed.
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<PAGE> 13
(b) FAILURE TO CONVERT OR RENEW. Absent due notice from a
Borrower of conversion or renewal in the circumstances described in Section
2.05(a)(ii) hereof, any part of the Euro-Rate Portion for which such notice is
not received shall be converted automatically to the Prime Rate Option on the
last day of the expiring Funding Period.
2.06. PREPAYMENTS GENERALLY. Whenever a Borrower desires or
is required to prepay any part of its Loans, it shall provide Standard Notice
to the Agent setting forth the following information: (a) the date, which
shall be a Business Day, on which the proposed prepayment is to be made; (b)
the total principal amount of such prepayment, which shall be the sum of the
principal amounts selected pursuant to clause (c) of this Section 2.06 and (c)
the principal amounts selected in accordance with Section 2.05(d) hereof of the
Prime Rate Portion and each part of each Funding Segment of Euro-Rate Portion
to be prepaid. Standard Notice having been so provided, on the date specified
in such Standard Notice, the principal amounts of the Prime Rate Portion and
each part of the Euro-Rate Portion specified in such notice, together with
interest on each such principal amount to such date, shall be due and payable.
2.07. OPTIONAL PREPAYMENTS. A Borrower shall have the right
at its option from time to time voluntarily to prepay its Loans in whole or
part without premium or penalty (subject, however, to Section 2.13(b) hereof):
(a) at any time with respect to any part of the Prime Rate Portion; or (b) at
the expiration of any Funding Period with respect to prepayment of the
Euro-Rate Portion with respect to any part of the Funding Segment corresponding
to such expiring Funding Period. Any such prepayment shall be made in
accordance with Section 2.06 hereof.
2.08. MANDATORY PREPAYMENTS. (a) On or before the date of
each reduction of the Revolving Credit Commitment Amount, the Company shall
prepay, and shall cause SFNBV to prepay, a principal amount equal to the amount
necessary to reduce the outstanding principal balance of the Revolving Credit
Loans to an amount not exceeding the Revolving Credit Commitment Amount as so
reduced. A reduction of the Revolving Credit Commitment Amount shall not cause
a reduction in the SFNBV Revolving Credit Commitment Amount unless the
Revolving Credit Commitment Amount shall have been reduced to an amount less
than the initial SFNBV Revolving Credit Commitment Amount.
(b) If the U.S. dollar equivalent of the principal amount of
SFNBV Revolving Credit Loans together with the U.S. dollar equivalent of the
aggregate amount in respect of all outstanding Letters of Credit constituting
undrawn and reimbursed amounts thereunder together with the principal amount of
all outstanding Company Revolving Credit Loans exceeds the Revolving Credit
Commitment Amount, then the Company shall immediately prepay a principal amount
of Company Revolving Credit Loans, or the Company shall cause SFNBV immediately
to prepay a principal amount of SFNBV Revolving Credit Loans, in any event so
as to reduce the U.S. dollar equivalent of the outstanding principal balance of
such credit facilities to an amount not exceeding the Revolving Credit
Commitment Amount as so reduced.
(c) If the U.S. dollar equivalent of the principal amount of
SFNBV Revolving Credit Loans together with the U.S. dollar equivalent of the
aggregate amount in respect of all outstanding Dutch Letters of Credit
constituting undrawn and reimbursed amounts thereunder exceeds the SFNBV
Revolving Credit Commitment Amount, then the Company shall cause SFNBV
immediately to prepay a principal amount of SFNBV Revolving Credit Loans so as
to reduce the U.S. dollar equivalent of the outstanding principal balance of
such credit facilities to an amount not exceeding the SFNBV Revolving Credit
Commitment Amount as so reduced.
2.09. INTEREST PAYMENT DATES. Interest on the Prime Rate
Portion shall be due and payable on each Regular Payment Date. Interest on
each Funding Segment of the Euro-Rate Portion shall be due and payable on each
Regular Payment Date and also on the last day of the corresponding
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<PAGE> 14
Euro-Rate Funding Period. After maturity of any part of the Loans (by
acceleration or otherwise), interest on such part of the Loans shall be due and
payable on demand.
2.10. PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing
from the Banks and each payment or prepayment to the Banks hereunder (except as
specifically provided in Sections 2.13, 2.14 and 2.15 or in any agreement among
the Banks concerning settlements of payments of Revolving Credit Loans under
the Automatic Borrowing Service Agreement) and all fees payable by the
Borrowers hereunder (except the fee payable to the Issuing Bank pursuant to the
last sentence of Section 2.11(d) hereof and the fees payable to the Agent
pursuant to Section 8.12 hereof) shall be made pro rata in accordance with each
Bank's Commitment Percentage and from and to each Bank on the same date.
(b) All payments and prepayments to be made in respect of
principal, interest, funding fees or other amounts due from the Company
hereunder with respect to Company Revolving Credit Loans or under any Company
Revolving Credit Note shall be payable by 12:00 Noon, Pittsburgh time, on the
day when due without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived, and an action therefor shall immediately
accrue. Such payments shall be made to the Agent at its Domestic Office in
Dollars in funds immediately available at such Office without setoff,
counterclaim or other deduction of any nature. The Agent shall make the funds
so received available to each Bank in funds immediately available at the
Agent's Domestic Office.
(c) All payments and prepayments to be made in respect of
principal, interest, funding fees or other amounts due from SFNBV hereunder
with respect to SFNBV Revolving Credit Loans, under any SFNBV Revolving Credit
Note and with respect to any Dutch Letter of Credit shall be payable by 12:00
Noon, London time, on the day when due without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, and an action
therefor shall immediately accrue. Such payments shall be made to the Agent at
its London Office in Dutch Guilders in funds immediately available at such
Office without setoff, counterclaim or other deduction of any nature. The
Agent shall promptly make the funds so received available to each Bank in funds
immediately available at each Bank's office designated in writing to the Agent.
(d) To the extent permitted by law, after there shall have
become due (by acceleration or otherwise) interest, funding fees or any other
amounts due from a Borrower hereunder or under its Notes (excluding overdue
principal, which shall bear interest as described in the immediately-following
sentence), such amounts shall bear interest for each day until paid (before and
after judgment), payable on demand, at a rate per annum (based on a year of 365
or 366 days, as the case may be, with respect to Loans bearing interest at the
Prime Rate and based on a year of 360 days with respect to Loans bearing
interest at the Euro-Rate Option) equal to the following: (a) in the case of
any part of the Euro-Rate Portion of the Loans, (i) until the end of the
applicable then-current Euro-Rate Funding Period, at a rate per annum 2% above
the rate otherwise applicable to such part, and (ii) thereafter in accordance
with the following clause (b); and (b) otherwise, 2% above the then- current
Prime Rate Option, such interest rate to change automatically from time to time
effective as of the effective date of each change in the Prime Rate. After the
principal amount of any Loan has become due (by acceleration or otherwise),
such Loan shall bear interest for each day until paid (before and after
judgment) at a rate per annum (based on a year of 365 or 366 days, as the case
may be, with respect to Loans bearing interest at the Prime Rate and based on a
year of 360 days with respect to Loans bearing interest at the Euro-Rate
Option) which shall be equal to the following: (c) in the case of any part of
the Euro-Rate Portion of the Loans, (iii) until the end of the applicable then-
current Euro-Rate Funding Period, at a rate per annum 2% above the rate
otherwise applicable to such part, and (iv) thereafter in accordance with the
following clause (d); and (d) in the case of any other principal amount due,
the greater of (x) 2% above the Prime Rate Option on the day such Loan shall
have become due and (y) 2% above the then-current Prime Rate Option, such
interest rate to change automatically from time to time effective as of the
effective date of each change in the Prime Rate.
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<PAGE> 15
(e) The provisions of this Section 2.10 are cumulative and
not exclusive of the other provisions of this Agreement; without limitation,
the increased interest rates provided for herein are cumulative with the
adjustments in interest rates provided for elsewhere in this Agreement
(including but not limited to the adjustments provided for in Sections 2.04(b),
7.02(a) and 7.02(b) hereof. The Banks and the Borrower's acknowledge that, in
no event shall the interest charged on any Loan exceed the maximum rate
permitted under applicable law. Interest in excess of the maximum allowed by
applicable law will not be collected, and, if inadvertently collected, will be
credited as a reduction of principal, effective as of the date inadvertently
collected. Any payment of principal in excess of the then outstanding
principal balance resulting from the inadvertent collection of interest in
excess of the maximum rate allowed by law shall be refunded to the relevant
Borrower, effective as of the date inadvertently collected.
2.11. LETTERS OF CREDIT.
(a) LETTER OF CREDIT LIMIT. At the request of the Company
(which shall be made at least five (5) Business Days prior to the date, which
shall be a Business Day, on which a Letter of Credit is proposed to be issued)
and pursuant to an Application duly executed by the Company, the Issuing Bank
agrees to issue one or more Letters of Credit for the account of the Company
and/or its Subsidiaries at any time and from time to time prior to the
Revolving Credit Expiration Date in an aggregate face amount at any one time
outstanding not exceeding $5,000,000 (the "Letter of Credit Limit").
(b) DUTCH LETTERS OF CREDIT. In addition to the Letters of
Credit described in Section 2.11(a) above, if the Agent or any Bank shall
become subject to, or shall have imposed upon it, any Tax in connection with
any SFNBV Revolving Credit Loan, which the Company or SFNBV shall be required
to pay or with respect to which the Company or SFNBV shall have indemnification
obligations pursuant to Section 2.15 hereof, and if, upon the occurrence
thereof, SFNBV elects to obtain a revolving credit loan (a "Dutch Loan") from a
financial institution within The Netherlands (a "Dutch Lender"), subject to the
provisions of Section 2.01(a), at the request of the Company (which shall be
made at least five (5) Business Days prior to the date, which shall be a
Business Day, on which the Letter of Credit is proposed to be issued) and
pursuant to an Application duly executed by the Company, the Issuing Bank
agrees to issue one or more Letters of Credit for the account of the Company
and for the benefit of the Dutch Lender, as security for SFNBV's repayment
obligation with respect to such Dutch Loan (each a "Dutch Letter of Credit"),
at any time and from time to time prior to the Revolving Credit Expiration
Date, in an aggregate face amount at any one time not exceeding the lesser of
(i) the amount of such Dutch Loan and (ii) the SFNBV Revolving Credit
Commitment Amount.
(c) COMMITMENT USAGE. The Letters of Credit described on
Schedule 2.11(c) are currently outstanding, and the aggregate amount in respect
of such outstanding Letters of Credit constituting undrawn and unreimbursed
amounts thereunder shall be charged against the Letter of Credit Limit and
against the Revolving Credit Commitment Amount.
(d) LETTER OF CREDIT FEES. The Agent shall be paid a fee by
the Company equal to one percent (1%) per annum based upon the undrawn amount
of the Letter of Credit issued, which shall be payable on the last Business Day
of each calendar quarter, and on the last date on which any Letter of Credit
issued hereunder expires or is drawn upon, in each case for the preceding
period for which such fee has not been paid and which fee shall be payable by
the Agent to the Banks pro rata in accordance with each Bank's percentage
interest in such Letter of Credit. The Issuing Bank shall be paid a fee by the
Company equal to one eighth of one percent (1/8%) of the face amount of each
Letter of Credit upon issuance of the Letter of Credit.
(e) PAYMENTS WITH RESPECT TO LETTERS OF CREDIT. As to each
Letter of Credit the Company shall reimburse the Issuing Bank forthwith and
otherwise in accordance with the terms of any related Application or
reimbursement or other like agreement, for any payment made by the Issuing
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<PAGE> 16
Bank under a Letter of Credit. Any such reimbursement to the Issuing Bank
shall be made absolutely and unconditionally and without any set-off,
counterclaim or reduction and free and clear of any withholding or similar
taxes other than any tax, levy, impost or duty based, in whole or in part, upon
the income, revenues or operations of the Issuing Bank. The Company shall pay
to the Issuing Bank interest on any unreimbursed portion of each such payment
made by the Issuing Bank from the date of such payment by the Issuing Bank
until reimbursement in full therefor at a rate per annum equal to two and one
half percent (2 1/2%) above the Prime Rate.
(f) ADDITIONAL UNDERSTANDINGS REGARDING LETTERS OF CREDIT.
In order to induce the Issuing Bank to establish each Letter of Credit: (i)
the Company agrees that neither the Issuing Bank nor the Banks shall be
responsible or liable for, and the obligation of the Company to reimburse the
Issuing Bank for any payment made by the Issuing Bank under or in respect of
any Letter of Credit shall not be affected by (A) the validity, enforceability
or genuineness of any instrument or document (or any endorsement thereof)
presented under such Letter of Credit which, upon examination by the Issuing
Bank and in the absence of gross negligence or willful misconduct, appears on
its face to be in accordance with the terms and conditions of such Letter of
Credit, even if such instrument or document (or such endorsement) is proven to
be invalid, unenforceable, fraudulent or forged, or (B) any dispute between the
Company and the beneficiary or beneficiaries under such Letter of Credit; (ii)
the Company agrees that drawings under any Letter of Credit issued hereunder
may be made only upon presentation of an appropriate sight draft and any other
documentation required by the relevant Application or Letter of Credit, and
that all Letters of Credit issued hereunder shall have an expiration date and
(if applicable) an automatically renewing standby letter of credit renewal
notification date permitting renewal by the Issuing Bank that is no later than
one year after the date of issuance of such Letter of Credit and is in any
event no later than the Revolving Credit Expiration Date; and (iii) to the
extent that there shall be an inconsistency between the provisions of this
Agreement and the provisions of an Application, the provisions of this
Agreement shall control.
(g) PARTICIPATING INTERESTS; GENERALLY. Concurrently with
the issuance of a Letter of Credit, the Issuing Bank shall (under circumstances
described in the immediately-succeeding sentence) irrevocably and
unconditionally, sell, assign, transfer and convey to each Bank, and each Bank
automatically shall be deemed, irrevocably and unconditionally, severally to
have purchased, acquired, accepted and assumed from the Issuing Bank, without
recourse to, or representation or warranty by, the Issuing Bank, an undivided
interest, in a percentage equal to such Bank's Commitment Percentage, in all
the Issuing Bank's rights and obligations in, to or under such Letter of
Credit, the reimbursement obligations thereof and all collateral and other
rights from time to time directly or indirectly securing the foregoing. Each
Bank shall purchase an undivided interest in each Letter of Credit in a
percentage equal to such Bank's Commitment Percentage (each such Letter of
Credit being referred to as a "Participated Letter of Credit").
(h) PAYMENT BY BANKS ON ACCOUNT OF UNREIMBURSED DRAWS. If
the Issuing Bank makes a payment under a Participated Letter of Credit and is
not reimbursed in full therefor on the date of such drawing, the Issuing Bank
promptly shall notify the Agent thereof (which notice may be made by
telephone), and the Agent shall notify each Bank. No later than the Agent's
close of business on the date such notice is given, each such Bank shall pay to
the Agent, for the account of the Issuing Bank, in immediately available funds,
an amount equal to such Bank's Commitment Percentage of the unreimbursed
payment by the Issuing Bank. To the extent that any Bank fails to make such
payment to the Agent on the date of the Issuing Bank's payment, such Bank shall
pay, on demand, interest to the Agent for the account of the Issuing Bank for
each day from the day of the Issuing Bank's payment to and including the date
of payment by such Bank (before and after judgment) at a rate per annum (based
on a year of 365 or 366 days, as the case may be) equal to the average federal
funds rate quoted by the Board of Governors of the Federal Reserve System (or
any successor). All payments by Banks under this Section 2.11(h) shall be made
to the Agent at its Domestic Office in Dollars in funds immediately available
at such Office, without set-off, withholding, counterclaim or other deduction
of any nature.
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<PAGE> 17
(i) OBLIGATIONS SEVERAL. The failure of any Bank to fund its
Commitment Percentage of any unreimbursed payment under a Participated Letter
of Credit shall not relieve any other Bank of its funding obligation hereunder,
but no Bank shall be responsible for the failure of any other Bank to meet its
funding obligation hereunder.
(j) OBLIGATIONS ABSOLUTE. Each Bank hereby agrees that its
obligation to participate in the Participated Letters of Credit issued
hereunder and to pay or to reimburse the Issuing Bank for its Commitment
Percentage of the drafts drawn thereunder shall be absolute, irrevocable and
unconditional.
(k) DISTRIBUTIONS. If, at any time after the Issuing Bank
has made payment under a Participated Letter of Credit and has received from
any Bank such Bank's Commitment Percentage of the unreimbursed payment, the
Issuing Bank receives any payment on account of such payment, or any payment of
interest on account thereof, or makes any application of funds on account
thereof, the Issuing Bank shall pay to the Agent, for the account of such Bank,
its Commitment Percentage thereof.
(l) RESCISSION. If any payment received by the Issuing Bank,
or interest thereon, or any application made by the Issuing Bank on account of
any payment on account of a Participated Letter of Credit, shall be rescinded
or otherwise shall be required to be returned or paid over by the Issuing Bank
for any reason at any time, whether before or after the termination of this
Agreement (or the Issuing Bank believes in good faith that such rescission,
return or payment is required, whether or not such matter has been
adjudicated), each such Bank shall, promptly upon notice to the Agent by the
Issuing Bank, pay over to the Agent, for the account of the Issuing Bank, its
Commitment Percentage of the amount so rescinded, returned or paid over,
together with its Commitment Percentage of any interest or penalties payable
with respect thereto.
(m) THE ISSUING BANK AND THE BANKS.
(i) The Issuing Bank may consult with legal counsel,
independent public accountants and any other experts selected by it and
shall not be liable to the Banks for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such
counsel, accountants or experts.
(ii) The Issuing Bank shall have no duties or
responsibilities except those expressly set forth in this Agreement.
The duties of the Issuing Bank shall be ministerial and administrative
in nature; the Issuing Bank shall not by reason of this Agreement have
a fiduciary relationship in respect of any Bank; and nothing in this
Agreement expressed or implied, is intended to or shall be so construed
as to impose upon the Issuing Bank any obligations in respect of this
Agreement except as expressly set forth herein or therein. Each Bank
expressly acknowledges: (A) that the Issuing Bank has not made any
representations or warranties to it and that no act by the Issuing Bank
hereafter taken, including any review of the affairs of the Company or
its Subsidiaries, shall be deemed to constitute any representation or
warranty by the Issuing Bank to any Bank; (B) that it has made and will
make its own independent investigation of the financial condition and
affairs, and its own appraisal of the creditworthiness, of the Company
or its subsidiaries in connection with the Letters of Credit and the
Applications; and (C) that the Issuing Bank shall have no duty or
responsibility, either initially or on a continuing basis, to provide
any Bank with any credit or other information except as otherwise
provided herein, whether coming into its possession before the issuance
of the Letters of Credit hereunder or at any time or times thereafter.
(iii) Neither the Issuing Bank nor any of its directors,
officers, employees or agents shall be liable to any Bank for any
action taken or omitted to be taken by it or them hereunder or in
connection herewith, unless caused by its or their own gross negligence
or willful misconduct. In performing its functions and duties
hereunder the Issuing Bank shall exercise the same care which it would
exercise in dealing with letters of credit for its own account, but it
shall not (A) be
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<PAGE> 18
responsible in any manner to any of the Banks for the effectiveness,
enforceability, genuineness, validity or due execution of this Agreement
or the Applications, or for any recital, representation, warranty,
document, certificate, report or statement herein or therein or made or
furnished under or in connection with this Agreement or the
Applications, or (B) be under any obligation to any of the Banks to
ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions hereof or thereof on the part of any
Borrower, or the financial condition of any Borrower, or the existence
or possible existence of any Event of Default or Potential Default.
(iv) Each Bank agrees to reimburse and indemnify the Issuing
Bank (to the extent not reimbursed by the applicable Borrower), ratably
in proportion to its Commitment Percentage, for and against any and all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted
against the Issuing Bank, in its capacity as such, in any way relating
to or arising out of the Participated Letters of Credit or any action
taken or omitted by the Issuing Bank hereunder or thereunder, provided
that no Bank shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements to the extent that they result from
the Issuing Bank's gross negligence or willful misconduct.
(v) The Issuing Bank shall be entitled to rely upon any
writing, telegram, telex or teletype message, resolution, notice,
consent, certificate, letters, cablegram, statement, order or other
document or conversation by telephone or otherwise believed by it to be
genuine and correct and to have been signed, sent or made by the proper
party or parties, and upon opinions of counsel and other professional
advisers selected by the Issuing Bank. The Issuing Bank shall be fully
justified in failing or refusing to take any action hereunder unless it
shall first be indemnified to its satisfaction by the Banks against any
and all liability and expense (which may be incurred by it by reason of
taking or continuing to take any such action.
(vi) The Issuing Bank appoints the Agent as its agent
hereunder and under the Security Documents and the transactions
contemplated hereby and thereby, and references to the "Banks" in
Article VIII hereof are deemed to include references to the Issuing
Bank.
2.12. SFNBV REVOLVING CREDIT LOAN PAYMENTS. The parties
agree that all payments by the Borrowers hereunder with respect to the SFNBV
Revolving Credit Loans and the Dutch Letters of Credit shall be made in Dutch
Guilders.
2.13. ADDITIONAL COMPENSATION IN CERTAIN CIRCUMSTANCES, etc.
(a) INCREASED COSTS OR REDUCED RETURN RESULTING FROM TAXES,
RESERVES, CAPITAL ADEQUACY REQUIREMENTS, EXPENSES, ETC. If any Law or
guideline or interpretation or application thereof by any Official Body charged
with the interpretation or administration thereof or compliance with any
request or directive of any Official Body (whether or not having the force of
Law) now existing or hereafter adopted:
(i) subjects any Bank or any Notional Euro-Rate Funding
Office to any tax or changes the basis of taxation with respect to this
Agreement, the Notes, the Loans or payments by a Borrower of principal,
interest, commitment fee or other amounts due from such Borrower
hereunder or under the Notes (except for taxes on the overall net
income or overall gross receipts of such Bank or such Notional
Euro-Rate Funding Office imposed by the jurisdictions (federal, state
and local) in which the Bank's principal office or Notional Euro-Rate
Funding Office is located),
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<PAGE> 19
(ii) imposes, modifies or deems applicable any reserve,
special deposit or similar requirement against credits or commitments
to extend credit extended by, assets (funded or contingent) of,
deposits with or for the account of, other acquisitions of funds by,
such Bank or any Notional Euro-Rate Funding Office (other than
requirements expressly included herein in the determination of the
Euro- Rate hereunder),
(iii) imposes, modifies or deems applicable any capital
adequacy or similar requirement (A) against assets (funded or
contingent) of, or credits or commitments to extend credit extended by,
any Bank or any Notional Euro-Rate Funding Office, or (B) otherwise
applicable to the obligations of any Bank or any Notional Euro-Rate
Funding Office under this Agreement, or
(iv) imposes upon any Bank or any Notional Euro-Rate Funding
Office any other condition or expense with respect to this Agreement,
the Notes or its making, maintenance or funding of any Loans any
security therefor,
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, or impose any expense (including loss of margin) upon any
Bank, any Notional Euro-Rate Funding Office or, in the case of clause (iii)
hereof, any person controlling a Bank, with respect to this Agreement, the
Notes or the making, maintenance or funding of any Loan (or, in the case of any
capital adequacy or similar requirement, to have the effect of reducing the
rate of return on such Bank's or controlling person s capital, taking into
consideration such Bank's or controlling person's policies with respect to
capital adequacy) by an amount which such Bank deems to be material (such Bank
being deemed for this purpose to have made, maintained or funded each Funding
Segment of the Euro-Rate Portion from a Corresponding Source of Funds), such
Bank may from time to time notify such Borrower of the amount determined in
good faith (using any averaging and attribution methods) by such Bank (which
determination shall be conclusive absent manifest error) to be necessary to
compensate such Bank or such Notional Euro-Rate Funding Office for such
increase, reduction or imposition. Such amount shall be due and payable by
such Borrower to such Bank five Business Days after such notice is given,
together with an amount equal to interest on such amount from the date two
Business Days after the date demanded until such due date at the Prime Rate
Option applicable to Term Loans. A certificate by such Bank as to the amount
due and payable under this Section 2.13(a) from time to time and the method of
calculating such amount shall be conclusive. Each Bank agrees that it will use
good faith efforts to notify the Company of the occurrence of any event that
would give rise to a payment under this Section 2.13(a); provided, however,
that any failure of such Bank to give any such notice shall have no effect on
the Company's obligations hereunder.
