<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 0-18815
OUTLOOK GROUP CORP.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1278569
- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1180 American Drive
Neenah, Wisconsin 54956
------------------------------------------------------------
(Address of principal executive offices, including zip code)
(414) 722-2333
------------------------------------------------------------
(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 twelve 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.
4,649,382 shares of common stock, $.01 par value, were
outstanding at December 31, 1996.
<PAGE> 2
OUTLOOK GROUP CORP. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
- -------------------------------
Item 1. Financial Statements 1
Condensed Consolidated Balance Sheets 2
As of November 29, 1996 and May 31, 1996 (Unaudited)
Condensed Consolidated Statements of Operations 3
For the three months and six months ended November 29, 1996
and November 30, 1995 (Unaudited)
Condensed Consolidated Statements of Cash Flows 4
For the six months ended November 29, 1996 and
November 30, 1995 (Unaudited)
Notes to Condensed Consolidated Financial Statements 5
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
PART II. OTHER INFORMATION
- ---------------------------
Item 2. Change In Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The condensed consolidated financial statements included herein have been
included by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. This information is unaudited
but includes all adjustments (consisting only of normal recurring accruals)
which, in the opinion of Company management, are necessary for a fair
presentation of the Company's financial position and results of operations for
such periods.
The results of operations for interim periods are not necessarily indicative of
the results of operations for the entire year. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's 1996 Annual Report.
- 1 -
<PAGE> 4
OUTLOOK GROUP CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS Of November 29, 1996 AND MAY 31,1996
(UNAUDITED)
----------------------------------------
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
NOVEMBER 29, MAY 31,
ASSETS 1996 1996
- ------ ------------ -------
<S> <C> <C>
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . $ -- $ 298
Accounts receivable, less allowance
of $842 and $896 respectively . . . . . . . . . 15,667 14,785
Inventories . . . . . . . . . . . . . . . . . . . 13,192 12,127
Deferred income taxes . . . . . . . . . . . . . . 1,181 1,181
Prepaid expenses and other . . . . . . . . . . . . 2,050 1,935
Income taxes refundable . . . . . . . . . . . . . 835 1,964
--------- ---------
Total current assets . . . . . . . . . . . . 32,925 32,290
PROPERTY, PLANT AND EQUIPMENT:
Land . . . . . . . . . . . . . . . . . . . . . . 1,051 1,051
Buildings . . . . . . . . . . . . . . . . . . . . 15,212 15,196
Machinery and equipment . . . . . . . . . . . . . 48,202 46,191
Machinery and equipment deposits . . . . . . . . . 343 227
--------- ---------
64,808 62,665
Less accumulated depreciation . . . . . . . . . 21,735 19,882
--------- ----------
43,073 42,783
--------- ----------
OTHER . . . . . . . . . . . . . . . . . . . . . . . . 3,068 2,780
--------- ---------
Total assets . . . . . . . . . . . . . . . $ 79,066 $ 77,853
----------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt . . . . . . . . $ 1,646 $ 1,532
Accounts payable . . . . . . . . . . . . . . . . . 6,198 4,147
Accrued liabilities:
Salaries and wages . . . . . . . . . . . . . . . 1,757 1,737
Other . . . . . . . . . . . . . . . . . . . . . 1,937 1,174
--------- ---------
Total current liabilities . . . . . . . . . . . 11,538 8,590
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . 30,521 30,859
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . 3,463 3,463
SHAREHOLDERS' EQUITY:
Cumulative Preferred Stock, $.01 par value,
1,000,000 shares authorized, none issued -- --
Common Stock, $.01 par value,
15,000,000 shares authorized,
5,099,382 shares issued . . . . . . . . . . . . 51 51
Additional paid-in capital . . . . . . . . . . . . 18,415 18,415
Retained earnings . . . . . . . . . . . . . . . . 19,527 20,924
---------- ----------
37,993 39,390
Less 450,000 of treasury stock, at cost . . . . . 4,449 4,449
---------- ----------
Total shareholders' equity . . . . . . . . . . . 33,544 34,941
---------- ----------
Total liabilities and shareholders' equity . $ 79,066 $ 77,853
========== ==========
</TABLE>
- 2 -
(see accompanying notes)
<PAGE> 5
OUTLOOK GROUP CORP. AND SUBSIDIARIES
-------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
-----------------------------------------------
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Three-Month Period Ended Six-Month Period Ended
Nov. 29, Nov. 30, Nov. 29, Nov. 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . $ 17,684 $ 20,296 $ 37,543 $ 40,644
Cost of sales . . . . . . 15,381 18,492 32,397 36,525
----------- ----------- ----------- -----------
Gross profit 2,303 1,804 5,146 4,119
Selling, general and
administrative
expenses . . . . . . . . 2,356 2,617 4,731 5,267
----------- ----------- ----------- -----------
Operating profit(loss) (53) (813) 415 (1,148)
Other income (expense):
Interest expense . . . . (735) (675) (1,448) (1,302)
Interest and other
income . . . . . . . . 223 413 376 1,181
----------- ----------- ----------- -----------
Total other income
(expense) (512) (262) (1,072) (121)
----------- ----------- ----------- -----------
Loss from continuing
operations before income
taxes . . . . . . . . . . (565) (1,075) (657) (1,269)
Provision for income
taxes (benefits). . . . . (172) (417) (185) (489)
----------- ----------- ----------- -----------
Loss from continuing
operations . . . . . . . (393) (658) (472) (780)
Discontinued Operations:
Earnings (loss) from
discontinued operations
before income taxes . . . (857) 556 (1,402) 563
Provision for income
taxes (benefits) . . . . (291) 217 (477) 219
----------- ----------- ----------- -----------
Earnings (loss) from
discontinued operations . (566) 339 (925) 344
----------- ----------- ----------- -----------
Net earnings(loss). . . . $ (959) $ (319) $ (1,397) $ (436)
=========== =========== =========== ===========
Net earnings (loss)
per share
- continuing . . . . . . $ (.08) $ (.14) $ (.10) $ (.17)
- discontinued . . . . . (.13) .07 (.20) .08
----------- ----------- ----------- -----------
- Total . . . . . . . . $ (.21) $ (.07) $ (.30) $ (.09)
=========== =========== =========== ===========
Weighted average
number of shares
outstanding . . . . . . 4,649,382 4,649,382 4,649,382 4,674,382
=========== =========== =========== ===========
</TABLE>
- 3 -
(see accompanying notes)
<PAGE> 6
OUTLOOK GROUP CORP. AND SUBSIDIARIES
------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
-----------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
Six-Month Period Ended
November 29, November 30,
1996 1995
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . $ (1,397) $ (435)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization . . . . . . . . . . 2,886 2,714
Gain on sale of operating unit. . . . . . . . . . --- (334)
Change in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . (882) (4,612)
Inventories . . . . . . . . . . . . . . . . . . (1,065) (1,763)
Prepaid expenses
and other current assets . . . . . . . . . . (115) (962)
Accounts payable . . . . . . . . . . . . . . . 2,051 1,174
Accrued liabilities . . . . . . . . . . . . . . 783 74
Income taxes . . . . . . . . . . . . . . . . . 1,129 231
---------- -----------
Net cash used in operating activities . . . . . . 3,390 (3,913)
Cash flows from investing activities:
Proceeds from sale of fixed assets . . . . . . . . 665 468
Proceeds from sale of operating unit. . . . . . . . --- 401
Acquisition of property, plant and equipment . . . (3,735) (3,095)
(Increase) decrease in equipment acquisition
trust fund . . . . . . . . . . . . . . . . . . --- 401
Other . . . . . . . . . . . . . . . . . . . . . . . (394) 57
---------- -----------
Net cash used in investing activities . . . . . . (3,464) (2,169)
Cash flows from financing activities:
Net Increase(decrease) in revolving credit
arrangement borrowings . . . . . . . . . . . . . (920) 8,200
Net Proceeds from long-term borrowing . . . . . . . 4,870 ---
Net Payments on long-term borrowings . . . . . . . (4,174) (984)
Acquisition of treasury stock . . . . . . . . . . . --- (887)
---------- -----------
Net cash provided by financing activities . . . . (224) 6,429
---------- -----------
Net increase (decrease) in cash . . . . . . . . . . (298) 347
Cash at beginning of period . . . . . . . . . . . . 298 82
---------- -----------
Cash at end of period . . . . . . . . . . . . . . . $ --- $ 429
---------- -----------
</TABLE>
- 4 -
(see accompanying notes)
<PAGE> 7
OUTLOOK GROUP CORP. AND SUBSIDIARIES
------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOVEMBER 29, 1996
-----------------
1. Net Earnings (Loss) Per Common Share:
------------------------------------
Net earnings (loss) per common share is computed using the weighted
average number of common shares outstanding, as shown in the
Statements of Operations.
2. Inventories:
-----------
Inventories consist of the following:
<TABLE>
<CAPTION>
November 29, 1996 May 31, 1996
----------------- ------------
<S> <C> <C>
Raw materials $ 8,053 $ 7,543
Work in process 1,458 1,658
Finished goods 3,681 2,926
---------- ----------
$ 13,192 $ 12,127
---------- ----------
</TABLE>
3. Income Taxes:
------------
The effective income tax rate used to calculate the income tax benefit
for the three-month periods ended November 29, 1996 and November 30,
1995, is based on the anticipated income tax rate for the entire
fiscal year.
4. Debt:
----
The Company entered into new financing arrangements during the quarter
(see Part II for details).
As of November 29, 1996 the Company had drawn $11.6 million of the
$14.3 million available for working capital under terms of the
revolving credit agreement.
5. Accounting Periods:
------------------
The Company has elected to adopt 13 week quarters beginning in fiscal
1997; however, it is anticipated that the fiscal year-end will remain
May 31.
- 5 -
<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results Of Operations
Results of Operations
---------------------
Results of operations have been restated to reflect the reclassification of
Outlook Foods, Inc. ("Foods"), a wholly owned subsidiary in Oconomowoc,
Wisconsin, as a discontinued segment. Foods was previously reported and
referred to as the food processing segment of Outlook Group. The
reclassification stems from a previously announced September 1996 Board of
Directors decision to divest Foods.
The Board of Directors has also decided to divest Barrier Films Corporation
("Barrier"), a Reno, Nevada based wholly owned subsidiary of Outlook Group
Corp. However, due to various factors, Barrier does not meet the criteria to
be reported as a discontinued operation. Therefore, Barrier remains reported
as part of continuing operations. The other three entities comprising
continuing operations are Outlook Group Corp., the parent company, d/b/a
Outlook Graphics ("Graphics"), Outlook Label Systems, Inc. ("Label"), and
Outlook Packaging, Inc. ("Packaging"). All three are Wisconsin based. Label
and Packaging are also wholly owned subsidiaries of Outlook Group.
CONTINUING OPERATIONS
- ---------------------
In the second quarter of fiscal 1997, net sales were $17.7 million as compared
to $20.3 million for the same period in the prior year. For the first six
months of fiscal 1997, sales of $37.5 million were down from sales of $40.6
million through six months of fiscal 1996. Comparative net sales by principal
lines of business are shown below:
<TABLE>
<CAPTION>
NET SALES IN MILLIONS
---------------------
FISCAL SECOND QUARTER FISCAL YEAR TO DATE
--------------------- -------------------
1997 1996 % CHANGE 1997 1996 % CHANGE
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
GRAPHIC SERVICES
- ----------------
SPECIALTY PRINTING 12.8 15.1 (15.2)% 26.3 30.5 (13.8)%
CONVERTING & PKG. 1.3 2.2 (40.9)% 3.2 5.0 (36.0)%
OTHER 3.6 3.0 20.0% 8.0 5.1 56.9%
----- ----- ------- ----- ----- -------
TOTAL $17.7 $20.3 (12.8)% $37.5 $40.6 (7.6)%
</TABLE>
Both the second quarter and year-to-date sales declines reflect the Company's
reduction of trading card business at its Graphics division. Trading card
business now reflects less than 5% of total company sales as compared to 11% in
fiscal 1996, 27% in fiscal 1995 and a high of 58% in fiscal 1992. The
reduction results from continuing weakness in the trading card markets
generally, changes in the Company's relationship with Fleer Corp., the
Company's strategy to reduce dependence on trading card business and other
factors. Barrier sales were also negatively affected by the Company's
divestiture announcement. Sales growth is occurring in folding cartons,
commercial printing, direct mail, fulfillment, distribution and flexible
packaging under the new strategic direction.
Gross profits improved in the quarter and year-to-date as improved controls and
efficiencies in all operations more than offset the impact of reduced sales.
Selling, general and administrative expenses were reduced by 10% for the
quarter and year-to-date reflecting continued efforts to reduce overhead while
improving operational efficiencies.
As a result of the above, improvements of $0.8 million and $1.5 million were
achieved at the operating profit (loss) line for the quarter and year-to-date
respectively.
Interest expense increased in the quarter and year-to-date as borrowings
increased and rates were negatively impacted by increased interest rates
resulting from covenant defaults prior to the November 1996 refinancing.
Interest and other income was below prior year results which included
significant gains on sales of equipment and the publishing division in fiscal
1996.
Income tax expense (benefit) is being accrued at 39% at profitable operations
and 34% at loss operations, yielding effective tax rates of 30.5% for the
second quarter and 28.1% on a year-to-date basis.
- 6 -
<PAGE> 9
The resulting loss from continuing operations of $393,000 for the quarter
equals $0.08 per share, an improvement of $0.06 per share from the second
quarter 1996 loss of $0.14. The year-to-date net loss of $472,000 or $0.10 per
share is also an improvement of $0.07 per share from prior year-to-date losses
which totalled $0.17.
Continuing operations, excluding Barrier which is to be divested, operated
nearly at a breakeven level in the second quarter of fiscal 1997.
DISCONTINUING OPERATIONS
Foods operated at a loss for the quarter as sales were below prior year levels,
primarily because of the previously disclosed termination of the Nestle gravies
and sauces contract as well as the effects of the Company's announcement of its
plans to divest foods. In addition, the Company established a reserve for
future operating losses through the expected divestiture date. No other
reserve was established as management currently expects no loss on the
divestiture transaction.
In total, the pre-tax loss for the quarter was $857,000. This compares
unfavorably with a pre-tax profit of $556,000 in the second quarter of fiscal
1996 when sales volumes were twice the level of this quarter. Year-to-date
pre-tax losses in fiscal 1997 now total $1.4 million versus a $0.6 million
pre-tax profit for prior year-to-date.
Net of provisions for tax expense (benefits) the fiscal 1997 loss for
discontinued operations was $566,000 or $0.13 per share for the quarter versus
a profit of $339,000 or $0.07 per share in prior year. Fiscal 1997
year-to-date figures are a net loss of $0.20 per share versus prior
year-to-date net income of $344,000 or $0.08 per share.
CONSOLIDATED
The consolidated total of the above yielded a net loss of $959,000 or $0.21 per
share for the second quarter of fiscal 1997 versus a loss of $319,000 or $0.07
for prior year period.
The year-to-date net loss for 1997 totalled $1,397,000 or $0.30 per share as
compared to a net loss of $436,000 or $0.09 per share for prior year-to-date.
Liquidity and Capital Resources
As shown in the Condensed Consolidated Statements of Cash Flow, cash decreased
from $298,000 to zero in the first six months of fiscal 1997.
Operating activities provided $3,390,000 during the first six months. Cash
increased due to depreciation and amortization, increases in accounts payable
and accrued liabilities, plus proceeds of an income tax refund related to
fiscal 1996. Operating activities utilizing cash were the net loss for the
period plus increases in accounts receivable and inventory, both of which have
been reduced subsequent to the end of the quarter.
Investing activities for the year-to-date utilized $3,464,000 of cash. Capital
expenditures of $3.7 million included $2.3 million for purchases of existing
equipment which was previously leased under operating leases.
Financing activities utilized a net total of $224,000 during the first six
months. A new long term debt note of $4,870,000 replaced other long term debt
of $4,174,000 in the first six months. Meanwhile, the balance under the
Company's revolving credit agreements declined by $920,000.
In November, 1996 the Company completed a refinancing package which is
discussed in greater detail in Part II of this report. Management believes
this new borrowing arrangement provides Outlook with the capacity and
flexibility to grow in the future. As a result of recent financial performance
(particularly relating to Foods and Barrier, which the Company believes is due
in significant part to its announced divestiture plans), the Company is in
violation of certain covenants (tangible net worth and fixed charge coverage)
in its new credit facilities. The Company has provided supporting information
to its lenders and is currently working with them to address the violations.
The Company has not received formal notices of default from its lenders, and
the Company believes that it will be able to obtain appropriate waivers.
Reaching appropriate arrangements with the lenders to address the covenant
violations, and continuation of the Company's financing arrangements, will be
important to the Company to maintain its liquidity and capital resources on an
ongoing basis.
While the agreements contain capital expenditure limitations, management has
negotiated additional operating lease capacity which it believes will cover any
necessary capital expenditures over the limitations cited above.
- 7 -
<PAGE> 10
[11/29/96]
* * *
Additional Cautionary Statements
The statements included in this Management's Discussion and Analysis
which are not statements of historical fact (including statements using terms
such as "believe," "expect" and "anticipate" and similar terms) may be
forward-looking statements subject to risks and uncertainties that could cause
actual results to differ materially from those set forth in the forward-looking
statements. In addition to the matters discussed in the preceding part of
Management's Discussion and Analysis, the following factors could cause or
contribute to differences from the future results or expectations which are
discussed, or from the Company's historical results:
The Company has recently announced that it intends to divest itself of
the food processing operations of its subsidiary, Outlook Foods, Inc. ("Foods")
and its subsidiary's Barrier Films Corporation ("Barrier") film extrusion
operations. The Company has not yet entered into any arrangements with respect
to those dispositions, and there can be no assurances that such dispositions
can be made upon terms acceptable to the Company. Also, the announcement may
affect the relationships with Foods and Barrier's customers and suppliers
pending the proposed divestitures.
The Company recently entered into new term credit financing
arrangements with a new lender and amended its term financing arrangements with
a prior lender. As a result of recent financial performance (particularly
relating to Foods and Barrier, which the Company believes is due in significant
part to its announced divestiture plans), the Company is in violation of
certain covenants (tangible net worth and fixed charge coverage) in its new
credit facilities. The Company has provided supporting information to its
lenders and is currently working with them to address the violations. The
Company has not received formal notices of default from its lenders, and the
Company believes that it will be able to obtain appropriate waivers. Reaching
appropriate arrangements with the lenders to address the covenant violations,
and continuation of the Company's financing arrangements, will be important to
the Company to maintain its liquidity and capital resources on an ongoing
basis.
A significant portion of the Company's sales historically related to
sports picture cards. Due to the project-oriented nature of the Company's
business, the maturity of the collectible picture card industry, increased
competition, and changes in customer relationships, however, these services
declined in fiscal 1994, and further significantly declined in fiscal 1996
(after having leveled in fiscal 1995). During fiscal 1996, approximately 11%
of the Company's net sales related to collectible picture cards, as compared to
27%, 27% and 51% in
-8-
<PAGE> 11
fiscal 1995, 1994 and 1993, respectively. Collectible picture card services
contributed significantly to the Company's earnings in fiscal 1993 and prior
years, and the reduction in these services was a factor in reduced earnings in
fiscal 1994 and 1995, and losses in fiscal 1996 and to date in fiscal 1997.
The Company expects its business related to the collectible cards to be further
reduced in fiscal 1997 and future years as a result of the above and other
factors.
During fiscal 1996, the Company's services were sold to over 1,000
customers, although five customers accounted for approximately 51% of the
Company's net sales (as compared to the five largest customers accounting for
approximately 54% of fiscal 1995 net sales and 59% of fiscal 1994 net sales).
Due to the project-oriented nature of the Company's business, sales to
particular customers may vary significantly from year to year depending upon
the number and size of their projects, and the identity of those customers may
change.
During fiscal 1996, sales (primarily in the food processing segment)
to Nestle Beverage Company and affiliates ("Nestle") accounted for 26% of the
Company's total net sales for the period. Sales to Nestle were 22%, 33% and
13% of the Company's total net sales in fiscal 1995, 1994 and 1993. During
fiscal 1996, sales (all in the graphic services segment) to Fleer accounted for
approximately 7% of the Company's total net sales for the period; sales to
Fleer were 15%, 15% and 25% of the Company's total net sales in fiscal 1995,
1994 and 1993, respectively. As a result of its announced intention to divest
its food processing operations, the termination of one contact with Nestle, and
the decline in the collectible card services, the Company expects fiscal 1997
sales to Nestle and Fleer to be reduced from fiscal 1996.