(b) FUNDING BREAKAGE. If (i) any Borrower fails to borrow,
convert or renew any Loan hereunder which would, after such borrowing,
conversion or renewal, have a Euro-Rate Portion, after notice requesting such
borrowing, conversion or renewal has been given by such Borrower (whether such
failure results from failure to satisfy applicable conditions to such
borrowing, conversion, or renewal or otherwise), or (ii) any part of any
Funding Segment of any Euro-Rate Portion of the Loans becomes due (by
acceleration or otherwise), or is paid, prepaid or converted to another
interest rate Option (whether or not such payment, prepayment or conversion is
mandatory or automatic and whether or not such payment or prepayment is then
due), on a day other than the last day of the corresponding Funding Period,
such Borrower shall indemnify the Banks on demand against any loss, liability,
cost or expense of any kind or nature which the Banks may sustain or incur in
connection with or as a result of such event. Such indemnification in any
event shall include an amount equal to the excess, if any, of (x) the aggregate
amount of interest which would have accrued on the amount of the Euro-Rate
Portion not so borrowed, converted or renewed, or which so becomes due, or
which is so paid, prepaid or converted, from and including the date on which
such borrowing, conversion or renewal would have been made pursuant to such
notice, or on which such part of such Funding Segment so becomes due, or on
which such part of such Funding Segment is so paid, prepaid or converted, to
the last day of the Funding Period applicable to such amount (or, in the case
of a failure to borrow, convert or renew, the Funding
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<PAGE> 20
Period that would have been applicable to such amount but for such failure), in
each case at the applicable rate of interest for such Euro-Rate Portion provided
for herein (excluding, however, the Applicable Margin included therein, if any),
over (y) the aggregate amount of interest (as determined in good faith by the
Banks) which would have accrued to the Banks on such amount for such period by
placing such amount on deposit for such period with leading banks in the
interbank market. A certificate by the Banks as to any amount that the Banks
are entitled to receive pursuant to this Section 2.13(b) shall be conclusive
absent manifest error if made in good faith.
2.14. FUNDING BY BRANCH, SUBSIDIARY OR AFFILIATE.
(a) NOTIONAL FUNDING. Each Bank shall have the right from
time to time, prospectively or retrospectively, without notice to a Borrower,
to deem any branch, subsidiary or affiliate of such Bank to have made,
maintained or funded any part of the Euro-Rate Portion at any time. Any
branch, subsidiary or affiliate so deemed shall be known as a "Notional
Euro-Rate Funding Office." Such Bank shall deem any part of the Euro-Rate
Portion of the Loans or the funding therefor to have been transferred to a
different Notional Euro-Rate Funding Office if such transfer would avoid or
cure an event or condition described in Section 2.04(e)(ii) hereof or would
lessen compensation payable by the Borrower under Section 2.13(a) hereof, and
if such Bank determines in its sole discretion that such transfer would be
practicable and would not have a material adverse effect on such part of the
Loans, such Bank or any Notional Euro-Rate Funding Office (it being assumed for
purposes of such determination that each part of the Euro-Rate Portion is
actually made or maintained by or funded through the corresponding Notional
Euro- Rate Funding Office). Notional Euro-Rate Funding Offices may be selected
by such Bank without regard to such Bank's actual methods of making,
maintaining or funding Loans or any sources of funding actually used by or
available to such Bank.
(b) ACTUAL FUNDING. Each Bank shall have the right from time
to time to make or maintain any part of the Euro-Rate Portion by arranging for
a branch, subsidiary or affiliate of such Bank to make or maintain such part of
the Euro-Rate Portion. Such Bank shall have the right to (i) hold any
applicable Note payable to its order for the benefit and account of such
branch, subsidiary or affiliate or (ii) request the Borrower to issue one or
more promissory notes in the principal amount of such Euro-Rate Portion, in
substantially the form of a Company Revolving Credit Note or an SFNBV Revolving
Credit Note, as the case may be, with the blanks appropriately filled, payable
to such branch, subsidiary or affiliate and with appropriate changes reflecting
that the holder thereof is not obligated to make any additional Loans to a
Borrower. Each Borrower agrees to comply promptly with any request under
subsection (ii) of this Section 2.14(b). If any Bank causes a branch,
subsidiary or affiliate to make or maintain any part of the Euro-Rate Portion
hereunder, all terms and conditions of this Agreement shall, except where the
context clearly requires otherwise, be applicable to such part of the Euro-Rate
Portion and to any note payable to the order of such branch, subsidiary or
affiliate to the same extent as if such part of the Euro-Rate Portion were made
or maintained and such note were a Company Revolving Credit Note or an SFNBV
Revolving Credit Note, as the case may be, payable to such Bank's order.
2.15. TAXES.
(a) PAYMENTS NET OF TAXES. All payments made by any Borrower
under this Agreement, any Note or any Security Document shall be made free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding (x) in the case of each Bank and the Agent, net income taxes
imposed on such Bank or the Agent (as the case may be) by the United States,
and net income taxes and franchise taxes imposed on such Bank or the Agent (as
the case may be) by the jurisdiction under the laws of which such Bank or the
Agent (as the case may be) is organized or by any political subdivision
thereof, and (y) in the case of each Bank, net income taxes and franchise taxes
imposed on such Bank by the jurisdiction in which is located the Bank's lending
office which makes or books a particular extension of credit hereunder or any
political subdivision thereof (all such non- excluded taxes, levies, imposts,
deduction,
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<PAGE> 21
charges, withholdings and liabilities being referred to as "Taxes"). If any
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable under this Agreement, any Note or any Security Loan Document to any
Bank or the Agent, (i) the sum payable shall be increased as may be necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.15) such Bank or the Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) such Borrower shall make such deductions, and
(iii) such Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) OTHER TAXES. In addition, each Borrower agrees to pay
any present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies which arise from any payment made
under this Agreement, any Note or any Security Document or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, any
Note or any Security Document (hereinafter referred to as "Other Taxes").
(c) INDEMNITY. Each Borrower will indemnify each Bank and
the Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.15) paid by such Bank or the Agent (as the case
may be) and any liability (including, without limitation, penalties, interest
and expenses) arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted. This indemnification
shall be made within 30 days from the date such Bank or the Agent (as the case
may be) makes written demand therefor. No Borrower shall have any obligation
to make any payments pursuant to the preceding sentence unless Agent or such
Bank has notified such Borrower of the existence and amount of such liability
for Taxes or Other Taxes in writing and in advance of payment to the relevant
authority, it being understood that such Borrower's payment obligation shall
not be affected by the failure of Agent or such Bank to notify such Borrower as
specified herein unless as a consequence of such failure such Borrower has been
actually prejudiced.
(d) RECEIPTS, ETC. Within 30 days after the date of any
payment of Taxes or Other Taxes, such Borrower will furnish to the Agent the
original or a certified copy of a receipt evidencing payment thereof. If no
Taxes or Other Taxes are payable in respect of any payment hereunder by any
Borrower through an account or branch outside the United States or on behalf of
such Borrower by a payor that is not a United States person, such Borrower will
furnish, or will cause such payor to furnish, to the Agent a certificate from
each appropriate taxing authority or an opinion of counsel acceptable to the
Agent, in either case stating that such payment is exempt from or not subject
to Taxes or Other Taxes. For purposes of this Section 2.15(d), the terms
"United States" and "United States person" shall have the meanings specified in
Section 7701 of the Internal Revenue Code.
(e) OTHER. Without prejudice to the survival of any other
agreement of the Borrowers hereunder, the obligations of the Borrowers
contained in this Section 2.15 shall survive the payment in full of all other
obligations of the Borrowers under this Agreement, the Notes and the Security
Documents, termination of all commitments to extend credit hereunder, and all
other events and circumstances whatever. Nothing in this Section 2.15 or
otherwise in this Agreement shall require the Agent or any Bank to disclose to
the Borrowers any of its tax returns (or any other information that it deems to
be confidential or proprietary).
(f) WITHHOLDING TAX EXEMPTION.
(i) Each Bank organized under the laws of a jurisdiction
outside the United States shall, on the date such Bank becomes party to this
Agreement, and from time to time thereafter if requested in writing by the
Company or the Agent, provide the Agent and the Company with the forms
prescribed by the United States Internal Revenue Service certifying as to such
Bank's status for purposes of determining exemption from, or reduced rate
applicable to, United States withholding taxes with respect
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<PAGE> 22
to payments to be made to such Bank under this Agreement, the Notes and the
Security Documents; provided, that a Bank shall not be obligated to provide
any such form after the date such Bank becomes party to this Agreement if such
Bank is not legally able to do so.
(ii) The Borrowers shall not be required to indemnify any
Bank, or to pay any additional amounts to any Bank, in respect of United States
withholding taxes (or any withholding tax imposed by a state of the United
States that applies only when such United States withholding tax is imposed),
pursuant to Sections 2.15(a) or 2.15(c), to the extent that: (A) the obligation
to withhold amounts with respect to United States withholding tax existed on
the date such Bank became a party to this Agreement; provided, that this clause
(A) shall not apply to a Bank that became a Bank as a result of an assignment
made or other action taken at the request of a Borrower, or (B) the obligation
to make such indemnification or to pay such additional amounts would not have
arisen but for a failure of such Bank to comply with the provisions of Section
2.15(f)(i).
(g) REFUNDS, CREDITS ETC. If a Bank or the Agent shall
become aware that it is entitled to claim a refund, credit or reduction in tax
from a governmental agency or authority in respect of Taxes or Other Taxes as
to which it has been indemnified by a Borrower, or with respect to which a
Borrower has paid additional amounts, pursuant to this Section 2.15, it shall
promptly notify such Borrower of the availability of such refund claim, credit
or reduction in tax and shall, within 30 days after receipt of a request by
such Borrower, make a claim to such governmental agency or authority for such
refund, credit or reduction in tax, at such Borrower's expense. If a Bank or
the Agent receives a refund or realizes a credit or reduction in tax in respect
of any Taxes or Other Taxes as to which it has been indemnified by a Borrower,
or with respect to which a Borrower has paid additional amounts, pursuant to
this Section 2.15, it shall promptly after the date of such receipt pay over
the amount of such refund or benefit of such credit or reduction in tax to such
Borrower (but only to the extent of indemnity payments made, or additional
amounts paid, by such Borrower under this Section 2.15 with respect to the
Taxes or Other Taxes giving rise to such refund, credit or reduction in tax and
only to the extent that the Bank has determined that the amount of any such
refund, credit or reduction in tax is directly attributable to payments made
under this Agreement), net of all reasonable expenses of the Bank or the Agent
(including additional Taxes and Other Taxes attributable to such refund, credit
or reduction in tax, as determined by the Bank) and without interest (other
than interest, if any, paid by the relevant governmental agency or authority
with respect to such refund, credit or reduction in tax). Each Borrower shall,
upon demand, pay to such Bank or Agent any amount paid over to such Borrower by
such Bank or Agent (plus penalties, interest or other charges) in the event
such Bank or the Agent is required to repay any portion of such refund, credit
or reduction in tax to such governmental agency or authority.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the Banks that:
3.01. ORGANIZATION AND QUALIFICATION. Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation. Each of the
Company and its Subsidiaries is duly qualified to do business as a foreign
corporation and in good standing in all jurisdictions in which the ownership of
its properties or the nature of its respective activities or both makes such
qualification necessary, except to the extent that failure to be so qualified
could not reasonably be expected to have a Material Adverse Effect.
3.02. AUTHORITY AND AUTHORIZATION. Each of the Company and
its Subsidiaries has all requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted and as
presently planned to be conducted. Each of the Borrowers has the corporate
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<PAGE> 23
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Each of the Borrowers has the corporate power and
authority to make the borrowings provided for herein, to execute and deliver
the Notes in evidence of such borrowings and to perform its obligations
thereunder. Each of the Borrower Parties has the corporate power and authority
to execute and deliver the Security Documents to which it is a party and to
perform its obligations thereunder. All such action has been duly and validly
authorized by all necessary corporate proceedings by each of the Borrower
Parties.
3.03. EXECUTION AND BINDING EFFECT. This Agreement, the
Notes and the Security Documents to which each of the Borrower Parties is a
party have been duly and validly executed and delivered by the Borrower Parties
and constitute legal, valid and binding obligations of the Borrower Parties
enforceable in accordance with their respective terms, except as the
enforceability of such documents may be limited by bankruptcy, insolvency or
other similar laws of general application affecting the enforcement of
creditors' rights or by general principles of equity limiting the availability
of equitable remedies.
3.04. AUTHORIZATIONS AND FILINGS. No authorization, consent,
approval, license, exemption or other action by, and no registration,
qualification, designation, declaration or filing with, any Official Body is or
will be necessary or advisable in connection with the execution and delivery of
this Agreement, the Notes or the Security Documents, consummation of the
transactions herein or therein contemplated or performance of or compliance
with the terms and conditions hereof or thereof, except for the filing or
recording of certain of the Security Documents. No Borrower is an "investment
company" or a company "controlled" by an investment company within the meaning
of the Investment Company Act of 1940, as amended.
3.05. ABSENCE OF CONFLICTS. Neither the execution and
delivery of this Agreement, the Notes or the Security Documents nor
consummation of the transactions herein or therein contemplated nor performance
of or compliance with the terms and conditions hereof or thereof will (a)
violate any Law where such violation could reasonably be expected to have a
Material Adverse Effect, (b) conflict with or result in a breach of or a
default under the articles of incorporation or bylaws of any Borrower Party or
any agreement or instrument to which any Borrower Party is a party or by which
any of them or any of their respective properties (now owned or hereafter
acquired) may be subject or bound or (c) result in the creation or imposition
of any Lien upon any property (now owned or hereafter acquired) of any Borrower
Party except for the Liens created by the Security Documents.
3.06. FINANCIAL STATEMENTS. The Company has heretofore
furnished to the Banks consolidated balance sheets of the Company and its
Consolidated Subsidiaries as of December 31, 1995 and the related consolidated
statements of income and retained earnings for the fiscal year then ended, as
examined and certified by Arthur Andersen & Co., independent certified public
accountants, and has also furnished to the Banks interim unaudited consolidated
balance sheets of the Company and its Consolidated Subsidiaries and the related
statements of income and retained earnings for the fiscal quarter ended March
31, 1996. Such financial statements (including the notes thereto) present
fairly the financial condition of the Company and its Consolidated Subsidiaries
as of the end of such fiscal year and such fiscal quarter ended March 31, 1996
and the results of their operations for the fiscal year then ended and such
fiscal quarter ended March 31, 1996 all in conformity with GAAP applied on a
basis consistent with that of the preceding fiscal year, subject, in the case
of the interim financial statements, to year-end adjustments.
3.07. NO EVENT OF DEFAULT; COMPLIANCE WITH INSTRUMENTS. No
event has occurred and is continuing and no condition exists which constitutes
an Event of Default or Potential Default.
3.08. LITIGATION. There is no pending or, to the Company's
knowledge, threatened action, suit, proceeding or investigation by or before
any Official Body against or affecting the Company
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<PAGE> 24
or any Subsidiary of the Company, except for (a) matters described in the
financial statements referred to in Section 3.06 hereof, and (b) matters that,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
3.09. SUBSIDIARIES AND PARTNERSHIPS. Schedule 3.09 hereof
states as of the date hereof the authorized capitalization of each Subsidiary
which, for fiscal 1995, accounted for in excess of 5% of the consolidated
assets or of the consolidated revenues of the Company and its Consolidated
Subsidiaries, the number of shares of each class of capital stock issued and
outstanding of each such Subsidiary, and the number and percentage of
outstanding shares of each such class of capital stock owned by the Company and
by each Subsidiary. The outstanding shares of each such Subsidiary have been
duly authorized and validly issued and are fully paid and nonassessable. The
Company and each Subsidiary owns beneficially and of record and has good title
to all of the shares it is listed as owning in such Schedule 3.09, free and
clear of any Lien. There are no options, warrants, calls, subscriptions,
conversion rights, exchange rights, preemptive rights or other rights,
agreements or arrangements (contingent or otherwise) which may in any
circumstances now or hereafter obligate any such Subsidiary to issue any shares
of its capital stock or any other securities except for matters set forth in
Schedule 3.09. As of the date hereof, neither the Company nor any Subsidiary
is a partner (general or limited) of any partnership, is a party to any joint
venture or owns (beneficially or of record) any equity or similar interest in
any person (including but not limited to any interest pursuant to which the
Company or any Subsidiary has or may in any circumstance have an obligation to
make capital contributions to, or be generally liable for or on account of the
liabilities, acts or omissions of such other person), except for (y) capital
stock of Subsidiaries referred to in this Section 3.09 hereof and (z) matters
set forth or described in Schedule 3.09.
3.10. EMPLOYEE BENEFITS. (a) No borrowing contemplated by
this Agreement is a transaction which is subject to the prohibitions of Section
406 of ERISA or in connection with which a tax could be imposed pursuant to
Section 4975 of the Code or a civil penalty assessed pursuant to Section 502(i)
of ERISA (assuming that monies other than monies representing plan assets are
borrowed hereunder). Neither the Company, any of its Subsidiaries nor any
other person, including any fiduciary, has engaged in any prohibited
transaction (as defined in Section 4975 of the Code or Section 406 of ERISA)
which could subject any of the Benefit Plans, the Company, or any Subsidiary
(or any entity which they have an obligation to indemnify) to any tax or
penalty imposed under 4975 of the Code or Section 502(i) of ERISA or any other
material liability under a foreign law of similar nature which alone or
together with any other item described in this Section 3.10 would have a
Material Adverse Effect.
(b) Neither the Company nor any of its Subsidiaries
(including any of their respective Controlled Group Members) (i) has incurred
or expects to incur any liability under Title IV of ERISA or Section 502(g) of
ERISA or any analogous provision relating to Section 515 of ERISA or (ii) has
become subject or expects to be subject to the Lien described in Section 412(n)
of the Code, which alone or together with any other item described in this
Section 3.10 would have a Material Adverse Effect.
(c) The Pension Plans do not have an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of the
Code or Section 302 of ERISA. No Pension Plan has benefit liabilities as
defined in Section 4001(a)(16) of ERISA which exceed the assets of such Pension
Plan by such an amount that the termination of such Pension Plan alone or
together with any other item described in this Section would have a Material
Adverse Effect. The Company has received a favorable determination letter from
the IRS with respect to all Pension Plans except for such Pension Plans with
respect to which the failure to receive such a favorable determination would
not alone or together with any other item described in this Section 3.10 have a
Material Adverse Effect and nothing has happened since the date of such letter
that has adversely affected such qualification. There is no Lien outstanding
or security interest given in connection with a Pension Plan or under Title IV
of ERISA. As of the date hereof, the Company has received both IRS and PBGC
approval with respect to any terminated Benefit Plans subject to Title IV of
ERISA.
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(d) Neither the Company nor any of its Subsidiaries
(including any of their respective Controlled Group Members) is in default in
any material respect under any Benefit Plan and all Benefit Plans are
administered in accordance with their terms and are in all material respects in
compliance with all applicable Laws, except where any such default or failure
to comply would not alone or together with any other item described in this
Section 3.10 have a Material Adverse Effect.
3.11. TITLE TO PROPERTY. The Company and each Subsidiary has
good and marketable title in fee simple to all real property owned or purported
to be owned by it and necessary for the operation of its business and good
title to all other property of whatever nature owned or purported to be owned
by it, including but not limited to all property reflected in the most recent
audited balance sheet referred to in Section 3.06 hereof or submitted pursuant
to Section 4.01(a) hereof, as the case may be (except as sold or otherwise
disposed of in the ordinary course of business after the date of such balance
sheet or, after the Closing Date, as otherwise expressly permitted by this
Agreement) in each case free and clear of all Liens, other than Permitted Liens
or Liens permitted pursuant to Section 6.02 hereof.
3.12. TAXES. All tax and information returns required to be
filed by or on behalf of the Company or any Subsidiary have been properly
prepared, executed and filed. All taxes, assessments, fees and other
governmental charges upon the Company or any Subsidiary or upon any of their
respective properties, incomes, sales or franchises which are due and payable
have been paid (other than those not yet delinquent and payable without premium
or penalty, and except for those being diligently contested in good faith by
appropriate proceedings, and in each case adequate reserves and provisions for
taxes have been made on the books of the Company and each Subsidiary). The
reserves and provisions for taxes on the books of the Company and each
Subsidiary are adequate for all open years and for its current fiscal period.
Neither the Company nor any Subsidiary knows of any proposed additional
assessment or basis for any material assessment for additional taxes (whether
or not reserved against). The federal and state income tax liabilities of the
Company and each of its Subsidiaries have been finally determined by the
Internal Revenue Service and other relevant taxing authorities, or the time for
audit has expired, for all fiscal periods ending on or prior to March 31, 1989,
and all such liabilities (including all deficiencies assessed following audit)
have been satisfied. Neither the Company nor any Subsidiary has at any time
filed a consolidated tax return with any person other than the Company and the
Subsidiaries except for any the result of which would not have a Material
Adverse Effect.
3.13. NO MATERIAL ADVERSE CHANGE. Since December 31, 1995
there has been no material adverse change in the business, operations,
properties, assets or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole.
3.14. MARGIN REGULATIONS. No part of the proceeds of any
Loan hereunder will be used for the purpose of buying or carrying any "margin
stock", as such term is used in Regulations G and U of the Board of Governors
of the Federal Reserve System, as amended from time to time, or to extend
credit to others for the purpose of buying or carrying any "margin stock."
Neither the Company nor any Subsidiary thereof is engaged in the business of
extending credit to others for the purpose of buying or carrying "margin
stock." Neither the making of any Loan nor any use of proceeds of any such
Loan will violate or conflict with the provisions of Regulation G, T, U or X of
the Board of Governors of the Federal Reserve System, as amended from time to
time.
3.15. COMPLIANCE WITH LAWS. To the knowledge of the Company
after due investigation, neither the Company nor any Subsidiary is in violation
of or subject to any contingent liability on account of any Law (including but
not limited to ERISA, the Code, any applicable occupational and health or
safety Law, environmental protection Law, or hazardous waste or toxic
substances management, handling or disposal Law and including but not limited
to (a) any restrictions, specifications or requirements pertaining to products
that the Company or any Subsidiary manufactures, produces, processes or sells
or pertaining to the services each performs, (b) the conduct of their
respective businesses and (c) the use, maintenance or operation of the real and
personal properties owned
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<PAGE> 26
or possessed by them), except for violations which in the aggregate could not
reasonably be expected to have a Material Adverse Effect.
3.16. INTELLECTUAL PROPERTY. The Company and each Subsidiary
thereof owns, or is licensed or otherwise has the right to use, all the
patents, trademarks, service marks, names (trade, service, fictitious or
otherwise), copyrights, technology (including but not limited to computer
programs and software), processes, data bases and other rights, free from
burdensome restrictions, necessary to own and operate its properties and to
carry on its business as presently conducted and presently planned to be
conducted without conflict with the rights of others, except for such instances
of noncompliance that, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect.
3.17. USE OF PROCEEDS. The proceeds of Company Revolving
Credit Loans are to be used to refinance the outstanding credit facilities of
Sylvan America (PA) and Quincy under the Original Agreement and, in addition,
the proceeds of the Company Revolving Credit Loans and the SFNBV Revolving
Credit Loans may be used for working capital, Capital Expenditures, Letters of
Credit and for general corporate purposes. The Company may make the proceeds
of the Company Revolving Credit Loans, and SFNBV may make the proceeds of the
SFNBV Revolving Credit Loans, available to the Subsidiaries of the Company for
working capital purposes, Capital Expenditures, Letters of Credit and general
corporate purposes.
3.18. INSURANCE. Each of the Company and its Subsidiaries
maintains with financially sound and reputable insurers insurance with respect
to their properties and business and against at least such liabilities,
casualties and contingencies and in at least such types and amounts as is
customary in the case of corporations engaged in the same or a similar business
or having similar properties similarly situated.
3.19. SOLVENCY MATTERS. (a) As to each Borrower Party, it
is not now nor will the incurrence by it of the obligations to repay its Loans
or the incurrence by it of the obligations under the Security Documents to
which it is a party render it "insolvent". For purposes hereof, the term
"insolvent" means that the present fair market value of a person's assets is
less than the amount that will be required to pay the probable liability on
existing debts, and the term "debts" includes any legal liability, whether
mature or unmatured, liquidated or unliquidated, absolute, fixed or contingent.
(b) As to each Borrower Party, by incurring the obligations
to repay its Loans or by incurring the obligations under the Security Documents
to which it is a party, such Borrower Party does not incur debts beyond its
ability to pay as they mature.
(c) As to each Borrower Party, the incurrence of the
obligations to repay its Loans or the incurrence of the obligations under the
Security Documents to which it is a party will not leave it with insufficient
capital.
(d) No Borrower Party has executed this Agreement or any Note
or Security Document, or made any transfer or incurred any obligations
thereunder, with intent to hinder, delay, or defraud either present or future
creditors.
3.20. ACCURATE AND COMPLETE DISCLOSURE. All factual
information (taken as a whole) heretofore, contemporaneously or hereafter
provided by or on behalf of the Company or any Subsidiary to the Agent or any
Bank pursuant to or in connection with this Agreement, any Note, any Security
Document or any transaction contemplated hereby or thereby is or will be (as
the case may be) true and accurate in all material respects on the date as of
which such information is dated (or, if not dated, when received by the Agent
or such Bank, as the case may be).