In connection with the Company's December 1992 acquisition of certain
Nestle assets, Foods and Nestle entered into operational agreements including a
five-year agreement under which Foods packages malted milk products for Nestle
and an agreement (which expired in December 1995) by which Foods packaged
certain sauces and gravies for Nestle. The Company's contract to blend sauces
and gravies for Nestle expired at the end of calendar 1995, and was not renewed
because of Nestle's desire to bring the work in-house (beginning in July 1996)
to utilize its excess capacity. That contract represented approximately 61%
and 65% of the Company's sales to Nestle in fiscal 1996 and 1995, respectively.
While Nestle has indicated to the Company that at least some of such work may
be replaced with additional Nestle non-contract projects, there can be no
assurances and the Company already has experienced a significant reduction in
sales to Nestle in fiscal 1997. Also, the Company's announced intention to
divest itself of Foods is likely to affect
-9-
<PAGE> 12
its relationship with Nestle because almost all Company sales to Nestle are
currently made through Foods.
During fiscal 1996, as a result of a change by Fleer in its strategies
for use of outside vendors, Fleer selected a company other than the Company as
its preferred outside vendor. The decision reduced the Company's sales to
Fleer in fiscal 1996, and that reduction is expected to continue to affect
future operations even though the Company has continued to produce projects for
Fleer on a very limited basis.
The Company expects that it will continue to experience significant
sales concentration (and therefore risk of volatility) given the relatively
large size of projects undertaken for certain customers. Furthermore, the
Company's largest customers may vary from year to year depending on the number
and size of the projects completed for such customers. The loss of all or part
of business of one or more principal customers or a change in the number or
character of projects for particular customers could have a material adverse
effect on the Company's sales volume and profitability.
Other than the Nestle agreements described above, customers generally
purchase the Company's services under cancelable purchase orders rather than
long-term contracts, although exceptions sometimes occur when the Company is
required to purchase substantial inventories or special machinery to meet
orders. The Company believes that operating without long-term contracts is
consistent with industry practices, although it increases the Company's
vulnerability to losses of business and significant period to period changes.
The Company has introduced several new proprietary products. In its
food processing segment, during fiscal 1996, the Company has introduced food
products such as Fresh Aroma bread mix and Outlook Hot Cocoa mix. Also,
Barrier has begun production of extruded packaging films. The introduction of
new products such as these is subject to various risks, including the risk of
market acceptance, production difficulties and delays, pricing pressure, cost
overruns, unforeseen or under estimated competition and other similar factors.
These and other factors can affect the ultimate success and profitability of
such products. The Company's announced intention to divest itself of Foods and
Barrier also may affect relationships with customers and suppliers, and sales
of these entities' products.
The Company uses complex and specialized equipment in the provision of
its services, and the manufacture of its products. Therefore, the Company is
dependent upon the functioning of such machinery, and its ability to acquire
and maintain appropriate equipment. Among other factors, the Company may be
affected by equipment malfunctions, training and operational needs relating
-10-
<PAGE> 13
to the equipment which may delay utilization, maintenance requirements, and
technological or mechanical obsolescence. The Company has had start up
difficulties in certain lines of equipment, and such difficulties may affect
future operations. Because of the substantial capital requirements for graphic
services equipment, larger companies with greater capital resources may have an
advantage in financing state-of-the-art equipment.
The market for the services provided by the Company is highly
competitive, primarily on the basis of price, quality, production capability,
capacity for prompt delivery and continuing relationships. The Company's
principal competitors, and the scope of the areas in which the Company
competes, vary based upon the services offered. With respect to specialty
printing services, its competitors are numerous and range in size from very
large multi-national companies with substantially greater resources than the
Company to many smaller local companies. Numerous competitors also exist for
other services. While there are fewer competitors offering converting and
packaging services, competition is very strong, particularly relating to the
contracting market for collectible picture cards. Numerous competitors also
perform services in the food processing segment.
The Company and the industries in which it operates are subject to
environmental laws and regulations concerning emissions into the air,
discharges into waterways and the generation, handling and disposal of waste
materials. These laws and regulations are constantly evolving, and it is
impossible to predict accurately the effect they may have upon the capital
expenditures, earnings and competitive position of the Company in the future.
As with other companies, the Company has significant accounts
receivable from its customers. From time to time, certain of these accounts
receivable have become unusually large and/or overdue, and on occasion the
Company has taken significant write-offs relating to accounts receivable. The
failure of the Company's customers to pay in full the Company's accounts
receivable would affect future profitability.
The Company is highly dependent on the services of its Chairman, David
Erdmann, and its President, Joseph Baksha. Although the Company has employment
agreements with Mr. Erdmann and Mr. Baksha, the loss of their services could
have a material adverse effect on the Company's business and operations. The
Company's success also depends upon its ability to attract and retain other
qualified management and technical personnel.
-11-
<PAGE> 14
PART II
(Outlook Group Corp. 11/29/96 10-Q)
ITEM 2. CHANGES IN SECURITIES.
On November 5, 1996, Outlook Group Corp. (the "Company") entered into
transactions which provided revised credit facilities for the Company and its
subsidiaries. These facilities, aggregating $40.6 million and further
described below, replaced the Company's prior $15.0 million revolving credit
facility, replaced the Company's prior $6.3 million letter of credit facilities
supporting existing industrial revenue bond obligations, replaced a prior $1.5
million equipment finance lease and amended the Company's prior $15.3 million
term loan facility. These transactions also resulted in revised financial
covenants.
Term Loan.
The Company's term note in the amount of $10,770,400 is issued under
an Amended and Restated Note Purchase Agreement (the "Term Agreement") between
the Company and the State of Wisconsin Investment Board. The Company's
subsidiaries also entered into agreements whereby they will have access to
certain of the Company's proceeds from the term lending, and by which they
guaranteed the debt created under the Term Agreement. The indebtedness under
the Term Agreement is secured by mortgages on all of the real property owned by
the Company and its subsidiaries and on certain equipment owned by the Company
and its subsidiaries. The Term Agreement requires quarterly principal payments
from March 16, 1997 through June 16, 2004 in accordance with a principal
payment schedule provided in the Term Agreement. The first $2,533,335 of
principal indebtedness under the Term Agreement bears interest at 9.15% per
annum. The remaining $8,237,065 of principal indebtedness under the Term
Agreement bears interest at 8.25% per annum.
Revolving Credit and Term Loans.
In addition, the Company and its subsidiaries entered into a Loan and
Security Agreement with BankAmerica Business Credit, Inc. (the "Revolving
Agreement"). Under the Revolving Agreement, the lender provides a revolving
commitment to loan up to $25 million (including irrevocable standby letters of
credit in the aggregate amount of $5,600,000 to support outstanding industrial
revenue bond obligations of two of the Company's subsidiaries) to the Company
and its subsidiaries from time to time, as well as term loans to the Company
and three of its subsidiaries in the aggregate amount of $4,870,000. The
indebtedness under the Revolving Agreement is secured by substantially all of
the personal assets of the Company and its subsidiaries. The Revolving
Agreement runs through November 5, 1999, unless earlier terminated. The unpaid
balances
12
<PAGE> 15
of the revolving commitment bear interest, at the Company's option, at either
(i) an annual variable rate based on the prime rate announced from time to time
by the lender plus a margin ranging from 0.25% to 1.25% depending upon the
ratio of senior debt to EBITDA of the Company and its subsidiaries, or (ii) an
annual rate fixed for interest periods of one, two or three months based on
LIBOR plus a margin ranging from 2.25% to 3.25% depending upon the ratio of
senior debt to EBITDA of the Company and its subsidiaries. The unpaid balances
of the term loans bear interest, at the Company's option, at either (i) an
annual variable rate based on the prime rate announced from time to time by the
lender plus a margin ranging from 0.75% to 1.75% depending upon the ratio of
senior debt to EBITDA of the Company and its subsidiaries, or (ii) an annual
rate fixed for interest periods of one, two or three months based on LIBOR plus
a margin ranging from 2.75% to 3.75% depending upon the ratio of senior debt to
EBITDA of the Company and its subsidiaries.
Financial Covenants.
Certain provisions of the Term Agreement and the Revolving Agreement
may be determined to affect the rights of holders of the Company's outstanding
securities. The following summary of certain of such provisions is qualified
in its entirety by references to the texts of the Term Agreement and the
Revolving Agreement, copies of which are filed as Exhibits to this report:
(a) Section 10.11 of the Revolving Agreement provides
that the Company and its subsidiaries will not create or incur any
indebtedness except under the Revolving Agreement, other existing
indebtedness, indebtedness under the Term Agreement and certain other
limited exceptions. Section 7.1 of the Term Agreement includes
similar covenants.
(b) Section 10.23 of the Revolving Agreement and Section
6.8(a) of the Term Agreement require the Company to maintain
consolidated adjusted tangible net worth of at least $33 million
through the fiscal quarter ended in February, 1997, and increasing
approximately $1 million to $1.25 million per fiscal quarter
thereafter.
(c) Section 10.22 of the Revolving Agreement and Section
6.8(b) of the Term Agreement require the Company to maintain a ratio
of consolidated indebtedness to consolidated adjusted tangible net
worth of not more than 1.60-to-1.0 to the last day of the fiscal
quarter ended in February, 1997, being reduced to 1.0-to-1.0 by the
last day of the fiscal quarter ended in May, 1999.
(d) Section 10.21 of the Revolving Agreement and Section
6.8(c) of the Term Agreement require the Company, on a consolidated
basis, to maintain a ratio of EBITDA to fixed
13
<PAGE> 16
charges of at least (i) 0.90-to-1.0 for the fiscal quarter ended
November 30, 1996, (ii) 1.10-to-1.0 for the two fiscal quarters ended
February 28, 1997, (iii) 1.20-to-1.0 for the three fiscal quarters
ended May 31, 1997, (iv) 1.25-to-1.0 for any period of four
consecutive fiscal quarters ended on August 31, and November 30, 1997,
and (v) 1.20-to-1.0 for any period of four consecutive fiscal quarters
ended on February 28, 1998 and each fiscal quarter thereafter.
(e) Section 10.20 of the Revolving Agreement and Section
7.13 of the Term Agreement limit the Company and its subsidiaries, on
a consolidated basis, from incurring capital expenditures in excess of
(i) $2,000,000 during the 1997 fiscal year, (ii) $3,000,000 during the
1998 fiscal year, and (iii) $4,000,000 during the 1999 fiscal year and
each fiscal year thereafter.
In addition to the foregoing, the Term Agreement and the Revolving
Agreement contain restrictions on operating lease obligations of the Company
and subsidiaries (Section 10.20 of the Revolving Agreement and Section 7.14 of
the Term Agreement), sale and leaseback transactions by the Company and
subsidiaries (Section 10.16 of the Revolving Agreement and Section 7.10 of the
Term Agreement), mergers or the sale of assets by the Company and subsidiaries
(Section 10.7 of the Revolving Agreement and Section 7.3 of the Term
Agreement), distributions by and certain changes in the capital structure of
the Company and subsidiaries (Section 10.8 of the Revolving Agreement and
Section 7.15 of the Term Agreement) and certain investments and business
acquisitions by the Company and subsidiaries (Section 10.18 of the Revolving
Agreement and 7.7 of the Term Agreement). Section 10.2 of the Revolving
Agreement and Section 6.4 of the Term Agreement also require the Company and
its subsidiaries to maintain the same general type of business now being
conducted by each of them.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a), (c) At the Company's annual meeting of shareholders on October 10,
1996, the two continuing directors who were management's
nominees for re-election for three-year terms were re-elected.
The nominees/directors were re-elected with the following
votes:
<TABLE>
<CAPTION>
Authority for
Director's Name Votes "For" Voting Withheld
--------------- ----------- ---------------
<S> <C> <C>
Harold J. Bergman 4,275,585 69,969
Richard C. Fischer 4,275,645 69,909
</TABLE>
Because there were no other matters voted upon, there were no "broker
non-votes".
14
<PAGE> 17
ITEM 7. EXHIBITS AND REPORTS ON FORM 8-K.
- ------ ----------------------------------
(a) EXHIBITS.
Incorporated by reference from the Exhibit List which is included as
the last page of this report.
(b) REPORTS ON FORM 8-K.
None filed during the quarter.
15
<PAGE> 18
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.
OUTLOOK GROUP CORP.
-------------------
(Registrant)
Dated: January 13, 1997
/s/ David L. Erdmann
-----------------------------------------
David L. Erdmann, Chief Executive Officer
/s/ Larry E. Driscoll
-----------------------------------------
Larry E. Driscoll, Vice President-Finance
and Chief Financial Officer
<PAGE> 19
OUTLOOK GROUP CORP.
EXHIBIT INDEX
To
FORM 10-Q
for the quarter ended November 29, 1996
<TABLE>
<CAPTION>
Exhibit Filed
Number Description Herewith
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
4.1 Amended and Restated Note Purchase Agreement dated November X
5, 1996 between the Company and State of Wisconsin
Investment Board*
4.2 Loan and Security Agreement dated November 5, 1996, among X
the Company, and its subsidiaries and BankAmerica Business
Credit, Inc.*
11 Computation of Per Share Earnings X
</TABLE>
__________________
* Certain schedules and exhibits omitted. Such information will be
furnished supplementally to the Commission upon request.
<PAGE> 1
AMENDED AND RESTATED NOTE PURCHASE AGREEMENT
This AMENDED AND RESTATED NOTE PURCHASE AGREEMENT is made and
entered into as of this 5th day of November, 1996, by and between OUTLOOK GROUP
CORP., formerly known as Outlook Graphics Corp., a Wisconsin corporation
(hereinafter referred to as the "Company"), and the undersigned lender, the
STATE OF WISCONSIN INVESTMENT BOARD, an independent agency of the State of
Wisconsin (hereinafter referred to as the "Board" or "Lender").
SECTION 1. BACKGROUND; AMENDMENT AND RESTATEMENT.
1.1. BACKGROUND.
(a) EXISTING NOTE PURCHASE AGREEMENT AND EXISTING NOTES.
The Company has issued two separate Promissory Notes in the aggregate principal
amount of Fifteen Million Three Hundred Fifty Thousand Dollars ($15,350,000)
(the "Existing Notes"), the first note (the "Existing Firstar Note") having
been issued to Firstar Milwaukee, N.A. (hereinafter referred to as "Firstar")
in the original principal amount of Four Million Three Hundred Fifty Thousand
Dollars ($4,350,000) and the second note (the "Existing Board Note") having
been issued to the Board in the original principal amount of Eleven Million
Dollars ($11,000,000), pursuant to that certain Note Purchase Agreement dated
June 16, 1994 by and among the Company, the Board and Firstar (as heretofore
amended, the "Note Purchase Agreement").
(b) EXISTING COLLATERAL DOCUMENTS AND EXISTING
INTERCREDITOR AGREEMENT. In connection with the execution and delivery of the
Note Purchase Agreement, the following agreements were executed and delivered:
(i) a Guaranty Agreement dated as of June 16,
1994, among Outlook Label Systems, Inc., Outlook Foods, Inc.,
formerly known as Oconomowoc Packaging, Inc. and Outlook
Packaging, Inc. (Wholly-owned Subsidiaries of the Company)
and a Guaranty Agreement dated as of August 1, 1995, from
Barrier Films Corporation (also a Wholly-owned Subsidiary of
the Company) (the "EXISTING GUARANTY AGREEMENTS") as an
inducement for Firstar and the Board to purchase the Existing
Notes and loan the proceeds thereof to the Company;
(ii) an Assignment of Life Insurance Policy as
Collateral dated August 31, 1994 (the "EXISTING ASSIGNMENT"),
pursuant to which the Company assigned to the Board its
interest as policy owner and beneficiary of the life insurance
policy upon the life of David L. Erdmann;
(iii) certain mortgages and security agreements
described on Schedule 1.1(b) hereto dated as of June 16, 1994
or, in the case of the Barrier Films Corporation agreement,
August 1, 1995 (collectively, the "EXISTING MORTGAGES") on all
interests in real property and certain interests in personal
property of the Company and its Subsidiaries in favor of
Firstar and the Board;
(iv) Back-up Subsidiary Promissory Notes from each
of the Subsidiaries, except Barrier, to the Company dated as
of June 16, 1994 (the "EXISTING SUBSIDIARY NOTES"), which were
assigned by the Company to Firstar and the Board pursuant to
Assignments and Powers of Attorney dated as of June 16, 1994
(the "EXISTING ASSIGNMENTS AND POWERS OF ATTORNEY"); and
<PAGE> 2
(v) an Intercreditor and Collateral Agency
Agreement dated as of June 16, 1994 (as heretofore amended,
the "EXISTING INTERCREDITOR AGREEMENT"), among M&I Bank Fox
Valley (formerly known as Valley Bank), Firstar, the Board and
Firstar Leasing Services Corporation.
The Agreements described in the foregoing clauses (i) through (vi),
inclusive, are herein collectively referred to as the "EXISTING COLLATERAL
DOCUMENTS."
1.2. AGREEMENT AND CONSENT OF COMPANY TO AMENDMENTS AND
RESTATEMENTS.
(a) AMENDED AND RESTATED NOTE. The Company has
authorized, and (subject to the effectiveness of the agreement and consent of
the Board as provided in Section 1.3) agrees and consents to, the amendment and
restatement in its entirety of the Existing Board Note, as provided for in this
Agreement. The Existing Board Note as so amended and restated, and any notes
delivered in substitution for any such note pursuant to any such provisions,
are hereinafter sometimes referred to, collectively, as the "NOTES" or
individually as the, or a, "NOTE". The Note shall (i) be substituted in the
place of the Existing Board Note (which shall be surrendered to the Company for
cancellation), (ii) be dated and bear interest from September 17, 1996, (iii)
have the terms and conditions herein and therein provided, and (iv) be
substantially in the form of Exhibit A.
(b) AMENDMENTS OF EXISTING COLLATERAL DOCUMENTS. The
Company has authorized, and (subject to the effectiveness of the agreement and
consent of Board as provided in Section 1.3) agrees and consents to,
(i) an Amended and Restated Guaranty Agreement,
replacing the Existing Guaranty Agreements (the "AMENDED AND
RESTATED GUARANTY AGREEMENT"), in the form attached hereto as
Exhibit B;
(ii) a First Amendment to the Existing Assignment
(the "ASSIGNMENT AGREEMENT AMENDMENT"), in the form attached
hereto as Exhibit C;
(iii) a First Amendment to each of the Existing
Mortgages that has not been released prior to the Effective
Date (the "MORTGAGE AMENDMENTS"), in the forms attached hereto
as Exhibit D-1, D-2, and D-3; and
(iv) an Intercreditor Agreement (the "BABC
INTERCREDITOR AGREEMENT"), between BankAmerica Business
Credit, Inc. ("BABC") and the Board, in the form attached
hereto as Exhibit E.
(c) EXISTING DEFAULTS. The Company requests that the
Board waive such Events of Default resulting from violations of Sections
6.8(a), (b), and (c), and 7.1(b) of the Existing Note Agreement by entering
into this Agreement, and amend certain covenants in the Existing Note
Agreement, in exchange for the substitution of the Note described in subsection
(a) above.
1.3. AGREEMENT AND CONSENT OF THE BOARD TO AMENDMENTS AND
RESTATEMENTS. Subject to the satisfaction of the conditions set forth in
Section 3, the Board, by execution of this Agreement, hereby agrees and
consents to the amendment and restatement of the Existing Board Note and the
Existing Note Purchase Agreement and the amendments of the Existing Collateral
Documents.
1.4. SUBSTITUTION OF NOTE ON EFFECTIVE DATE. On the Effective
Date, the Company will deliver to the Board, at the office of Winston & Strawn,
35 West Wacker Drive, Chicago, Illinois, a Note, in the form of Exhibit A, in
the aggregate outstanding principal amount of the Existing Note held by the
Board, dated the
-2-
<PAGE> 3
Effective Date, 1996, and payable to the Board, against delivery by the Board
of such Existing Board Note to the Company for cancellation. All amounts owing
under, and evidenced by, the Existing Board Note as of the Effective Date shall
continue to be outstanding under, and shall after the Effective Date be
evidenced by, the Board Note, and shall be repayable in accordance with this
Agreement and the Note.
1.5. FAILURE TO DELIVER, FAILURE OF CONDITIONS. If on the Effective
Date the Company fails to tender to the Board the Note to be delivered on such
date, or if the conditions specified in Section 3 to be fulfilled on or before
the Effective Date have not been fulfilled, the Board may thereupon elect to be
relieved of all further obligations hereunder and the consent and agreement of
the Board contemplated by Section 1.3 shall not become effective. In such
event, nothing in this Section 1.5 shall operate to relieve the Company from
any of its obligations under the Existing Note Purchase Agreement, which shall
continue in full force and effect and shall not be modified by this Agreement.
SECTION 2. DEFINITIONS.
2.1. DEFINITIONS. Unless the context otherwise requires, the
following terms shall have the following meanings, and the following
definitions shall be equally applicable to both the singular and plural forms
of any of the terms herein defined:
"ADJUSTED NET EARNINGS FROM OPERATIONS" means, with respect to any
fiscal period of the Company and its Subsidiaries, the Company's and its
Subsidiaries' consolidated net income after provision for income taxes for such
fiscal period, as determined in accordance with GAAP and reported on the
Financial Statements for such period, less any and all of the following
included in such net income: (a) gain or loss arising from the sale of a
capital asset; (b) gain arising from any write-up in the book value of any
asset; (c) earnings of any corporation, substantially all the assets of which
have been acquired by any Company or any of its Subsidiaries in any manner, to
the extent realized by such other corporation prior to the date of acquisition;
(d) earnings of any business entity in which the Company or any of its
Subsidiaries has an ownership interest unless (and only to the extent) such
earnings shall actually have been received by the Company or and its
Subsidiary, as applicable, in the form of cash distributions; (e) earnings of
any Person to which assets of the Company or any of its Subsidiaries shall have
been sold, transferred or disposed of, or into which any the Company or any of
its Subsidiaries shall have been merged, or which has been a party with the
Company or any of its Subsidiaries to any consolidation or other form of
reorganization, prior to the date of such transaction; (f) gain arising from
the acquisition of debt or equity securities of the Company or any of its
Subsidiaries or from cancellation or forgiveness of Indebtedness; and (g) gain
arising from extraordinary items, as determined in accordance with GAAP, or
from any other non-recurring transaction.
"ADJUSTED TANGIBLE ASSETS" means the Company's and its Subsidiaries'
consolidated assets except: (a) goodwill; (b) assets of the Company or any of
its Subsidiaries constituting Intercompany Accounts; and (c) fixed assets to
the extent of any write-up in the book value thereof resulting from a
revaluation effective after the Closing Date.
"ADJUSTED TANGIBLE NET WORTH" means, at any date: (a) the book value
(after deducting related depreciation, obsolescence, amortization, valuation,
and other proper reserves as determined in accordance with GAAP) at which the
consolidated Adjusted Tangible Assets would be shown on a consolidated balance
sheet of the Company and its Subsidiaries at such date prepared in accordance
with GAAP less (b) the amount at which the Company's and its Subsidiaries'
consolidated liabilities would be shown on such balance sheet, including as
liabilities all reserves for contingencies and other potential liabilities
which would be shown on such balance sheet or disclosed in the notes thereto.
-3-
<PAGE> 4
"AFFILIATE" shall mean any Person (other than a Subsidiary) (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (ii) which
beneficially owns or holds 5% or more of any class of the Voting Stock of the
Company or (iii) 5% or more of the Voting Stock (or in the case of a Person
which is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by the Company or a Subsidiary. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise.
"AGREEMENT" shall mean that certain Note Purchase Agreement, dated as
of June 16, 1994, as amended by this Amended and Restated Note Purchase
Agreement, as the same may be amended, supplemented or modified from time to
time.
"BABC" is defined in subsection 1.2(b).
"BABC DEBT" shall mean the credit facility in the aggregate amount of
$29,870,000 which BABC is extending to the Company and its Subsidiaries
pursuant to the BABC Loan Agreement, including the relending, pursuant to the
terms of the BABC Loan Agreement, of amounts repaid on the revolving loans made
thereunder.
"BABC LOAN AGREEMENT" shall mean the Loan and Security Agreement dated
as of November 5, 1996, among the Company, its Subsidiaries and BABC.
"BUSINESS DAY" shall mean any day except a Saturday, a Sunday, a day
on which banks in the State of Wisconsin are required by law to close or on
which it is customary for banks situated similarly to banks used by the Company
to close, or a day on which agencies of the State of Wisconsin are authorized
or required by law to close.
"CAPITAL EXPENDITURES" means all payments due (whether or not paid)
during a Fiscal Year of the Company in respect of the cost of any fixed asset
or improvement, or replacement, substitution, or addition thereto, which has a
useful life of more than one year, including, without limitation, those arising
in connection with the direct or indirect acquisition of such assets by way of
increased product or service charges or offset items or in connection with
Capital Leases.
"CAPITAL LEASE" means any lease of Property by any Borrower or any of
its Subsidiaries that, in accordance with GAAP, should be reflected as a
liability on the consolidated balance sheet of the Borrower and its
Subsidiaries.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMONLY CONTROLLED ENTITY" shall mean an entity, whether or not
incorporated, which is under common control with the Company within the meaning
of Section 414(b) or (c) of the Code.
"CONTINGENT OBLIGATION" shall mean, as to any Person, any guarantee of
Indebtedness or any other obligation of any second Person or any assurance with
respect to the financial condition of any second Person, whether direct,
indirect or contingent, including without limitation, any purchase or
repurchase agreement or other arrangement of whatever nature having the effect
of assuring or holding harmless any third Person against loss with respect to
any obligation of such second Person; provided, however, that the term
Contingent Obligation shall not include (i) endorsements of instruments for
deposit or collection in the ordinary course of business or (ii) any
obligations to reimburse an issuer of a letter of credit to the extent that the
letter of credit assures payment of obligations otherwise constituting
Indebtedness.
-4-
<PAGE> 5
"CONTRACTUAL OBLIGATION" shall mean, as to any Person, any provision
of any Security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
Property is bound.
"DEFAULT" shall mean any of the events specified in Section 8 hereof,
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition has been satisfied.
"DISTRIBUTION" means, in respect of any corporation: (a) the payment
or making of any dividend or other distribution of Property in respect of
capital stock or options or warrants in respect of such capital stock of such
corporation, other than distributions in capital stock of the same class; or
(b) the redemption or other acquisition of any capital stock of such
corporation.
"DOLLARS" and "$" shall mean dollars in lawful currency of the United
States of America.
"EBITDA" means with respect to the Company and its Subsidiaries, on a
consolidated basis for any period, Adjusted Net Earnings from Operations, plus
the sum of (i) interest expenses, (ii) income taxes, (iii) depreciation, (iv)
amortization, and (v) other non-cash expenses, each to the extent deducted in
determining the Company's and its Subsidiaries' Adjusted Net Earnings from
Operations for that period, less non-cash income included in the calculation of
Adjusted Net Earnings from Operations for that period.
"EFFECTIVE DATE" shall mean the date upon which the conditions set
forth in subsections 3.1 through 3.6 shall have been satisfied, but not, in any
event, later than November 6, 1996.
"ENVIRONMENTAL LAWS" shall mean any federal, state or local laws
(including statutes, regulations, ordinances or other governmental restrictions
and requirements) relating to the discharge of air pollutants, water pollutants
or process waste water or otherwise relating to the environment or hazardous
substances, whether currently existing or enacted in the future.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may, from time to time, be supplemented or amended.
"EVENT OF DEFAULT" shall mean any of the events specified in Section 8
hereof, provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"FINANCIAL STATEMENTS" means, according to the context in which it is
used, the financial statements furnished to the Lender pursuant to Sections 5.1
and 6.2, or any combination thereof.
"FISCAL YEAR" means the Company's and its Subsidiaries' fiscal year
for financial accounting purposes. The current Fiscal Year of the Company and
its Subsidiaries will end on May 31, 1997.
"FIXED CHARGE COVERAGE RATIO" means as to the Company and its
Subsidiaries on a consolidated basis, for any fiscal period, the ratio of
EBITDA to Fixed Charges.
"FIXED CHARGES" means as to the Company and its Subsidiaries on a
consolidated basis, for any fiscal period, the sum of (i) interest expenses
paid or payable in cash, (ii) scheduled installments of principal paid or
payable with respect to Debt for borrowed money and Capital Leases; (iii) that
portion of Capital Expenditures acquired for cash or financed by borrowing on
the Company's or any of its Subsidiaries' general working capital credit
facility or; (iv) income taxes paid or payable in cash.
-5-
<PAGE> 6
"FUNDED DEBT" shall mean (i) all Indebtedness having a final or
remaining maturity of one or more than one year from the date of origin thereof
(or which is renewable or extendible at the option of the obligor for a period
or periods more than one year from the date of origin), including all payments
in respect thereof that are required to be made within one year from the date
of any determination of Funded Debt, whether or not included in consolidated
liabilities, and (ii) all Guaranties of such Indebtedness of others, of the
Company and its Subsidiaries on a consolidated basis eliminating Intercompany
Items.
"GAAP" means United States generally accepted accounting principles
consistently applied and maintained throughout the period indicated and, except
changes to prior financial practice mandated by the Financial Accounting
Standard Board or any similar accounting authority of comparable standing,
consistent with the prior financial practice of the Company and any
predecessor. Whenever any accounting term is used herein which is not
otherwise defined, it shall be interpreted in accordance with GAAP.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state or other political subdivision thereof, including municipalities of any
kind, and any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government and any corporation or
other entity owned or controlled (through stock or capital ownership or
otherwise) by any of the foregoing.
"GUARANTY" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing
any Indebtedness, dividend or other obligation, of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, all obligations incurred through an agreement, contingent
or otherwise, by such Person: (i) to purchase such Indebtedness or obligation
or any property or assets constituting security therefor, (ii) to advance or
supply funds (x) for the purchase or payment of such Indebtedness or
obligation, (y) to maintain working capital or other balance sheet condition or
otherwise to advance or make available funds for the purchase or payment of
such Indebtedness or obligation, or (iii) to lease property or to purchase
Securities or other property or services primarily for the purpose of assuring
the owner of such Indebtedness or obligation of the ability of the primary
obligor to make payment of the Indebtedness or obligation, or (iv) otherwise to
assure the owner of the Indebtedness or obligation of the primary obligor
against loss in respect thereof. For the purposes of all computations made
under this Agreement, a Guaranty in respect of any Indebtedness for borrowed
money shall be deemed to be Indebtedness equal to the principal amount of such
Indebtedness for borrowed money which has been guaranteed, and a Guaranty in
respect of any other obligation or liability or any dividend shall be deemed to
be Indebtedness equal to the maximum aggregate amount of such obligation,
liability or dividend.
"HAZARDOUS SUBSTANCES" shall mean any hazardous or toxic wastes,
chemicals or other substances, the generation, possession or existence of which
is prohibited or governed by any Environmental Laws.
"INDEBTEDNESS" shall mean, all liabilities, obligations and
indebtedness of the Company and each of its Subsidiaries to any Person of any
kind or nature, now or hereafter owing, arising, due or payable, howsoever
evidenced, created, incurred, acquired or owing, whether primary, secondary,
direct, contingent, fixed or otherwise, and including, without in any way
limiting the generality of the foregoing: (a) the Company's and each of its
Subsidiaries' liabilities and obligations to trade creditors; (b) all
obligations with respect to payments under the Notes, this Agreement, the BABC
Debt, other loans or Capitalized Leases shown on Schedule 3.1(h); (c) all
obligations and liabilities of any Person secured by any lien on any Company or
any of its Subsidiaries' property, even though the Company and its Subsidiaries
shall not have assumed or become liable for the payment thereof; provided,
however, that all such obligations and liabilities which are limited in
recourse to such property shall be included in Indebtedness only to the extent
of the book value of such property as would be shown on a balance sheet of the
Company and its Subsidiaries prepared in accordance with GAAP; (d) all
obligations or liabilities created or arising under any Capital Lease or
conditional sale or other title retention
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<PAGE> 7
agreement with respect to Property used or acquired by the Company or any of
its Subsidiaries, even if the rights and remedies of the lessor, seller or
lender thereunder are limited to repossession of such Property; provided,
however, that all such obligations and liabilities which are limited in
recourse to such property shall be including in Indebtedness only to the extent
of the book value of such property as would be shown on a balance sheet of the
Company and its Subsidiaries prepared in accordance with GAAP; (e) all accrued
pension fund and other employee benefit plan obligations and liabilities; (f)
all obligations and liabilities under any Guaranty; (g) indebtedness arising
under acceptance facilities and the face amount of all letters of credit
(excluding letters of credit used by the Company or any Subsidiary to secure
obligations of that Person to the extent such obligations otherwise constitute
Indebtedness of such Person, and excluding, to the extent necessary to avoid
duplication, letters of credit the Person's obligation to reimburse the issuer
of which is evidenced by a reimbursement agreement, promissory note or other
evidence of indebtedness which otherwise constitutes Indebtedness) issued for
the account of such Person, and without duplication, all drafts drawn
thereunder, and (h) deferred taxes.
"INTERCOMPANY ACCOUNTS" means all assets and liabilities, however
arising, which are due to the Company or any of its Subsidiaries from another
of the Company or any of its Subsidiaries, or which otherwise arise from any
transaction by any Company or any of its Subsidiaries with, any Affiliate.
"LOAN DOCUMENTS" shall mean this Agreement, the Notes, the Amended and
Restated Guaranty Agreement, the Existing Assignment as amended by the
Assignment Agreement Amendment, the Existing Mortgages as Amended by the
Mortgage Amendments, the Existing Subsidiary Notes, and the Existing
Assignments and Powers of Attorney as Amended by the Assignments and Powers of
Attorney Amendment, as amended and any schedule or exhibit thereto; one of the
Loan Documents, a "Loan Document."
"LONG-TERM LEASE" shall mean any lease of real or personal property
(other than a Capital Lease) having an original term, including any period for
which the lease may be renewed or extended at the option of the lessor, of more
than twelve (12) months.
"MAKE WHOLE PREMIUM" shall mean at any time with respect to any
prepayment of the Notes (other than pursuant to Section 4.1), the excess of (a)
the present value of the principal and interest payments on and in respect of
the Notes being prepaid that would otherwise become due and payable discounted
at a rate (computed on the basis of a 360-day year of twelve 30-day months)
which is equal to the Reinvestment Rate over (b) the aggregate principal amount
of the Notes then to be prepaid. To the extent that the Reinvestment Rate at
the time of such prepayment is equal to or greater than the rate of interest
provided in the Notes, the Make Whole Premium is zero. Any calculation of the
Make Whole Premium shall be made by the Company on and as of five Business Days
prior to the date such Make Whole Premium is to be paid and the detailed
calculation shall be delivered to the Noteholders via telecopy or telex on such
date of calculation. In the event of a disagreement as to such calculation the
determination of the Noteholders shall be final absent manifest error.
"MINORITY INTERESTS" shall mean any shares of stock of any class of a
Subsidiary (other than directors' qualifying shares as required by law) that
are not owned by the Company and/or one or more of its Subsidiaries. Minority
Interests shall be valued in accordance with GAAP consistently applied.
"MONTH" shall mean any calendar month.
"NOTEHOLDER" shall mean any Person who owns any Note or any portion
thereof, whether the Lender or its nominees or assigns, such assignment being
subject to the provisions of subsection 10.8 hereof.
"OUTLOOK FOODS EQUIPMENT" means all furniture, fixtures, and
equipment now owned by Outlook Foods, Inc. and listed on Schedule 2.1 hereto,
and all accessions thereto and proceeds thereof.
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"OUTLOOK FOODS REAL ESTATE" means the real estate now owned by
Outlook Foods, Inc.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"PERSON" shall mean an individual, partnership, corporation, trust or
unincorporated organization, and a government or agency or political
subdivision thereof.
"PLAN" shall mean as to any Person any pension plan that is covered by
Title IV of ERISA and in respect of which that Person or a Commonly Controlled
Entity of that Person is an "employer" as defined in Section 3(5) of ERISA.
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"REINVESTMENT RATE" shall mean the Treasury Rate plus 0.25%.
"REMEDIAL ACTION" shall mean the clean up, removal or remediation or
other action with respect to any Hazardous Substances.
"RENTALS" means all payments due from the lessee or sublessee under a
lease, including, without limitation, basic rent, percentage rent, property
taxes, utility or maintenance costs, and insurance premiums.
"REPORTABLE EVENT" shall mean any of the events set forth in Section
404(3)(b) of ERISA or the regulations thereunder.
"REQUIREMENT OF LAW" shall mean, as to any Person, the Articles of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person
or any of its property is subject.
"RESPONSIBLE OFFICER" shall mean, as to the Company, the President of
the Company and, with respect to financial matters, the chief financial officer
of the Company.
"SECURED INDEBTEDNESS" shall mean Indebtedness which is secured in any
manner including, without limitation, by way of mortgage, pledge, lien,
encumbrance or charge upon, or security interest in, any property of the
Company or any Subsidiary and in any event shall include Capital Leases.
"SECURITY" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"SPECIFIED CAPITAL EXPENDITURES" means Capital Expenditures relating
to (i) the purchase by the Company of a heidelberg press, provided that the
aggregate consideration paid by the Company in connection therewith shall not
exceed $765,000, (ii) the purchase by the company of a jagerberg sheeter,
provided that the aggregate consideration paid by the Company in connection
therewith shall not exceed $1,500,000, and (iii) the purchase by the Company of
various pieces of equipment previously leased through MetLife Capital and Fleet
Capital, provided that the aggregate consideration paid by the Company in
connection therewith shall not exceed $345,000, and (iv) the purchase by
Outlook Packaging, Inc., of various pieces of equipment previously leased
through MetLife Capital and Fleet Capital, provided that the aggregate
consideration paid by Outlook Packaging, Inc., in connection therewith shall
not exceed $94,000.
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<PAGE> 9
"SUBORDINATED FUNDED DEBT" shall mean any unsecured Funded Debt which
shall contain provisions which expressly subordinate its right of payment of
principal and interest to that of any outstanding senior Indebtedness in a
manner satisfactory to the Lender.
"SUBSIDIARY" shall mean, as to any particular parent corporation, any
corporation of which more than 50% (by number of votes) of the Voting Stock
shall be owned by such parent corporation and/or one or more corporations which
are themselves subsidiaries of such parent corporation.
"TREASURY RATE" shall mean at any time with respect to the Notes being
prepaid, the then existing yield to maturity on the United States Treasury
obligations with a maturity (as compiled by and published in the most recently
published issue of the United States Federal Reserve Statistical Release
designated H.15(519) or its successor publication) equal to the remaining
weighted average maturity of the portion of the Notes being prepaid. If no
maturity exactly corresponding to such weighted average maturity shall appear
therein, the United States Treasury obligations with the nearest published
maturity occurring prior thereto and with the nearest published maturity
occurring thereafter shall each be determined and the Treasury Rate shall be
interpolated on a straight-line basis based on the respective yields to
maturity of such obligations. "WEIGHTED AVERAGE MATURITY OF THE NOTES" shall
mean, at any date, the number of years (and fractions thereof) obtained by
dividing the then Dollar-years of the payments on the Notes being prepaid by
the principal amount thereof of the prepayment; and for purposes of this
definition, the term "DOLLAR-YEARS" means, at any date, the total of the
products obtained by multiplying (i) the amount of each payment to be prepaid,
including payment at final maturity, in respect thereof by (ii) the number of
years (including fractions thereof) which will elapse between the date of
prepayment and the date on which such scheduled payment is required to be made.
"VOTING STOCK" shall mean Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
"WHOLLY-OWNED" when used in connection with any Subsidiary shall mean
a Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) and all Indebtedness for
borrowed money, other than certain Indebtedness which is permitted under
subsection 8.1 hereof, including any renewals thereof, shall be owned by the
Company and/or one or more of its Wholly-owned Subsidiaries.
SECTION 3. CONDITIONS PRECEDENT.
This Agreement shall become effective upon satisfaction of the
conditions set forth in this Section, and the Lender shall not be required to
exchange the Existing Board Note for the Note hereunder, unless prior to the
Effective Date:
3.1. NOTE AND DOCUMENTS.
(a) NOTE. The Lender shall have received the Amended and
Restated Note, payable to the order of the Lender, conforming to the
requirements hereof and duly executed by Responsible Officers.
(b) MORTGAGE AMENDMENTS. The Lender shall have received
the Mortgage Amendments, executed by the Company or its Subsidiaries, as
applicable, each in such form as is acceptable to the Lender.