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<PAGE> 27
ARTICLE IV
CONDITIONS OF LENDING
4.01. CONDITIONS TO INITIAL LOANS. The obligation of each
Bank to make its first Loan (and the right of the Borrowers to request a Loan
if no Loans have theretofore been made) is subject to the satisfaction, on the
Closing Date and prior to or concurrently with the making of such Loan, of the
following conditions precedent, in addition to the conditions precedent set
forth in Section 4.02 hereof:
(a) AGREEMENT; NOTES; SECURITY DOCUMENTS. The Agent shall
have received a counterpart of this Agreement for each Bank, duly executed by
the Borrowers, the Company Revolving Credit Notes and the SFNBV Revolving
Credit Notes conforming to the requirements hereof, duly executed on behalf of
the Borrowers, and the Security Document conforming to the requirements hereof,
duly executed on behalf of the respective Borrower Parties party thereto.
(b) CORPORATE PROCEEDINGS. The Agent shall have received,
with a counterpart for each Bank, certificates by the Secretary or Assistant
Secretary of each Borrower Party dated as of the Closing Date as to (i) true
copies of the articles of incorporation and by-laws (or other constituent
documents) of such Borrower Party in effect on such date, (ii) true copies of
all corporate action taken by such Borrower Party relative to this Agreement,
the Notes and the Security Documents to which it is a party and (iii) the
incumbency and signature of the respective officers of such Borrower Party,
together with satisfactory evidence of the incumbency of such Secretary or
Assistant Secretary.
(c) LEGAL OPINION OF COUNSEL TO THE BORROWER PARTIES. The
Agent shall have received, with an executed counterpart for each Bank, an
opinion addressed to the Agent and each Bank, dated the Closing Date, of
counsel to the Borrower Parties as to the matters set forth on Exhibit C in
form and substance satisfactory to the Agent.
(d) OFFICERS' CERTIFICATES. The Agent shall have received,
with an executed counterpart for each Bank, certificates from such officers of
the Company as to such matters as the Agent may request.
(e) FEES, EXPENSES, ETC. All fees and other compensation
required to be paid to the Agent and the Banks pursuant hereto or pursuant to
any written agreement on or prior to the Closing Date shall have been paid or
received.
(f) ADDITIONAL MATTERS. All corporate and other
proceedings, and all documents, instruments and other matters in connection
with the transactions contemplated by this Agreement, the Notes and the
Security Documents shall be satisfactory in form and substance to the Agent and
each Bank.
4.02. CONDITIONS TO ALL LOANS. The obligation of each Bank
to make any Loan is subject to performance by the Borrowers of their respective
obligations to be performed hereunder on or before the date of such Loan,
satisfaction of the conditions precedent set forth herein and to satisfaction
of the following further conditions precedent:
(a) NOTICE. Appropriate notice of such Loan shall have been
given by the respective Borrower as provided in Article II hereof.
(b) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Company in Article III hereof shall
be true and correct in all material respects on and as of such date as if made
on and as of such date, both before and after giving effect to the Loans
requested to be made on such date, except to the extent any such representation
or warranty relates solely and specifically to a prior date.
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<PAGE> 28
(c) NO DEFAULTS. No Event of Default or Potential Default
shall have occurred and be continuing on such date or after giving effect to
the Loans requested to be made on such date.
(d) NO VIOLATIONS OF LAW, ETC. Neither the making nor use of
the Loans shall cause any Bank to violate or conflict with any Law.
Each request by any Borrower for any Loan shall constitute a representation and
warranty by the Company that the conditions set forth in this Section 4.02 have
been satisfied as of the date of such request. Failure of the Agent to receive
notice from the Company to the contrary before such Loan is made shall
constitute a further representation and warranty by the Company that the
conditions referred to in this Section 4.02 have been satisfied as of the date
such Loan is made.
ARTICLE V
AFFIRMATIVE COVENANTS
The Company covenants to the Banks, the Issuing Bank and the
Agent as follows:
5.01. REPORTING AND INFORMATION REQUIREMENTS.
(a) ANNUAL AUDIT REPORTS. As soon as practicable, and in any
event within 90 days after the close of each fiscal year of the Company, the
Company shall furnish to the Agent, with a copy for each Bank, (i) consolidated
statements of income, retained earnings and changes in financial position of
the Company and its Consolidated Subsidiaries for such fiscal year and a
consolidated balance sheet of the Company and its Consolidated Subsidiaries as
of the close of such fiscal year, and notes to each, all in reasonable detail,
setting forth in comparative form the corresponding figures for the preceding
fiscal year, with such consolidated financial statements and balance sheet to
be certified by independent certified public accountants of recognized national
standing selected by the Company (the "Accountants") and (ii) the underlying
consolidating statements of income, retained earnings and changes in financial
position of the Company and its Consolidated Subsidiaries provided by the
Company to the Accountants for the purpose of the preparation by the
Accountants of the consolidated statements described in clause (i) above and
with such consolidating financial statements and balance sheets of the Company
and the Consolidated Subsidiaries to be compiled by the Company. The
certificate or report of such Accountants shall be free of exceptions or
qualifications not acceptable to the Banks (it being understood that exceptions
constituting items in connection with this Agreement that have either been
cured or waived shall be deemed to be acceptable to the Banks), a copy of such
certificate or report shall be addressed to the Banks and signed by such
Accountants, and such certificate or report shall contain a written statement
of such Accountants substantially to the effect that (i) such Accountants
examined such consolidated statements and balance sheet in accordance with
generally accepted auditing standards and accordingly made such tests of
accounting records and such other auditing procedures as such Accountants
considered necessary in the circumstances and (ii) in the opinion of such
Accountants such consolidated statements and balance sheet present fairly the
financial position of the Company and its Consolidated Subsidiaries as of the
end of such fiscal year and the results of their operations and the changes in
their financial position for such fiscal year, in conformity with GAAP applied
on a basis consistent with that of the preceding fiscal year (except for
changes in application in which such accountants concur).
(b) QUARTERLY REPORTS. As soon as practicable, and in any
event within 45 days after the close of each of the first three quarters of
each fiscal year of the Company, the Company shall furnish to the Agent, with a
copy for each Bank, unaudited consolidated statements of income and changes in
financial position for the Company and its Consolidated Subsidiaries for such
fiscal quarter and for the period from the beginning of such fiscal year to the
end of such fiscal quarter, and an unaudited consolidated balance sheet of the
Company and its Consolidated Subsidiaries as of the close of such fiscal
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<PAGE> 29
quarter, and notes to each, all in reasonable detail, setting forth in
comparative form the corresponding figures for the same period or as of the
same date during the preceding fiscal year (except for the balance sheet, which
shall set forth in comparative form the corresponding balance sheet as of the
prior fiscal year end), and certified by the chief financial officer or the
chief accounting officer of the Company as presenting fairly the financial
position of the Company and its Consolidated Subsidiaries as of the end of such
fiscal quarter and the results of their operations and the changes in their
financial position for such fiscal quarter, in conformity with GAAP applied in
a manner consistent with that of the most recent audited financial statements
furnished to the Banks, subject to year-end audit adjustments.
(c) COMPLIANCE CERTIFICATES. Within 90 days after the end of
each fiscal year of the Company and within 45 days after the end of each of the
first three fiscal quarters of each fiscal year of the Company, the Company
shall deliver to the Agent, with a copy for each Bank, a certificate dated as
of the end of such fiscal year or quarter signed on behalf of the Company by
its chief financial officer or principal accounting officer (i) stating that as
of the date thereof no Event of Default or Potential Default has occurred and
is continuing or exists, or if an Event of Default or Potential Default has
occurred and is continuing or exists, specifying in detail the nature and
period of existence thereof and any act on with respect thereto taken or
contemplated to be taken by the Company and (ii) stating in reasonable detail
the information and calculations necessary to establish compliance with the
provisions of Sections 6.01 and 6.14 hereof.
(d) FORECAST AND ANALYSIS. As soon as practicable, and in
any event within 90 days after the close of each fiscal year of the Company,
the Company shall furnish to the Agent, with a copy for each Bank, a forecast
of the (i) budgeted Capital Expenditures for the following fiscal year on a
consolidated basis and (ii) budgeted income statements on a consolidated basis,
together with an outline of the assumptions and contingencies upon which such
forecasts are based.
(e) OTHER REPORTS AND INFORMATION. Promptly upon their
becoming available to the Company, the Company shall deliver to the Agent, with
a copy for each Bank, a copy of (i) all regular or special reports or effective
registration statements which the Company shall file with the Securities and
Exchange Commission (or any successor thereto) or any securities exchange, (ii)
all reports, proxy statements, financial statements and other information
distributed by the Company to its stockholders, bondholders or the financial
community in general, and (iii) any reports submitted to the Company by
independent accountants in connection with any annual, interim or special audit
of the Company.
(f) FURTHER INFORMATION. The Company will promptly furnish
to the Agent, with a copy for each Bank, such other information and in such
form as the Agent or any Bank may reasonably request.
(g) NOTICE OF CERTAIN EVENTS. Promptly upon becoming aware
of any of the following, the Company shall give the Agent (with a copy for each
Bank) notice thereof, together with a written statement of a Responsible
Officer of the Company setting forth the details thereof and any action with
respect thereto taken or proposed to be taken by the Company:
(i) Any Event of Default or Potential Default.
(ii) Any material adverse change in the business, operations,
properties, assets or condition (financial or otherwise) of the Company
and its Subsidiaries taken as a whole.
(iii) Any pending action, suit, proceeding or investigation by
or before any Official Body against or affecting the Company or any
Subsidiary, except for matters that if adversely decided, individually
or in the aggregate, the Company reasonably believes would not have a
Material Adverse Effect.
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(h) VISITATION. The Company shall permit such persons as the
Agent or any Bank may designate to visit and inspect any of the properties of
the Company and of any Subsidiary, to examine their respective books and
records and take copies and extracts therefrom and to discuss their respective
affairs with their respective officers, employees and independent accountants
at such times and as often as the Agent or any Bank may reasonably request.
The Company hereby authorizes such officers, employees and independent
accountants to discuss with the Agent or any Bank the affairs of the Company
and its Subsidiaries.
(i) QUARTERLY CALCULATION. The Company shall deliver to the
Agent, with a copy for each Bank, a certificate signed by a Responsible Officer
of the Company setting forth the calculation of (A) the U.S. dollar equivalent
of the principal amount of SFNBV Revolving Credit Loans together with the U.S.
dollar equivalent of the aggregate amount in respect of all outstanding Letters
of Credit constituting undrawn and reimbursed amounts thereunder together with
the principal amount of all outstanding Company Revolving Credit Loans as well
as the amount by which the U.S. dollar equivalent of such credit facilities
exceeds the Revolving Credit Commitment Amount and (B) the U.S. dollar
equivalent of the principal amount of SFNBV Revolving Credit Loans together
with the U.S. dollar equivalent of the aggregate amount in respect of all
outstanding Dutch Letters of Credit constituting undrawn and reimbursed amounts
thereunder as well as the amount by which the U.S. dollar equivalent of such
credit facilities exceeds the SFNBV Revolving Credit Commitment Amount. Such
certificate shall be delivered on or prior to the close of each fiscal quarter
of the Company, but no sooner than 10 days prior to the close of such fiscal
quarter, it being understood that the Company shall have no obligation to
furnish that portion of the certification described in item (A) if the
aggregate of credit facilities described therein is not, at the time of
required calculation, in excess of 90% of the Revolving Credit Commitment
Amount at such time and the Company shall have no obligation to furnish that
portion of the certification described in item (B) if the aggregate of credit
facilities described therein is not, at the time of required calculation, in
excess of 90% of the SFNBV Revolving Credit Commitment Amount at such time.
5.02. PRESERVATION OF EXISTENCE AND FRANCHISES. Subject to
Section 6.09 hereof, the Company shall cause itself, SFNBV, each other Borrower
Party and each other Subsidiary, which, the failure of which to do so in the
aggregate could reasonably be expected to have a Material Adverse Effect, to
maintain its corporate existence, rights and franchises in full force and
effect in its jurisdiction of incorporation. The Company shall cause itself,
SFNBV, each other Borrower Party and each other Subsidiary, which, the failure
of which to do so in the aggregate could reasonably be expected to have a
Material Adverse Effect, to qualify and remain qualified as a foreign
corporation in each jurisdiction in which failure to receive or retain such
qualification could reasonably be expected to have a Material Adverse Effect.
5.03. INSURANCE. The Company shall cause itself and each
Subsidiary to maintain with financially sound and reputable insurers insurance
with respect to its properties and business and against such liabilities,
casualties and contingencies and of such types and in such amounts as are
customary in the case of corporations engaged in the same or a similar business
or having similar properties similarly situated.
5.04. MAINTENANCE OF PROPERTIES. The Company shall cause
itself and each Subsidiary to maintain or cause to be maintained in good
repair, working order and condition the properties now or hereafter owned,
leased or otherwise possessed by it and shall make or cause to be made all
repairs, renewals, replacements and improvements reasonably required thereto so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
5.05. PAYMENT OF TAXES AND OTHER POTENTIAL CHARGES AND
PRIORITY CLAIMS; PAYMENT OF OTHER CURRENT LIABILITIES. The Company shall cause
itself and each Subsidiary to pay or discharge:
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<PAGE> 31
(a) prior to the date on which penalties attach thereto, all
taxes, assessments and other governmental charges or levies imposed upon it or
any of its properties or income (including such as may arise under Section
4062, Section 4063 or Section 4064 of ERISA or any similar provision of law);
(b) on or prior to the date when due, all lawful claims of
materialmen, mechanics, carriers, warehousemen, landlords and other like
persons which, if unpaid, might result in the creation of a Lien upon any such
property; and
(c) on or prior to the date when due, all other lawful claims
which, if unpaid, might result in the creation of a Lien upon any such property
(other than Liens not forbidden by Section 6.02 hereof) or which, if unpaid,
might give rise to a claim entitled to priority over general creditors of the
Company or such Subsidiary in a case under Title 11 (Bankruptcy) of the United
States Code, as amended, or in any insolvency proceeding or dissolution or
winding-up involving the Company or such Subsidiary;
provided, that unless and until foreclosure, distraint, levy, sale or similar
proceedings shall have been commenced, the Company or such Subsidiary need not
pay or discharge any such tax, assessment, charge, levy, claim or current
liability so long as the validity thereof is contested in good faith and by
appropriate proceedings diligently conducted and so long as such reserves or
other appropriate provisions as may be required by GAAP shall have been made
therefor and so long as such failure to pay or discharge could not reasonably
be expected to have a Material Adverse Effect.
5.06. FINANCIAL ACCOUNTING PRACTICES. The Company shall
cause itself and each Subsidiary to keep proper books of record and account in
accordance with normal business practice in which full and appropriate entries
shall be made of all dealings or transactions in relation to its business and
activities.
5.07. COMPLIANCE WITH LAWS. The Company shall cause itself
and each Subsidiary to comply with all applicable Laws, (including but not
limited to ERISA, the Code and any applicable tax Law, product safety Law,
occupational safety or health Law, environmental protection or pollution
control Law, hazardous waste or toxic substances management, handling or
disposal Law) in all respects; provided that the Company shall not be deemed to
be in violation of this Section 5.07 as a result of any failures to comply
which would not result in fines, penalties, injunctive relief or other civil or
criminal liabilities which, in the aggregate, could not reasonably be expected
to have a Material Adverse Effect.
5.08. USE OF PROCEEDS. The Borrowers shall apply the
proceeds of all Loans hereunder as described in Section 3.17 hereof.
5.09. GOVERNMENT APPROVALS AND FILINGS. The Company shall
cause itself and each Subsidiary to keep and maintain in force and effect all
Governmental Actions necessary in connection with execution and delivery of
this Agreement, the Notes or the Security Documents, consummation of the
transactions herein or therein contemplated, performance of or compliance with
the terms and conditions hereof or thereof or to ensure the legality, validity,
binding effect, enforceability or admissibility into evidence hereof or
thereof.
5.10. CONTINUATION OF OR CHANGE IN BUSINESS. The enterprise
comprised of the Company and its Subsidiaries taken as a whole shall continue
to engage in its business substantially as conducted and operated during the
present and preceding fiscal year, and the Company will not, and will not
permit any Subsidiary to, engage in any other business; provided, that the
Banks and the Agent acknowledge that the Company's business includes production
of fungal and other microbial agents and spore which are used both inside and
outside the mushroom industry, and that variations in the relative mix of
products sold within and outside the mushroom industry will not constitute a
substantial change in business so long as the production equipment is suitable
without significant modification and
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<PAGE> 32
acknowledge further that the Company's business includes composting activities,
which do not constitute a significant change in business.
ARTICLE VI
NEGATIVE COVENANTS
The Company covenants to the Banks, the Issuing Bank and the
Agent as follows:
6.01. FINANCIAL MAINTENANCE COVENANTS.
(a) CONSOLIDATED FUNDED INDEBTEDNESS TO CONSOLIDATED
CAPITALIZATION. The ratio of Consolidated Funded Indebtedness to Consolidated
Capitalization shall not be greater than .55 at any time from and including the
Closing Date to and including December 30, 1996, shall not be greater than .50
at any time from and including December 31, 1996, to and including December 30,
1998, and shall not be greater than .45 at any time from and including December
31, 1998, and thereafter.
(b) CONSOLIDATED FUNDED INDEBTEDNESS TO CONSOLIDATED CASH
FLOW. The ratio of Consolidated Funded Indebtedness to Consolidated Cash Flow
shall not be greater than 5.0 to 1 at any time.
(c) CONSOLIDATED INTEREST COVERAGE RATIO. The Consolidated
Interest Coverage Ratio shall not be less than 3.0 to 1 as determined on a
Rolling Four Quarter Basis.
6.02. LIENS. The Company shall not permit itself or any
Subsidiary, at any time, to create, incur, assume or suffer to exist any Lien
on any of its property or assets, tangible or intangible, now owned or
hereafter acquired, or agree or become liable to do so, except:
(a) Liens existing on the date hereof and listed in Schedule
6.02 hereto (and extension, renewal and replacement Liens upon the same
property theretofore subject to a listed Lien, provided the amount secured by
each Lien constituting such an extension, renewal or replacement Lien shall not
exceed the amount secured by the Lien theretofore existing);
(b) Liens arising from taxes, assessments, charges, levies or
claims described in Section 5.05 hereof that are not yet due or that remain
payable without penalty or to the extent permitted to remain unpaid under the
proviso to such Section 5.05;
(c) Deposits or pledges to secure workmen's compensation,
unemployment insurance, old age benefits or other social security obligations,
or in connection with or to secure the performance of bids, tenders, trade
contracts or leases, or to secure statutory obligations, or stay, surety or
appeal bonds, or other pledges or deposits of like nature and all in the
ordinary course of business;
(d) Liens on property securing all or part of the purchase
price thereof to the Company or a Subsidiary and Liens (whether or not assumed)
existing on property at the time of purchase thereof by the Company or a
Subsidiary, as the case may be (and extension, renewal and replacement Liens
upon the same property theretofore subject to a Lien described in this Section
6.02(d), provided the amount secured by each Lien constituting such extension,
renewal or replacement shall not exceed the amount secured by the Lien
theretofore existing), provided
(i) each such Lien is confined solely to the property so
purchased, improvements thereto and proceeds thereof,
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(ii) the aggregate amount secured by all such Liens on any
particular property at the time purchased by the Company
or such Subsidiary, as the case may be, shall not exceed
75% of the lesser of the fair market value of such
property at such time or the purchase price of such
property ("purchase price" for this purpose including
the amount secured by each such Lien thereon whether or
not assumed), and
(iii) the aggregate amount secured by all Liens described in
this Section 6.02(d) shall not at any time exceed
$2,000,000;
(e) Rights reserved to or vested in others to take or receive
any part of the gas, oil or other minerals or by-products thereof or timber or
power grown on or developed, manufactured, generated, produced, transported,
transmitted or processed on or by any property of the Company or any Subsidiary
or to receive royalties, lease rentals or other payments or remuneration,
services or benefits as a result of the acquisition, construction, development
or operation thereof;
(f) Liens arising from legal proceedings, so long as such
proceedings are being contested in good faith by appropriate proceedings
diligently conducted and so long as execution is stayed on all judgments
resulting from any such proceedings; and
(g) Zoning restrictions, easements, minor restrictions on the
use of real property, minor irregularities in title thereto and other minor
Liens that do not secure the payment of money or the performance of an
obligation and that do not in the aggregate materially detract from the value
of a property or asset to, or materially impair its use in the business of, the
Company or such Subsidiary; and
(h) Liens created by the Security Documents.
6.03. INDEBTEDNESS. The Company shall not permit itself or
any Subsidiary, at any time, to create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness under this Agreement or the Notes, or under
Secured Hedge Agreements;
(b) Indebtedness existing on the date hereof and listed in
Schedule 6.03 hereto (and extensions, renewals and replacements thereof on
terms no less advantageous than the Indebtedness extended, renewed or
replaced);
(c) Indebtedness secured by a Lien described in Section
6.02(d) hereof;
(d) up to $3,000,000 of Indebtedness which is fully secured
by cash collateral;
(e) in addition to the Indebtedness permitted by clause (d)
above, Indebtedness for borrowed money incurred by the Company or the
Subsidiaries from time to time, provided that the aggregate amount of such
Indebtedness shall not exceed $4,000,000 at any time;
(f) current accounts payable arising out of transactions
(other than borrowings) in the ordinary course of business; and
(g) Dutch Loans incurred and Dutch Letters of Credit issued
pursuant to Section 2.11(b) hereof.
6.04. GUARANTEES AND CONTINGENT LIABILITIES. The Company
shall not permit itself or any Subsidiary, at any time, directly or indirectly,
to assume, guarantee, become surety for, endorse or otherwise agree, become or
remain directly or contingently liable upon or with respect to any obligation
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or liability of any other person, except guarantees and contingent liabilities
with respect to obligations or liabilities of other persons not in excess of
$2,000,000 and listed on Schedule 6.04 hereto.
"Direct or contingent liability upon or with respect to any obligation or
liability of any other person" of the Company or a Subsidiary within the
meaning of this Section 6.04 includes but is not limited to an agreement,
contingent or otherwise:
(v) to reimburse banks, surety companies and other persons in
respect of drawings and other payments under letters of credit,
guarantees, surety bonds and similar documents opened or issued by such
other persons for the account of the Company or such Subsidiary;
(w) to purchase an obligation or assume a liability of such
person or to supply funds for the payment or purchase of such
obligation or satisfaction of such liability;
(x) to make any loan, advance, capital contribution or other
investment in, or to purchase any property, services or securities
from, such person so as to enable such person to meet a minimum equity,
net worth, working capital or other financial condition or to enable
such person to satisfy any obligation or liability or pay any dividend
or stock liquidation payment, or otherwise to supply funds to or in any
manner invest in such person;
(y) to purchase, sell or lease (as lessee or lessor) property
or assets or to purchase or sell services (i) primarily for the purpose
of enabling such person to satisfy such obligation or liability or of
assuring the owner of such indebtedness or liability against loss, or
(ii) regardless of the nondelivery of such property or assets or the
failure to furnish such services, or (iii) in a transaction otherwise
having the characteristics of a take-or-pay or throughput contract or
as described in paragraph 6 of FASB Statement of Financial Accounting
Standards No. 47; or
(z) which is substantially equivalent in economic effect to
any of the foregoing or otherwise substantially equivalent in economic
effect to an assumption, guarantee, endorsement or other direct or
contingent liability upon or with respect to any obligation or
liability of such person.
Notwithstanding the foregoing, however, for purposes of this
Section 6.04, Letters of Credit issued hereunder shall not constitute "direct
or contingent liabilities upon or with respect to any obligation or liability
of any other person".
6.05. LOANS AND INVESTMENTS. The Company shall not permit
itself or any Subsidiary, at any time, to make or suffer to remain outstanding
any loan or advance to, or purchase, acquire or own any stock, bonds, notes or
securities of, or any partnership interest (whether general or limited) in, or
any other interest in, or make any capital contribution to, any other person,
or agree, become or remain liable to do any of the foregoing, except:
(a) loans and investments existing on the date hereof and
listed in Schedule 6.05 hereto (including any extensions or renewals thereof);
(b) trade credit extended, and loans and advances extended to
subcontractors or suppliers, under usual and customary terms in the ordinary
course of business;
(c) advances to employees to meet expenses incurred by such
employees in the ordinary course of business;
(d) loans to employees of the Company and its Subsidiaries in
an aggregate amount not to exceed $500,000 and incorporating commercially
reasonable terms including without limitation the
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applicable interest rate and repayment terms, provided, that all such loans
shall be evidenced by promissory notes, which promissory notes shall be
delivered to and endorsed in favor of the Agent for the ratable benefit of
Banks as further security for the Loans;
(e) in addition to the loans described in Section 6.05(d),
loans to employees of the Company and its Subsidiaries to defray the cost of
employee relocations in an aggregate amount not to exceed $750,000 and
incorporating commercially reasonable terms including without limitation the
applicable interest rate and repayment terms, provided, that all such loans
shall be evidenced by promissory notes, which promissory notes shall be
delivered to and endorsed in favor of the Agent for the ratable benefit of
Banks as further security for the Loans;
(f) the capital stock of, or partnership interests in, a
Subsidiary owned on the date hereof and listed in Schedule 3.09 hereto;
(g) demand deposits, time deposits or certificates of deposit
in commercial banks reasonably acceptable to the Required Banks and maturing
not in excess of one year from the date of acquisition, so long as the
aggregate of such deposits by the Company and its Subsidiaries does not exceed
$15,000,000 at any one time; and
(h) obligations backed by the full faith and credit of the
United States of America maturing not in excess of one year from the date of
acquisition, commercial paper maturing not in excess of one year from the date
of acquisition and rated P-1 by Moody's Investors Service, Inc. or A-1 by
Standard & Poor's Corporation on the date of acquisition, and preferred stock
or indebtedness which is (i) traded on a national securities exchange and (ii)
rated A or better by Moody's Investors Service, Inc. or Standard & Poor's
Corporation on the date of acquisition, so long as the aggregate amount
invested pursuant to this subsection (h) does not exceed $1,000,000 at any
time;
(i) notes or securities received in a good-faith settlement
of loans or investments described in this Section 6.05, if such loan or
investment was not made in the expectation of such settlement which notes and
securities shall be delivered to and endorsed in favor of the Agent for the
ratable benefit of the Banks as further security for the Loans;
(j) loans and investments made by the Company and its
Subsidiaries not exceeding $2,000,000 in the aggregate; provided that the
Company may make investments in connection with acquisitions permitted pursuant
to Section 6.09(d); and
(k) advances to Subsidiaries permitted pursuant to Section
3.17.