(c) ASSIGNMENT AGREEMENT AMENDMENT. The Lender shall
have received the Assignment Agreement Amendment executed by the Company, in
such form as is acceptable to the Lender.
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<PAGE> 10
(d) SUBSIDIARY GUARANTIES. The Lender shall have
received an Amended and Restated Guaranty Agreement, executed by all of the
Company's Subsidiaries in favor of the Lender, in such form as is acceptable to
the Lender.
(e) BARRIER SUBSIDIARY NOTE AND ASSIGNMENT. The Lender
shall have received a Subsidiary Promissory Note in the form of the, Existing
Subsidiary Notes, executed by Barrier, and an Assignment and Power of Attorney
from the Company to Lender in the form of the Existing Assignment as amended by
the Assignment Agreement Amendment.
(f) INTERCREDITOR AGREEMENT. The Lender shall have
entered into an Intercreditor Agreement with BABC in form and substance
acceptable to the Lender.
(g) LEGAL OPINIONS. The Company shall have delivered to
the Lender an opinion of counsel for the Company and its Subsidiaries, dated as
of the Effective Date, addressed to the Lender, in form satisfactory to the
Lender and covering the matters set forth in Exhibit F and such other matters
as the Lender may require.
(h) CERTIFICATE OF FUNDED DEBT, LONG-TERM LEASES, SECURED
INDEBTEDNESS AND CONTINGENT OBLIGATIONS. The Company shall have delivered to
the Lender a certificate, in the form of Schedule 3.1(h) and satisfactory to
the Lender, dated the Effective Date and signed by a Responsible Officer,
certifying as to all Funded Debt, Long-Term Leases, Secured Indebtedness and
Contingent Obligations as of the date thereof (including such as is expected to
be established substantially contemporaneously with the loans hereunder, and
including the loans hereunder), the amount of the debt, the names of all
lenders and the names of the respective borrowers and, as to Secured
Indebtedness, the location of any and all collateral securing each item of
Secured Indebtedness, including leased property, and, as to each Long Term
Lease, the aggregate Rentals payable thereunder, and reflecting all information
both on a consolidated basis and for the Company and each Subsidiary.
(i) OFFICER'S CERTIFICATE. The Company shall have
delivered to the Lender a certificate of the Secretary of the Company and a
certificate of the Secretary or Assistant Secretary of each Subsidiary, dated
the date of the Note, as to: (i) the incumbency and signature of the officers
of the Company or Subsidiary signing this Agreement, the Note, and any other
Loan Documents, (ii) the adoption and continued effect of resolutions of the
Board of Directors of the Company or Subsidiary authorizing the execution,
delivery and performance of this Agreement and the other Loan Documents, and
(iii) the accuracy of a copy of the Articles of Incorporation and By-laws of
the Company or Subsidiary attached thereto.
(j) MISCELLANEOUS DOCUMENTS. The Lender shall have
received such other documents and instruments as the Lender shall reasonably
deem necessary in connection with the purchase of the Note by the Lender as
contemplated hereunder including, but not limited to the environmental
assessments described in subsection 5.19, and any consents, waivers, approvals,
authorizations, registrations, filings and notifications which are required for
the making of the loan contemplated hereby.
3.2. BABC LOAN. The Company and its Subsidiaries shall entered
into, and satisfied each condition of closing specified in Section 11 of, the
BABC Loan Agreement. The BABC Loan Agreement shall be in a form satisfactory
to Lender, and the Lender shall have received copies of the BABC Loan Agreement
and the other Loan Documents described therein.
3.3. REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Company herein, in any Loan Document, or in any
certificate, document, financial statement or other statement delivered
hereunder are true as of the Effective Date to the same extent as if made on
and as of such date.
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3.4 INSURANCE. The Company shall have purchased all insurance
required to be maintained by the Company and its Subsidiaries as provided in
subsection 6.7 hereof and the Lender shall have received a certificate dated as
of the Effective Date and in form satisfactory to the Lender of the President
of the Company certifying that all of the insurance policies are in full force
as of the Effective Date.
3.5 APPRAISALS. The Lender shall have received written reports of
appraisals of the Company's and its Subsidiaries' equipment real estate
performed by independent appraisers acceptable to the Lender and on a basis
satisfactory to the Lender, and stating a fair market value of the real estate
and an orderly liquidation value of the equipment satisfactory to the Lender.
3.6 PAYMENT OF FEES AND EXPENSES. The Company and its
Subsidiaries shall have paid all fees and expenses of the Lender's outside
counsel and all other fees and expenses of the Lender incurred in connection
with any of the Loan Documents and the transactions contemplated thereby.
3.7. ADDITIONAL MATTERS. All other documents and legal matters in
connection with the transaction contemplated by this Agreement and the other
Loan Documents, including without limitation the evidence of the Company's and
its Subsidiaries' title to their property and the absence of any liens except
liens permitted under the terms of the Loan Documents, are satisfactory in form
and substance to the Lender and the Lender's counsel.
3.8. SATISFACTORY PROCEEDINGS. All proceedings taken in connection
with the transactions contemplated by this Agreement, and all documents
necessary to the consummation thereof, shall be satisfactory in form and
substance to the Lender and its counsel, and the Lender shall have received a
copy (executed or certified as may be appropriate) of all legal documents or
proceedings taken in connection with the consummation of said transactions.
SECTION 4. PREPAYMENT OF NOTES.
4.1. REQUIRED PREPAYMENTS. The Company agrees that:
(a) On the sixteenth day of each March, June, September and
December of each year, commencing March 16, 1997 and ending June 16, 2004,
inclusive, (the dates for required prepayments for the Notes are herein called
"Fixed Payment Dates"), it will prepay and apply and there shall become due and
payable an amount on the principal indebtedness evidenced by the Notes as shown
on the Schedule of Principal Payments, Schedule 4.1, attached; and
(b) It will, promptly upon receipt thereof, prepay and apply on
the principal indebtedness evidenced by the Notes the net proceeds of the sale
of the Outlook Foods Real Estate and, if sold in a single transaction or series
of related transactions, the Outlook Foods Equipment.
No premium shall be payable in connection with any required prepayment made
pursuant to this subsection 4.1. Any payment of less than all of the Notes
pursuant to the provisions of paragraph (b) of this subsection 4.1, or
subsection 4.2, shall not relieve the Company of the obligation to make
required payments or prepayments on the Notes in accordance with the terms of
paragraph (a) of this subsection 4.1.
4.2. OPTIONAL PREPAYMENTS. The Company may not prepay the
outstanding Notes, in whole or in part, without the consent of the Noteholders,
which consent may be withheld in the sole discretion of the Noteholders, except
as follows:
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<PAGE> 12
(a) required prepayments as provided under subsection 4.1;
(b) prepayments made solely from the proceeds of the
contemporaneous issuance of the Company's common stock, which, upon compliance
with the provisions of this Section 4, may be made beginning June 16, 1997; and
(c) other prepayments which, upon compliance with the provisions
of this Section 4, may be made after June 16, 1999.
For all prepayments made pursuant to paragraphs (b) and (c) of this subsection
4.2, the Company shall, upon compliance with subsection 4.3, have the privilege
of prepaying the outstanding Notes, either in whole or in part on any date (but
if in part then in units of $100,000 or an integral multiple of $10,000 in
excess thereof), providing that the Company shall pay, together with the
principal prepayment, interest accrued through the date of the prepayment, and
a premium equal to the applicable Make Whole Premium on the principal amount to
be so prepaid. Prepayments made pursuant to paragraphs (b) and (c) shall not
relieve the Company from its obligation to make the required prepayments
provided under subsection 4.1.
4.3. NOTICE OF PREPAYMENTS. The Company will give notice of any
prepayment of the Notes (other than the prepayments required by subsection
4.1(a)) to the Noteholders thereof not less than 30 days nor more than 60 days
before the date fixed for such optional prepayment specifying (i) such date,
(ii) the section of this Agreement under which the prepayment is to be made,
(iii) the principal amount of the Noteholder's Note to be prepaid on such date,
and (iv) the estimated premium, if any, and accrued interest applicable to the
prepayment. Such notice of prepayment shall also certify all facts which are
conditions precedent to any such prepayment. Principal specified in such
notice, together with the premium, if any, and accrued interest thereon shall
become due and payable on the prepayment date.
4.4. DIRECT PAYMENT. Notwithstanding anything to the contrary in
this Agreement or the Notes, in the case of any Note owned by Lender, or by a
Noteholder who has given written notice to the Company requesting that the
provisions of this Section shall apply, the Company will promptly and
punctually pay when due the principal thereof and premium, if any, and interest
thereon, without any presentment thereof, directly to such Lender or Noteholder
or such subsequent holder at the address of such Lender or Noteholder set forth
in Schedule 4.4 or at such other address as such Lender or Noteholder or such
subsequent holder may from time to time designate in writing to the Company or,
if a bank account is designated for such Lender or Noteholder on Schedule 4.4
hereto or in any written notice to the Company from such Lender or Noteholder
or any such subsequent holder, the Company will make such payments by wire
transfer, no later than 11:00 a.m. Central time on the day of payment, of
immediately available funds to such bank account, marked for attention as
indicated, or in such other manner or to such other account of such Lender or
Noteholder or such holder in any bank in the United States as the Lender or
Noteholder or any such subsequent holder may from time to time direct in
writing. The holder of any Note to which this Section applies agrees that in
the event it shall sell or transfer any such Note (other than the sale of
participations in the Note) (i) it will, prior to the delivery of such Note
(unless it has already done so), make a notation thereon of all principal, if
any, prepaid on such Note and will also note thereon the date to which interest
has been paid on such Note, and (ii) it will promptly notify the Company of the
name and address of the transferee of any Note so transferred. With respect to
the Notes to which this Section applies, the Company shall be entitled to
presume conclusively that the original or such subsequent institutional holder
as shall have requested the provisions hereof to apply to its Note remains the
holder of such Note until (y) the Company shall have received notice of the
transfer of such Note, and of the name and address of the transferee, or (z)
such Note shall have been presented to the Company as evidence of the transfer.
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<PAGE> 13
4.5. PAYMENTS DUE ON SATURDAYS, SUNDAYS, AND HOLIDAYS. In any case
where any interest payment date on the Notes or the date fixed for any other
payment of any Note or exchange of any Note shall be other than a Business Day,
then such payment or exchange shall not be made on such date but shall be made
on the preceding Business Day.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender to enter into this Agreement and to
exchange the Existing Board Note for the Note, and in recognition of the fact
that the Lender is acting in reliance thereupon, the Company hereby covenants,
represents and warrants to the Lender that:
5.1. FINANCIAL CONDITION. The consolidated financial statements of
the Company and its Subsidiaries for the period ended May 31, 1996, and for
each interim period thereafter, and the filings made with the Securities and
Exchange Commission since June 16, 1994 and as are listed on Schedule 5.1(i)
attached hereto, copies of all of which have heretofore been furnished to the
Lender, are complete and correct and present fairly the financial condition of
the Company as of such date. The financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except, with respect to the
interim statements, for the usual year-end adjustments). As of the date
thereof, neither the Company nor any Subsidiary has any material Contingent
Obligation, Indebtedness, contingent liability or liability for taxes,
long-term leases or unusual forward or long-term commitment, which is not
reflected on Schedule 3.1(h) attached hereto. As of the date hereof, neither
the Company nor any Subsidiary has any investment of the type contemplated by
subsection 7.7(b) or (f) in any company which is not reflected on Schedule
5.1(ii) attached hereto.
5.2. NO CHANGE. Except as disclosed on Schedule 5.2, since August
31, 1996, there has been no material adverse change in the business,
operations, assets, Property, prospects or financial condition of the Company
or any of its Subsidiaries, and there has been no fire, explosion, labor
dispute, storm, act of God, accident or other casualty which has had a material
adverse effect upon the business, operations, assets, Property, prospects or
financial condition of the Company or any of its Subsidiaries.
5.3. CORPORATE EXISTENCE; COMPLIANCE WITH LAW. The Company and
each of its Subsidiaries is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has the
corporate power and authority and the legal right to own and operate its
Property, to lease the Property it operates and to conduct the business in
which it is currently engaged. The Company and each of its Subsidiaries is
duly qualified as a foreign corporation and in good standing under the laws of
each jurisdiction where its ownership, lease or operation of Property or the
conduct of its business requires such qualification, and is in compliance with
all Requirements of Law, except such noncompliances which individually and in
the aggregate would not have a material adverse effect on the business,
property, finances or prospects of the Company or its Subsidiaries.
5.4. CORPORATE POWER; ENFORCEABLE OBLIGATIONS. The Company and
each of its Subsidiaries has the corporate power and the authority to enter
into, deliver, issue and perform all of its obligations under all Loan
Documents. The Company has the corporate power and the authority to borrow
under this Agreement. The Loan Documents when duly executed and delivered on
behalf of the Company and its Subsidiaries will constitute, legal, valid and
binding obligations of the Company and its Subsidiaries enforceable against the
Company and its Subsidiaries in accordance with their terms.
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<PAGE> 14
5.5. NO LEGAL BAR. No consent or authorization of, filing with, or
other act by or in respect of any Governmental Authority, is required in
connection with the Company's activities in connection with the borrowings
hereunder or with the execution, delivery, performance, validity or
enforceability of the Loan Documents. The execution, delivery and performance
of the Loan Documents by the Company and each Subsidiary, prospective
borrowings hereunder and the use of the proceeds thereof, (i) have been duly
authorized by all necessary corporate action, (ii) will not require any consent
or approval of the Company's or any Subsidiary's stockholders, (iii) will not
violate any Requirement of Law or any Contractual Obligation of the Company or
any of its Subsidiaries which has not been waived, and (iv) will not result in,
or require, the creation or imposition of any Lien, other than pursuant to the
Loan Documents, on any of their Properties or revenues pursuant to any
Requirement of Law or Contractual Obligation.
5.6. NO LITIGATION. Except as disclosed in Schedule 5.6, no
litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the Company,
threatened by or against the Company or any of its Subsidiaries or against any
of its or their respective Properties or revenues.
5.7. NO DEFAULT. Neither the Company nor any of its Subsidiaries
is in default under or with respect to any Contractual Obligation, the
noncompliance with which could be materially adverse to the business,
operations, assets, Property, prospects or financial condition of the Company
or any of its Subsidiaries, or which could have a material adverse effect upon
the ability of the Company to perform its obligations under the Loan Documents.
No event which has not been waived in writing and which would constitute, or
which but for the requirement that notice be given or time elapse or both would
constitute, a Default or Event of Default has occurred and is continuing.
5.8. PROPERTY; LIENS. None of the assets of the Company or any of
its Subsidiaries is subject to any Lien, except as permitted in subsection 7.2
hereof.
5.9. NO BURDENSOME RESTRICTIONS. No Contractual Obligation of the
Company or any of its Subsidiaries and no Requirement of Law has a material
adverse effect upon, or insofar as the Company may reasonably foresee may have
such an effect upon the business, operations, assets, Property, prospects or
financial condition of the Company or any of its Subsidiaries.
5.10. TAXES. The Company and each of its Subsidiaries have filed
all tax returns required to be filed and paid all taxes shown thereon to be
due, including interest and penalties, or provided adequate reserves for
payment thereof. The Company and each of its Subsidiaries have paid, or
provided adequate reserves for, all taxes, including interest and penalties,
shown to be due on any assessments made against it or any of its Property and
all other taxes, fees and other charges imposed on it or its Property by any
Governmental Authority. Neither the Company nor any of its Subsidiaries has
any outstanding unpaid tax liabilities (except for taxes which are currently
accruing from its current operations and ownership of Property, which are not
delinquent) and no tax deficiencies have been proposed or assessed against it.
All federal income tax returns of the Company have been examined and reported
on or closed by applicable statute and satisfied for all Fiscal Years up to and
including the Fiscal Year ending in 1992, and all taxes shown on any such
return for any such Fiscal Year, together with any adjustments arising out of
any examination of such return, have been paid. The state income tax returns
of the Company for the Fiscal Year 1991 has been audited, amended returns for
such year have been filed, and all additional taxes shown on such return for
such Fiscal Year have been paid.
5.11. ERISA. Except as set forth on attached Schedule 5.11, neither
the Company nor any Commonly Controlled Entity has been an "employer," as
defined in Section 3(5) of ERISA, in respect of any defined benefit plan, and
is not a member of a group of Commonly Controlled Entities; and its aggregate
conditional obligation if it were to withdraw from the multiemployer plans
shown on Schedule 5.11 is not more than $500,000.
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<PAGE> 15
5.12. INVESTMENT COMPANY ACT. Neither the Company nor any
Subsidiary is an "investment company" or company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
5.13. MARGIN REGULATIONS. The Company is not engaged, principally
or as one of its important activities, in the business of extending credit for
the purpose of "purchasing" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under the applicable
regulations of the Federal Reserve Board as now and from time to time hereafter
in effect.
5.14. SUBSIDIARIES AND AFFILIATES. The Company has no Subsidiaries
or Affiliates and does not own shares or other interests in any business,
including notes receivable from other businesses, other than those shown on
Schedules 5.14 and 5.1(ii), and the amounts of the ownership interest and the
location of the operations of the Subsidiaries disclosed on Schedules 5.14 and
5.1(ii) are accurate and complete as of the Effective Date.
5.15. NO MISSTATEMENTS. No information, exhibit or report furnished
by the Company or any Subsidiary to the Lender in connection with the
negotiation of, or pursuant to, any of the Loan Documents contains any material
misstatement of fact or omits to state a material fact or any fact necessary to
make the statements contained therein not misleading.
5.16. PROTECTED RIGHTS. The Company and each of its Subsidiaries
possess adequate trademarks, tradenames, copyrights, patents, permits, service
marks and licenses, or rights thereto, for the present and planned future
conduct of its business substantially as it is now conducted without any known
conflict with the rights of others which might result in a material adverse
effect on the Company or any of its Subsidiaries.
5.17. LEASES. Neither the Company nor any of its Subsidiaries is a
party to any leases which are not disclosed on Schedule 3.1(h) attached hereto.
5.18. PARTNERSHIPS AND JOINT VENTURES. Neither the Company nor any
of its Subsidiaries is a party to any partnership or joint venture which is not
disclosed in its financial statements for the Fiscal Year ended May 31, 1996,
or which have not otherwise been disclosed in writing to the Lender.
5.19. ENVIRONMENTAL REGULATIONS. There exists no uncorrected
violation by the Company or any Subsidiary of any Environmental Laws. Except
in accordance with Environmental Laws and in the course of the regular business
of the Company and its Subsidiaries, the Company and each Subsidiary does not
and will not generate or have in its possession Hazardous Substances. Except
as described in Schedule 5.19 attached hereto, neither the Company nor any
Subsidiary is subject to any judgment, decree, order or citation, or a party to
(or threatened with) any litigation or administrative proceeding, which asserts
that the Company or Subsidiary (i) violated any Environmental Laws; (ii) is
required to take Remedial Action; or (iii) is required to pay all or a portion
of the cost of any Remedial Action, as a potentially responsible party. Except
in accordance with Environmental Laws and in the course of the regular business
of the Company and Subsidiaries, there are not now, nor to the Company's
knowledge after reasonable investigation have there ever been, any Hazardous
Substances (or tanks or other facilities for the storage of Hazardous
Substances) stored, deposited, recycled or disposed of on, under or at any real
estate owned or occupied by the Company or any Subsidiary during the periods
that the Company or Subsidiary owned or occupied such real estate, which if
present on the property or in soils or ground water, could require Remedial
Action. To the Company's knowledge, there are no proposed or pending changes
in Environmental Laws which would materially adversely affect the Company or
any Subsidiary or their businesses, and there are no conditions existing
currently or likely to exist during the term of this loan which would subject
the Company or any Subsidiary to Remedial Action or other material liability.
The Company and each Subsidiary has all permits, licenses and approvals
required under Environmental Laws.
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<PAGE> 16
The Company has furnished to the Lender copies of an environmental assessment,
survey, or report with regard to each property owned by Company or any of its
Subsidiaries.
5.20. OSHA REGULATIONS. Except for the matters disclosed on
Schedule 5.20, the Company and each of its Subsidiaries are, and have been for
a period of one year prior to the Effective Date, in full compliance with all
Requirements of Law relating to occupational safety and health in the
respective jurisdictions where the Company or any of its Subsidiaries is
presently doing business or conducting operations, except for immaterial
instances of non- compliance which do not in the aggregate impair any
operations of the Company or its subsidiaries or their ownership of any
Property, and the Company has no notice or knowledge of any open investigation
or inquiry concerning the same.
5.21. SEC REGULATIONS. The execution of this Agreement and the
issuance, sale and delivery of the Note to the Lender are exempt transactions
under the Securities Act of 1933, and no registration under that Act is
required.
5.22. NO CONFLICTS. To the best of the Company's knowledge no
member of the Board, nor any Board employee has a direct or indirect economic
interest in the Company or its property or contracts, except such interests as
are generally owned by members of the public and which were acquired in
transactions unrelated to the issuance of the Existing Board Note or the Note,
nor will any member of the Board or Board employee receive, directly or
indirectly, anything of economic value for his or her private benefit from the
Company or anyone acting on its behalf in connection with the investment made
pursuant to this Agreement.
SECTION 6. AFFIRMATIVE COVENANTS.
The Company hereby agrees that, from and after the Closing Date and
continuing so long as any amount remains unpaid on the Notes, the Company shall
and shall cause each of its Subsidiaries to:
6.1. FINANCIAL REPORTS. Keep true and proper books of record and
account in which full and correct entries will be made of all dealings or
transactions of or in relation to the business and affairs of the Company or
such Subsidiary, and reflect in its financial statements adequate accruals and
appropriations to reserves, all in accordance with GAAP consistently
maintained.
6.2. FINANCIAL STATEMENTS. Furnish to the Noteholders:
(a) MONTHLY STATEMENTS. As soon as available and in any
event within 30 days after the end of each month of each Fiscal Year, copies
of:
(i) consolidated and consolidating balance sheets
of the Company and its Subsidiaries as of the close of such month
setting forth in comparative form the amount for the end of the
preceding Fiscal Year,
(ii) consolidated and consolidating statements of
income and retained earnings of the Company and its Subsidiaries for
such monthly period and for the portion of the Fiscal Year ending with
such month, setting forth in comparative form the amount for the
corresponding periods of the preceding Fiscal Year, and
(iii) consolidated statements of cash flow of the
Company and its Subsidiaries for the portion of the Fiscal Year ending
with such month, setting forth in comparative form the amount of the
corresponding period of the preceding Fiscal Year,
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<PAGE> 17
all in reasonable detail and certified as complete and correct, by a
Responsible Officer;
(b) QUARTERLY STATEMENTS. As soon as available and in
any event within 45 days after the end of each quarter (except the last) of
each Fiscal Year, copies of:
(i) consolidated and consolidating balance sheets
of the Company and its Subsidiaries as of the close of such quarter
setting forth in comparative form the amount for the end of the
preceding Fiscal Year,
(ii) consolidated and consolidating statements of
income and retained earnings of the Company and its Subsidiaries for
such quarterly period and for the portion of the Fiscal Year ending
with such quarter, setting forth in comparative form the amount for
the corresponding periods of the preceding Fiscal Year, and
(iii) consolidated statements of cash flow of the
Company and its Subsidiaries for the portion of the Fiscal Year ending
with such quarter, setting forth in comparative form the amount of the
corresponding period of the preceding Fiscal Year,
all in reasonable detail and certified as complete and correct, by a
Responsible Officer;
(c) ANNUAL STATEMENTS. As soon as available and in any
event within 90 days after the close of each Fiscal Year of the Company, copies
of:
(i) consolidated and consolidating balance sheets
of the Company and its Subsidiaries as of the close of such Fiscal
Year,
(ii) consolidated and consolidating statements of
income and retained earnings of the Company and its Subsidiaries for
such Fiscal Year, and
(iii) consolidated statements of cash flow of the
Company and its Subsidiaries for such Fiscal Year,
in each case setting forth in comparative form the consolidated and
consolidating, where applicable, figures for the preceding Fiscal Year, all in
reasonable detail and accompanied, with respect to the consolidated figures
only, by an opinion thereon (which shall not be qualified by reasons of any
limitation as to the scope of the audit or otherwise) of Coopers & Lybrand, or
any of the following firms of independent certified public accountants selected
by the Company: Arthur Andersen & Co., Deloitte & Touche, Ernst & Young, Peat
Marwick Mitchell & Co., or Price Waterhouse & Co., or of such other firm of
independent public accountants of recognized national standing selected by the
Company and approved by the Noteholders, to the effect that the consolidated
financial statements have been prepared in accordance with GAAP consistently
applied and present fairly the financial condition of the Company and its
Subsidiaries and that the examination of such accountants in connection with
such financial statements has been made in accordance with generally accepted
auditing standards and accordingly, includes such tests of the accounting
records and such other auditing procedures as were considered necessary in the
circumstances;
(d) ACCOUNTANT'S CERTIFICATES. Simultaneously with the
delivery of the audited statements required by subparagraph (c) hereof, copies
of a certificate of said accountants stating that, in making the examination
necessary for their review of the financial affairs of the Company and its
Subsidiaries for such Fiscal Year, nothing came to their attention that caused
them to believe that either the Company or any Subsidiary
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<PAGE> 18
failed to comply with the terms, covenants, provisions or conditions of this
Agreement insofar as they relate to accounting matters;
(e) OFFICER'S CERTIFICATES. Within the periods provided
in paragraphs (a) through (c) above, a certificate of a Responsible Officer
stating that he has reviewed the provisions of this Agreement and setting
forth: (i) the information and computations (in sufficient detail) required in
order to establish whether the Company was in compliance with the requirements
of subsections 6.8, 7.13, and 7.14 at the end of the period covered by the
financial statements then being furnished, (ii) whether there existed as of the
date of such financial statements and whether, to the best of his knowledge,
there exists on the date of the certificate or existed at any time during the
period covered by such financial statements any Default or Event of Default
and, if any such condition or event exists on the date of the certificate,
specifying the nature and period of existence thereof and the action the
Company is taking and proposes to take with respect thereto, (iii) that all of
the insurance policies required under subsection 6.7 and referenced under
subsection 6.2(g) are in full force and effect, and (iv) that the Company and
its Subsidiaries are in compliance with all environmental representations
referenced under subsection 5.19;
(f) REPORT OF INVESTMENTS IN NON-SUBSIDIARIES. As soon
as available and in any event within forty-five (45) days after the end of
each quarterly fiscal period of each Fiscal Year, a report of a Responsible
Officer setting forth: (i) a listing, substantially in the form of Schedule
5.1(ii), Investments in Non-Subsidiaries, attached hereto, reflecting
information applicable as of the end of such fiscal period, including an
estimate of the fair market value of each such investment as of such date; and
(ii) whether or not the Company has any notice or knowledge that there has been
any material adverse change since the previous quarterly report in the value of
each such investment or in the finances or prospects of the company in which
such investment is made;
(g) AUDIT REPORTS. Promptly upon receipt thereof, copies
of all audit reports submitted to the Company or its Subsidiaries by
independent accountants in connection with any interim or special audits of the
books of the Company or any Subsidiary made by such accountants;
(h) INSURANCE CERTIFICATE. As soon as available and in
any event within ninety (90) days after the end of each Fiscal Year, copies of
a certificate of the President of the Company certifying that the Company's
coverage meets the requirements of subsection 6.7;
(i) SEC AND OTHER REPORTS. Promptly upon their becoming
available, one copy of each financial statement, report, notice or proxy
statement sent by the Company to stockholders generally and of each regular or
periodic report, and any registration statement, prospectus, offering circular,
offering memoranda or similar materials relating to any public or private
offering of securities of the Company filed by the Company or any Subsidiary
with any securities exchange or the Securities and Exchange Commission or any
successor agency, and copies of any orders in any proceedings to which the
Company or any of its Subsidiaries is a party, issued by any Governmental
Authority having jurisdiction over the Company or any of its Subsidiaries which
have a material adverse effect on the operations of the Company or any of its
Subsidiaries, including, without limitation, notice of any "accumulated funding
deficiency", or prohibited transaction under Sections 302 of ERISA or Section
4975 of the Code, respectively, and notice of a change in the firm of
independent certified public accountants engaged by the Company;
(j) NOTICE OF LIENS. Promptly upon the occurrence
thereof, notice of the incurrence of a lien permitted under subsection 7.2
where the Indebtedness secured, or the value of the property encumbered,
exceeds $500,000.
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<PAGE> 19
(k) MANAGEMENT LETTER. Promptly, and in any event within
30 days of the receipt thereof, copies of any management letter received from
the independent certified accountants retained by the Company; and
(l) REQUESTED INFORMATION. With reasonable promptness,
such additional information as the Noteholders may reasonably request
concerning the Company and/or any of its Subsidiaries in order to enable the
Lender to determine whether the covenants, terms and provisions of the Loan
Documents have been complied with by the Company;
(m) RIGHT OF INSPECTION. Without limiting the foregoing,
the Company will permit each Noteholder (or such Persons as a Noteholder may
designate) to visit and inspect any of the properties of the Company or any
Subsidiary, to examine all their books of account, records, reports and other
papers, to make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers, management
employees, and independent public accountants (and by this provision the
Company authorized said accountants to discuss with the Noteholder, at the
Noteholder's expense, the finances and affairs of the Company and its
Subsidiaries) all at such reasonable times, upon reasonable notice, and as
often as may be reasonably requested, provided that such visitations and
inspections are conducted in a manner that is reasonably non-disruptive to the
business and operations of the Company and its Subsidiaries. The Company shall
not be required to pay or reimburse the Noteholders for expenses which the
Noteholders may incur in connection with any such visitation or inspection.
6.3. TAXES, CLAIMS FOR LABOR AND MATERIALS, COMPLIANCE WITH LAWS,
HAZARDOUS SUBSTANCES. Pay, discharge or otherwise satisfy at or before
maturity or before they become delinquent, as the case may be, all lawful
taxes, assessments and governmental charges or levies imposed upon the Company
or any Subsidiary, respectively, or upon or in respect of all or any part of
the property or business of the Company or such Subsidiary, all trade accounts
payable in accordance with usual and customary business terms as negotiated by
the Company or Subsidiary with their suppliers, and all claims for work, labor
or materials, which if unpaid might become a lien or charge upon any property
of the Company or such Subsidiary; provided the Company or such Subsidiary
shall not be required to pay any such tax, assessment, charge, levy, account
payable or claim if (i) the validity, applicability or amount thereof is being
contested in good faith by appropriate actions or proceedings which will
prevent the forfeiture or sale of any property of the Company or such
Subsidiary or any material interference with the use thereof by the Company or
such Subsidiary, and (ii) the Company or such Subsidiary shall set aside on its
books, adequate reserves with respect thereto. The Company will promptly
comply and will cause each Subsidiary to comply with all applicable laws,
ordinances or governmental rules and regulations to which it is subject,
including without limitation, the Occupational Safety and Health Act of 1970,
except where such non-compliance is not material in nature, and ERISA. Except
in accordance with Environmental Laws and in the course of the regular business
of the Company and its Subsidiaries, the Company and each Subsidiary does not
and will not generate or have in its possession Hazardous Substances. The
Company and each Subsidiary will timely comply with all applicable
Environmental Laws; and provide all Noteholders, immediately upon receipt,
copies of any correspondence, notice, complaint, order or other document from
any source asserting or alleging any circumstance or condition which requires
or may require a financial contribution by the Company or Remedial Action or
other response by or on the part of the Company under Environmental Laws, or
which seeks damages or civil, criminal or punitive penalties from the Company
for an alleged violation of Environmental Laws.
6.4. MAINTENANCE OF CORPORATE EXISTENCE. Preserve, renew and keep
in full force and effect its corporate existence and all licenses and permits
necessary to the proper conduct of its business, provided that the foregoing
shall not prevent any transaction permitted by subsection 7.3.
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<PAGE> 20
6.5. NATURE OF BUSINESS. Continue to engage in business of the
same general type as now conducted by it and not engage in any business if, as
a result, the general nature of the business, taken on a consolidated basis,
which would then be engaged in by the Company and its Subsidiaries would be
substantially changed from the general nature of the business engaged in by the
Company and its Subsidiaries on the Effective Date; continue to operate Outlook
Foods, Inc. substantially as now operated until November 30, 1998 unless its
assets are sold earlier; and take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of its
business; comply with all Contractual Obligations and Requirements of Law
except (unless unqualified compliance is required elsewhere herein) to the
extent that the failure to comply therewith could not, in the aggregate, have a
material adverse effect upon the business, operations, assets, Property,
prospects or financial condition of the Company or any of its Subsidiaries, or
could result in the creation or imposition of any Lien against any of its
Properties.
6.6. MAINTENANCE OF PROPERTIES. Maintain, preserve and keep its
Properties which are used or useful, as reasonably determined by the Company,
in the conduct of its business (whether owned in fee or a leasehold interest)
in good repair and working order and from time to time will make all necessary
repairs, replacements, renewals, additions, betterments and improvements
thereto so that at all times the efficiency thereof shall be maintained.
6.7. INSURANCE. Maintain, with financially sound and reputable
insurers, adequate insurance with respect to its properties and business
against such casualties and contingencies, of such types (including, without
limitation, fire and casualty, with extended coverage, public liability,
worker's compensation, products liability and boiler insurance) and in such
amounts and with such co-insurance as is customary in the case of corporations
of established reputation engaged in the same or a similar business and
similarly situated, and in any event adequate to provide coverage of all
insurable assets. The policies for such insurance shall name the Noteholders,
as lender's loss payee, as its interest may appear, and shall contain a
provision whereby they cannot be canceled except after thirty (30) days'
written notice to the Noteholders. The Company hereby agrees that, in the
event it or any Subsidiary fails to pay or cause to be paid the premium on any
such insurance at least seven (7) days before expiration, the Noteholders may
do so, give notice to the Company, and be reimbursed by the Company therefor.
6.8. FINANCIAL COVENANTS.
(a) Maintain Adjusted Tangible Net Worth of not less than
the following amounts during the following periods:
<TABLE>
<CAPTION>
Amount Period
------ ------
<S> <C>
$33,000,000 From and including the last day of the fiscal quarter ended
in November, 1996 to but excluding the last day of the fiscal
quarter ended in February, 1997
$34,000,000 Thereafter from and including the last day of the fiscal
quarter ended in February, 1997 to but excluding the last day
of the fiscal quarter ended in May, 1997
$35,000,000 Thereafter from and including the last day of the fiscal
quarter ended in May, 1997 to but excluding the last day of
the fiscal quarter ended in August, 1997
</TABLE>
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<PAGE> 21
<TABLE>
<S> <C>
$36,000,000 Thereafter from and including the last day of the fiscal
quarter ended in August, 1997 to but excluding the last day
of the fiscal quarter ended in November, 1997
$36,500,000 Thereafter from and including the last day of the fiscal
quarter ended in November, 1997 to but excluding the last day
of the fiscal quarter ended in February, 1998
$37,500,000 Thereafter from and including the last day of the fiscal
quarter ended in February, 1998 to but excluding the last day
of the fiscal quarter ended in May, 1998
$38,500,000 Thereafter from and including the last day of the fiscal
quarter ended in May, 1998 to but excluding the last day of
the fiscal quarter ended in August, 1998
$39,500,000 Thereafter from and including the last day of the fiscal
quarter ended in August, 1998 to but excluding the last day
of the fiscal quarter ended in November, 1998
$41,000,000 Thereafter from and including the last day of the fiscal
quarter ended in November, 1998 to but excluding the last day
of the fiscal quarter ended in February, 1999
$42,500,000 Thereafter from and including the last day of the fiscal
quarter ended in February, 1999 to but excluding the last day
of the fiscal quarter ended in May, 1999
$43,500,000 Thereafter from and including the last day of the fiscal
quarter ended in May, 1999 to but excluding the last day of
the fiscal quarter ended in August, 1999
$43,500,000 plus Thereafter from and including the last day $1,250,000 for of
the fiscal quarter then last ended to but each fiscal quarter
excluding the last day of the immediately ending after the succeeding
fiscal quarter ended fiscal quarter ended in August, 1999, and prior
to the date of
</TABLE>
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<PAGE> 22
determination
(b) DEBT RATIO. Maintain a ratio of Indebtedness to
Adjusted Tangible Net Worth during the following periods of not more than the
following ratios:
<TABLE>
<CAPTION>
Ratio Fiscal Quarter Ended
----- --------------------
<S> <C>
1.60 to 1.0 From and including the last day of the fiscal quarter ended
in November, 1996 to but excluding the last day of the fiscal
quarter ended in February, 1997
1.50 to 1.0 Thereafter from and including the last day of the fiscal
quarter ended in February, 1997 to but excluding the last day
of the fiscal quarter ended in May, 1997
1.40 to 1.0 Thereafter from and including the last day of the fiscal
quarter ended in May, 1997 to but excluding the last day of
the fiscal quarter ended in November, 1997
1.30 to 1.0 Thereafter from and including the last day of the fiscal
quarter ended in November, 1997 to but excluding the last day
of the fiscal quarter ended in May, 1998
1.20 to 1.0 Thereafter from and including the last day of the fiscal
quarter ended in May, 1998 to but excluding the last day of
the fiscal quarter ended in November, 1998
1.10 to 1.0 Thereafter from and including the last day of the fiscal
quarter ended in November, 1998 to but excluding the last day
of the fiscal quarter ended in May, 1999
1.00 to 1.0 Thereafter
</TABLE>
(c) FIXED CHARGE COVERAGE RATIO. Maintain a Fixed Charge
Coverage Ratio, (i) for the fiscal quarter ended November 30, 1996, of not less
than .90 to 1.0, (ii) for the two consecutive fiscal quarters (taken as one
accounting period) ended February 28, 1997, of not less than 1.10 to 1.0, (iii)
for the three consecutive fiscal quarters (taken as one accounting period)
ended May 31, 1997, of not less than 1.20 to 1.0, and (iv) for any period of
four consecutive fiscal quarters (in each case taken as one accounting period)
ended on each date set forth below to be not less than the ratio set forth
opposite such date below:
<TABLE>
<CAPTION>
Ratio Fiscal Quarter Ended
----- --------------------
<S> <C>
1.25 to 1.0 August 31, and November 30, 1997
</TABLE>
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<PAGE> 23
<TABLE>
<S> <C>
1.20 to 1.0 February 28, 1998 and each fiscal quarter thereafter
</TABLE>
6.9. NOTICE OF DEFAULT. Within ten (10) days after any Responsible
Officer of the Company becomes aware of any condition or event which
constitutes an Event of Default hereunder, or which after notice or lapse of
time or both, would constitute such an Event of Default, give written notice to
the Noteholders of the existence of such condition or event, specifying the
nature and period of existence thereof and specifying what action the Company
proposes to take with respect thereto.
6.10. ADDITIONAL NOTICES. Within ten (10) days of when such first
becomes known to any Responsible Officer of the Company, give notice to the
Lender:
(a) of any default or event of default under any
Contractual Obligation of the Company or any of its Subsidiaries, the
noncompliance with which could have a material adverse effect upon the
business, operations, assets, Property, prospects or financial condition of the
Company or any of its Subsidiaries or could result in the creation or
imposition of any Lien against any of its Properties;
(b) of any litigation, investigation or proceeding which
may exist at any time between the Company, or any of its Subsidiaries, and any
Governmental Authority, and which, if adversely determined, could have a
material adverse effect upon the business, operations, assets, Property,
prospects or financial condition of the Company or any of its Subsidiaries;
(c) of any litigation or proceeding affecting the
Company, any of its Subsidiaries or the Property of any of them, in which the
amount involved is $500,000 or more and not covered by insurance or in which
injunctive or similar relief is sought;
(d) of the following events, as soon as possible and in
any event within 30 days after the Company knows or has reason to know thereof:
(i) the occurrence or expected occurrence of any Reportable Event with respect
to any Plan with respect to which the Company or any of its Subsidiaries is an
employer; or (ii) the institution of proceedings or the taking or expected
taking of any other action by the PBGC or the Company or any Commonly
Controlled Entity to terminate, withdraw or partially withdraw from any such
Plan and with respect to a Multiemployer Plan (as that term is defined in
Section 4001(a)(3) of ERISA), the reorganization or insolvency of such a Plan,
and in addition to such notice, deliver to the Lender whichever of the
following may be applicable: (A) a certificate of a Responsible Officer setting
forth details as to such Reportable Event and the action that the Company or
Commonly Controlled Entity proposes to take with respect thereto, together with
a copy of any notice of such Reportable Event that may be required to be filed
with the PBGC, or (B) any notice delivered by the PBGC evidencing its intent to
institute such proceedings or any notice to the PBGC that such Plan is to be
terminated, as the case may be.