Notwithstanding the foregoing, loans and/or investments of the
nature described in the last sentence of Section 6.14 hereof shall not be
considered loans and investments for purposes of this Section 6.05.
6.06. DIVIDENDS AND RELATED DISTRIBUTIONS. The Company shall
not permit itself or any Subsidiary, at any time, to declare or make any Stock
Payment, or agree, become or remain liable (contingently or otherwise) to do
any of the foregoing, except as follows:
(a) A Subsidiary may declare and make Stock Payments if all
of the capital stock of such Subsidiary is owned by the Company or by a direct
or indirect wholly-owned Subsidiary of the Company.
(b) The Company may from time to time declare and make Stock
Payments if such Stock Payment is payable solely in shares of common stock (or
options, warrants or rights therefor) of the Company.
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(c) The Company may from time to time declare and make cash
Stock Payments on account of a dividend on, or purchase, redemption, retirement
or acquisition of, its capital stock, if on the date of such payment (or, in
the case of a dividend, on the date of declaration) (the "determination date"):
(i) The aggregate amount of all Stock Payments declared or
made under this Section 6.06(c) in the fiscal quarter of the Company containing
the determination date, plus the proposed Stock Payment, does not exceed the
greater of (x) $700,000 or (y) 50% of the Consolidated Net Income of the
Company for the prior fiscal quarter less the Current Maturities of
Consolidated Funded Indebtedness for the prior fiscal quarter less Capital
Expenditures for the prior fiscal quarter (but in any event not to exceed under
this item (y) $2,800,000 in any fiscal year);
(ii) Consolidated Net Income of the Company shall not have
been less than $500,000 in the aggregate over the two immediately-preceding
fiscal years; and
(iii) No Event of Default or Potential Default shall exist
at the determination date or immediately thereafter and after giving effect to
such proposed declaration (for this purpose treating a dividend as made on the
date declared), purchase, redemption, retirement or acquisition.
The Company shall not permit itself or any Subsidiary, at any time, to declare
any dividend payable later than 75 days after declaration.
6.07. SALE-LEASEBACKS. The Company shall not permit itself
or any Subsidiary, at any time, to enter into or suffer to remain in effect any
transaction to which the Borrower or such Subsidiary is a party involving the
sale, transfer or other disposition by the Company or any Subsidiary of any
property, real or personal, now owned or hereafter acquired, with a view
directly or indirectly to the leasing back of any part of the same property or
any other property used for the same or a similar purpose or purposes.
6.08. Leases. The Company shall not permit itself or any
Subsidiary, at any time, to enter into or suffer to remain in effect any
agreement to lease, as lessee, any real or personal property, except:
(a) leases cancellable by the lessee without penalty on not
more than 90 days' notice;
(b) leases by the Company as lessor to a Subsidiary as lessee
or by a Subsidiary as lessor to the Company or a Subsidiary as lessee;
(c) Capitalized Leases; and
(d) operating leases which on any date in the aggregate will
not result in the payment or accrual by the Company and its Subsidiaries of a
total of more than $2,000,000 in the twelve month period after such date.
6.09. MERGERS, ACQUISITIONS, ETC. The Company shall not
permit itself or any Subsidiary, at any time, to (v) merge with or into or
consolidate with any other person, (w) liquidate, wind-up, dissolve or divide,
(x) acquire all or any substantial portion of the properties of any going
concern or going line of business, (y) acquire all or any substantial portion
of the properties of any other person other than in the ordinary course of
business or (z) agree, become or remain liable (contingently or otherwise) to
do any of the foregoing, except:
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(a) A wholly-owned Subsidiary may merge with or into or
consolidate with any other wholly-owned Subsidiary, provided that no Event of
Default or Potential Default shall occur and be continuing or shall exist at
such time or after giving effect to such transaction;
(b) A wholly-owned Subsidiary may merge with the Company,
provided that the Company shall be the surviving corporation and no Event of
Default or Potential Default shall occur and be continuing or shall exist at
such time or after giving effect to such transaction;
(c) The Company or a Subsidiary may acquire additional
mushroom growing or spore production or related businesses, provided that the
acquisition cost thereof expended in any calendar year shall not exceed
$2,000,000 in the aggregate and during the term of this Agreement shall not
exceed $10,000,000 in the aggregate; and
(d) The Company or a Subsidiary may acquire ownership
interests in Affiliates, provided that the aggregate cost thereof expended in
any calendar year for all such acquisitions shall not exceed $1,250,000.
6.10. DISPOSITIONS OF PROPERTIES. The Company shall not
permit itself or any Subsidiary, at any time, to sell, convey, assign, lease,
transfer, abandon or otherwise dispose of, voluntarily or involuntarily, any of
its properties, or agree, become or remain liable (contingently or otherwise)
to do any of the foregoing, except:
(a) The Company and each Subsidiary may sell inventory in the
ordinary course of business; and
(b) The Company and the Subsidiaries may dispose of
properties, provided that the aggregate value of all such properties shall not
exceed $1,000,000 in any calendar year, it being understood that licensing
arrangements entered into by the Company and its Subsidiaries with respect to
proprietary interests in mushroom growing or spore production shall not be
deemed to be dispositions and, accordingly, shall not be prohibited by this
Section 6.10.
By way of illustration, and without limitation, it is understood that the
following are dispositions of property subject to this Section 6.10: any
disposition of accounts, chattel paper or general intangibles, with or without
recourse; any disposition of any leasehold interest; and any disposition of any
capital stock in or indebtedness of any Subsidiary. Nothing in this Section
6.10 shall be construed to limit any other restriction on dispositions of
property imposed by the Security Documents.
6.11. SELF-DEALING. The Company shall not permit itself or
any Subsidiary, at any time, to enter into or carry out any transaction with
(including, without limitation, purchasing property or services from or selling
property or services to) any Affiliate except
(a) directors, officers and employees of the Company and its
Subsidiaries may render services to the Company or such Subsidiary for
compensation at the same rates generally paid by corporations engaged in the
same or similar businesses for the same or similar services; and
(b) the Company or its Subsidiaries may enter into and carry
out other transactions with Affiliates if in the ordinary course of business,
pursuant to the reasonable requirements of the Company's or such Subsidiary's
business, upon terms reasonably found by the board of directors of the Company
or such Subsidiary after due inquiry to be fair and reasonable and no less
favorable to the Company or such Subsidiary than would obtain in a comparable
arms-length transaction.
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6.12. CONSOLIDATED TAX RETURNS. The Company shall not permit
itself or any Subsidiary, at any time, to file, or consent to the filing of,
any consolidated income tax return with any person other than the Company or a
Consolidated Subsidiary.
6.13. REGULATION U. No Borrower shall use the proceeds of
any Loans hereunder directly or indirectly to purchase or carry any "margin
stock" (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System) or to extend credit to others for the purpose of
purchasing or carrying, directly or indirectly, any such margin stock.
6.14. CAPITAL EXPENDITURES. The Company shall not permit
itself or any Subsidiary, at any time, to make any Capital Expenditures, except
for Capital Expenditures not in excess of $10,000,000 in the aggregate in any
calendar year. For purposes hereof, any investment by the Company in, or loan
by the Company to, any entity with whom the Company has entered into a license
arrangement shall constitute a Capital Expenditure hereunder.
6.15. LIMITATION ON OTHER RESTRICTIONS ON LIENS. The Company
shall not permit itself or any Subsidiary, at any time, to enter into, become
or remain subject to any agreement or instrument to which the Company or such
Subsidiary is a party or by which either of them or any of their respective
properties (now owned or hereafter acquired) may be subject or bound that would
prohibit the grant of any Lien upon any of its properties (now owned or
hereafter required) or that would prohibit a pledge of the stock owned by the
Company or any Subsidiary, except the Security Documents.
6.16. LIMITATION ON OTHER RESTRICTIONS ON STOCK PAYMENTS,
LOANS AND INVESTMENTS. Except as set forth on Schedule 6.16, the Company shall
not permit itself or any Subsidiary, at any time, to enter into, become or
remain subject to any agreement or instrument to which the Company or such
Subsidiary is a party or by which either of them may be subject or bound that
would prohibit any Subsidiary from making any Stock Payment or loan to or
investment in the Company.
ARTICLE VII
DEFAULTS
7.01. EVENTS OF DEFAULT. An Event of Default shall mean the
occurrence or existence of one or more of the following events or conditions
(whatever the reason for such Event of Default and whether voluntary,
involuntary or effected by operation of Law):
(a) A Borrower shall fail to pay when due principal of or
interest on any Note or an obligor of a reimbursement obligation under a Letter
of Credit shall fail to pay when due such a reimbursement obligation; or
(b) A Borrower shall fail to pay any amount due hereunder or
under any Note (other than the amounts referred to in 7.01(a) hereof) or the
Company shall fail to pay when due any other amount due hereunder or any
Borrower Party shall fail to pay when due any amount due under any Security
Document and any such failure to pay shall continue for five Business Days;
(c) Any representation or warranty made by the Company under
this Agreement or any statement made by the Company in any financial statement,
certificate, report, exhibit or document furnished by the Company to the Agent
or any Bank pursuant to this Agreement shall prove to have been false or
misleading in any material respect as of the time when made; or
(d) Any representation or warranty made by the Company or any
Borrower Party under any Security Document or any statement made by the Company
or any Borrower Party in any certificate, report, exhibit or document furnished
by the Company or any Borrower Party to the Agent pursuant to
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any Security Document shall prove to have been false or misleading in any
material respect as of the time when made; or
(e) The Company shall default in the performance or
observance of any covenant contained in Article VI hereof or of the covenant
contained in Section 5.01(g) hereof; or
(f) The Company shall default in the performance or
observance of any other covenant, agreement or duty under this Agreement or any
Note and (i) in the case of a default under Section 5.01 hereof (other than
under subsection (i) of such Section 5.01) such default shall have continued
for a period of ten days after notice from the Agent to the Company and (ii) in
the case of any other default such default shall have continued for a period of
thirty days after notice from the Agent to the Company; or
(g) Any Borrower Party shall default in the performance of
any covenant, agreement or duty under any Security Document and such default
shall have continued for a period of thirty days after notice from the Agent to
such Borrower Party;
(h) Any Borrower Party (i) shall default (as principal or as
guarantor or other surety) in any payment of any obligation (or set of related
obligations) in respect of Indebtedness in excess of $500,000 in aggregate
amount beyond any period of grace with respect thereto or, if such obligation
or obligations is or are payable or repayable on demand, shall fail to pay or
repay such obligation or obligations when demanded or (ii) shall default in the
observance of any covenant, term or condition contained in any agreement or
instrument by which such obligation or obligations is or are created, secured
or evidenced if the effect of such default is to cause, or to permit the holder
or holders of such obligation or obligations (or a trustee or agent on behalf
of such holder or holders) to cause, all or part of such obligation or
obligations to become due before its or their otherwise stated maturity; or
(i) The Agent shall determine in good faith (which
determination shall be conclusive absent manifest error) that the potential
liabilities associated with the events set forth in subsections (i) through
(vii) below, individually or in the aggregate, could have a material adverse
effect on the business, operations, condition, financial or otherwise, or
prospects of a Borrower or of the enterprise comprised of the Company and its
Subsidiaries taken as a whole:
(i) The PBGC notifies a Plan pursuant to Section 4042
of ERISA by service of a complaint, threat of filing a law
suit or otherwise of its determination that an event described
in Section 4042(a) of ERISA has occurred, a Plan should be
terminated, or a trustee should be appointed for a Plan; or
(ii) Any action is taken to terminate a Plan pursuant
to its provisions or the plan administrator files with the
PBGC a notice of intent to terminate a Plan in accordance with
Section 4041 of ERISA; or
(iii) Any action is taken by a plan administrator to
have a trustee appointed for a Plan pursuant to Section 4042
of ERISA; or
(iv) A return is filed with the Internal Revenue
Service, or a Plan is notified by the Secretary of the
Treasury that a notice of deficiency under Section 6212 of the
Code has been mailed, with respect to the tax imposed under
Section 4971(a) of the Code for failure to meet the minimum
funding standards established under Section 412 of the Code;
or
(v) A Reportable Event occurs with respect to a Plan; or
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(vi) Any action is taken to amend a Plan to become an
employee benefit plan described in Section 4021(b)(1) of
ERISA, causing a Plan termination under Section 4041(e) of
ERISA; or
(vii) The Company, any Subsidiary or any Controlled
Group Member receives a notice of liability or demand for
payment on account of complete withdrawal under Section 4203
of ERISA, partial withdrawal under Section 4205 of ERISA or on
account of becoming secondarily liable for withdrawal
liability payments under Section 4204 of ERISA (sale of
assets); or
(j) One or more judgments for the payment of money shall have
been entered against the Company or any Subsidiary, which judgment or judgments
exceed $500,000 in the aggregate, and such judgment or judgments shall have
remained undischarged and unstayed for a period of thirty consecutive days; or
(k) One or more writs or warrants of attachment, garnishment,
execution, distraint or similar process exceeding in value the aggregate amount
of $500,000 shall have been issued against the Company or any Subsidiary or any
of their respective properties which shall have remained undischarged and
unstayed for a period of thirty consecutive days; or
(l) Any authorization, consent, approval, license, exemption,
registration, qualification, designation, declaration, filing or other action
or undertaking now or hereafter made by or with any Official Body in connection
with this Agreement, the Notes or any Security Document or any such action or
undertaking now or hereafter necessary or advisable to make this Agreement, the
Notes or any Security Document legal, valid, enforceable and admissible in
evidence is not obtained or shall have ceased to be in full force and effect or
shall have been modified or amended or shall have been held to be illegal or
invalid, and the Agent shall have determined in good faith (which determination
shall be conclusive) that such event or occurrence may have a material adverse
effect on the Banks' rights under this Agreement, any Note or any Security
Document; or
(m) a Change in Control shall have occurred;
(n) The Agent shall have determined in good faith (which
determination shall be conclusive absent manifest error) that a material
adverse change has occurred in the business, operations, properties, assets or
condition (financial or otherwise) of a Borrower or of the enterprise comprised
of the Company and its Subsidiaries taken as a whole or that the prospect of
payment or performance of any covenant, agreement or duty under this Agreement,
the Notes or any Security Document is impaired; or
(o) A Borrower shall fail to pay any amount payable by it in
respect of any Secured Hedge Agreement when the same becomes due and payable
(whether by scheduled payment, early termination or otherwise), and such
failure shall continue beyond any period of grace provided in such Secured
Hedge Agreement with respect thereto (not to exceed 30 days).
(p) A proceeding shall have been instituted in respect of the
Company or any Subsidiary
(i) seeking to have an order for relief entered in
respect of the Company or such Subsidiary, or seeking a
declaration or entailing a finding that the Company or such
Subsidiary is insolvent or a similar declaration or finding,
or seeking dissolution, winding-up, charter revocation or
forfeiture, liquidation, reorganization, arrangement,
adjustment, composition or other similar relief with respect
to the Company or such Subsidiary, its assets or its debts
under any law relating to bankruptcy, insolvency, relief of
debtors or protection of creditors, termination of legal
entities or any other similar law now or hereafter in effect,
or
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(ii) seeking appointment of a receiver, trustee,
custodian, liquidator, assignee, sequestrator or other similar
official for the Company or such Subsidiary or for all or any
substantial part of its property
and such proceeding shall result in the entry, making or grant of any such
order for relief, declaration, finding, relief or appointment, or such
proceeding shall remain undismissed and unstayed for a period of thirty
consecutive days; or
(q) The Company or any Subsidiary shall become insolvent,
shall become generally unable to pay its debts as they become due, shall
voluntarily suspend transaction of its business, shall make a general
assignment for the benefit of creditors, shall institute a proceeding described
in Section 7.01(p)(i) hereof or shall consent to any such order for relief,
declaration, finding or relief described therein, shall institute a proceeding
described in Section 7.01(p)(ii) hereof or shall consent to any such
appointment or to the taking of possession by any such official of all or any
substantial part of its property whether or not any such proceeding is
instituted, shall dissolve, wind-up or liquidate itself or any substantial part
of its property (except as provided in Section 6.10 hereof), or shall take any
action in furtherance of any of the foregoing.
7.02. CONSEQUENCES OF AN EVENT OF DEFAULT.
(a) If an Event of Default specified in subsections (a)
through (o) of Section 7.01 hereof shall occur or exist, then, in addition to
all other rights and remedies which the Agent, any Bank or the Issuing Bank may
have hereunder or under any Security Document, at law, in equity or otherwise,
the Banks shall be under no further obligation to make Loans and the Issuing
Bank shall be under no further obligation to issue Letters of Credit, and the
Agent may, and upon the written request of the Required Banks shall, by notice
to the Borrower, from time to time do any or all of the following:
(i) Declare the Revolving Credit Commitments (and the
commitments to issue Letters of Credit) terminated, whereupon the
Revolving Credit Commitments (and such commitments to issue Letters of
Credit) will terminate and any fees hereunder shall be immediately due
and payable without presentment, demand, protest or further notice of
any kind, all of which are hereby waived, and an action therefor shall
immediately accrue.
(ii) Declare the unpaid principal amount of the Notes,
interest accrued thereon and all other obligations of any of the
Borrowers hereunder or under the Security Documents to be immediately
due and payable without presentment, demand, protest or further notice
of any kind, all of which are hereby waived, and an action therefor
shall immediately accrue.
(iii) Give notice to the Borrower that the Applicable Margin
shall increase by 2.00% above the amount otherwise applicable under
Section 2.04(b) hereof, whereupon the Applicable Margin shall so
increase for each day from and including the date of such notice to the
Borrower to and including the first subsequent date on which no Event
of Default shall be continuing (or, if the Agent, acting at the
direction of the Required Banks, by written notice to the Borrower
expressly terminates such notice at an earlier date, to and including
such earlier date).
(b) If an Event of Default specified in subsection (p) or (q)
of Section 7.01 hereof shall occur or exist, then, in addition to all other
rights and remedies which the Agent, any Bank or the Issuing Bank may have
hereunder or under any Security Document, at law, in equity or otherwise, the
Banks shall be under no further obligation to make Loans or the Issuing Bank
shall be under no further obligation to issue Letters of Credit, and the
following provisions shall automatically apply:
(i) The Revolving Credit Commitments (and the commitments to
issue Letters of Credit) shall terminate, and any fees hereunder shall
be immediately due and payable without
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presentment, demand, protest or further notice of any kind, all of which
are hereby waived, and an action therefor shall immediately accrue.
(ii) The unpaid principal amount of the Notes, interest
accrued thereon and all other obligations of any of the Borrowers
hereunder or under the Security Documents shall be immediately due and
payable without presentment, demand, protest or further notice of any
kind, all of which are hereby waived, and an action therefor shall
immediately accrue.
(iii) The Applicable Margin shall increase by 2.00% above the
amount otherwise applicable under Section 2.04(b) hereof.
7.03. SET-OFF. If the unpaid principal amount of any Note,
interest accrued thereon or any other amount owing by a Borrower hereunder or
under any Note or by the Company or any Subsidiary under any Security Document
shall have become due and payable (by acceleration or otherwise), the Banks and
the holder of any participation in any Note shall each have the right, in
addition to all other rights and remedies available to it, without notice to
the Borrower, the Company or any Subsidiary, to set-off against and to
appropriate and apply to such due and payable amounts any debt owing to, and
any other funds held in any manner for the account of, the Borrower, the
Company or such Subsidiary by such Bank or by such holder, including without
limitation all funds in all deposit accounts (whether time or demand, general
or special, provisionally credited or finally credited, or otherwise) now or
hereafter maintained by the Borrower, the Company or such Subsidiary with such
Bank or such holder. Such right shall exist whether or not any such Bank or
any such holder shall have given notice or made any demand hereunder or under
any Note, participation or Security Document, whether or not such debt owing to
or funds held for the account of the Borrower, the Company or such Subsidiary
is or are matured or unmatured, whether or not any amounts owing by any person
with respect to such participation are matured or unmatured, whether or not the
holder of such participation is in privity with or is a creditor of the
Borrower with respect to such participation, and regardless of the existence or
adequacy of any collateral, guaranty or any other security, right or remedy
available to the Banks or any such holder. The Borrowers hereby consent to and
confirm the foregoing arrangements and confirm each Bank's and holder's rights
of banker's lien and set-off. Nothing in this Agreement shall be deemed a
waiver or prohibition of or restriction on any Bank's or holder's rights of
banker's lien or set-off.
7.04. EQUALIZATION AMONG BANKS AND PARTICIPANTS. Each Bank
and each holder of any participation in any Note hereby agree among themselves
that, with respect to all amounts received by such Bank or holder for
application on any obligation hereunder or under the Notes, any such
participation or the Security Documents, whether received by voluntary payment,
by realization upon security, by the exercise of the right of set-off or
banker's lien, by counterclaim or by any other non-pro rata source, equitable
adjustment will be made in the manner stated in the following sentence so that,
in effect, all such amounts will be shared ratably among the Banks and all such
holders in proportion to their interests in payments under the Notes. Any Bank
or holder receiving any such amount shall purchase for cash from the other
Banks and holders an interest in the Notes or in participations therein, as the
case may be, in such amount as shall result in a ratable participation by each
Bank and holder in the aggregate unpaid amount under the Notes; provided, that
if all or any portion of such amount is thereafter recovered from the Bank or
the holder making such purchase, such purchase shall be rescinded and the
purchase price restored to the extent of such recovery, together with interest
or other amounts, if any, required by Law (including court order) to be paid by
such Bank or the holder making such purchase. The Borrowers hereby consent to
and confirm the foregoing arrangements and hereby confirm the Banks' right
without notice to or consent of the Borrowers to create or dispose of
participations in the Notes (whether such participations are in the form of
partial or complete assignments of the Banks' rights hereunder or under the
Notes, creation of a debtor-creditor or trustee-beneficiary relationship
between a Bank and the holders of such participations or otherwise).
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7.05. JUDGMENT CURRENCY. If the Agent obtains a judgment
against SFNBV in Dutch Guilders, the obligations of SFNBV in respect of any sum
adjudged to be due to the Banks or the Agent hereunder or under the Notes (the
"Judgment Amount" shall be discharged only to the extent that, on the Business
Day following receipt by such Bank or the Agent of the Judgment Amount in Dutch
Guilders, such Bank or Agent, in accordance with normal banking procedures,
purchases Dollars with the Judgment Amount in Dutch Guilders. If the amount of
Dollars so purchased is less than the amount of Dollars that could have been
purchased with the Judgment Amount on the date or dates the Judgment Amount
(excluding the portion of the Judgment Amount which has accrued as a result of
the failure of SFNBV to pay the sum originally due hereunder or under the Notes
when it was originally due hereunder or under the Notes) was originally due and
owing to the Banks or the Agent hereunder or under the Notes (the "Original Due
Date") (the "Loss"), SFNBV and the Company agree, jointly and severally, as a
separate obligation and notwithstanding any such judgment, to indemnify such
Bank or the Agent, as the case may be, against the Loss, and if the amount of
Dollars so purchased exceeds the amount of Dollars that could have been
purchased with the Judgment Amount on the Original Due Date, such Bank or the
Agent agrees to remit such excess to SFNBV.
ARTICLE VIII
THE AGENT
8.01. APPOINTMENT. The Banks hereby appoint Mellon Bank,
N.A. to act as Agent as herein specified for the Banks hereunder. Each of the
Banks hereby irrevocably authorizes, and each holder of any Note by the
acceptance of such Note shall be deemed irrevocably to authorize, the Agent to
take such action on its behalf under the provisions of this Agreement and any
other instruments and agreements referred to herein, and to exercise such
powers and to perform such duties hereunder, as are specifically delegated to
or required of the Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. Mellon Bank, N.A. agrees to act as Agent on
behalf of the Banks to the extent provided in this Agreement.
8.02. DELEGATION OF DUTIES. The Agent may perform any of its
duties hereunder by or through agents or employees. The Agent may consult with
legal counsel (including counsel for the Borrowers), independent public
accountants and any other experts selected by it and shall not be liable to the
Banks for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts.