6.11. BOARD'S PARTICIPATION IN ADDITIONAL LONG-TERM DEBT. If the
Company or any Subsidiary hereafter determines to create or incur Indebtedness
for borrowed money in amounts of $3,000,000 or more and providing for repayment
over a period of seven (7) years or more, provided that the incurrence of such
Indebtedness is permitted under subsection 7.1, the Company or the Subsidiary
shall notify the Lender in writing of the amount of such proposed Indebtedness
and the Lender shall have an opportunity:
(a) to present the terms on which the Lender would be
willing to lend such funds; and
(b) discuss such terms with representatives of the
Company. The Company and each Subsidiary agree that neither the Company nor
any Subsidiary will enter into any binding commitment for such borrowing until
thirty (30) days after the notice required hereby has been given and
thereafter, if the funds are available from the Lender on terms and conditions
which are substantially similar to those on funds available
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<PAGE> 24
from other sources, to borrow such funds from the Lender, and if they are not
willing to provide funds on substantially similar terms, then the funds may be
obtained from whatever sources and on whatever terms Company or Subsidiary may
in its sole discretion determine.
6.12. PAYMENT OF NOTES. Duly pay the Notes strictly in accordance
with its terms and without any set-offs or modifications of any kind.
SECTION 7. NEGATIVE COVENANTS
The Company hereby agrees that, so long as the Notes remains
outstanding and unpaid or any amount is owed to Lender or any Noteholder
hereunder:
7.1. LIMITATION ON INDEBTEDNESS. The Company will not, and will
not permit any Subsidiary to, create, incur, assume or become or remain liable
with respect to any Indebtedness other than:
(a) Indebtedness outstanding on the date hereof, as
reflected in the certificate with respect thereto delivered pursuant to
subsection 3.1(h) hereof;
(b) additional secured Funded Debt, if secured by liens
permitted under subsection 7.2(f), provided that the aggregate amount of all
such additional debt and additional debt incurred under the subsection 7.1(c)
hereof shall not exceed $250,000;
(c) additional unsecured Funded Debt, provided that such
unsecured Funded Debt is incurred for the purchase of assets, is furnished by
the seller of such assets and that such purchase otherwise conforms to the
requirements of subsection 7.2(f), provided that the aggregate amount of all
such additional debt and additional debt incurred under the subsection 7.1(b)
hereof shall not exceed $250,000;
(d) accounts payable for goods and services purchased in
the ordinary course of business, provided that such accounts payable are not
overdue (unless they are being contested in good faith by appropriate
proceedings);
(e) with regard to the Company only, additional
Subordinated Funded Debt;
(f) Indebtedness incurred pursuant to interest rate swaps
or other financial transactions reasonably structured solely for the purposes
of hedging interest rate risk, provided that such swaps or other transactions
are reasonably intended for hedging the interest rate risk of the Company or
Subsidiaries, and are in the amount and of the type reasonably necessary for
such hedging;
(g) renewals, extensions and refundings by the borrower
thereon of any of the Indebtedness permitted above, but the foregoing shall not
be deemed to permit any increase in the interest rate, fees payable with
respect to, or principal amount of, acceleration of the rate of repayment of
principal or redemption of, the granting of any additional collateral security
for, or the making of more restrictive covenants or defaults in connection
with, any such Indebtedness being renewed, extended or refunded; and
(h) the BABC Debt and amendments, modifications,
renewals, extensions, refinancings, and refundings thereof, including an
increase in the amount available under the revolving loans thereunder to a
maximum aggregate amount available of $27,900,000, but the foregoing shall not
be deemed to permit any increase in the interest rate, rate of fees payable
with respect to, or, except as specifically provided, principal amount of,
acceleration of the rate of repayment of principal or redemption of, the
granting of any additional
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<PAGE> 25
equipment or additional categories of collateral as security for, or the making
of more restrictive covenants or defaults in connection with, any such BABC
Debt being amended, modified, renewed, extended, refinanced, or refunded, and
further provided that any such transaction shall meet the requirements of
subsection 7.12 provided, in each case, that the incurrence of any additional
Funded Debt will not cause Funded Debt to exceed the debt ratio limit provided
in subsection 6.8(b) and that such additional Funded Debt will not result in
any Default or Event of Default on the date of such incurrence and immediately
after taking into account the incurrence of that Funded Debt.
Notwithstanding the foregoing, the Company shall not have Indebtedness
outstanding to any Subsidiary, and no Subsidiary shall have Indebtedness
outstanding to the Company or any Subsidiary other than itself unless, in
either case, the Indebtedness is fully subordinated, both as to collateral, if
any, and as to payment, to the repayment in full of all interest, principal and
premium on the Notes in form satisfactory to the Noteholders.
7.2. LIMITATION ON LIENS. The Company will not, and will not
permit any Subsidiary to, create or incur, or suffer to be incurred or to
exist, any mortgage, pledge, security interest, encumbrance, lien or charge of
any kind on its or their property or assets, whether now owned or hereafter
acquired, or upon any income or profits therefrom, or upon any shares of stock
or evidence of Indebtedness of a Subsidiary, or transfer any property for the
purpose of subjecting the same to the payment of obligations in priority to the
payment of its or their general creditors, or acquire or agree to acquire, or
permit any Subsidiary to acquire, any property or assets upon conditional sales
agreements or other title retention devices, nor enter into any sale-leaseback
transactions, except:
(a) liens for property taxes and assessments or
governmental charges or levies and liens securing claims or demands of
mechanics and materialmen, provided that payment thereof is not at the time
required by subsection 6.3;
(b) liens of or resulting from any judgment or award, the
time for the appeal or petition for rehearing of which shall not have expired,
or in respect of which the Company or a Subsidiary shall at any time in good
faith be prosecuting an appeal or proceeding for a review and in respect of
which a stay of execution pending such appeal or a proceeding for review shall
have been secured;
(c) liens for taxes, assessments or governmental charges,
and liens incident to construction, which are either not delinquent or are
being contested in good faith by the Company or a Subsidiary by appropriate
proceedings which will prevent foreclosure of such liens, and against which
adequate reserves have been provided; and easements, restrictions, minor title
irregularities and similar matters which are shown on the title policies and
which have no adverse effect as a practical matter upon the ownership and use
of the affected property by the Company or any Subsidiary;
(d) liens or deposits in connection with worker's
compensation or other insurance or to secure customs' duties, public or
statutory obligations in lieu of surety, stay or appeal bonds, or to secure
performance of contracts or bids (other than contracts for the payment of
borrowed money), or deposits required by law or governmental regulations or by
any court order, decree, judgment or rule as a condition to the transaction of
business or the exercise of any right, privilege or license; or other liens or
deposits of a like nature made in the ordinary course of business;
(e) mortgages, conditional sale contracts, security
interests or other arrangements for the retention of title (including Capital
Leases) existing on the Effective Date and shown on Schedule 3.1(h), securing
Indebtedness of the Company or any Subsidiary outstanding on such date, or
renewals, extensions and refundings thereof which are permitted under
subsection 7.1;
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<PAGE> 26
(f) mortgages, conditional sale contracts, security
interests or other arrangements for the retention of title (including Capital
Leases) incurred after the date hereof given to secure the payment of the
purchase price incurred in connection with the acquisition or construction of
fixed assets useful and intended to be used in carrying on the business of the
Company or a Subsidiary, including liens existing on such fixed assets at the
time of acquisition thereof or at the time of acquisition by the Company or a
Subsidiary of any business entity then owning such fixed assets, whether or not
such existing liens were given to secure the payment of the purchase price of
the fixed assets to which they attach so long as they were not incurred,
extended or renewed in contemplation of such acquisition, provided that (i) the
lien or charge shall attach solely to the property acquired or purchased, (ii)
at the time of acquisition of such fixed assets, the aggregate amount remaining
unpaid on all Indebtedness secured by liens on such fixed assets whether or not
assumed by the Company or a Subsidiary shall not exceed an amount equal to the
total purchase price (provided that such purchase price bears a reasonable
relationship to the fair market value of such fixed assets at the time of
acquisition, as determined in good faith by the chief executive officer of the
Company, and (iii) immediately after taking into account such additional
Indebtedness, the requirements of subsection 6.8(b) are not violated;
(g) liens contemplated by the BABC Loan Agreement as
security for the BABC Debt and liens securing any credit facilities replacing
the BABC Debt, meeting the requirements of subsection 7.1(h), and secured by
the same categories of collateral (subject to Lender's prior lien on Outlook
Foods Equipment to the extent then still in existence); and
(h) liens required by this Agreement as security for the
Notes.
7.3. MERGERS, CONSOLIDATIONS AND SALES OF ASSETS.
(a) The Company will not, and will not permit any
Subsidiary to (i) consolidate with or be a party to a merger with any other
corporation or (ii) sell, lease or otherwise dispose of all or any substantial
part (as defined below) of the assets of the Company and its Subsidiaries,
provided, however, if both before and immediately after the transaction, no
Event of Default under this Agreement has occurred which has not been cured or
waived:
(i) any Subsidiary may merge or consolidate with
or into the Company or any Wholly-owned Subsidiary so long as in any
merger or consolidation involving the Company, the Company shall be
the surviving or continuing corporation;
(ii) any Subsidiary may sell, lease or otherwise
dispose of all or any substantial part of its assets to the Company or
any Wholly-owned Subsidiary; and
(iii) the Company or any Subsidiary may sell or
factor any receivable for fair value and without recourse in the
ordinary course of business.
(b) The Company will not permit any Subsidiary to issue
or sell any shares of stock of any class (including as "stock" for the purposes
of this subsection 7.3, any warrants, rights or options to purchase or
otherwise acquire stock or other Securities exchangeable for or convertible
into stock) of such Subsidiary to any Person other than the Company or a
Wholly-owned Subsidiary.
(c) The Company will not sell, transfer or otherwise
dispose of any shares of stock in any Subsidiary (except to qualify directors)
or any Indebtedness of any Subsidiary, and will not permit any Subsidiary to
sell, transfer or otherwise dispose of (except to the Company or a Wholly-owned
Subsidiary) any shares of stock or any Indebtedness of any other Subsidiary.
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<PAGE> 27
(d) Notwithstanding the above, the Company and its
Subsidiaries may sell assets, other than real estate or Outlook Foods
Equipment, in any twelve-month period with an aggregate value (including assets
disposed of in such twelve-month period in transactions not involving a
substantial part (as defined below) of the assets of the Company and its
Subsidiaries) of up to $200,000, as shown by the appraisals furnished pursuant
to subsection 3.5, provided that:
(i) the assets sold did not constitute some or
all of the essential assets used in the production of ten percent
(10%) or more of the Adjusted Net Income from Operations for the
four-quarter period then most recently completed; and
(ii) the greater of (x) the fair market value of
the assets, as determined by a contemporaneous appraisal satisfactory
to the Lender, or (y) seventy-five percent (75%) of the net proceeds
generated from the sale of assets are used to repay outstanding Funded
Debt, and, with respect to real estate, or any other asset upon which
there is not, or is not permitted, a lien securing Funded Debt which
is prior to the lien securing the Notes, the Company shall use such
proceeds to first repay amounts outstanding under the Notes prior to
repaying any other outstanding Funded Debt.
(e) Notwithstanding the above, Outlook Foods, Inc. may
sell the Outlook Foods Real Estate and the Outlook Foods Equipment, for cash
and at prices no less than the fair market value of real estate or the orderly
liquidation value of equipment, each as shown by the appraisals furnished
pursuant to subsection 3.5, or upon such other terms and conditions agreeable
to Lender, and provided that the proceeds shall be applied to prepay the Notes
pursuant to subsection 4.1(b), and Barrier Films Corporation may sell its
assets upon terms and conditions agreeable to Lender, and, alternatively,
Outlook Foods, Inc. or Barrier Films Corporation may be divested by the Company
in transactions that would be substantially equivalent to such asset
dispositions, including with respect to the approval of the Lender and the
application of proceeds.
As used in this subsection 7.3, a sale, lease or other
disposition of assets shall be deemed to be a "substantial part" of the assets
of the Company and its Subsidiaries only if the value of such assets, as shown
by the appraisals furnished pursuant to subsection 3.5, exceeds $50,000 per
transaction or group of related transactions. Where the sale, lease or
disposition is of other than a substantial part of the assets of the Company
and its Subsidiaries, and is not of Outlook Foods Equipment or Outlook Foods
Real Estate, the Company may dispose of such assets without the consent of the
Noteholders and without being required to use the proceeds to repay any
outstanding Funded Debt.
7.4. GUARANTIES. Except as permitted under the Intercreditor
Agreement, the Company will not and will not permit any Subsidiary to become or
be liable in respect to any Guaranty except Guaranties by the Company or a
Subsidiary of Indebtedness of the Company or a Subsidiary.
7.5. TRANSACTION WITH AFFILIATES, OFFICERS. Except as provided in
subsection 7.7(b), the Company will not, and will not permit any Subsidiary to,
enter into or be a party to, any transaction or arrangement with any Affiliate
(including without limitation, the purchase from, sale to or exchange of
property with, or the rendering of any service by or for, any Affiliate),
except in the ordinary course of and pursuant to the reasonable requirements of
the Company's or such Subsidiary's business and upon fair and reasonable terms
no less favorable to the Company or such Subsidiary than would obtain in a
comparable arm's-length transaction with a Person other than an Affiliate. The
Company will not permit any officer, including all persons related to such
officer, of the Company, a Subsidiary, or an Affiliate, or any Affiliate to
incur Indebtedness to the Company or a Subsidiary if the aggregate of all such
Indebtedness for such officer and all persons related to such officer would
thereby exceed $100,000.
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<PAGE> 28
7.6. COMPLIANCE WITH ERISA. The Company will not, and will not
permit any Subsidiary to, (a) terminate any Plan if such termination results in
any material liability to the PBGC, (b) engage in any "prohibited transaction"
(as defined in ERISA and the Code) if such transaction involves a Plan and
could result in a material liability for an excise tax or civil penalty in
connection therewith, or (c) incur or suffer to exist any material "accumulated
funding deficiency" (as defined in ERISA), whether or not waived, involving any
condition which creates a material risk that the Company will incur a material
liability to the PBGC by reason of any termination of any such Plan.
7.7. INVESTMENTS. The Company will not, and will not permit any
Subsidiary to, make any investments in or loans, advances or extensions of
credit to, any Person, except:
(a) investments, loans and advances by the Company and
its Subsidiaries in and to Subsidiaries, including any investment in a
corporation which, after giving effect to such investment, will become a
Subsidiary;
(b) investments,other than investments permitted under
subsection (a), (c), (d), (e), (f) or (g) hereof, outstanding on the Effective
Date, and shown on Schedule 5.1(ii) attached hereto;
(c) investments in commercial paper maturing in 180 days
or less from the date of issuance, or municipal obligations, at least
seventy-five percent (75%) of which at the time of acquisition by the Company
or any Subsidiary, is accorded the highest rating by Standard & Poor's
Corporation, Moody's Investors Services, Inc. or other nationally recognized
credit rating agency of similar standing, and the remainder of which may be in
regional, unrated commercial paper, provided that a maximum of $200,000 of such
unrated paper may be of any single issuer;
(d) investments in direct obligations of the United
States of America, or any agency thereof, maturing in nine (9) months or less
from the date of acquisition thereof, provided that such obligations may mature
in more than nine (9) months from the date of acquisition thereof if they are
acquired for the purpose of a sinking, reserve, liquidity or similar fund, in
such form as is customary or consistent with the lender's usual practices or as
may be reasonably required under the circumstances, for outstanding
Indebtedness, and have maturities equal to or less than the expected holding
period of the investment by the sinking, reserve, liquidity or similar fund;
(e) investments in savings accounts with, or certificates
of deposit maturing within one year from the date of origin and issued by, a
bank or trust company organized under the laws of the United States or any
state thereof, having capital, surplus and undivided profits aggregating at
least $100,000,000;
(f) loans or advances in the usual and ordinary course of
business to officers, directors and employees for expenses (including moving
expenses related to a transfer) incidental to carrying on the business of the
Company or any Subsidiary provided such loans or advances are permitted under
subsection 7.5; and
(g) receivables arising from the sale of goods and
services in the ordinary course of business of the Company and its Subsidiaries
due within 90 days, but not in any case credit to customers intended to enable,
or in fact used by, customers to finance their accounts receivable.
In valuing any investments, loans and advances for the purpose
of applying the limitations set forth in this subsection 7.7, such investments,
loans and advances shall be taken at the original cost thereof, without
allowance for any subsequent write-offs or appreciation or depreciation
therein, but less any amount repaid or recovered on account of capital or
principal.
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<PAGE> 29
For purposes of this subsection 7.7, at any time when a
corporation becomes a Subsidiary, all investments of such corporation at such
time shall be deemed to have been made by such corporation, as a Subsidiary, at
such time.
7.8. MARGIN STOCK. The Company will not, directly or indirectly,
use the proceeds of the loan evidenced by the Existing Board Note and the Note
to purchase or carry any margin stock (within the meaning of the applicable
regulations of the Federal Reserve Board), to extend credit to others for the
purpose of purchasing or carrying margin stock, or to undertake any other
activity inconsistent with the Federal Reserve Board's regulations. If
requested by Lender, a statement in conformity with the requirements of the
applicable Federal Reserve Board form shall be provided by the Company to the
Lender.
7.9. OBLIGATION UNCONDITIONAL. Except as otherwise expressly
provided, neither this Agreement nor the Notes shall terminate, nor shall
Company have any right to terminate this Agreement or the Notes or be entitled
to abatement, suspension, deferment or reduction of any payments which Company
is obligated to pay hereunder, nor shall the obligations of Company be affected
by reason of any insolvency, bankruptcy, reorganization or similar proceedings
by or against Company, any breach, default, or misrepresentation by Lender or
any holder of the Notes at any time or invalidity or unenforceability, in whole
or in part, of this Agreement or the Notes or any other infirmity herein or
therein, or any lack of power or authority of any party to this Agreement, it
being the intention of the parties hereto that the obligations of Company shall
be absolute and unconditional and shall be separate and independent covenants
and agreements and shall continue unaffected unless and until the covenants
have been terminated pursuant to an express provision of this Agreement. The
Company shall not transfer nor allow the assumption of the obligations
represented by this Agreement or the Notes, whether with or without the Company
purportedly being released from its obligations hereunder or thereunder and, in
the event of any purported transfer or assumption the holders of the Notes may
look to the transferee or assumer without thereby releasing or waiving any
rights against the Company.
7.10. SALE AND LEASEBACK TRANSACTIONS. The Company will not, and
will not permit any Subsidiary to, directly or indirectly, enter into any
arrangement with any Person providing for the Company or any Subsidiary to
lease or rent property that the Company or any Subsidiary has or will sell or
otherwise transfer to such Person, except that the Company and Outlook
Packaging, Inc., may effect a sale to and lease from General Electric Capital
Corporation of certain equipment described on Schedule 7.10 (the "GECC
Transaction") pursuant to documents which are in form and substance
satisfactory to Lender and fully executed originals of which shall be furnished
to Lender prior to the date of consummation of such transaction.
7.11. MISCELLANEOUS NEGATIVE COVENANTS. The Company will not, and
will not permit any Subsidiary to:
(a) Change its Fiscal Year; or
(b) Change its auditors from those described in
subsection 6.2(c).
7.12 BABC DEBT. The Company will not, and will not permit any
Subsidiary to (a) prepay (other than in connection with a refinancing permitted
under the terms of this Agreement), or, in the case of any revolving credit or
similar credit facility, reduce the amount available for draw (other than
mandatory prepayment in accord with the BABC Loan Agreement or by sales of
inventory in the ordinary course of business and collection of accounts
receivable) under, the BABC Debt; or, (b) amend or modify any document
evidencing or supporting the BABC Debt if the effect of such amendment or
modification is to (i) increase the rate of interest or fees payable with
respect thereto; (ii) change the dates on which any payments are due thereunder
other than to extend such dates; (iii) make more restrictive the covenants or
defaults contained therein; (iv) accelerate the date for payment or redemption,
of any such debt; or (v) grant any lien to secure the
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<PAGE> 30
payment thereof other than liens in effect or contemplated on the date hereof;
provided that prepayments of Funded Debt may be made as required or permitted
by subsection 7.3(d)(ii). Repayment of any revolving credit facility under
circumstances where the available amount committed by the lender thereof is not
reduced shall not be considered a prepayment for this purpose.