8.03. NATURE OF DUTIES; INDEPENDENT CREDIT INVESTIGATION.
The Agent shall have no duties or responsibilities except those expressly set
forth in this Agreement, the Notes and the Security Documents. The duties of
the Agent shall be mechanical and administrative in nature. The Agent shall
not have by reason of this Agreement, the Notes or the Security Documents a
fiduciary relationship in respect of any Bank. Nothing in this Agreement, the
Notes or the Security Documents, expressed or implied, is intended to or shall
be so construed as to impose upon the Agent any obligations in respect of this
Agreement except as expressly set forth herein or therein. Each Bank expressly
acknowledges (a) that the Agent has not made any representations or warranties
to it and that no act by the Agent hereafter taken, including any review of the
affairs of SFNBV, the Company or the Company's other Subsidiaries, shall be
deemed to constitute any representation or warranty by the Agent to any Bank;
(b) that it has made and will make its own independent investigation of the
financial condition and affairs, and its own appraisal of the creditworthiness,
of SFNBV, the Company and the Company's other Subsidiaries in connection with
this Agreement, the Notes and the Security Documents; and (c) that the Agent
shall have no duty or responsibility, either initially or on a continuing
basis, to provide any Bank with any credit or other information except as
otherwise provided herein, whether coming into its possession before the making
of any Loans hereunder or at any time or times thereafter.
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8.04. ACTIONS IN DISCRETION OF AGENT; INSTRUCTIONS FROM
BANKS. The Agent agrees, upon the written request of the Required Banks, to
take any action of the type specified as being within the Agent's rights,
powers or discretion herein or in the Notes or the Security Documents. In the
absence of a request by the Required Banks, the Agent shall have authority
pursuant to Section 9.03 hereof, in its sole discretion, to take or not to take
any such action, unless this Agreement, the Notes or the Security Documents
specifically require the consent of the Required Banks. Any action taken or
failure to act pursuant to such instructions or discretion shall be binding on
all of the Banks and on all holders of Notes. No Bank shall have any right of
action whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder or under the Notes or the Security Documents
in accordance with the instructions of the Required Banks, or in the absence of
such instructions, in the absolute discretion of the Agent, subject to the
provisions of Section 9.05.
8.05. EXCULPATORY PROVISIONS.
(a) LIABILITY OF AGENT. Neither the Agent nor any of its
directors, officers, employees or agents shall be liable to any Bank for any
action taken or omitted to be taken by it or them hereunder or under the Notes
or the Security Documents or in connection herewith or therewith, unless caused
by its or their own gross negligence or willful misconduct. In performing its
functions and duties hereunder and thereunder on behalf of the Banks, the Agent
shall exercise the same care which it would exercise in dealing with loans for
its own account, but it shall not (i) be responsible in any manner to any of
the Banks for the effectiveness, enforceability, genuineness, validity or due
execution of this Agreement or any of the Notes or Security Documents, or for
any recital, representation, warranty, document, certificate, report or
statement herein or therein or made or furnished hereunder or thereunder or in
connection herewith or therewith, or (ii) be under any obligation to any of the
Banks to ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions hereof or thereof on the part of any
Borrower, the Company or any other Subsidiary, or the financial condition of
the Company, SFNBV or any other Subsidiary, or the existence or possible
existence of any Event of Default or Potential Default.
(b) NOTICE OF DEFAULT. The Agent shall be under no
obligation to any of the Banks to ascertain the existence or possible existence
of any Potential Default or Event of Default and shall not be deemed to have
knowledge of the occurrence of an Event of Default or Potential Default unless
a required payment by a Borrower to the Agent has not been made or the Agent
has received notice from a Bank, or a Borrower specifying such Event of Default
or Potential Default and stating that such notice is a "Notice of Default". In
the event that the Agent receives such a notice of the occurrence of an Event
of Default or Potential Default, the Agent shall give prompt notice thereof to
the Banks (and shall give each Bank prompt notice of each such nonpayment).
The Agent shall (subject to Section 9.03 hereof) take such action with respect
to such Event of Default or Potential Default as shall be directed by the
Required Banks, provided that, unless and until the Agent shall have received
such directions, the Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Event of
Default or Potential Default as it shall deem advisable and in the best
interests of the Banks.
8.06. REIMBURSEMENT AND INDEMNIFICATION. Each Bank agrees to
reimburse and indemnify the Agent (to the extent not reimbursed by the
Borrowers), ratably in proportion to its Commitment Percentage, for and against
any and all liabilities, obligations, losses (other than any "losses" resulting
from a failure by the Agent to receive from the Borrowers any amount owing
pursuant to Section 8.12 hereof), damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against the Agent, in its capacity
as such, in any way relating to or arising out of this Agreement, the Notes or
the Security Documents or any action taken or omitted by the Agent hereunder or
thereunder, provided that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements to the extent that they result from (a)
the Agent's
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gross negligence or willful misconduct, (b) a claim against the Agent or such
Bank with respect to which such Bank was not given notice and the opportunity
to participate in the defense thereof, at its expense, or (c) a compromise and
settlement agreement entered into without the consent of such Bank.
8.07. RELIANCE BY AGENT. The Agent shall be entitled to rely
upon any writing, telegram, telex or teletype message, resolution, notice,
consent, certificate, letter, cablegram, statement, order or other document or
conversation by telephone or otherwise believed by it to be genuine and correct
and to have been signed, sent or made by the proper party or parties, and upon
opinions of counsel and other professional advisers selected by the Agent.
Subject to Section 9.05, the Agent shall be fully justified in failing or
refusing to take any action hereunder unless it shall first be indemnified to
its satisfaction by the Banks against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such
action.
8.08. MELLON BANK, N.A. IN ITS INDIVIDUAL CAPACITY. With
respect to its Revolving Credit Commitment, the Loans made by it and the Notes
held by it, Mellon Bank, N.A. shall have the same rights and powers hereunder
and under the Notes and the Security Documents as any other Bank and may
exercise the same as though it were not the Agent, and the terms "Banks" or
"holders of Notes" shall, unless the context hereof otherwise indicates,
include Mellon Bank, N.A. in its individual capacity. Except as otherwise
provided herein, Mellon Bank, N.A. and its affiliates may, without liability to
account, make loans to, accept deposits from, act as trustee under indentures
of, and generally engage in any kind of banking or trust business with, the
Company and its stockholders, Subsidiaries and affiliates as though it were not
acting as Agent hereunder.
8.09. HOLDERS OF NOTES. The Agent may deem and treat the
payee of any Note as the owner of such Note for all purposes hereof unless and
until written notice of the assignment or transfer thereof shall have been
filed with the Agent. Any request, authority or consent of any party who at
the time of making such request or giving such authority or consent is the
holder of any Note shall be conclusive and binding on any subsequent holder,
transferee or assignee of such Note or of any Note or Notes issued in exchange
therefor.
8.10. SUCCESSOR AGENT. The Agent may resign at any time by
giving 10 days' prior written notice thereof to the Banks, the Company and the
Borrowers. The Agent may be removed by the Required Banks at any time by the
Required Banks' giving 10 days' prior written notice thereof to the Agent, the
other Banks and the Borrowers. Upon any such resignation or removal, the
Required Banks shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed, and shall have accepted such
appointment, within 30 days after such notice of resignation or removal, then
the Agent may, on behalf of the Banks, appoint a successor Agent which shall be
either a Bank or a commercial bank authorized to engage in the business of
banking under the laws of the United States of America or any State thereof and
having a combined capital and surplus of at least $100,000,000. Upon the
acceptance by a successor Agent of its appointment as Agent hereunder, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the former Agent, and the former Agent
shall be discharged from its duties under this Agreement, the Notes and the
Security Documents. After any Agent's resignation or removal hereunder as
Agent, the provisions of this Article IX shall inure to its benefit as to any
actions taken or omitted by it while it was Agent under this Agreement.
8.11. CALCULATIONS. In the absence of gross negligence or
willful misconduct, the Agent shall not be liable for any error in computing
the amount payable to any Bank whether in respect of the Loans, fees or any
other amounts due to the Banks under this Agreement, the Notes or the Security
Documents. In the event an error in computing any amount payable to any Bank
is made, the Agent, the Borrowers and each affected Bank shall, forthwith upon
discovery of such error, make such adjustments as shall be required to correct
such error and any compensation therefor will be calculated at the daily
average federal funds rate quoted by the Board of Governors of the Federal
Reserve System.
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8.12. AGENT'S FEE. The Company agrees to pay to the Agent,
for its individual account, the annual Agent's fees and the up-front
arrangement fee set forth in the fee letter dated December 8, 1995, from the
Agent to the Company, payable in accordance with the terms of such fee letter.
ARTICLE IV
MISCELLANEOUS
9.01. HOLIDAYS. Except as otherwise provided herein,
whenever any payment or action to be made or taken hereunder or under the Notes
shall be stated to be due on a day which is not a Business Day, such payment or
action shall be made or taken on the next following Business Day and such
extension of time shall be included in computing interest or fees, if any, in
connection with such payment or action.
9.02. RECORDS. The unpaid principal amount of the Notes, the
unpaid interest accrued thereon, the interest rate or rates applicable to such
unpaid principal amount, the duration of such applicability, each Bank's
Commitment Percentage and the accrued and unpaid commitment fee shall at all
times be ascertained from the records of the Agent, which shall be conclusive
absent manifest error.
9.03. AMENDMENTS AND WAIVERS. The Banks, the Agent, and the
Borrowers may from time to time enter into agreements amending, modifying or
supplementing this Agreement, the Notes or any other documents or instruments
pursuant to or in connection herewith or changing the rights of the Banks or of
the Borrowers hereunder or thereunder, or granting a waiver or consent to a
departure from the due performance of the obligations of the Borrowers
hereunder or thereunder. Any such agreement, waiver or consent must be in
writing and be executed by each of the Banks, the Agent and the Borrowers and
shall be effective only to the extent specifically set forth in such writing.
In the case of any such waiver or consent relating to any Event of Default or
Potential Default, any Event of Default or Potential Default so waived or
consented to shall be deemed to be cured and not continuing, but no such waiver
or consent shall extend to any other or subsequent Event of Default or
Potential Default or impair any right consequent thereto. Notwithstanding the
provisions hereof, the Agent alone may grant a waiver or consent to a departure
from the due performance of the obligations of the Borrowers under Sections
6.01(a) through (g), inclusive.
9.04. NO IMPLIED WAIVER; CUMULATIVE REMEDIES. No course of
dealing and no delay or failure of the Agent or the Banks in exercising any
right, power or privilege under this Agreement, the Notes, the Security
Documents or any other documents or instruments pursuant to or in connection
herewith shall affect any other or future exercise thereof or exercise of any
other right, power or privilege; nor shall any single or partial exercise of
any such right, power or privilege or any abandonment or discontinuance of
steps to enforce such a right, power or privilege preclude any further exercise
thereof or of any other right, power or privilege. The rights and remedies of
the Agent and the Banks under this Agreement, the Notes, the Security Documents
or any other documents or instruments pursuant to or in connection herewith are
cumulative and not exclusive of any rights or remedies which the Agent or the
Banks would otherwise have.
9.05. NOTICES. All notices, requests, demands, directions
and other communications (collectively "notices") under the provisions of this
Agreement or any Note or Security Document shall be in writing (including
telexed communication) unless otherwise expressly permitted hereunder or
thereunder and shall be sent by first-class or overnight express mail, or by
telex with confirmation in writing mailed first-class, in all cases with
charges prepaid, and any such properly given notice shall be effective when
received. All notices shall be sent to the applicable party at the address
stated on the signature page hereof or in accordance with the last unrevoked
written direction from such party to the other parties hereto.
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9.06. EXPENSES; TAXES; ATTORNEYS' FEES. The Borrowers agree
to pay or cause to be paid and to save the Agent and the Banks harmless against
liability for the payment of all reasonable out-of-pocket expenses, including
but not limited to (a) fees and expenses of counsel for the Agent and Mellon
Bank, N.A., arising in connection with the preparation, execution, delivery and
performance of this Agreement, the Notes, the Security Documents and any
documents, instruments or transactions pursuant to or in connection herewith,
(b) relating to any requested amendments, waivers or consents to this
Agreement, the Notes, the Security Documents or any such documents or
instruments and (c) arising in connection with the Agent's or any Bank's
enforcement or preservation of rights under this Agreement, the Notes, the
Security Documents or any such documents or instruments, including but not
limited to such expenses as may be incurred by the Agent or the Banks in the
collection of any outstanding Note. The Borrowers agree to pay all stamp,
document, transfer, recording or filing taxes or fees and similar impositions
now or hereafter determined by the Agent or the Banks to be payable in
connection with this Agreement, the Notes, the Security Documents or any other
documents, instruments or transactions pursuant to or in connection herewith,
and the Borrowers agree to save the Agent and the Banks harmless from and
against any and all present or future claims, liabilities or losses with
respect to or resulting from any omission to pay or delay in paying any such
taxes, fees or impositions.
9.07. SEVERABILITY. The provisions of this Agreement are
intended to be severable. If any provision of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction such provision
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
9.08. GOVERNING LAW; SUBMISSION TO JURISDICTION. This
Agreement and the Notes shall be deemed to be contracts under the laws of the
Commonwealth of Pennsylvania and for all purposes shall be governed by and
construed and enforced in accordance with the laws of said Commonwealth. Each
Borrower hereby irrevocably and unconditionally:
(i) agrees that any action, suit or proceeding by any person
arising from or relating to this Agreement or any other Loan Documents
or any statement, course of conduct, act, omission or event occurring
in connection herewith or therewith (collectively, "Related
Litigation") by any Bank or the Agent may be brought in any state or
federal court of competent jurisdiction sitting in Allegheny County,
Pennsylvania and submits to the jurisdiction of such courts (but
nothing herein shall affect the right of the Agent or any Bank to bring
any action, suit or proceeding in any other forum);
(ii) waives any objection which it may have at any time to
the laying of venue of any Related Litigation brought in any such
court, waives any claim that any such Related Litigation has been
brought in an inconvenient forum, and waives any right to object, with
respect to any Related Litigation brought in any such court, that such
court does not have jurisdiction over such Borrower; and
(iii) consents and agrees to service of any summons,
complaint or other legal process in any Related Litigation by
registered or certified U.S. mail, postage prepaid, to such Borrower at
the address for notices to the Company set forth on the signature page
hereof, and consents and agrees that such service shall constitute in
every respect valid and effective service (but nothing herein shall
affect the validity or effectiveness of process served in any other
manner permitted by law) and SFNBV hereby appoints the Company as its
agent for service of process.
9.09. PRIOR UNDERSTANDINGS. This Agreement supersedes all
prior understandings and agreements, whether written or oral, among the parties
hereto relating to the transactions provided for herein.
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9.10. DURATION; SURVIVAL. All representations and warranties
of the Company or the Borrowers contained herein or made in connection herewith
shall survive the making of and shall not be waived by the execution and
delivery of this Agreement or the Notes, any investigation by the Agent or the
Banks or the making of any Loan hereunder. All covenants and agreements of the
Borrowers contained herein shall continue in full force and effect from and
after the date hereof so long as the Borrowers may borrow hereunder and until
payment in full of the Notes, interest thereon, funding fees and all other
obligations of the Borrowers under this Agreement or any Note. Without
limitation, it is understood that all obligations of the Borrowers to make
payments to or indemnify the Agent or the Banks shall survive the payment in
full of the Notes and of all other obligations of the Borrowers thereunder and
hereunder.
9.11. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
9.12. SUCCESSORS AND ASSIGNS; PARTICIPATIONS; ASSIGNMENTS.
(a) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the Borrowers, the Banks, all future holders
of the Notes, the Agent and their respective successors and assigns, except
that no Borrower may assign or transfer any of its rights hereunder or
interests herein without the prior written consent of all the Banks and the
Agent, and any purported assignment without such consent shall be void.
(b) PARTICIPATIONS. Any Bank may, in the ordinary course of
its commercial banking business and in accordance with applicable Law, at any
time sell participations to one or more commercial banks or other persons (each
a "Participant") in all or a portion of its rights and obligations under this
Agreement, the Notes and the Security Documents (including, without limitation,
all or a portion of its commitments to make Loans (collectively, its
"Commitments") and the Loans owing to it and any Note held by it); provided,
that
(i) any such Bank's obligations under this Agreement, the
Notes and the Security Documents shall remain unchanged,
(ii) such Bank shall remain solely responsible to the other
parties hereto for the performance of such obligations,
(iii) the parties hereto shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and
obligations under this Agreement, the Notes and each of the Security
Documents, and
(iv) such Participant shall be bound by the provisions of
Section 7.04 hereof.
The Borrowers agree that any such Participant shall be entitled to the benefits
of Sections 2.13, 2.15 and 9.06 with respect to its participation in the
Commitments and the Loans outstanding from time to time; provided, that no such
Participant shall be entitled to receive any greater amount pursuant to such
Sections than the transferor Bank would have been entitled to receive in
respect of the amount of the participation transferred to such Participant had
no such transfer occurred.
(c) ASSIGNMENTS. Any Bank may, in the ordinary course of its
commercial banking business and in accordance with applicable Law, at any time
assign all or a portion of its rights and obligations under this Agreement, the
Notes and the Security Documents (including, without limitation, all or any
portion of its Commitments and Loans owing to it and any Note held by it) to
any Bank, any
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affiliate of a Bank or to one or more additional commercial banks or other
persons (each a "Purchasing Bank"); provided, that
(i) any such assignment shall be made only with the consent
of each Borrower (which in each case shall not be unreasonably
withheld), the Issuing Bank, the Agent and the Required Banks, except
that an assignment by any Bank to any other Bank, to any affiliate of
such assigning Bank or of any other Bank or to a Federal Reserve Bank
shall not require the consent of the Borrowers,
(ii) if a Bank makes such an assignment of less than all of
its then remaining rights and obligations under this Agreement, the
Notes and the Security Documents, such transferor Bank shall retain,
after such assignment, a minimum principal amount of $5,000,000 of the
Commitments and Loans then outstanding, and such assignment shall be in
a minimum aggregate principal amount of $5,000,000 of the Commitments
and Loans then outstanding,
(iii) each such assignment shall be of a constant, and not a
varying, percentage of each Commitment of the transferor Bank and of
all of the transferor Bank's rights and obligations under this
Agreement, the Notes and the Security Documents, and
(iv) each such assignment shall be made pursuant to a Transfer
Supplement in substantially the form of Exhibit D to this Agreement,
duly completed (a "Transfer Supplement").
In order to effect any such assignment, the transferor Bank and the Purchasing
Bank shall execute and deliver to the Agent a duly completed Transfer
Supplement (including the consents required by clause (i) of the preceding
sentence) with respect to such assignment, together with any Note or Notes
subject to such assignment (the "Transferor Bank Notes") and a processing and
recording fee of $2,000; and, upon receipt thereof, the Agent shall accept such
Transfer Supplement. Upon receipt of the Purchase Price Receipt Notice
pursuant to such Transfer Supplement, the Agent shall record such acceptance in
the Register. Upon such execution, delivery, acceptance and recording, from
and after the close of business at the Agent's Domestic Office on the Transfer
Effective Date specified in such Transfer Supplement
(x) the Purchasing Bank shall be a party hereto and, to the
extent provided in such Transfer Supplement, shall have the rights and
obligations of a Bank hereunder, and
(y) the transferor Bank thereunder shall be released from its
obligations under this Agreement to the extent so transferred (and, in
the case of a Transfer Supplement covering all or the remaining portion
of a transferor Bank's rights and obligations under this Agreement,
such transferor Bank shall cease to be a party to this Agreement) from
and after the Transfer Effective Date.
On or prior to the Transfer Effective Date specified in a Transfer Supplement,
the Borrowers, at their expense, shall execute and deliver to the Agent (for
delivery to the Purchasing Bank) new Notes evidencing such Purchasing Bank's
assigned Commitments or Loans and (for delivery to the transferor Bank)
replacement Notes in the principal amount of the Loans or Commitments retained
by the transferor Bank (such Notes to be in exchange for, but not in payment
of, those Notes then held by such transferor Bank). Each such Note shall be
dated the date and be substantially in the form of the predecessor Note. The
Agent shall mark the predecessor Notes "exchanged" and deliver them to the
respective Borrowers. Accrued interest and accrued fees shall be paid to the
Purchasing Bank at the same time or times provided in the predecessor Notes and
this Agreement.
(d) REGISTER. The Agent shall maintain at its Domestic
Office a copy of each Transfer Supplement delivered to it and a register (the
"Register") for the recordation of the names and addresses of the Banks and the
Commitment of, and principal amount of the Loans owing to, each Bank from time
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<PAGE> 50
to time. The entries in the Register shall be conclusive absent manifest error
and the Borrowers, the Agent and the Banks may treat each person whose name is
recorded in the Register as a Bank hereunder for all purposes of the Agreement.
The Register shall be available for inspection by any Borrower or any Bank at
any reasonable time and from time to time upon reasonable prior notice.
(e) FINANCIAL AND OTHER INFORMATION. Each Borrower
authorizes the Agent and each Bank to disclose to any Participant or Purchasing
Bank (each, a "transferee") and any prospective transferee any and all
financial and other information in such person's possession concerning the
Company, the Borrowers and their respective Subsidiaries and affiliates which
has been or may be delivered to such person by or on behalf of any Borrower in
connection with this Agreement, the Notes or any Security Document or such
person's credit evaluation of the Company, the Borrowers and their respective
Subsidiaries and affiliates. At the request of any Bank, each Borrower, at
such Borrower's expense, shall provide to each prospective transferee the
conformed copies of documents referred to in Section 4 of the form of Transfer
Supplement.
9.13. SECURED HEDGE AGREEMENTS; Application of Security.
(a) A Hedge Agreement shall constitute a "Secured Hedge
Agreement" entitled to the benefit of the Security Documents if and only if (x)
such Hedge Agreement is between a Borrower and a Bank which, at the time such
Hedge Agreement is designated a "Secured Hedge Agreement," is party hereto as a
Bank (other than by virtue of its status as party to such Secured Hedge
Agreement), and (y) such Borrower, such Bank and the Agent enter into a Secured
Hedge Supplement in substantially the form of Exhibit F hereto, designating
such Hedge Agreement as a "Secured Hedge Agreement" hereunder. The Agent shall
enter into a Secured Hedge Supplement with respect to any particular Secured
Hedge Agreement only at the direction of the Required Banks, and each of the
Banks may give or withhold such direction in its absolute discretion. A
Secured Hedge Agreement shall cease to constitute a "Secured Hedge Agreement"
if, without the consent of the Agent (who shall give such consent only at the
direction of the Required Banks as aforesaid), such Secured Hedge Agreement (i)
is amended, unless such amendment merely eliminates, waives or renders less
restrictive on the Borrower any term or condition otherwise applicable to the
Borrower, reduces or defers amounts otherwise payable by the Borrower or
increases or accelerates amounts otherwise receivable by the Borrower, or (ii)
is supplemented by an additional transaction (unless such additional
transaction is evidenced by a confirmation which itself is designated, pursuant
to a separate Secured Hedge Supplement, a "Secured Hedge Agreement"). A
Secured Hedge Agreement shall remain such even if the Secured Hedge Bank party
thereto subsequently ceases to be a Bank party hereto (other than by virtue of
its status as a Secured Hedge Bank). The parties hereby agree that the Secured
Hedge Agreements existing on the date hereof and listed on Schedule 9.13 hereto
are and shall be deemed to be Secured Hedge Agreements as defined herein.
(b) All cash proceeds received by the Agent in respect of any
realization upon or under any Security Document or any collateral granted
thereunder shall be applied, subject to the provisions of such Security
Document and the provisions of this Section 9.13(b), in the following order of
priority:
(i) first, to the payment of all amounts which may be
due to the Agent in its capacity as such;
(ii) second, to the payment of all principal,
interest, fees, indemnities, expenses and other obligations
which may be due to the Agent, the Banks or the Issuing Bank
under this Agreement, the Notes, any Security Document or any
Secured Hedge Agreement, ratably in proportion to the amounts
then due;
(iii) third, if (x) any obligation under this
Agreement, the Notes, any Security Document or any Secured
Hedge Agreement remains outstanding but is not then due, or
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<PAGE> 51
(y) any commitment to extend credit hereunder, any Letter of
Credit issued hereunder or any Secured Hedge Agreement remains
outstanding, then to the Agent, to be held by the Agent as cash
collateral in a non-interest bearing account under the sole
dominion and control of the Agent and thereafter applied by the
Agent from time to time as provided in the foregoing clauses
(i) and (ii) (in that order of priority); and
(iv) fourth, if and when all obligations under this
Agreement, the Notes, the Security Documents and the Secured
Hedge Agreements have been paid in full, all commitments to
extend credit hereunder have terminated, all Letters of Credit
issued hereunder have terminated and all Secured Hedge
Agreements have terminated, then to the grantor under such
Security Document or as otherwise required by law.