7.13 CAPITAL EXPENDITURES. The Company will not, and will not
permit any Subsidiary to, make or incur any Capital Expenditure if, after
giving effect thereto, the aggregate amount of all Capital Expenditures (other
than Specified Capital Expenditures) by Company and its Subsidiaries on a
consolidated basis would exceed the following respective amounts in the
following respective Fiscal Years:
<TABLE>
<CAPTION>
CapEx Limit Fiscal Year
----------- -----------
<S> <C>
$2,200,000 1997
$3,000,000 1998
$4,000,000 1999 and each Fiscal Year thereafter
</TABLE>
7.14 OPERATING LEASE OBLIGATIONS. The Company will not, and will
not permit any Subsidiary to, enter into any lease of real or personal property
as lessee or sublessee (other than Capital Leases), if, after giving effect
thereto, the aggregate amount of Rentals payable by the Company and its
Subsidiaries in any Fiscal year in respect of such lease and all other such
leases would exceed (such amount being referred to herein as "Permitted
Rentals") (x) prior to the consummation of the GECC Transaction $4,214,000 for
the 1997 Fiscal Year, $4,428,000 for the 1998 Fiscal Year, and $4, 628,000 for
each Fiscal Year thereafter, and (y) after the consummation of the GECC
Transaction, $3,600,000 for the 1997 Fiscal Year, $3,200,000 for the 1998 Fiscal
Year, and $3,400,000 for each Fiscal Year thereafter. The term "Rentals" means
all payments due from the lessee or sublessee under a lease, including, without
limitation, basic rent, percentage rent, property taxes, utility or maintenance
costs, and insurance premiums.
7.15 DISTRIBUTIONS; CAPITAL CHANGES. The Company will not, and
will not permit any Subsidiary to, (a) directly or indirectly declare or make,
or incur any liability to make, any Distribution, except Distributions to the
Company by a Wholly-Owned Subsidiary; or (b) make any change in its capital
structure which could adversely affect the repayment of the Notes.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
8.1. EVENTS OF DEFAULT. Any one or more of the following shall
constitute an "Event of Default" as the term is used herein:
(a) The Company shall fail to make the payment of
interest on the Notes within five (5) Business Days of the date when the same
shall have become due; or
(b) The Company shall fail to make any prepayment
required under subsection 4.1(a) on the Notes within five (5) Business Days of
the date such payment shall be due as provided in subsection 4.1(a); or
(c) The Company shall fail to make any other payment of
the principal of the Notes or the premium thereon at the expressed or any
accelerated maturity date or at any date fixed for prepayment; or
(d) Except as described in Schedule 8.1(d), attached,
default or the happening of any event shall occur, which default or event has
not been waived in writing, under any indenture, agreement, or other
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<PAGE> 31
instrument under which any Indebtedness of the Company or any Subsidiary for
borrowed money or any other lease agreement may be issued and such default or
event shall continue for a period time sufficient to permit the acceleration of
the maturity of Indebtedness of the Company or any Subsidiary outstanding
thereunder or any other lease agreement in any case in an amount in excess of
$500,000, or any Event of Default shall occur and be continuing under the BABC
Loan Agreement; or
(e) Default shall occur in the observance or performance
of the provisions set forth in sections 6.2, 6.7, 6.8 or 7.1 through 7.15 of
this Agreement; or
(f) Default shall occur in the observance or performance
of any other provision of this Agreement or any of the other Loan Documents
which is not remedied within 30 days after notice thereof to the Company by a
holder of the Notes or 30 days after the Company first obtains knowledge
thereof, the Company has informed the Noteholders and the Noteholders have
confirmed to the Company that such an event would constitute a Default if not
remedied, whichever is sooner; or
(g) If any representation or warranty made by the Company
herein, or made by the Company in any statement or certificate furnished by the
Company in connection with the consummation of the issuance and delivery of the
Existing Board Note, the Note or furnished by the Company pursuant thereto or
hereto, is untrue in any material respect as of the date of the issuance or
making thereof; or
(h) A custodian, trustee or receiver is appointed for the
Company or any Subsidiary or for the major part of the property of either and
is not discharged within 30 days after such appointment; or
(i) Final judgment or judgments for the payment of money
aggregating in excess of $500,000 is or are outstanding against the Company or
any Subsidiary or against any property or assets of either and any one of such
judgments has remained unpaid, unvacated, unbonded or unstayed by appeal or
otherwise for a period of 60 days from the date of its entry; or
(j) The Company or any Subsidiary becomes insolvent or
bankrupt, is generally not paying its debts as they become due or makes an
assignment for the benefit of creditors, or the Company or any Subsidiary
causes or suffers an order for relief to be entered with respect to it under
applicable Federal bankruptcy law or applies for or consents to the appointment
of a custodian, trustee or receiver for the Company or such Subsidiary or for
the major part of the property or either; or
(k) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or similar
law or laws for the relief of debtors, are instituted by or against the Company
or any Subsidiary and, if instituted against the Company or any Subsidiary, are
consented to or are not dismissed within 60 days after such institution; or
(l) The Company ceases to own all of the issued and
outstanding capital stock of each Subsidiary (except as permitted in Section
7.3(e)) or any person or group of persons (within the meaning of the Securities
Exchange Act of 1934) shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Securities Exchange Commission) of 30%
or more of the outstanding capital stock of the Company.
8.2. NOTICE TO HOLDER. When any Default or Event of Default
described in the foregoing subsection 8.1 has occurred, or if any holder of the
Notes or of any other evidence of Indebtedness of the Company gives any notice
to the Company or a Subsidiary or takes any other action with respect to a
claimed default of which the Company or a Subsidiary is aware, the Company
agrees to give notice within three business days of such
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<PAGE> 32
event to all holders of the Notes then outstanding, such notice to be in
writing and sent by registered or certified mail or by telegram.
8.3. ACCELERATION OF MATURITIES. When any Event of Default
described in paragraph (a) through (i), inclusive, or paragraph (l), of
subsection 8.1 has happened and is continuing, together, all Noteholders who
hold one or more Notes whereby each holds 25% or more of the principal amount
of Notes at the time outstanding may jointly, by notice in writing sent by
registered or certified mail to the Company, declare the entire principal and
all interest accrued on all Notes to be, and all Notes shall thereupon become,
forthwith due and payable, without any presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived. When any Event
of Default described in paragraph (j) or (k) of subsection 8.1 has occurred,
then the Notes shall immediately become due and payable without presentment,
demand or notice of any kind. Upon the Notes becoming due and payable as a
result of any Event of Default as aforesaid, the Company will forthwith pay to
the holders of the Notes the entire principal and interest accrued on the Notes
and, to the extent permitted by law, the amount which would be payable if the
Company then had elected to prepay the Notes at a premium pursuant to
subsection 4.2. No course of dealing on the part of any Noteholder nor any
delay or failure on the part of any Noteholder to exercise any right,
including, without limitation, the acceptance of a partial payment, shall
operate as a waiver of such right or otherwise prejudice such holder's rights,
powers and remedies. The Company further agrees, to the extent permitted by
law, to pay to the holder of the Notes all costs and expenses before and after
judgment incurred by such holder in the collection of the Notes upon any
default hereunder or thereon, including reasonable compensation to such
holder's or holders' attorneys for all services rendered in connection
therewith.
8.4. RESCISSION OF ACCELERATION. The provisions of subsection 8.3
are subject to the condition that if the principal of and accrued interest on
the Notes have been declared immediately due and payable by reason of the
occurrence of any Event of Default described in paragraphs (a) through (i),
inclusive, and paragraph (l), of subsection 8.1, the holders of 66-2/3% in
aggregate principal amount of the Notes then outstanding may, by written
instrument filed with the Company, rescind and annul such declaration and the
consequences thereof, provided that at the time such declaration is annulled
and rescinded:
(a) no judgment or decree has been entered for the
payment of any monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes or all
other sums payable under the Notes and under this Agreement (except any
principal, interest or premium on the Notes which has become due and payable
solely by reason of such declaration under subsection 8.3) shall have been duly
paid; and
(c) each and every other Default and Event of Default
shall have been made good, cured or waived pursuant to subsection 9.1;
and provided further that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right
consequent thereto.
SECTION 9. AMENDMENTS, WAIVERS AND CONSENTS.
9.1. CONSENT REQUIRED. Any term, covenant or condition of this
Agreement may, with the consent of the Company, be amended or compliance
therewith may be waived (either generally or in a particular instance and
either retroactively or prospectively), if the Company shall have obtained the
consent in writing of the holders of at least 83% in aggregate principal amount
of outstanding Notes; provided that without the written
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<PAGE> 33
consent of the holders of all of the Notes then outstanding, no such waiver,
modification, alteration or amendment shall be effective (i) which will extend
the time of payment (including any prepayment required by subsection 4.1(a)) of
the principal of or the interest on any Note or reduce the principal amount
thereof or change the rate of interest thereon, or (ii) which will change any
of the provisions with respect to optional prepayments, or (iii) which will
change the percentage of holders of the Notes required to consent to any such
amendment, alteration or modification or any of the provisions of this Section
9 or Section 8.
9.2. EFFECT OF AMENDMENT OR WAIVER. Any such amendment or waiver
shall apply equally to all of the holders of the Notes and shall be binding
upon them, upon each future holder of any Note and upon the Company, whether or
not such Note shall have been marked to indicate such amendment or waiver. No
such amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right consequent thereon.
SECTION 10. MISCELLANEOUS.
10.1. REGISTERED NOTES. The Company shall cause to be kept at its
principal office a register for the registration and transfer of the Notes
(hereinafter called the "Note Register"), and the Company will register or
transfer or cause to be registered or transferred, as hereinafter provided and
under such reasonable regulations as it may prescribe, the Notes issued
pursuant to this Agreement.
At any time and from time to time the registered holder of any Note
which has been duly registered as hereinabove provided may transfer such Note
upon surrender thereof at the principal office of the Company duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered
holder of such Note or its attorney duly authorized in writing.
The Person in whose name the registered Note shall be registered shall
be deemed and treated as the owner and holder thereof for all purposes of this
Agreement. Payment of or on account of the principal, premium, if any, and
interest on the registered Note shall be made to or upon the written order of
such registered holder.
10.2. EXCHANGE OF NOTES. At any time, and from time to time, upon
not less than ten days' notice to that effect given by the holder of the Note
initially delivered or of any Note substituted therefor pursuant to subsection
10.3, this subsection 10.2 or subsection 10.3, and, upon surrender of such Note
at its office, the Company will deliver in exchange therefor, without expense
to the holder, except as set forth below, Notes in registered form for the same
aggregate principal amount as the then unpaid principal amount of the Note so
surrendered, in the denomination of $250,000 or any amount in excess thereof as
such holder shall specify, dated as of the date to which interest has been paid
on the Note so surrendered or, if such surrender is prior to the payment of any
interest thereon, then dated as of the date of issue, payable to such Person or
Persons as may be designated by such holder, and otherwise of the same form and
tenor as the Note so surrendered for exchange. The Company may require the
payment of a sum sufficient to cover any stamp tax or governmental charge
imposed upon such exchange or transfer.
10.3. LOSS, THEFT, ETC. OF NOTES. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of
any Note, and in the case of any such loss, theft or destruction upon delivery
of a bond of indemnity in such form and amount as shall be reasonably
satisfactory to the Company, or in the event of such mutilation upon surrender
and cancellation of the Note, the Company will make and deliver without expense
to the holder thereof, a new Note, of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Note. If the Lender or any subsequent institutional
holder is the owner of any such lost, stolen or destroyed Note, then the
affidavit of an authorized officer of such owner, setting forth the fact of
loss, theft or
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<PAGE> 34
destruction and of its ownership of the Note at the time of such loss, theft or
destruction shall be accepted as satisfactory evidence thereof and no further
indemnity shall be required as a condition to the execution and delivery of a
new Note other than the written agreement of such owner to indemnify the
Company.
10.4. EXPENSES, STAMP TAX INDEMNITY. Whether or not the
transactions herein contemplated shall be consummated, the Company agrees to
pay directly all of the Lender's out-of-pocket expenses in connection with the
preparation, execution and delivery of this Agreement and the transactions
contemplated hereby, including but not limited to the reasonable charges and
disbursements of Lender's counsel, duplicating and printing costs, and charges
for shipping the Note, adequately insured, to the Lender at its main office or
at such other place as it may designate, and so long as the Lender holds the
Note, all such expenses relating to any amendment, waivers or consents pursuant
to the provisions hereof. The Company also agrees that it will pay and save
the Lender harmless against any and all liability with respect to stamp and
other taxes, if any, which may be payable or which may be determined to be
payable in connection with the execution and delivery of this Agreement or the
Note, whether or not any Note is then outstanding. The Company agrees to
protect and indemnify the Lender against any liability for any and all
brokerage fees and commissions payable or claimed to be payable to any Person
in connection with the transactions contemplated by this Agreement.
10.5. REPRESENTATIONS OF THE LENDER. The Lender represents, and in
entering into this Agreement the Company understands, that it is acquiring the
Note for the purpose of investment and not with a view to the resale or
distribution thereof, and that it has no present intention of selling,
negotiating or otherwise disposing of the Note other than the possible sale of
participations in the Note; provided that the disposition of its property shall
at all times be and remain within its control.
To the best of the Board's knowledge, no employee of the Board with
any direct responsibility for this transaction has a direct or indirect
economic interest in the Company or its property or contracts, except such
interests as are generally owned by members of the public and which were
acquired in transactions unrelated to the issuance of the Note, nor will such
employees receive, directly or indirectly, anything of economic value for his
or her private benefit from the Company or anyone acting on its behalf in
connection with the transaction contemplated by this Agreement. With respect
to information which is furnished to or obtained by the Board pursuant to
subsection 6.2(k), the Board shall use its best efforts and follow its usual
procedures to see that such information is not used by the Board in transacting
in any Security of the Company other than the Note, and that such information
is held in confidence unless or until the same has been publicly disclosed (by
a Person other than the Board), provided that the Board may disclose such
information as may be required by law.
10.6. POWERS AND RIGHTS NOT WAIVED; REMEDIES CUMULATIVE. No delay
or failure on the part of any holder of the Notes in the exercise of any power
or right shall operate as a waiver thereof; nor shall any single or partial
exercise of the same preclude any other or further exercise thereof, or the
exercise of any other power or right, and the rights and remedies of the
holders of the Notes are cumulative to and are not exclusive of any rights or
remedies any such holder would otherwise have, and no waiver or consent, given
or extended pursuant to Section 10 of this Agreement, shall extend to or affect
any obligation or right not expressly waived or consented to.
10.7. NOTICES. All communications provided for hereunder shall be
in writing and, if to the Lender, delivered or mailed by registered or
certified mail or recognized national overnight express delivery service
addressed to the Lender at its address appearing on Schedule 4.4 to this
Agreement or such other address as it or any subsequent holder of the Notes may
designate to the Company in writing, provided that the Company may deliver
routine financial statements and SEC filings by regular mail, and if to the
Company, delivered or mailed by registered or certified mail or recognized
national overnight express delivery service to the Company at Outlook Group
Corp., 1180 American Drive, Neenah, Wisconsin 54957, Attention: Larry Driscoll,
CFO, or
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<PAGE> 35
to such other address as the Company may in writing designate to the Lender or
to a subsequent holder of the Notes.
10.8. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the Company and its successors and assigns and shall inure to the Lender
benefit and to the benefit of their successors and assigns, including each
successive holder or holders of the Notes. If any subsequent holder of the
Notes shall have presented the same to the Company for inspection, accompanied
by a written designation of the address to which notice in respect of such
holder is to be given, then wherever
-35-
<PAGE> 36
in this Agreement it is provided that notice shall be given to the holder of
the Notes, the notice in respect of the Note so presented shall be addressed to
such holder at the address so given.
10.9. SURVIVAL OF COVENANTS AND REPRESENTATIONS. All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Closing Date, shall survive the closing and the delivery of this Agreement and
the Amended and Restated Note.
10.10. SEVERABILITY. Should any part of this Agreement for any reason
be declared invalid, such decision shall not affect the validity of any
remaining portion, which remaining portion shall remain in force and effect as
if this Agreement had been executed with the invalid portion thereof eliminated
and it is hereby declared the intention of the parties hereto that they would
have executed the remaining portion of this Agreement without including therein
any such part, parts, or portion which may, for any reason, be hereafter
declared invalid.
10.11. GOVERNING LAW. This Agreement and the Notes issued and sold
hereunder shall be governed by and construed in accordance with Wisconsin law.
10.12. CAPTIONS. The descriptive headings of the various Sections or
parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
The execution hereof by the Lender shall constitute a contract for the
uses and purposes hereinabove set forth, and this Agreement may be executed in
any number of counterparts, each executed counterpart constituting an original
but all together only one agreement.
COMPANY: OUTLOOK GROUP CORP.
By:
----------------------------------
Name:
-----------------------------
Its:
------------------------------
LENDER: STATE OF WISCONSIN INVESTMENT BOARD
By:
----------------------------------
Name: Robert L. Zobel
Its: Investment Director -
Private Placements
-36-
<PAGE> 37
Attachments to Amended and Restated Note Purchase Agreement
<TABLE>
<S> <C>
Schedule 1.1(b) - Schedule of Existing Mortgages Securing State of Wisconsin Investment Board Note
Schedule 2.1 - Outlook Foods Equipment
Schedule 3.1(h) - Certificate of Funded Debt, Secured Indebtedness, Long-Term Leases, and Contingent
Obligations
Schedule 4.1 - Schedule of Principal Payments
Schedule 4.4 - Lender Information
Schedule 5.1(i) - SEC Filings
Schedule 5.1(ii) - Investments in Non-Subsidiaries
Schedule 5.2 - Changes to Business
Schedule 5.6 - Litigation
Schedule 5.11 - ERISA
Schedule 5.14 - Information as to Company, Subsidiaries and Affiliates
Schedule 5.19 - Environmental Disclosures
Schedule 5.20 - OSHA
Schedule 7.10 - GECC Sale and Leaseback Equipment
Schedule 8.1(d) - Defaults
Exhibit A - Form of Amended and Restated Note
Exhibit B - Form of Amended and Restated Guaranty Agreement
Exhibit C - Form of Assignment Agreement Amendment
Exhibit D-1, D-2, Form of Mortgage Amendments
and D-3
Exhibit E - Form of Intercreditor Agreement Amendment
Exhibit F - Form Opinion of Company's Counsel
</TABLE>
-37-
<PAGE> 38
SCHEDULE 4.1
SCHEDULE OF PRINCIPAL PAYMENTS
BOARD NOTE: DATE AMOUNT
---- ------
[S] [C]
December 16, 1996 $ 0 .00
March 16, 1997 183,333.50
June 16, 1997 183,333.50
September 16, 1997 183,333.50
December 16, 1997 183,333.50
March 16, 1998 183,333.50
June 16, 1998 183,333.50
September 16, 1998 358,333.50
December 16, 1998 358,333.50
March 16, 1999 358,333.50
June 16, 1999 358,333.50
September 16, 1999 383,333.50
December 16, 1999 383,333.50
March 16, 2000 383,333.50
June 16, 2000 383,333.50
September 16, 2000 433,833.50
December 16, 2000 433,833.50
March 16, 2001 433,833.50
June 16, 2001 433,833.50
September 16, 2001 433,833.50
December 16, 2001 433,833.50
March 16, 2002 433,833.50
June 16, 2002 433,833.50
September 16, 2002 433,833.50
December 16, 2002 433,833.50
March 16, 2003 433,833.50
June 16, 2003 433,833.50
September 16, 2003 433,833.50
December 16, 2003 433,833.50
March 16, 2004 433,833.50
June 16, 2004 196,226.99
<PAGE> 1
LOAN AND SECURITY AGREEMENT
Dated as of November 5, 1996
Among
BANKAMERICA BUSINESS CREDIT, INC.
as the Lender
and
OUTLOOK GROUP CORP.,
OUTLOOK LABEL SYSTEMS, INC.,
OUTLOOK FOODS, INC.,
OUTLOOK PACKAGING, INC.,
BARRIER FILMS CORPORATION
as the Borrowers
<PAGE> 2
LOAN AND SECURITY AGREEMENT, dated as of November 5,1996, by and between
BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation, with offices at 231
S. LaSalle St., Chicago, Illinois 60697 (the "Lender") and OUTLOOK GROUP CORP.,
a Wisconsin corporation, ("Parent") with offices at 1180 American Drive,
Neenah, Wisconsin 54957-0748; OUTLOOK LABEL SYSTEMS, INC. ("Outlook Label");
OUTLOOK FOODS, INC. ("Outlook Foods"); OUTLOOK PACKAGING, INC. ("Outlook
Packaging"); and BARRIER FILMS CORPORATION ("Barrier") (collectively, the
"Borrowers")
W I T N E S S E T H
WHEREAS, Borrowers desire to borrow funds to refinance existing
indebtedness and replace existing stand-by letters of credit supporting
industrial revenue bonds (the "Refinancing"); and
WHEREAS, the Borrowers have requested that the Lender make a term loan to
the Borrowers in the aggregate principal amount of $4,870,000 and to make
available to the Borrowers a revolving line of credit for loans and letters of
credit in an amount not to exceed $25,000,000, which extensions of credit the
Borrowers will use for the Refinancing and for their working capital needs and
general business purposes;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth in this Agreement, and for good and valuable consideration, the
receipt of which is hereby acknowledged, the Borrowers and the Lender hereby
agree as follows:
1. DEFINITIONS. As used herein:
"Account" means each Borrower's right to payment for a sale or lease and
delivery of goods or rendition of services.