In making the determinations and allocations required by this Section 9.13(b),
the Agent may rely upon information supplied by the Banks and the Issuing Bank
as to the amounts due or outstanding to such parties, respectively, and the
Agent shall have no liability for actions taken in reliance on such
information. The priority of distribution specified above is based upon the
assumptions that the Liens granted under the Security Documents will be equally
valid, perfected and nonavoidable as to each of the Banks, that such Liens will
be deemed of equal priority as against all other persons, and that the Security
Documents will be equally valid, enforceable and nonavoidable as to each of the
Banks; and if and to the extent that any such assumption fails to be true, the
priority of distribution set forth above shall be adjusted so that the burden
of such failure falls upon the Bank or Banks as to which such assumption fails
to be true. The provisions of this Section 9.13(b) apply solely to priorities
of distributions resulting from realization on the Security Documents, and not
to the priorities of the obligations entitled to the benefit thereof, and
nothing in this Agreement or any Security Document is intended to effect a
subordination of any such obligation to any other such obligations.
(c) The Agent, the Banks and the Issuing Bank agree that,
upon any realization upon or under any Security Document or any collateral
granted thereunder, the Agent, the Banks and the Issuing Bank shall share in
the proceeds of such realization in the manner provided in Section 9.13(b)
hereof, and if any party shall realize any funds upon or under any Security
Document or any collateral granted thereunder in excess of the amount to which
it is entitled under such Section 9.13(b), it shall remit the excess to the
Agent, who shall apply the same as provided hereby.
(d) The Banks acknowledge that no Secured Hedge Bank, in its
capacity as such, shall have any right to require the Agent or any Bank to
exercise any right or remedy any of them may have under this Agreement or any
Security Document, at law or otherwise, or to contest any exercise or failure
to exercise any such right or remedy.
9.14. COUNSEL CONSENT. Each of the Company and SFNBV, on the
one hand, and the Agent and the Banks, on the other hand, as well as the Banks
inter se, acknowledge that the Agent and Mellon Bank, N.A., in its capacity as
a Bank, and the Borrower Parties have engaged Reed Smith Shaw & McClay to serve
as their respective legal counsel in connection with this Agreement and the
transactions related hereto, and consent to Reed Smith Shaw & McClay serving as
legal counsel for such parties in connection with such matters.
9.15. AMENDMENT AND RESTATEMENT. This Agreement is an
amendment and restatement of (and not a novation of) the Amended and Restated
Revolving Credit and Term Loan Agreement dated as of November 19, 1991, as
subsequently amended eight times, (as so amended, the "Original Agreement")
among the Company, Sylvan America (NV), Quincy, Moonlight Mushrooms, Inc., the
Agent, the Banks and the Issuing Bank (without any discharge, release or
satisfaction of the existing indebtedness or any guaranty or collateral
security therefor). Promptly after receipt of its Revolving Credit Notes each
Bank shall deliver to the Agent its promissory note (if any) issued under the
Original Agreement, and upon receipt of all such promissory notes the Agent
shall deliver them to the Company.
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<PAGE> 52
IN WITNESS WHEREOF, the parties hereto, by their officers
thereunto duly authorized, have executed and delivered this Agreement as of the
date first above written.
Attest: SYLVAN INC.
By By
----------------------------- -----------------------------
Title Title
------------------------- --------------------------
[CORPORATE SEAL] Address
------------------------
--------------------------------
Attest: SYLVAN FOODS NETHERLANDS) BV
By By
----------------------------- -----------------------------
Title Title
------------------------- --------------------------
[CORPORATE SEAL] Address
------------------------
--------------------------------
MELLON BANK, N.A.
individually and in its
capacity as Agent
By
-----------------------------
Title
--------------------------
Address of Domestic Office:
--------------------------------
--------------------------------
Address of London Office:
--------------------------------
--------------------------------
Commitment Percentage:
66.6666666666667%
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<PAGE> 53
ABN AMRO BANK N.V.,
Pittsburgh Branch
By: ABN AMRO NORTH AMERICA, INC.,
as Agent
By
-------------------------------------
Title
----------------------------------
By
-------------------------------------
Title
----------------------------------
Address
--------------------------------
----------------------------------------
Commitment Percentage:
33.3333333333333%
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<PAGE> 54
ANNEX A
TO
REVOLVING CREDIT AGREEMENT
1.1. CERTAIN DEFINITIONS. In addition to other words and
terms defined elsewhere in this Agreement, as used herein, the following words
and terms shall have the following meanings, respectively, unless the context
hereof otherwise clearly requires:
"Affected Bank" shall have the meaning set forth in Section
2.04(e) hereof.
"Affiliate" of a person shall mean any person which directly
or indirectly controls, or is controlled by, or is under common control with,
such person. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
a person, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" shall mean this Revolving Credit Agreement, as the
same may be amended, supplemented or modified from time to time.
"Applicable Margin" shall have the meaning set forth in
Section 2.04(b) hereof.
"Applications" shall mean the applications customarily used by
the Issuing Bank to document the issuance and reimbursement obligations
relating to letters of credit, forms of which are attached hereto as Exhibit E.
"Bank" shall have the meaning given that term in the preamble
hereof (it being understood that the term "Bank" in any case includes each
Secured Hedge Bank.
"Benefit Plan" shall mean any plan, agreement, arrangement or
commitment which is an employment or consulting agreement, executive
compensation plan, bonus plan, deferred compensation agreement, employee
pension, profit-sharing, savings or retirement plan, employee stock option or
stock purchase plan, retiree medical or life, group life, health, or accident
insurance or other benefit plan, agreement, arrangement or commitment,
including, without limitation, severance, or other bonus practice (including,
but not limited to, employee benefit plans, as defined in section 3(3) of
ERISA), with respect to which the Company, any of its Subsidiaries, or any of
their respective Controlled Group Members, at any relevant time have some
liability or obligation to contribute or pay benefits and which relates to
current or former employees of the Company, any Subsidiary or any of their
respective Controlled Group Members.
"Borrower Parties" shall mean, collectively, the Borrowers,
Sylvan Foods, Inc., Sylvan America (PA), Quincy, Sylvan America (NV) and French
Holding Company.
"Borrowers" shall mean, collectively, the Company and SFNBV,
or any of their respective successors or assigns, and "Borrower" shall mean any
one of the Company or SFNBV, or any of their respective successors or assigns.
"Business Day" shall mean any day other than a Saturday,
Sunday, public holiday under the laws of the Commonwealth of Pennsylvania or
other day on which banking institutions are authorized or obligated to close in
Pittsburgh, Pennsylvania and, if the applicable Business Day relates to SFNBV
Revolving Credit Loan, any London Business Day.
<PAGE> 55
"Capital Expenditures" of any person shall mean, for any
period, all expenditures (whether paid in cash or accrued as liabilities during
such period) of such person during such period which would be classified as
capital expenditures in accordance with GAAP (including, without limitation,
expenditures for maintenance and repairs which are capitalized and Capitalized
Leases to the extent an asset is recorded in accordance therewith in accordance
with GAAP).
"Capitalized Lease" shall mean at any time any lease which is
required to be capitalized on the balance sheet of the lessee at such time, and
"Capitalized Lease Obligation" of any person at any time shall mean the
aggregate amount which is required to be reported as a liability on the balance
sheet of such person at such time as lessee under a Capitalized Lease.
"Change of Control" shall mean any person or group of persons
(as used in Sections 13 and 14 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations thereunder) shall
have become the beneficial owner (as defined in Rules 13d-3 and 13d-5
promulgated by the Securities and Exchange Commission (the "SEC") under the
Exchange Act) of 51% or more of the combined voting power of all the
outstanding voting securities of the Company and, at any time following an
acquisition as described in this clause, during any period of 2 consecutive
calendar months, individuals who were directors of the Company on the first day
of such period, together with individuals elected as directors by not less than
two-thirds of the individuals who were directors of the Company on the first
day of such period, shall cease to constitute a majority of the members of the
board of directors of the Company.
"Closing Date" shall mean the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended,
and any successor statute of similar import, and regulations thereunder, in
each case as in effect from time to time. References to sections of the Code
shall be construed to also refer to any successor sections.
"Commitment Amount" of any Bank at any time shall mean the
Revolving Credit Commitment Amount multiplied by such Bank's Commitment
Percentage.
"Commitment Fee" shall have the meaning assigned to such term
in Section 2.01(d) hereof.
"Commitment Percentage" of any Bank shall mean the percentage
set forth opposite such Bank's name on the signature page hereof.
"Company Revolving Credit Commitment" shall have the meaning
assigned to such term in Section 2.01(a).
"Company Revolving Credit Loans" shall have the meaning set
forth in Section 2.01(a) hereof.
"Company Revolving Credit Notes" shall mean the promissory
notes of the Company executed and delivered under Section 2.01 hereof, together
with all extensions, renewals, refinancings or refundings thereof, in whole or
in part.
"Consolidated Capitalization" at any time shall mean
Consolidated Net Worth (excluding the effects of any GAAP-stated cumulative
foreign currency translation adjustment calculated in accordance with Statement
of Financial Accounting Standards (SFAS) No. 52, "Foreign Currency
Translation") at such time plus Consolidated Funded Indebtedness at such time.
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<PAGE> 56
"Consolidated Cash Flow" for any period shall mean
Consolidated Net Income for such period plus depreciation expenses for such
period plus amortization expense for such period minus Core Capital
Expenditures for such period plus the cumulative non-cash charges from adopting
FAS 106 Employers' Accounting for Postretirement Benefits Other Than Pensions
("FAS 106") for such period plus the on-going net non-cash FAS 106 charges
(i.e., FAS 106 expenses, net of amounts actually funded in cash) for such
period, all as determined on a consolidated basis in accordance with GAAP,
determined on a Rolling Four Quarter Basis.
"Consolidated EBIT" for any period, with respect to the
Company and its Consolidated Subsidiaries, shall mean the sum of (a)
Consolidated Net Income for such period, (b) Consolidated Interest Expense for
such period and (c) Consolidated Income Tax Expense for such period, all as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Funded Indebtedness" at any time shall mean all
Funded Indebtedness of the Company and its Consolidated Subsidiaries at such
time, determined and consolidated in accordance with GAAP.
"Consolidated Income Tax Expense" for any period, with respect
to the Company and its Consolidated Subsidiaries, shall mean the charges
against income for foreign, federal, state and local income taxes for such
period, determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Coverage Ratio" for any period shall
mean the ratio of Consolidated EBIT to Consolidated Interest Expense for such
period.
"Consolidated Interest Expense" for any period shall mean the
total interest expense of the Company and its Consolidated Subsidiaries for
such period determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" at any time shall mean the net
income from continuing operations (after taxes) of the Company and its
Consolidated Subsidiaries, determined and consolidated in accordance with GAAP.
"Consolidated Subsidiaries" at any time shall mean those
Subsidiaries whose accounts are consolidated with those of the Company in
accordance with GAAP.
"Controlled Group Member" means each trade or business
(whether or not incorporated) which, together with the Company or any
Subsidiary, is treated as a single employer under Section 414(b), 414(c),
414(m) or 414(o) of the Code or Section 4001(a)(2) of ERISA.
"Core Capital Expenditures" for any period shall mean the
lesser of (i) $3,000,000 or (ii) actual Capital Expenditures for such period.
"Corresponding Source of Funds" shall mean in the case of any
Funding Segment of the Euro-Rate Portion, the proceeds of hypothetical receipts
by a Notional Euro-Rate Funding Office or by a Bank through a Notional
Euro-Rate Funding Office of one or more deposits in the Selected Currency in
the interbank eurodollar market at the beginning of the Euro-Rate Funding
Period corresponding to such Funding Segment having maturities approximately
equal to such Euro-Rate Funding Period and in an aggregate amount approximately
equal to such Bank's pro rata share of such Funding Segment.
"Current Maturities of Consolidated Funded Indebtedness" at
any time shall mean the aggregate amount of principal, calculated in accordance
with GAAP (including but not limited to amortization of Capitalized Lease
Obligations), due and payable within one year after such time in respect of
Consolidated Funded Indebtedness at such time.
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<PAGE> 57
"Dollar," "Dollars" and the symbol "$" shall mean lawful money
of the United States of America.
"Dutch Guilders" shall mean lawful money of The Netherlands.
"Dutch Letter of Credit" shall have the meaning set forth in
Section 2.11(b).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to
sections of ERISA shall be construed to also refer to any successor sections.
"Euro-Rate" shall have the meaning set forth in Section
2.04(a) hereof.
"Euro-Rate Funding Period" shall have the meaning set forth in
Section 2.04(c) hereof.
"Euro-Rate Option" shall have the meaning set forth in Section
2.04(a) hereof.
"Euro-Rate Portion" of any Loan or Loans shall mean at any
time the portion, including the whole, of such Loan or Loans bearing interest
at any time under the Euro-Rate Option. If no Loan or Loans is specified,
"Euro-Rate Portion" shall refer to the Euro-Rate Portion of all Loans
outstanding at such time.
"Euro-Rate Reserve Percentage" shall have the meaning set
forth in Section 2.04(a) hereof.
"Event of Default" shall mean any of the Events of Default
described in Section 7.01 hereof.
"French Holding Company" shall mean Sylvan Foods (France),
S.A., a French corporation.
"Funded Indebtedness" of a person at any time shall mean all
Indebtedness (including the current portion thereof) of such person which would
at such time be classified in whole or part as a long-term liability of such
person in accordance with GAAP and shall also and in any event include (i) any
Indebtedness having a final maturity more than one year from the date of
creation of such Indebtedness and (ii) any Indebtedness, regardless of its
term, which is renewable or extendable by such person (pursuant to the terms
thereof or pursuant to a revolving credit or similar agreement or otherwise) to
a date more than one year from such date or more than one year from the date of
creation of such Indebtedness.
"Funding Segment" of the Euro-Rate Portion of the Loans at any
time shall mean the entire principal amount of such Portion to which at the
time in question there is applicable a particular Euro-Rate Funding Period
beginning on a particular day and ending on a particular day. (By definition,
each such Portion is at all times composed of an integral number of discrete
Funding Segments and the sum of the principal amounts of all Funding Segments
of any such Portion at any time equals the principal amount of such Portion at
such time.)
"GAAP" shall mean generally accepted accounting principles as
such principles shall be in effect at the time of the computation or
determination, subject to Annex A hereof.
"Governmental Action" shall mean any approval, order, consent,
authorization, certificate, license, permit or validation of, or exemption or
other action by, or filing, recording or registration with, or notice to, any
Official Body.
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<PAGE> 58
"Hedge Agreement" shall mean interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap agreements,
currency future or option contracts and other similar agreements designed to
hedge against fluctuations in interest rates or foreign exchange rates.
"Indebtedness" of a person shall mean:
(i) all obligations on account of money borrowed by, or
credit extended to or advances to, such person;
(ii) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments;
(iii) all obligations of such person for the deferred
purchase price of property or services;
(iv) all obligations secured by a Lien on property owned by
such person (whether or not assumed) and Capitalized Lease
Obligations of such person (without regard to any limitation of
the rights and remedies of the holder of such Lien or the
lessor under such Capitalized Lease to repossession or sale of
such property);
(v) the face amount of all letters of credit issued for the
account of such person and, without duplication, the
unreimbursed amount of all drafts drawn thereunder, and all
other obligations of such person associated with such letters
of credit or draws thereon; and
(vi) all obligations of such person in respect of acceptances
or similar obligations issued for the account of such person.
"Interest Payments" shall mean all payments of interest,
including any penalties, on all Indebtedness of the Company or its Consolidated
Subsidiaries.
"Issuing Bank" shall mean Mellon Bank, N.A. in its capacity as
issuer of a Letter of Credit hereunder.
"Law" shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree
or award of any Official Body.
"Letter of Credit Limit" shall have the meaning assigned to
such term in Section 2.11(a) hereof.
"Letters of Credit" shall mean collectively the letters of
credit issued by the Issuing Bank under this Agreement and "Letter of Credit"
shall mean individually a letter of credit issued by the Issuing Bank under
this Agreement, including without limitation all Dutch Letters of Credit.
"Lien" shall mean any mortgage, deed of trust, pledge, lien,
security interest, charge or other encumbrance or security arrangement of any
nature whatsoever, including but not limited to any conditional sale or title
retention arrangement, and any assignment, deposit arrangement or lease
intended as, or having the effect of, security.
"Loan" shall mean any loan made by a Bank to a Borrower under
this Agreement and "Loans" shall mean, as the context may require, all loans
made by the Banks to a Borrower under this Agreement or all loans made by the
Banks to all Borrowers under this Agreement. Further, as the context may
require, "Loan" shall mean any amount owed by the Company or any applicable
Borrower
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<PAGE> 59
to the Issuing Bank in respect of a Letter of Credit, including without
limitation, any reimbursement obligation pursuant to an Application relating
thereto.
"London Business Day" shall mean a day for dealing in deposits
in the Selected Currency by and among banks in the London interbank market and
which is a Business Day.
"London Office" when used in connection with the Agent, shall
mean its office located at the address in London, England, set forth on the
signature page hereof, or such other address of the Agent or branch, subsidiary
or affiliate thereof as may be designated in writing from time to time by the
Agent to the Borrowers.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the business, operations, properties, assets or condition (financial or
otherwise) of a Borrower or the enterprise comprised of the Company and its
Subsidiaries taken as a whole or (b) the ability of a Borrower Party to perform
its obligations under any of this Agreement, the Notes or the Security
Documents to which it is a party.
"Multiemployer Plan" means any employee benefit plan which is
a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to
which the Company, any Subsidiary or any Controlled Group Member has or had an
obligation to contribute.
"Net Cash Proceeds" with respect to any property shall mean
cash or cash equivalents received by the Company or any of its Subsidiaries
from the sale or other disposition of such property, minus the sum of (a)
expenses reasonably incurred in respect of such sale or other disposition, (b)
any sales or transfer taxes payable as a result of such sale or other
disposition, (c) the amount required to discharge any indebtedness or
obligation secured by a Lien on such property and required to be discharged in
connection with such sale or other disposition and (d) any tax payable on any
gain resulting from such sale or disposition.
"Notes" shall mean, collectively, the Company Revolving Credit
Notes and the SFNBV Revolving Credit Notes.
"Notional Euro-Rate Funding Office" shall have the meaning
given to that term in Section 2.14(a) hereof.
"Official Body" shall mean any government or political
subdivision or any agency, authority, bureau, central bank, commission,
department or instrumentality of either, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic.
"Option" shall mean the Prime Rate Option or the Euro-Rate
Option, as the case may be.
"Original Agreement" shall have the meaning set forth in
Section 9.15.
"PBGC" means the Pension Benefit Guaranty Corporation
established under Title IV of ERISA or any other governmental agency,
department or instrumentality succeeding to the functions of said corporation.
"Pension Plan" shall mean a single employer plan as defined in
Section 4001(a)(15) of ERISA or an individual account plan which is subject to
the funding standards of Section 302 of ERISA with respect to which the
Company, any of its Subsidiaries, or their respective Controlled Group Members,
at any relevant time have some liability or obligation to contribute or pay
benefits and which relates to current or former employees of the Company, any
of its Subsidiaries or any of their respective Controlled Group Members.
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"person" shall mean an individual, corporation, partnership,
trust, unincorporated association, joint venture, joint-stock company,
government (including political subdivisions), governmental authority or
agency, or any other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) to which Section 4021 of ERISA applies and (i) which is
maintained for employees of the Company, any Subsidiary or any Controlled Group
Member; or (ii) to which the Company, any Subsidiary or any Controlled Group
Member made, or was required to make, contributions at any time within the
preceding five (5) years.
"Portion" shall mean the Prime Rate Portion or the Euro-Rate
Portion, as the case may be.
"Potential Default" shall mean any event or condition which
with notice, the expiration of any applicable cure period or a determination by
the Agent, or any combination of the foregoing, would constitute an Event of
Default.
"Prime Rate", as used herein, shall mean the interest rate per
annum announced from time to time by the Agent as its prime rate, provided,
that the prime rate shall not necessarily be the lowest or best commercial loan
rate offered by the Agent at any time or from time to time.
"Prime Rate Option" shall have the meaning set forth in
Section 2.04(a) hereof.
"Prime Rate Portion" of any Loan or Loans shall mean at any
time the portion, including the whole of such Loan or Loans bearing interest at
any time under the Prime Rate Option. If no Loan or Loans is specified, "Prime
Rate Portion" shall refer to the Prime Rate Portion of all Loans outstanding at
such time.
"Quincy" shall mean Quincy Corporation, a Florida corporation.
"Regular Payment Date" shall mean the last day of each
September, December, March and June after the date hereof, and the Revolving
Credit Expiration Date.
"Reportable Event" means (i) a reportable event described in
Section 4043 of ERISA and regulations thereunder, (ii) a withdrawal by a
substantial employer from a Plan to which more than one employer contributes,
as referred to in Section 4063(b) of ERISA, or (iii) a cessation of operations
at a facility causing more than twenty percent (20%) of Plan participants to be
separated from employment, as referred to in Section 4062(e) of ERISA.
"Required Banks" shall mean, as of any date, Banks which have
made Loans or have issued or participated in Letters of Credit constituting, in
the aggregate, 100% in principal amount of Loans or face amount of Letters of
Credit outstanding on such date or, if no Loans or Letters of Credit are
outstanding on such date, Banks which have Commitment Percentages constituting,
in the aggregate, 100%.
"Responsible Officer" shall mean the Chairman, the President,
the Chief Financial Officer or the Treasurer of the Company.
"Revolving Credit Commitments" shall mean, collectively, the
Company Revolving Credit Commitment and the SFNBV Revolving Credit Commitment.
"Revolving Credit Commitment Amount" shall mean, initially,
Forty-Five Million Dollars ($45,000,000) and shall be reduced, (i) on the
second anniversary of the date hereof, to Forty Million
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<PAGE> 61
Dollars ($40,000,000), (ii) on the third anniversary of the date hereof, to
Thirty-Five Million Dollars ($35,000,000), (iii) on the fifth anniversary of
the date hereof, to Twenty-Five Million Dollars ($25,000,000) and (iv) on the
sixth anniversary of the date hereof, to Twenty Million Dollars ($20,000,000).
"Revolving Credit Expiration Date" shall mean May 31, 2003.
"Revolving Credit Loans" shall mean collectively, all Company
Revolving Credit Loans and all SFNBV Revolving Credit Loans.
"Revolving Credit Notes" shall mean, collectively, the Company
Revolving Credit Notes and the SFNBV Revolving Credit Notes.
"Rolling Four Quarter Basis" shall mean with respect to any
component of any ratio, the sum of such component for each of the four fiscal
quarters of the Company and its Consolidated Subsidiaries immediately preceding
the date with respect to which such ratio is to be determined.
"Secured Hedge Agreement" shall mean a Hedge Agreement between
a Borrower and a Bank party hereto (which Bank, in its capacity as party to
such Hedge Agreement, is referred to as a "Secured Hedge Bank") which is
designated and remains a "Secured Hedge Agreement" in accordance with Section
9.13 hereof.
"Secured Hedge Bank" shall have the meaning given that term in
the definition of "Secured Hedge Agreement."
"Security Documents" shall mean the following documents, each
dated as of the date hereof, and as any of the same may be amended,
supplemented or modified from time to time: (i) Guaranty and Suretyship
Agreement from Sylvan Foods, Inc. to the Agent; (ii) Guaranty and Suretyship
Agreement from the Company to the Agent; (iii) Guaranty and Suretyship
Agreement from Sylvan America (PA), Quincy and Sylvan America (NV) to the
Agent; (iv) Pledge Agreement between Sylvan Foods, Inc. and the Agent (as to
the stock of Quincy and Sylvan America (PA)); (v) Pledge Agreement between the
Company and the Agent (as to the stock of Sylvan Foods, Inc. and Sylvan America
(NV)); (vi) Pledge Agreement between the Company and the Agent (as to the stock
of French Holding Company and SFNBV); (vii) Pledge Agreement between French
Holding Company and Agent (as to the stock of Somycel, S.A.); (viii) Share
Pledge Agreement between Sylvan Inc. and the Agent (as to the stock of French
Holding Company and (ix) Share Pledge Agreement between French Holding Company
and the Agent (as to the stock of Somycel, S.A.). The term "Security
Documents" shall also include all financing statements on Form UCC-1 and all
other documents which are executed, filed or recorded in order to create,
preserve, perfect or maintain prior and perfected the mortgages, pledges,
security interests and liens granted by the foregoing documents.
"Selected Currency" shall mean either Dollars or Dutch
Guilders, so long as Dutch Guilders remain freely transferable and convertible
into Dollars and readily available to banks in the London interbank eurodollar
market.
"SFNBV Revolving Credit Commitment" shall have the meaning
set forth in Section 2.01(a).
"SFNBV Revolving Credit Commitment Amount" shall mean an
amount in Dutch Guilders equal to the equivalent of $6,000,000 and, with
respect to each Bank, shall mean an amount in Dutch Guilders equal to the
equivalent of $6,000,000 multiplied by such Bank's Commitment Percentage (such
amount to be rounded to the nearest Dutch Guilder).
-8-
<PAGE> 62
"SFNBV Revolving Credit Loans" shall have the meaning set
forth in Section 2.01(a) hereof.
"SFNBV Revolving Credit Notes" shall mean the promissory notes
of SFNBV executed and delivered under Section 2.01(c) hereof, together with all
extensions, renewals, refinancings or refundings hereof, in whole or in part.
"Standard Notice" shall mean an irrevocable notice provided to
the Agent on a Business Day which is
(a) At least one Business Day in advance in the case of
selection of, conversion to or renewal of the Prime Rate Option or prepayment
of any Prime Rate Portion; and
(b) At least three London Business Days in advance in the
case of selection of the Euro-Rate Option or prepayment of any Euro-Rate
Portion.
Standard Notice must be provided no later than 10:00 a.m., Pittsburgh time, on
the last day permitted for such notice.
"Stock Payment" by any person shall mean any dividend,
distribution or payment of any nature (whether in cash, securities, or other
property) on account of or in respect of any shares of the capital stock (or
warrants, options or rights therefor) of such person, including but not limited
to any payment on account of the purchase, redemption, retirement, defeasance
or acquisition of any shares of the capital stock (or warrants, options or
rights therefor) of such person, in each case regardless of whether required by
the terms of such capital stock (or warrants, options or rights) or any other
agreement or instrument.
"Subsidiary" at any time shall mean any corporation of which a
majority (by number of shares or number of votes) of any class of outstanding
capital stock normally entitled to vote for the election of one or more
directors (regardless of any contingency which does or may suspend or dilute
the voting rights of such class) is at such time owned directly or indirectly
by the Company or one or more Subsidiaries.
"Sylvan America (NV)" shall mean Sylvan America Inc., a Nevada
corporation (formerly known as Sylvan Spawn Laboratory (Nevada), Inc.).
"Sylvan America (PA)" shall mean Sylvan America Inc., a
Pennsylvania corporation (formerly known as Sylvan Spawn Laboratory, Inc.).
"Taxes" shall have the meaning set forth in Section 2.15.
1.2. CONSTRUCTION. Unless the context of this Agreement
otherwise clearly requires, references to the plural include the singular, the
singular the plural, the part the whole and "or" has the inclusive meaning
represented by the phrase "and/or." References in this Agreement to
"determination" by the Agent or by any Bank include good faith estimates by the
Agent or by any Bank (in the case of quantitative determinations) and good
faith beliefs by the Agent or by any Bank (in the case of qualitative
determinations). The words "hereof," "herein," "hereunder" and similar terms
in this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. The section and other headings contained in this
Agreement and the Table of Contents preceding this Agreement are for reference
purposes only and shall not control or affect the construction of this
Agreement or the interpretation thereof in any respect. Section, subsection
and exhibit references are to this Agreement unless otherwise specified.
-9-
<PAGE> 63
1.3. ACCOUNTING PRINCIPLES.
(a) Except as otherwise provided in this Agreement, all
computations and determinations as to accounting or financial matters and all
financial statements to be delivered pursuant to this Agreement shall be made
and prepared in accordance with GAAP (including principles of consolidation
where appropriate), and all accounting or financial terms shall have the
meanings ascribed to such terms by GAAP.
(b) If any change in GAAP after the date of this Agreement is
or shall be required to be applied to transactions then or thereafter in
existence, and a violation of one or more provisions of this Agreement shall
have occurred or in the opinion of the Company would likely occur which would
not have occurred or be likely to occur if no change in accounting principles
had taken place:
(i) the parties agree that such violation shall not be
considered to constitute an Event of Default or a Potential Default for
a period of 30 days from the date the Company notifies the Agent of the
application of this Section 1.3(b) of this Annex A;
(ii) the parties agree in such event to negotiate in good
faith an amendment of this Agreement which shall approximate to the
extent possible the economic effect of the original financial covenants
after taking into account such change in GAAP; and
(iii) if the parties are unable to negotiate such an
amendment within 30 days, the Borrowers shall have the option of (A)
prepaying the Loans (pursuant to applicable provisions hereof) or (B)
submitting the drafting of such an amendment to a firm of independent
certified public accountants of nationally recognized standing
acceptable to the parties, which shall complete its draft of such
amendment within 90 days of submission; if the parties cannot so agree
on such an accounting firm, such firm shall be selected by binding
arbitration in the City of Pittsburgh, Pennsylvania in accordance with
the rules then obtaining of the American Arbitration Association. If
the Borrowers do not exercise either such option within said period,
then as used in this Agreement, "GAAP" shall mean generally accepted
accounting principles in effect at the date of the relevant financial
statements. The parties agree that if the Borrowers elect the option
in clause (B) above, until such firm has been selected and completes
drafting such amendment, no such violation shall constitute an Event of
Default or a Potential Default.
(c) If any change in GAAP after the date of this Agreement is
required to be applied to transactions or conditions then or thereafter in
existence, and the Agent shall assert that the effect of such change is or
shall likely be to distort materially the effect of any of the definitions of
financial terms in Section 1.1 of this Annex A or any of the covenants of the
Borrowers in Section 6.01 hereof (the "Financial Provisions"), so that the
intended economic effect of any of the Financial Provisions will not in fact be
accomplished:
(i) the Agent shall notify the Company of such assertion,
specifying the change in GAAP which is objected to, and until otherwise
determined as provided below, the specified change in GAAP shall not be made by
the Company in its financial statements for the purpose of applying the
Financial Provisions; and
(ii) the parties shall follow the procedures set forth in
paragraph (ii) and the first sentence of paragraph (iii) of Section 1.3(b) of
this Annex A. If the parties are unable to agree on an amendment as provided
in said paragraph (ii) and if the Company does not exercise either option set
forth in the first sentence of said paragraph (iii) within the specified
period, then as used in this Agreement "GAAP" shall mean generally accepted
accounting principles in effect on the date of the relevant financial
statements, except that the specified change in GAAP which is objected to by
the Agent shall not be made in applying the Financial Provisions. The parties
agree that if the Company elects the
-10-
<PAGE> 64
option in clause (B) of the first sentence of said paragraph (iii), until such
independent firm has been selected and completes drafting such amendment, the
specified change in GAAP shall not be made in applying the Financial
Provisions.
(d) All expenses of compliance with this Section 1.3 shall be
paid for by the Company.
-11-
<PAGE> 65
EXHIBIT A-1
SYLVAN, INC.
REVOLVING CREDIT NOTE
$_______________ Pittsburgh, Pennsylvania
June 1, 1996
FOR VALUE RECEIVED, the undersigned, SYLVAN INC., a Nevada
corporation (the "Borrower"), promises to pay to the order of __________, a
__________ (the "Bank") on or before May 31, 2003, and at such earlier dates as
may be required by the Agreement (as defined below), the lesser of (i) the
principal sum of __________ Dollars ($__________) or (ii) the aggregate unpaid
principal amount of all Company Revolving Credit Loans made by the Bank to the
Borrower from time to time pursuant to the Agreement. The Borrower further
promises to pay to the order of the Bank interest on the unpaid principal
amount hereof from time to time outstanding at the rate or rates per annum
determined pursuant to the Agreement, payable on the dates set forth in the
Agreement.
This Note is one of the "Revolving Credit Notes" as referred
to in, and is entitled to the benefits of, the Revolving Credit Agreement,
dated as of June 1, 1996, by and among the Borrower, Sylvan Foods (Netherlands)
BV, the Banks parties thereto from time to time, the Issuing Bank named therein
and Mellon Bank, N.A., a national banking association, as Agent for the Banks
and the Issuing Bank (as the same may be amended, modified or supplemented from
time to time, the "Agreement"), which among other things provides for the
acceleration of the maturity hereof upon the occurrence of certain events and
for prepayments in certain circumstances and upon certain terms and conditions.
Terms defined in the Agreement have the same meanings herein.
This Note is secured by and is entitled to the benefits of the
Liens granted by the Security Documents referred to in the Agreement.
The Borrower hereby expressly waives presentment, demand,
notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note and the
Agreement, and an action for amounts due hereunder or thereunder shall
immediately accrue.
This Note shall be governed by, construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania, without regard to
principles of choice of law.
SYLVAN INC.
By
-----------------------------------
Title:
<PAGE> 66
EXHIBIT A-2
SYLVAN FOODS (NETHERLANDS) BV
REVOLVING CREDIT NOTE
Pittsburgh, Pennsylvania
June 1, 1996
FOR VALUE RECEIVED, the undersigned, SYLVAN FOODS
(NETHERLANDS) BV, a Dutch corporation (the "Borrower"), promises to pay to the
order of __________, a __________ (the "Bank") on or before May 31, 2003, and
at such earlier dates as may be required by the Agreement (as defined below),
the aggregate unpaid principal amount of all SFNBV Revolving Credit Loans made
by the Bank to the Borrower from time to time pursuant to the Agreement. The
Borrower further promises to pay to the order of the Bank interest on the
unpaid principal amount hereof from time to time outstanding at the rate or
rates per annum determined pursuant to the Agreement, payable on the dates set
forth in the Agreement.
This Note is one of the "Revolving Credit Notes" as referred
to in, and is entitled to the benefits of, the Revolving Credit Agreement,
dated as of June 1, 1996, by and among the Borrower, Sylvan Inc., the Banks
parties thereto from time to time, the Issuing Bank named therein and Mellon
Bank, N.A., a national banking association, as Agent for the Banks and the
Issuing Bank (as the same may be amended, modified or supplemented from time to
time, the "Agreement"), which among other things provides for the acceleration
of the maturity hereof upon the occurrence of certain events and for
prepayments in certain circumstances and upon certain terms and conditions.
Terms defined in the Agreement have the same meanings herein.
This Note is secured by and is entitled to the benefits of the
Liens granted by the Security Documents referred to in the Agreement.
The Borrower hereby expressly waives presentment, demand,
notice, protest and all other demands and notices in connection with the
delivery, acceptance, performance, default or enforcement of this Note and the
Agreement, and an action for amounts due hereunder or thereunder shall
immediately accrue.
This Note shall be governed by, construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania, without regard to
principles of choice of law.
SYLVAN FOODS (NETHERLANDS) BV
By
------------------------------
Title:
<PAGE> 67
EXHIBIT B
Cash Management Services MELLON BANK
- - - -------------------------------------------------------------------------------
AUTOMATIC BORROWING SERVICE - Mellon Bank, N.A. Page 1 of 2
Agreement Letter
____________________ (the "Company") has requested that Mellon Bank, N.A. (the
"Bank") provide the Company with that service which the Bank refers to as its
Automatic Borrowing Service (the "Service") pursuant to which the Bank shall
automatically make advances of funds ("Advances") to an accept repayments
thereof ("Payments") from Bank customers. In order to induce the Bank to make
the Service available to the Company, the Company agrees that the following
terms and conditions will govern the Bank's provision and the Company's receipt
of the Service:
1. Prior to the Company's use of the Service, the Bank will have granted the
Company a line of credit and the Company will have executed and entered
into with the Bank, an agreement providing for such line of credit in the
form attached hereto as Exhibit A to this Agreement (the "Credit
Agreement"). The Company agrees with the Bank that in addition to the
terms and conditions of this Agreement, the Credit Agreement will govern
all Advances and Payments and matters related thereto and is expressly
incorporated herein.
2. The Company hereby designates the account identified in Exhibit B to this
Agreement as the account to be used in connection with the Service (the
"Account"). All advances made by the Bank will be credited to the Account
and all Payments made by the Company will be debited from the Account. The
Company acknowledges and agrees that in addition to the terms and
conditions of this Agreement, the Account will be subject to the terms and
conditions applicable to demand deposit accounts maintained at the Bank.
3. (a) As a means to utilizing the Service, the Company and the Bank have
agreed upon each of the following:
(i) a target balance ("Target Balance") which shall be the balance
which, except as otherwise specified in this Agreement, the
Service shall attempt to maintain in the Account;
(ii) an advance trigger amount ("Advance Trigger") which shall be the
Account balance amount which, if reached, shall trigger an
automatic Advance by the Bank to the Company by means of a
credit to the Account;
(iii) an advance increment ("Advance Increment") which shall be the
incremental amount of any Advance made by the Bank to the
Company;
(iv) a payment trigger amount ("Payment Trigger") which shall be the
Account balance amount which, if reached, shall trigger a
Payment to the Bank by means of a debit to the Account;
(v) a payment increment ("Payment Increment") which shall be the
incremental amount of any Payment made by the Company pursuant
to the Service.
(b) The Target Balance, Advance Trigger, Payment Trigger, Advance
Increment and Payment Increment, which the Company and the Bank have
agreed upon are set forth on Exhibit B attached hereto. For all
purposes of this Agreement, the Company and the Bank may amend Exhibit
B from time to time by mutual agreement. Such agreement may be reached
by telephone in which event the Bank shall proceed to revise Exhibit B
accordingly. The Bank's records shall be presumed correct, absent
manifest error.
4. (a) On each banking day at the cutoff time selected by the Company (from
the time or times then currently available), the Bank shall review all
debits and credits posted to the Account on such banking day prior to
such cutoff time. All debits and credits to the Account shall be in
accordance with the terms and conditions established by the Bank as
applicable to such matters. For all purposes of this Agreement
"banking day" shall refer to any day upon which the Bank's principal
office in Pittsburgh, Pennsylvania is open for the conduct of
substantially all of the Bank's banking functions. The cutoff time
selected by the Company is set forth on Exhibit B.
(b) If, during its review of the Account at the agreed upon cutoff time,
the Bank determines that the balance within the account is less than
the Target Balance and provided the Advance Trigger Amount is reached,
the Bank shall make an Advance to the Company in one or more Advance
Increments in order to bring the Account balance as close as possible
to the Target Balance.
(c) If, during its review of the Account at the agreed upon cutoff time,
the Bank determines that the balance within the Account is in excess
of the Target Balance and provided the Payment Trigger amount is
reached, the Bank shall debit the Account in one or more Payment
Increments in order to bring the balance in the Account as close as
possible to the Target Balance. In no event shall the amount of any
Payment exceed the Company's total indebtedness to the Bank.
5. (a) On any business day, the Company may request that the Bank lean
additional funds in excess of Advances made automatically as part of
the Service. Such request may be made by either of the following
means:
<PAGE> 68
Page 2 of 2
(i) by telephone call to the Bank at the telephone number specified
on Exhibit B; provided, however, that prior to making any such
request the Company shall have designated on Exhibit B two or
more individuals authorized to act for the Company ("Authorized
Representatives") in requesting additional Advances hereunder.
The Bank shall assign each Authorized Representative a Person
Identification Number ("Pin") to be used by such Authorized
Representative in requesting additional Advances. The Bank shall
be authorized and entitled to rely upon any telephonic
communication received from any person identifying
himself/herself as an Authorized Representative by means of an
appropriate PIN; or
(ii) by utilization of the Bank's Telecash System in accordance with
the terms and conditions of the Bank's Telecash Agreement.
(b) The Company expressly agrees and acknowledges that in no event shall
the aggregate amount of funds lent to the Company by the Bank (whether
automatically as part of the Service or pursuant to the Company's
request in accordance with this Section 5) exceed the credit limit
applicable to the Company as such limit is set forth in the Credit
Agreement.
6. (a) The Company will pay the Bank for the Service in accordance with the
Bank's current fees for the Service as then in effect. The Bank may
amend all fees from time to time upon thirty (30) days' written notice
to the Company.
(b) The Company agrees to pay all invoices submitted by the Bank within
thirty (30) days of the billing date set forth in the invoice. The
Company may elect to receive a credit against fees owned to the Bank
hereunder based upon the dollar amount of the balances maintained by
the Company in its accounts at the Bank. The amount of such credit
shall be determined in accordance with the Bank's then current formula
and procedures. The Bank reserves the right to debit the Company's
account in the amount of all fees not paid when due.
7. (a) Unless the Bank is negligent or does not act in good faith with
respect to its performance of the Service, the Company agrees to hold
the Bank harmless and indemnify the Bank from and against any and all
liabilities, losses, claims, or damages or expenses, including
reasonable attorneys' fees, which the Bank may incur in connection
with this Agreement and its performance of the Services hereunder.
(b) In the event that the Bank breaches the standard of care set forth in
this Section 7, the Bank will be liable to the Company only for actual
damages directly caused by the Bank's breach. The Company expressly
agrees that in no event will the Bank be liable for any indirect,
special, consequential or punitive damages in connection with the
Bank's performance of the Service.
(c) Notwithstanding any other provision of this Agreement, the Bank shall
not be liable for any failure or inability to perform or any delay in
performance hereunder if such failure, inability or delay is due to
acts of God, war, civil or industrial disturbance, strikes, natural
disaster, equipment malfunction or any other cause which are beyond
the Bank's reasonable control.
8. (a) Either party may terminate this Agreement at any time either: (i)
immediately for cause; or (ii) without cause upon prior written notice
to the other party of at least thirty (30) days. Notwithstanding such
termination, this Agreement shall remain in full force and effect with
respect to all transactions hereunder occurring prior to the date of
such termination.
(b) The Bank reserves the right to change any aspect to the Service upon
thirty (30) days' written notice to the Company.
9. (a) All notices permitted or required by this Agreement shall be in
writing and shall be deemed to have been duly given if sent by
personal delivery, mail, telegram or telex addressed to the address
specified for such party in Exhibit B.
(b) This Agreement shall incur to the benefit of and shall be binding
upon the respective successors and assigns of the parties hereto, but
it may not be assigned in whole or in part by either party without the
prior written consent of the other, except that the Bank may freely
assign this Agreement to any company that is directly or indirectly:
(i) in control of the Bank; or, (ii) under the control of the Bank;
or, (iii) under common control with the Bank.
(c) Noting contained in this Agreement shall be deemed to impair any
rights which the Bank may have arising out of the Credit Agreement or
by operation of law.
(d) This Agreement supersedes any prior agreements or representations
relating to the subject matter hereof. Except as specified herein, no
amendment or waiver of any provision of this Agreement shall be
effective unless evidenced in writing and signed by the Bank and the
Company.
(e) This Agreement shall be governed by the laws of the Commonwealth of
Pennsylvania.
<PAGE> 69
Page 3 of 3
The Company, by a duly authorized officer, agrees and assents to the matters
set forth as of the date of this letter and with an intent to be legally bound.
Very truly yours,
MELLON BANK, N.A.
By:
-------------------------- --------------------------
Signature Company
Name: By: Date:
------------------------ ----------------------- --------------
Title: Name:
----------------------- ---------------------
Title:
--------------------
<PAGE> 70
EXHIBIT A
CREDIT AGREEMENT
Mellon will attach the loan documents for the Company's line of credit
to this Exhibit.
<PAGE> 71
EXHIBIT B
All information in this Exhibit must be supplied by the Company.
1. Mellon Demand Deposit Account Number:
------------------------------------
2. Borrowing Parameters:
Target Balance:
-----------------------
Advance Trigger:
----------------------
Advance Increment:
--------------------
Payment Trigger:
----------------------
Payment Increment:
--------------------
3. Cutoff Time:
--------------------------
(The Automatic Borrowing Service operates at either 1:30 p.m. or 4:00 p.m.,
Pittsburgh time. No other time will be accepted.)
4. Mellon Bank ABS Telephone Numbers:
Pittsburgh 234-3050
In Pennsylvania 800-982-9275
Outside of Pennsylvania 800-468-5048
5. Authorized Company Representatives:
(These Authorized Representatives will be permitted to request that Mellon
lend the Company additional funds.)
Name:
---------------------------------------------
Title:
--------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
6. Company Mailing Address and Telephone Number:
(Mellon will mail material to the Company at this address and will contract
the Company by phone at this number.)
Mailing Address:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
Telephone Number:
----------------------------------
<PAGE> 72
EXHIBIT C
FORM OF OPINION
1. Each of the Borrower Parties is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation.
2. Each of the Borrower Parties has all requisite corporate
power and authority to own and operate its properties and to carry on its
business as now conducted and as presently planned to be conducted. Each of
the Borrowers has the corporate power and authority to execute and deliver the
Loan Agreement and to perform its obligations thereunder. Each of the
Borrowers has the corporate power and authority to make the borrowings provided
for in the Loan Agreement, to execute and deliver the Notes in evidence of such
borrowings and to perform its obligations hereunder. Each of the Borrower
Parties has the corporate power and authority to execute and deliver the
Security Documents to which it is a party and to perform its obligations
thereunder. All such action has been duly and validly authorized by all
necessary corporate proceedings by the Borrower Parties.
3. The Loan Agreement, the Notes and the Security Documents
to which any of the Borrower Parties is a party have been duly and validly
executed and delivered by such Borrower Parties and constitute legal, valid and
binding obligations of the Borrower Parties enforceable in accordance with
their respective terms, except as the enforceability of such documents may be
limited by bankruptcy, insolvency or other similar laws of general application
affecting the enforcement of creditors' rights or by general principles of
equity limiting the availability of equitable remedies.
4. No authorization, consent, approval, license, exemption or
other action by, and no registration, qualification, designation, declaration
or filing with, any Official Body is or will be necessary or advisable in
connection with the execution and delivery of the Loan Agreement, the Notes or
the Security Documents, consummation of the transactions therein contemplated
or performance of or compliance with the terms and conditions thereof.
5. Neither the execution and delivery of the Loan Agreement,
the Notes or the Security Documents nor consummation of the transactions
therein contemplated nor performance of or compliance with the terms and
conditions thereof will (a) violate any Law, (b) conflict with or result in a
breach of or a default under the articles of incorporation or bylaws of any
Borrower Party or any agreement or instrument to which any Borrower Party is a
party or by which any of them or any of their respective properties (now owned
or hereafter acquired) may be subject or bound or (c) result in the creation or
imposition of any Lien upon any property (now owned or hereafter acquired) of
any Borrower Party except for the Liens created by the Security Documents.
6. Except as set forth in the financial statements referred
to in Section 3.06 of the Loan Agreement, to our knowledge there is no pending
or threatened proceeding by or before any Official Body against or affecting
any of the Borrower Parties which, individually or in the aggregate, could be
could be reasonably expected to have a Material Adverse Effect.
7. The choice by SFNBV of the laws of the Commonwealth of
Pennsylvania, U.S.A., to govern the Loan Documents is legal, valid and binding
under the laws of The Netherlands. The provisions of the Loan Documents
regarding Borrower's submission to jurisdiction and venue and regarding the
appointment of an agent for service of process are valid and effective under
the laws of The Netherlands. In the event a final judgment of any Pennsylvania
state or Federal court for the payment of money is rendered against SFNBV under
the SFNBV Revolving Credit Notes or any of the other Loan Documents, the Courts
of The Netherlands would regard such judgment as conclusive and
<PAGE> 73
such judgment would be enforced by the courts of The Netherlands without a
further review on the merits.
8. There are no requirements of any laws or regulations of
The Netherlands with respect to the availability and transfer of U.S. Dollars
or any other currency that must be met in order for SFNBV to make required
payments under the SFNBV Revolving Credit Notes or the other Loan Documents.
9. Neither any of the Loan Documents nor any payments
required to be made by SFNBV under or in connection with any of the Loan
Documents, whether in the form of principal, interest, fees or any other form,
is subject to any Netherlands tax, withholding, or other similar deductions.
No stamp, duties or other similar taxes are payable under the laws of The
Netherlands in respect of any of the Loan Documents or in respect of the
enforcement thereof, and the holders of the SFNBV Revolving Credit Notes and
the other Loan Documents will not incur or become liable for any transfer or
other like taxes under the laws of The Netherlands by reason of the
acquisition, ownership, transfer, or other disposition of the SFNBV Revolving
Credit Notes or any of the other Loan Documents.
<PAGE> 74
EXHIBIT D
TRANSFER SUPPLEMENT
THIS TRANSFER SUPPLEMENT, dated as of the date specified in
Item 1 of Schedule I hereto, among the Transferor Bank specified in Item 2 of
Schedule I hereto (the "Transferor Bank"), each Purchasing Bank specified in
Item 3 of Schedule I hereto (each a "Purchasing Bank") and MELLON BANK, N.A.,
as Agent for the Banks and the Issuing Bank under the Credit Agreement
described below.
Recitals:
A. This Transfer Supplement is being executed and delivered
in accordance with Section 9.12(c) of the Revolving Credit Agreement dated as
of June 1, 1996 among Sylvan Inc., a Delaware corporation (the "Company"),
Sylvan Foods (Netherlands) BV, a Dutch corporation ("SFNBV") (the Company and
SFNBV being referred to collectively as the "Borrowers"), the Banks named
therein, the Issuing Bank named therein and Mellon Bank, N.A., as Agent for the
Banks and the Issuing Bank (as the same may be amended, modified or
supplemented from time to time, the "Credit Agreement"). Capitalized terms
used herein without definition have the meaning specified in the Credit
Agreement.
B. Each Purchasing Bank (if it is not already a Bank) wishes
to become a Bank party to the Credit Agreement.
C. The Transferor Bank is selling and assigning to each
Purchasing Bank, and each Purchasing Bank is purchasing and assuming, a certain
portion of the Transferor Bank's rights and obligations under the Credit
Agreement, including, without limitation, the Transferor Bank's Commitments and
Loans owing to it and any Notes held by it (the "Transferor Bank's Interests").
NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. TRANSFER EFFECTIVE NOTICE. Upon receipt by the Agent of
seven counterparts of this Transfer Supplement (to each of which is attached a
fully completed Schedule I and Schedule II), and each of which has been
executed by the Transferor Bank, by each Purchasing Bank and by any other
Person required by Section 9.12(c) of the Credit Agreement to execute this
Transfer Supplement, the Agent will transmit to each Borrower, the Transferor
Bank and each Purchasing Bank a transfer effective notice, substantially in the
form of Schedule III to this Transfer Supplement (a "Transfer Effective
Notice"). The date specified in such Transfer Effective Notice as the date on
which the transfer effected by this Transfer Supplement shall become effective
(the "Transfer Effective Date") shall be the fifth Business Day following the
date of such Transfer Effective Notice or such other date as shall be agreed
upon among the Transferor Bank, the Purchasing Bank, the Agent and the
Borrowers. From and after the close of business at the Agent's Office on the
Transfer Effective Date each Purchasing Bank (if not already a Bank party to
the Credit Agreement) shall be a Bank party to the Credit Agreement for all
purposes thereof having the respective interests in the Transferor Bank's
interests reflected in this Transfer Supplement.
2. PURCHASE PRICE; SALE. At or before 12:00 Noon, local time
at the Transferor Bank's office specified in Schedule III, on the Transfer
Effective Date, each Purchasing Bank shall pay to the Transferor Bank, in
immediately available funds, an amount equal to the purchase price, as agreed
between the Transferor Bank and such Purchasing Bank (the "Purchase Price"), of
the portion being purchased by such Purchasing Bank (such Purchasing Bank's
"Purchased Percentage") of the
<PAGE> 75
Transferor Bank's Interests. Effective upon receipt by the Transferor Bank of
the Purchase Price from a Purchasing Bank, the Transferor Bank hereby
irrevocably sells, assigns and transfers to such Purchasing Bank, without
recourse, representation or warranty (express or implied) except as set forth in
Section 6 hereof, and each Purchasing Bank hereby irrevocably purchases, takes
and assumes from the Transferor Bank such Purchasing Bank's Purchased Percentage
of the Transferor Bank's Interests. The Transferor Bank shall promptly notify
the Agent of the receipt of the Purchase Price from a Purchasing Bank ("Purchase
Price Receipt Notice"). Upon receipt by the Agent of such Purchase Price
Receipt Notice, the Agent shall record in the Register the information with
respect to such sale and purchase as contemplated by Section 9.12(d) of the
Credit Agreement.
3. PRINCIPAL, INTEREST AND FEES. All principal payments,
interest, fees and other amounts that would otherwise be payable from and after
the Transfer Effective Date to or for the account of the Transferor Bank in
respect of the Transferor Bank's Interests shall, instead, be payable to or for
the account of the Transferor Bank and the Purchasing Banks, as the case may
be, in accordance with their respective interests as reflected in this Transfer
Supplement.
4. CLOSING DOCUMENTS. Concurrently with the execution and
delivery hereof, the Transferor Bank will request that the Borrower provide to
each Purchasing Bank (if it is not already a Bank party to the Credit
Agreement) conformed copies of all documents delivered to such Transferor Bank
on the Closing Date in satisfaction of conditions precedent set forth in the
Credit Agreement.
5. FURTHER ASSURANCES. Each of the parties to this Transfer
Supplement agrees that at any time and from time to time upon the written
request of any other party, it will execute and deliver such further documents
and do such further acts and things as such other party may reasonably request
in order to effect the purposes of this Transfer Supplement.
6. CERTAIN REPRESENTATIONS AND AGREEMENTS. By executing and
delivering this Transfer Supplement, the Transferor Bank and each Purchasing
Bank confirm to and agree with each other and the Agent and the Banks as
follows:
(a) Other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned hereby free
and clear of any adverse claim, the Transferor Bank makes no
representation or warranty and assumes no responsibility with respect
to (i) the execution, delivery, effectiveness, enforceability,
genuineness, validity or adequacy of the Credit Agreement, any Note or
any Security Document, (ii) any recital, representation, warranty,
document, certificate, report or statement in, provided for in,
received under or in connection with, the Credit Agreement, any Note or
any Security Document, or (iv) the existence, validity, enforceability,
perfection, recordation, priority, adequacy or value, now or hereafter,
of any Lien or other direct or indirect security afforded or purported
to be afforded by any of the Security Documents or otherwise from time
to time.
(b) The Transferor Bank makes no representation or warranty
and assumes no responsibility with respect to (i) the performance or
observance of any of the terms or conditions of the Credit Agreement,
any Note or any Security Document on the part of the Company, any
Borrower or any other Person, (ii) the business, operations, condition
(financial or otherwise) or prospects of the Company, any Borrower or
any other Person, or (iii) the existence of any Event of Default or
Potential Default.
(c) Each Purchasing Bank confirms that it has received a copy
of the Credit Agreement, each Note and each of the other Loan
Documents, together with copies of the financial statements referred to
in Section 3.06 thereof, the most recent financial statements delivered
pursuant to Section 5.01 thereof, if any, and such other documents and
information as it has deemed appropriate to make its own credit and
legal analysis and decision to enter into
<PAGE> 76
this Transfer Supplement. Each Purchasing Bank confirms that it has made
such analysis and decision independently and without reliance upon the
Agent, the Transferor Bank or any other Bank.
(d) Each Purchasing Bank, independently and without reliance
upon the Agent, the Transferor Bank or any other Bank, and based on
such documents and information as it shall deem appropriate at the
time, will make its own decisions to take or not take action under or
in connection with the Credit Agreement, any Note or any Security
Document.
(e) Each Purchasing Bank irrevocably appoints the Agent to
act as Agent for such Purchasing Bank under the Agreement and the
Security Documents, all in accordance with Article IX of the Credit
Agreement and the other provisions of the Credit Agreement and the
Security Documents.
(f) Each Purchasing Bank agrees that it will perform in
accordance with their terms all of the obligations which by the terms
of the Credit Agreement and the Security Documents are required to be
performed by it as a Bank.
7. SCHEDULE II. Schedule II hereto sets forth the revised
Commitments of the Transferor Bank and each Purchasing Bank as well as
administrative information with respect to each Purchasing Bank.
8. GOVERNING LAW. This Transfer Supplement shall be governed
by, construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to principles of choice of law.
9. COUNTERPARTS. This Transfer Supplement may be executed on
any number of counterparts and by the different parties hereto on separate
counterparts each of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Transfer Supplement to be executed by their respective duly authorized officers
on Schedule I hereto as of the date set forth in Item 1 of Schedule I hereto.
<PAGE> 77
EXHIBIT E
Application for Standby Letter of Credit [LOGO]
<TABLE>
<CAPTION>
<C> <C> <C>
Mellon Bank, N.A. Phone: (412) 234-6882
Trade Banking Operations or (800) 227-6302
- - - ------------------------------------------------------------------ Three Mellon Bank Center Room 2329 Fax: (412) 234-2732
Application Date: L/C Number (for Bank Use Only): Pittsburgh, PA 15259-0001
===================================================================================================================================
Please issue an irrevocable Letter of Credit in accordance with the terms and conditions set forth below:
Letter of Credit to be delivered by: [ ] Airmail [ ] Courier [ ] Telex or other teletansmission
- - - -----------------------------------------------------------------------------------------------------------------------------------
Applicant (Name & Complete Address) Beneficiary (Name & Complete Address)
- - - -----------------------------------------------------------------------------------------------------------------------------------
Advising Bank (Name & Complete Address) Expiry Date at Mellon Bank, N.A.
------------------------------------------------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
Currency:
[ ] USD [ ] Other (specify) [ ] Amount
----------------------- -----------------------
- - - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Indicate any of the following that are to apply:
[ ] Letter of credit to be "clean" (meaning a sight draft on Mellon Bank is
required for payment)
[ ] Issue Letter of Credit in accordance with attached form (subject to
approval of Mellon Bank)
[ ] Letter of Credit to be transferable.*
* No transfer will be effected until Mellon Bank's transfer form is
completed and returned to Mellon Bank along with the original of this
Credit for endorsement and Mellon Bank's transfer fee is paid by the
Beneficiary.
[ ] (Auto-Renewable) "It is a condition of this Letter of Credit that it
will be automatically extended for periods of _________________ each from
the present or any future expiry date, unless we notify you in writing at
least _____ days prior to such expiry date that we elect not to further
extend this Letter of Credit. Upon receipt of such notice, you may draw
on this Credit by presenting your one sight draft to us for an amount up
to the unused balance of this Letter of Credit on or before the then
relevant expiry date" (For "clean" credits last sentence is not required)
[ ] All banking charges other than Mellon Bank's are for the account of:
[ ] Beneficiary [ ] Applicant
[ ] Guarantee to be issued by correspondent Bank (the beneficiary of the
Letter of Credit) for the account of Applicant and in favor of
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
for the same amount of this Letter of Credit, to expire at their counters
on ______________ (should be about 30 days prior to the expiry date of
this Letter of Credit). This Letter of Credit is to be available against
the beneficiary's signed statement that it has been required to pay under
the above guarantee:
[ ] Beneficiary may draw by its tested telex/SWIFT message stating
that it has been called upon to pay under its guarantee and that
it has airmailed to Mellon Bank the required draft and statement.
[ ] Payment against sight draft and any of the following statements or
documents to be presented by the beneficiary:
[ ] (UNPAID INVOICES) This Letter of Credit covers unpaid invoice(s)
and is to be available against (i) the beneficiary's statement as
follows: "We hereby certify that the draft accompanying this
statement drawn under your Letter of Credit represents the amount
due (insert name of beneficiary) as a result of the failure of
(insert name of applicant) to pay invoice(s) _________ days
after the invoice date as agreed, that payment has been demanded
and not received,"; (ii) and copy(ies) of relative invoice(s)
marked "UNPAID".
[ ] (PERF) This Letter of Credit is available against beneficiary's
signed statement as follows: "We hereby certify that (insert name
of Applicant) has failed to
-------------------------------------
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[ ] Any other documents, statements, or certifications required:
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==============================================================================
The undersigned Applicant agrees to pay Mellon Bank on demand, any and all
charges and expenses (including without limitation attorneys' fees) paid or
incurred by Mellon Bank in connection with the Letter of Credit, interest in
accordance with the terms and conditions of the Letter of Credit Agreement
between Applicant and Mellon Bank and the following fees and commissions for
establishing the Letter of Credit (plus any customary commission for any
increase, amendment or renewal thereof):
Issuance Fee of $__________, Standby Letter of Credit Commission of
$_________ or at __________% per annum, other fees as follows:
-----------------
- - - -------------------------------------------------------------------------------
WE UNCONDITIONALLY AGREE THAT THIS APPLICATION AND LETTER OF CREDIT SHALL BE
GOVERNED BY THE TERMS AND CONDITIONS OF OUR LETTER OF CREDIT AGREEMENT WITH YOU
OF MOST RECENT DATE.
- - - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<C> <C> <C>
- - - -------------------------------------------------------------------------------------------------------------------------
Company Name Authorized Signature (including title) Date
- - - -------------------------------------------------------------------------------------------------------------------------
Contact at Applicant (Name & Title) Telephone Number
( )
- - - -------------------------------------------------------------------------------------------------------------------------
Correspondent Bank Name Correspondent Bank Authorized Signature Date
- - - -------------------------------------------------------------------------------------------------------------------------
Contact at Correspondent Bank (Name & Title) Telephone Number
- - - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 78
EXHIBIT F
SECURED HEDGE SUPPLEMENT
THIS SUPPLEMENT to the Revolving Credit Agreement, dated as of
June 1, 1996 among Sylvan Inc. (the "Company"), Sylvan Foods (Netherlands) BV
("SFNBV"), certain Banks, the Issuing Bank thereunder and Mellon Bank, N.A., as
Agent for the Banks thereunder (in such capacity, the "Agent") (as the same has
been heretofore amended and as the same may be further amended, modified or
supplemented, hereinafter referred to herein as the "Loan Agreement").
Capitalized terms used herein and not otherwise defined shall have the meanings
given them in the Loan Agreement.
The parties hereto, intending to be legally bound, hereby
agree as follows:
1. This Supplement is a "Secured Hedge Supplement" referred
to in Section 9.13 of the Loan Agreement.
2. Attached to this Supplement is a copy of a Hedge Agreement
between the Bank party hereto (which is a Bank party to the Loan Agreement) and
the Borrower party hereto, which Hedge Agreement is referred to herein as the
"Designated Hedge Agreement". Such Bank, such Borrower and the Agent (acting
at the direction of the Required Banks as provided in Section 9.13 of the Loan
Agreement) hereby designate the Designated Hedge Agreement to be a "Secured
Hedge Agreement" pursuant to such Section 9.13.
3. The Bank party hereto and the Borrower party hereto hereby
represent, warrant, acknowledge and agree that (a) the attached copy of the
Designated Hedge Agreement is true, correct and complete and contains the
entire agreement of such Bank and such Borrower relating to the subject matter
thereof, (b) to the extent such Designated Hedge Agreement is in the form of a
master agreement, pursuant to which multiple "confirmations" (however named)
may be entered into from time to time, only the transaction(s) evidenced by
confirmation(s) attached hereto shall constitute part of such Designated Hedge
Agreement, and (c) no other transactions have been entered into under such
master agreement, unless such transaction is evidenced by a confirmation which
itself has been designated, pursuant to a separate Secured Hedge Supplement, a
"Secured Hedge Agreement".
IN WITNESS WHEREOF, this Supplement has been entered into by
the Bank party hereto, the Borrower party hereto, and the Agent, by their duly
authorized officers.
BANK:
--------------------------------
By
------------------------------
Title
---------------------------
Date:
---------------------------
<PAGE> 79
BORROWER:
--------------------------------
By
------------------------------
Title
---------------------------
Date:
---------------------------
AGENT: MELLON BANK, N.A., as Agent
By
------------------------------
Title
---------------------------
Date:
---------------------------
<PAGE> 80
SCHEDULE 2.11(c)
LETTERS OF CREDIT
<TABLE>
<S> <C> <C>
- - - ---------------------------------------------------------------------------------------------------------------
Letter of Credit #202 451 8035360 Expiring 9/1/96 in the amount of $1,000,000 to
Republic Western Insurance Co.
- - - ---------------------------------------------------------------------------------------------------------------
Letter of Credit #202 451 8006640 Expiring 9/1/96 in the amount of $1,000,000 to
Employers Reinsurance Corp.
- - - ---------------------------------------------------------------------------------------------------------------
</TABLE>
SCHEDULE 6.02
LIENS
<TABLE>
<S> <C> <C>
- - - ---------------------------------------------------------------------------------------------------------------
AMOUNT LIENHOLDER
- - - ---------------------------------------------------------------------------------------------------------------
British Sterling 300,000 Midland Bank, plc First mortgage on White Queen Ltd. real property
- - - ---------------------------------------------------------------------------------------------------------------
Dutch Guilders 5,600,000 ABN-AMRO Bank N.V. First mortgage on Sylvan Horst property including
a pledge on inventory and receivables
- - - ---------------------------------------------------------------------------------------------------------------
French Francs 15,000,000 ABN-AMRO Bank N.V. Pledge of French Franc time deposits at ABN-AMBO
plus accrued interest Bank N.V. Chicago branch
- - - ---------------------------------------------------------------------------------------------------------------
</TABLE>
SCHEDULE 6.03
INDEBTEDNESS
<TABLE>
<S> <C> <C>
- - - ---------------------------------------------------------------------------------------------------------------
AMOUNT BORROWER INDEBTEDNESS
- - - ---------------------------------------------------------------------------------------------------------------
French Francs 16,366,505.36 Sylvan Foods (France) S.A. FFr 15,000,000 working capital loan from bank.
FFr 1,366,505.36 accrued interest payable
on above note, payable to Bank Neuflize,
Schlumberger Maillot, expiring 1/17/98.
- - - ----------------------------------------------------------------------------------------------------------------
Dutch Guilders 2,470,000 Sylvan Horst B.V. ABN-AMRO Bank amortizing term loan due 4/1/2015
- - - ----------------------------------------------------------------------------------------------------------------
Dutch Guilders 3,300,000 Sylvan Horst B.V. ABN-AMRO Bank amortizing term loan due 2/28/2000
- - - ----------------------------------------------------------------------------------------------------------------
Dutch Guilders 600,000 Sylvan Horst B.V. Overdraft facility
- - - ----------------------------------------------------------------------------------------------------------------
British Sterling 300,000 E. Hauser Ltd. Midland Bank overdraft facility
White Queen Ltd.
- - - ----------------------------------------------------------------------------------------------------------------
French Francs 185,895 Somycel S.A. Various French development term loans agencies
- - - ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 81
SCHEDULE 3.09
SUBSIDIARIES AND PARTNERSHIPS
(SUBSIDIARIES WHICH, WITH RESPECT TO FISCAL 1995, ACCOUNTED FOR MORE THAN
$4.0 MILLION OF CONSOLIDATED ASSETS OR MORE THAN $3.8 MILLION OF
CONSOLIDATED REVENUES)
<TABLE>
<CAPTION>
DIRECT SUBSIDIARIES OF SYLVAN INC.
- - - ---------------------------------------------------------------------------------------------------------------------------
NO. OF SHARES ISSUED PERCENTAGE OF OWNERSHIP
SUBSIDIARY AUTHORIZED CAPITALIZATION & OUTSTANDING BY PARENT
- - - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sylvan Foods, Inc. 1,000 shares @ $1 1,000 100%
- - - ---------------------------------------------------------------------------------------------------------------------------
Sylvan Foods (France) S.A. 2,500 shares @ FF100 2,500 100%
- - - ---------------------------------------------------------------------------------------------------------------------------
Sylvan Foods (Netherlands) B.V. 2,000 shares @ Dfl 100 400 100%
- - - ---------------------------------------------------------------------------------------------------------------------------
Sylvan America, Inc. 25,000 shares @ $1 1,000 100%
- - - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DIRECT SUBSIDIARIES OF SYLVAN FOODS, INC.
- - - ---------------------------------------------------------------------------------------------------------------------------
NO. OF SHARES ISSUED
SUBSIDIARY AUTHORIZED CAPITALIZATION & OUTSTANDING PERCENTAGE OF OWNERSHIP
- - - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Quincy Corporation 30,000 Pfd. shares @ $100 -0-
10,000 Com. shares @ $1 400 100%
- - - ---------------------------------------------------------------------------------------------------------------------------
Sylvan America Inc. 2,000 shares @ $1 2,000 100%
- - - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DIRECT SUBSIDIARIES OF SYLVAN FOODS, (FRANCE) S.A.
- - - ---------------------------------------------------------------------------------------------------------------------------
NO. OF SHARES ISSUED
SUBSIDIARY AUTHORIZED CAPITALIZATION & OUTSTANDING PERCENTAGE OF OWNERSHIP
- - - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Somycel S.A. 307,568 @ FF100 307,568 100%
- - - ---------------------------------------------------------------------------------------------------------------------------
Darlington Mushroom Labs. Ltd. 40,000 @ L1 40,000 20%
- - - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 82
Schedule 3.09
Page 2
<TABLE>
<CAPTION>
DIRECT SUBSIDIARIES OF SYLVAN FOODS (NETHERLANDS) B.V.
- - - ---------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY
- - - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sylvan Horst B.V. 1,500 A shares @ Dfl 1 300 A 100%
500 B shares @ Dfl 1 100 B 50%
- - - ---------------------------------------------------------------------------------------------------------------------------
White Queen Ltd. 168,000 A shares @ L1 108,000 A 0%
132,000 B shares @ L1 132,000 B 100%
- - - ---------------------------------------------------------------------------------------------------------------------------
E. Hauser (England) Ltd. 1,000 voting @ L1 1,000 voting 100%
4,000 nonvoting @ L1 4,000 nonvoting 100%
- - - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DIRECT SUBSIDIARIES OF SOMYCEL S.A.
- - - ---------------------------------------------------------------------------------------------------------------------------
NO. OF SHARES ISSUED
SUBSIDIARY AUTHORIZED CAPITALIZATION & OUTSTANDING PERCENTAGE OF OWNERSHIP
- - - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Darlington Mushroom Laboratories Ltd. 40,000 @ L1 40,000 80%
- - - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 83
SCHEDULE 6.04
GUARANTEED CONTINGENT LIABILITIES
- - - --------------------------------------------------------------------------------
Guaranty by Sylvan Foods Holdings, Inc. (now Sylvan Inc.) and Sylvan Foods Inc.
to guarantee such sums as are in default under Moonlight Mushrooms, Inc. (now
Worthington Holdings, Inc.) self-insured worker's compensation program. The
guaranty is dated 11/30/89 and remains in force until terminated [attached as
Exhibit 6.04-(A)].
- - - --------------------------------------------------------------------------------
Guaranty by Sylvan Foods Holdings, Inc. (now Sylvan Inc.) and Sylvan Foods Inc.
to guarantee such sums as are in default under Sylvan Spawn Laboratories Inc.
self-insured worker's compensation program. The guaranty is dated 11/30/89 and
remains in force until terminated [attached as Exhibit 6.04-(B)].
- - - --------------------------------------------------------------------------------
SCHEDULE 6.05
LOANS AND INVESTMENTS
- - - --------------------------------------------------------------------------------
AMOUNT BORROWER LENDER
- - - --------------------------------------------------------------------------------
$375,000 Mushroom Producers' Cooperative Inc. Sylvan Spawn Laboratory Inc.
[Attached as Exhibit 6.05]
- - - --------------------------------------------------------------------------------
<PAGE> 84
SCHEDULE 6.16
LIMITATIONS ON RESTRICTIONS ON STOCK PAYMENTS, LOANS AND INVESTMENTS
SYLVAN HOLDINGS PTY. LIMITED: Sylvan Foods (Netherlands) B.V. owns 49%
of the shares of Sylvan Holdings Pty. Limited, which in turn holds 100% of the
shares of Sylvan Australia Pty. Limited. Sylvan's Board members have the right
to cast a tie-breaking vote in the event of a deadlock of the Board of
Directors. The Board has the right to approve share transfers, as well as to
declare dividends. Sylvan's exercise of a tie-breaking vote initiates a buyout
valuation process, whereby Sylvan buys the remaining 51% after the conclusion
of a valuation.
SYLVAN HORST B.V.: Sylvan Horst B.V. [75% owned subsidiary of Sylvan
Foods (Netherlands) B.V.] is party to a loan agreement with ABN-AMRO Bank B.V.
The agreement requires the shareholders to maintain a minimum of capital and
subordinated loan base of 30% of the balance sheet total prior to the payment
of any dividends, or the repayment of any subordinated loans.
Certain U.S. Subsidiaries are subject to restrictions imposed by their
respective jurisdictions of incorporation on the making of Stock Payments or
loans or investments in the Company if the Subsidiary's capital would thereby
be impaired. Further, French law restricts a French company from making
financial commitments in favor of another company in the same affiliated group
unless (1) the two companies belong to a structured group the members of which
share a common economic purpose (as opposed to a conglomerate situation),
(2) the transaction has been entered into in furtherance of economic, corporate
or financial interests within the framework of a common policy defined for the
group as a whole and (3) the financial commitment must not be entered into
without consideration, or disrupt the balance between the respective
commitments of each company involved, nor must it exceed the financial
capacities of the company that bears the burden of such commitment. The Company
is not aware of similar restrictions imposed by other countries; however, the
Company believes that if any such restrictions exist, they would not materially
and adversely affect the ability of the Borrower Parties duly to perform all of
their obligations under the Agreement, the Notes and the Security Documents.
<PAGE> 85
SCHEDULE 9.13
EXISTING SECURED HEDGE AGREEMENTS
- - - --------------------------------------------------------------------------------
SWAP IDENTIFICATION #2 #3
- - - --------------------------------------------------------------------------------
COUNTERPARTY Mellon Bank, Pittsburgh ABN-AMRO, Chicago
- - - --------------------------------------------------------------------------------
AMOUNT $5,000,000 $5,000,000
- - - --------------------------------------------------------------------------------
PAY FIXED INTEREST RATE 7.58% 7.63%
- - - --------------------------------------------------------------------------------
MATURITY DATE 11/30/96 11/28/97
- - - --------------------------------------------------------------------------------
AGREEMENT DATE 11/28/94 11/25/94
- - - --------------------------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000861291
<NAME> SYLVAN INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,199
<SECURITIES> 0
<RECEIVABLES> 9,592
<ALLOWANCES> 944
<INVENTORY> 7,519
<CURRENT-ASSETS> 23,853
<PP&E> 62,609
<DEPRECIATION> 18,774
<TOTAL-ASSETS> 83,326
<CURRENT-LIABILITIES> 8,956
<BONDS> 0
0
0
<COMMON> 6
<OTHER-SE> 36,436
<TOTAL-LIABILITY-AND-EQUITY> 83,326
<SALES> 38,867
<TOTAL-REVENUES> 38,867
<CGS> 21,874
<TOTAL-COSTS> 11,337
<OTHER-EXPENSES> (129)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,158
<INCOME-PRETAX> 4,627
<INCOME-TAX> 1,222
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,405
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.53
</TABLE>