"Account Debtor" means each Person obligated in any way on or in
connection with an Account.
"ACH Settlement Risk Reserve" means any and all reserves which the Lender
from time to time establishes, in its sole discretion, with respect to ACH
Transactions.
"ACH Transactions" means all debts, liabilities, and obligations now or
hereafter owing from the Borrowers to the Bank or Bank of America Illinois
arising from or related to the automatic clearing house transfer of funds by
the Bank for the account of any of the Borrowers pursuant to agreement or
overdrafts.
"Adjusted Net Earnings from Operations" means, with respect to any fiscal
period of the Borrowers, the Borrowers' consolidated net income after provision
for income taxes for such fiscal period, as determined in accordance with GAAP
and reported on the Financial Statements for such period, less any and all of
the following included in such net income: (a) gain or loss arising
-2-
<PAGE> 3
from the sale of a capital asset; (b) gain arising from any write-up in the
book value of any asset; (c) earnings of any corporation, substantially all the
assets of which have been acquired by any Borrower in any manner, to the extent
realized by such other corporation prior to the date of acquisition;
(d) earnings of any business entity in which any Borrower has an ownership
interest unless (and only to the extent) such earnings shall actually have
been received by such Borrower in the form of cash distributions; (e) earnings
of any Person to which assets of any Borrower shall have been sold, transferred
or disposed of, or into which any Borrower shall have been merged, or which has
been a party with any Borrower to any consolidation or other form of
reorganization, prior to the date of such transaction; (f) gain arising from
the acquisition of debt or equity securities of any Borrower or from
cancellation or forgiveness of Debt; and (g) gain arising from extraordinary
items, as determined in accordance with GAAP, or from any other non-recurring
transaction.
"Adjusted Tangible Assets" means all of the Borrowers' consolidated assets
except: (a) goodwill; (b) assets of any Borrower constituting Intercompany
Accounts; and (c) fixed assets to the extent of any write-up in the book value
thereof resulting from a revaluation effective after the Closing Date.
"Adjusted Tangible Net Worth" means, at any date: (a) the book value
(after deducting related depreciation, obsolescence, amortization, valuation,
and other proper reserves as determined in accordance with GAAP) at which the
consolidated Adjusted Tangible Assets would be shown on a consolidated balance
sheet of the Borrowers at such date prepared in accordance with GAAP less (b)
the amount at which the Borrowers' consolidated liabilities would be shown on
such balance sheet, including as liabilities all reserves for contingencies and
other potential liabilities which would be shown on such balance sheet or
disclosed in the notes thereto.
"Affiliate" means: (a) a Person which, directly or indirectly, controls,
is controlled by or is under common control with, any Borrower; (b) a Person
which beneficially owns or holds, directly or indirectly, five percent or more
of any class of voting stock of any Borrower; or (c) a Person in which five
percent of any class of the voting stock is beneficially owned or held,
directly or indirectly, by any Borrower. The term control (including the terms
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of the Person in question.
"Anniversary Date" means each anniversary of the Closing Date.
"Availability" means at any time the lesser of:
(A) The amount of twenty-five million Dollars
($25,000,000) less the aggregate undrawn face amount of all
outstanding IRB Letters of Credit (the "Maximum Revolving
Credit Line") less
(i) the unpaid balance of Revolving Loans at that time; and
-3-
<PAGE> 4
(ii) the aggregate undrawn face amount of all outstanding Letters of
Credit (other than the undrawn face amount of outstanding IRB
Letters of Credit) which the Lender has caused to be issued or
obtained for any Borrower's account;
or
(B) The Borrowers' consolidated Borrowing Bases equal to the sum of
(a) up to eighty percent (80%) of the Net Amount of Eligible
Accounts, plus
(b) the lesser of
a) $8,000,000 (provided that no more than (i) $2,000,000 may
be attributable to each of Parent, Outlook Packaging and
Outlook Foods, and (ii) $1,500,000 may be attributable to
each of Barrier and Outlook Label); or
b) an amount equal to sixty percent (60%) of the book value
of Eligible Inventory (valued at the lower of cost or
market on a First-In, First-Out basis) (provided that in
no event shall advances against the Outlook Foods
Private Label Inventory exceed $500,000); less
(i) the unpaid balance of Revolving Loans at that time;
(ii) the aggregate undrawn face amount of all outstanding Letters of
Credit (other than the undrawn face amount of outstanding IRB
Letters of Credit) which the Lende has caused to be issued or
obtained for any Borrower's account;
(iii) reserves for accrued interest on the Revolving Loans and the Term
Loan;
(iv) the Environmental Compliance Reserve;
(v) the ACH Settlement Risk Reserve;
(vi) a reserve for customer deposits;
(vii) the IRB Reserve; and
(viii) all other reserves which the Lender in its reasonable credit
judgment deems necessary to maintain with respect to each
Borrower's account, including, without limitation, any amounts
which the Lender may need to pay for the account of such Borrower
in order to preserve the priority of the Lender's
-4-
<PAGE> 5
Security Interests in the Collateral consistent with the
terms of this Agreement.
"Bank" means Bank of America National Trust and Savings Association in San
Francisco, California.
"Borrowing" means a borrowing hereunder consisting of Revolving Loans or
Term Loans by the Lender to the Borrowers.
"Borrowing Base" means as to each Borrower, the sum of
(a) up to 80% of the Net Amount of Eligible Accounts of that Borrower;
plus
(b) up to 60% of the book value of that Borrower's Eligible Inventory
(valued at the lower of cost or market on a First-In First-Out
basis); provided that advances attributable to this clause (c) shall
not exceed (x) $2,000,000 with respect to each of Parent, Outlook
Packaging and Outlook Foods (of which amount with respect to Outlook
Foods Private Label Inventory shall not exceed $500,000) and
(y) $1,500,000 with respect to each of Barrier and Outlook Label;
less
(i) reserves for accrued interest on the Revolving Loans and Term Loan
outstanding to that Borrower;
(ii) that portion of the Environmental Compliance Reserve applicable to
that Borrower;
(iii) the ACH Settlement Risk Reserve applicable to that Borrower;
(iv) a reserve for customer deposits reflected on that Borrower's books
and records;
(v) the IRB Reserve applicable to that Borrower; and
(vi) all other reserves which the Lender in its reasonable credit
judgment deems necessary to maintain with respect to each Borrower's
account, including, without limitation, any amounts which the Lender
may need to pay for the account of such Borrower in order to
preserve the value of the Collateral and/or the priority of the
Lender's Security Interest in the Collateral consistent with the
terms of this Agreement.
"Borrowing Base Certificate" means a certificate regarding a Borrower's
Borrowing Base in the form of Exhibit D hereto.
-5-
<PAGE> 6
"Business Day" means (a) any day that is not a Saturday, Sunday, or a day
on which banks in San Francisco, California, or Chicago, Illinois, are required
or permitted to be closed, and (b) with respect to all notices, determinations,
fundings and payments in connection with the LIBOR Rate or LIBOR Rate Loans,
any day that is a Business Day pursuant to clause (a) above and that is also a
day on which trading is carried on by and between banks in the London interbank
market.
"Capital Adequacy Regulation" means any guideline, request or directive of
any central bank or other Public Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Capital Expenditures" means all payments due (whether or not paid) during
a Fiscal Year in respect of the cost of any fixed asset or improvement, or
replacement, substitution, or addition thereto, which has a useful life of more
than one year, including, without limitation, those arising in connection with
the direct or indirect acquisition of such assets by way of increased product
or service charges or offset items or in connection with Capital Leases.
"Capital Lease" means any lease of Property by any Borrower that, in
accordance with GAAP, should be reflected as a liability on the consolidated
balance sheet of the Borrowers.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" has the meaning given to such term in Section 7.1.
"Collateral Management Fee" has the meaning specified in Section 3.5.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated
biphenyls ("PCBs"), or other substance or material, the handling, release, or
possession of which is regulated to protect health, safety, or environment, or
any constituent of any such substance or waste.
"Debt" means all liabilities, obligations and indebtedness of each
Borrower to any Person, of any kind or nature, now or hereafter owing, arising,
due or payable, howsoever evidenced, created, incurred, acquired or owing,
whether primary, secondary, direct, contingent, fixed or otherwise, and
including, without in any way limiting the generality of the foregoing: (a)
each Borrower's liabilities and obligations to trade creditors; (b) all
Obligations; (c) all obligations and liabilities of any Person secured by any
Lien on any Borrower's Property, even though such Borrower shall not have
assumed or become liable for the payment thereof; provided, however, that all
such obligations and liabilities which are limited in recourse to such Property
shall be included in Debt only to the extent of the book value of such Property
as would be shown on a balance sheet of such Borrower prepared in accordance
with GAAP; (d) all obligations or liabilities created or
-6-
<PAGE> 7
arising under any Capital Lease or conditional sale or other title retention
agreement with respect to Property used or acquired by any Borrower, even if
the rights and remedies of the lessor, seller or lender thereunder are limited
to repossession of such Property; provided, however, that all such obligations
and liabilities which are limited in recourse to such Property shall be
included in Debt only to the extent of the book value of such Property as would
be shown on a balance sheet of that Borrower prepared in accordance with GAAP;
(e) all accrued pension fund and other employee benefit plan obligations and
liabilities; (f) all obligations and liabilities under Guaranties; and (g)
deferred taxes.
"Distribution" means, in respect of any corporation: (a) the payment or
making of any dividend or other distribution of Property in respect of capital
stock or options or warrants in respect of such capital stock of such
corporation, other than distributions in capital stock of the same class; or
(b) the redemption or other acquisition of any capital stock of such
corporation.
"DOL" means the United States Department of Labor or any successor
department or agency.
"EBITDA" means with respect to the Borrowers, on a consolidated basis for
any period, Adjusted Net Earnings from Operations, plus the sum of (i) interest
expenses, (ii) income taxes, (iii) depreciation, (iv) amortization, and (v)
other non-cash expenses, each to the extent deducted in determining the
Borrowers' Adjusted Net Earnings from Operations for that period, less non-cash
income included in the calculation of Adjusted Net Earnings from Operations for
that period.
"Eligible Accounts" means those Accounts which are not ineligible as the
basis for Revolving Loans, based on the following criteria and on such other
criteria as the Lender may from time to time establish in its reasonable
commercial discretion. Without intending to limit the Lender's discretion to
establish other criteria of eligibility, Eligible Accounts shall not include
any Account:
(a) (i) except as permitted in the following clause (ii), with
respect to which more than 90 days have elapsed since the date of
the original invoice therefor or (ii) which are outstanding more
than sixty (60) days past the due date specified in the original
invoice thereof; provided that the specified due date shall not be
more than sixty (60) days after the original invoice date;
(b) with respect to which any of the epresentations,
warranties, covenants, and agreements contained in this Agreement
are not or have ceased to be complete and correct or have been
breached;
(c) with respect to which, in whole or in part, a check,
promissory note, daft, trade acceptance or other instrument for the
payment of money has been received, presented for payment and
returned uncollected for any reason;
-7-
<PAGE> 8
(d) which represents a progress billing (as hereinafter
defined) or as to which the applicable Borrower has extended the
time for payment without the consent of the Lender; for the
purposes hereof, "progress billing" means any invoice for goods
sold or leased or services rendered under a contract or agreement
pursuant to which the Account Debtor's obligation to pay such
invoice is conditioned upon the applicable Borrower's completion of
any further performance under the contract or agreement;
(e) as to which any one or more of the following events has
occurred with respect to the Account Debtor on such Account: death
or judicial declaration of incompetency of an Account Debtor who is
an individual; the filing by or against the Account Debtor of a
request or petition for liquidation, reorganization, arrangement,
adjustment of debts, adjudication as a bankrupt, winding-up, or
other relief under the bankruptcy, insolvency, or similar laws of
the United States, any state or territory thereof, or any foreign
jurisdiction, now or hereafter in effect; the making of any general
assignment by the Account Debtor for the benefit of creditors; the
appointment of a receiver or trustee for the Account Debtor or for
any of the assets of the Account Debtor, including, without
limitation, the appointment of or taking possession by a
"custodian," as defined in the Federal Bankruptcy Code; the
institution by or against the Account Debtor of any other type of
insolvency proceeding (under the bankruptcy laws of the United
States or otherwise) or of any formal or informal proceeding for
the dissolution or liquidation of, settlement of claims against, or
winding up of affairs of, the Account Debtor; the sale, assignment,
or transfer of all or any material part of the assets of the
Account Debtor; the nonpayment generally by the Account Debtor of
its debts as they become due; or the cessation of the business of
the Account Debtor as a going concern;
(f) owed by an Account Debtor if the aggregate dollar amount
of all Accounts owed by such Account Debtor exceeds a credit limit
determined by Lender in its sole discretion, but only to the extent
such Accounts exceed such limit;
(g) owed by an Account Debtor which: (i) does not maintain its
chief executive office in the United States; or (ii) is not
organized under the laws of the United States or any state thereof;
or (iii) is the government of any foreign country or sovereign
state, or of any state, province, municipality, or other political
subdivision thereof, or of any department, agency, public
corporation, or other instrumentality thereof; except to the extent
that such Account is secured or payable by a letter of credit
acceptable to Lender;
(h) owed by an Account Debtor which is an Affiliate or
employee of any Borrower;
(i) except as provided in (k) below, as to which the
perfection, enforceability, or validity of the Security Interest
in such Account, or the Lender's right or ability to obtain direct
payment to the Lender of the Proceeds of such Account, is governed
by any federal, state, or local statutory requirements other than
those of the UCC;
-8-
<PAGE> 9
(j) which is owed by an Account Debtor to which the applicable
Borrower is indebted in any way, or which is subject to any right
of setoff or recoupment by the Account Debtor, unless the Account
Debtor has entered into an agreement acceptable to the Lender to
waive setoff and recoupment rights; or if the Account Debtor
thereon has disputed liability or made any claim with respect to
any other Account due from such Account Debtor; but in each such
case only to the extent of such indebtedness, setoff, recoupment,
dispute, or claim;
(k) which is owed by the government of the United States of
America, or any department, agency, public corporation, or other
instrumentality thereof, unless the Federal Assignment of Claims
Act of 1940, as amended, and any other steps necessary to perfect
the Security Interest and protect the Lender's rights therein, have
been complied with to the Lender's satisfaction with respect to
such Account;
(l) which is owed by any state, municipality, or other
political subdivision of the United States of America, or any
department, agency, public corporation, or other instrumentality
thereof and as to which the Lender determines that its Security
Interest therein is not or cannot be perfected;
(m) which arises out of a sale to an Account Debtor on a
bill-and-hold, guaranteed sale, sale and return, sale on approval,
consignment, or other repurchase or return basis or on a C.O.D.
basis;
(n) which is evidenced by a promissory note or other
instrument or by chattel paper;
(o) if twenty-five percent (25%) or more of the aggregate
dollar amount of outstanding Accounts owed at such time by the
Account Debtor is classified as ineligible under clause (a) above;
(p) with respect to which the Account Debtor is located in any
state requiring the filing of a Notice of Business Activities
Report or similar report in order to permit the applicable Borrower
to seek judicial enforcement in such state of payment of such
Account, unless such Borrower has qualified to do business in such
state or has filed a Notice of Business Activities Report or
equivalent report for the then current year; or
(q) arising out of a sale not made in the ordinary course of
the applicable Borrower's business;
(r) with respect to which the goods giving rise to such
Account have not been shipped and delivered to and accepted by the
Account Debtor or the services giving rise to such Account have not
been performed by the applicable Borrower, and, if applicable,
accepted by the Account Debtor, or the Account Debtor revokes its
acceptance of such goods or services;
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<PAGE> 10
(s) which is not subject to a first priority, perfected
security interest in favor of the Lender;
(t) if Lender believes in its reasonable credit judgment that
the prospect of collection of such Account is impaired or that the
Account may not be paid by reason of the Account Debtor's financial
inability to pay; or
(u) which is owed by an Account Debtor which the Lender, in
its reasonable credit judgment, otherwise deems to be
uncreditworthy.
If any Account at any time ceases to be an Eligible Account by reason of any of
the foregoing exclusions or any failure to meet any other eligibility criteria
established by the Lender in the exercise of its reasonable discretion then
such Account shall promptly be excluded from the calculation of Eligible
Accounts.
"Eligible Inventory" means Inventory, valued at the lower of cost or
market, that constitutes raw materials or first quality finished goods and
that:
(a) is not, in the Lender's reasonable opinion, obsolete, or
unmerchantable;
(b) is not slow-moving Inventory, including but not limited
to, Inventory consisting of twenty-five percent (25%) (by value) of
all paper stock with a "last purchase date" equal to or greater
than one year as of any date of determination;
(c) is located at Premises owned or leased by the Borrowers or
on Premises otherwise reasonably acceptable to the Lender,
provided, however, that Inventory located on Premises leased to the
Borrowers shall not be Eligible Inventory unless the Borrowers
shall have delivered to the Lender a written waiver, duly executed
on behalf of the appropriate landlord and in form and substance
acceptable to the Lender, of all Liens which the landlord for such
Premises may be entitled to assert against such Eligible Inventory;
(d) is subject to the Lender's first priority perfected
security interest;
(e) is not work-in-process, or spare, service or used parts,
bill-and-hold Inventory, returned or defective Inventory, or
Inventory delivered to the Borrowers on consignment;
(f) does not constitute Outlook Foods Private Label Inventory
at any date more than 180 days after the Closing Date;
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<PAGE> 11
(g) is not wrapping materials, packing materials, shipping
materials, corrugated containers, or rolls and sheets (other than
such materials as constitute a part of finished goods);
(h) is not Make-Ready Inventory;
(i) is not printing plates used for production but not part of
finished goods;
(j) is not supply items, including paper sheeter skids and
items for enhancement;
(k) is not Inventory in-transit; provided that Inventory
in-transit that otherwise meets all other criteria for eligibility
shall be Eligible if it is in-transit to a Borrower's facilities,
will be paid for upon a presentation of a trade Letter of Credit;
the Lender is named as a consignee on the applicable bill of lading
or other document of title; the Lender has possession of that bill
of lading or other document of title and has a first priority
perfected security interest in the Inventory in-transit and such
Inventory is covered by insurance acceptable to the Lender; and
(l) is not otherwise deemed ineligible by the Lender in the
exercise of its reasonable discretion as the basis for Revolving
Loans based on such collateral and credit criteria as the Lender
may from time to time establish.
If any Inventory at any time ceases to be Eligible Inventory, such
Inventory shall promptly be excluded from the calculation of Eligible
Inventory.
"Environmental Compliance Reserve" means all reserves which the Lender
from time to time establishes for amounts that are reasonably required to be
expended in order for each Borrower and its operations and Property to comply
with Environmental Laws or in order to correct any violation by any Borrower or
its operations or Property of Environmental Laws.
"Environmental Laws" means all federal, state and local laws, rules,
regulations, ordinances, programs, permits, guidance, orders and consent
decrees relating to health, safety, hazardous substances, and environmental
matters applicable to the Borrowers' business and facilities (whether or not
owned by a Borrower). Such laws and regulations include but are not limited to
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., as
amended; the Comprehensive Environmental Response Compensation and Liability
Act, 42 U.S.C. Section 9601 et seq., as amended; the Toxic Substances Control
Act, 15 U.S.C. Section 2601 et seq., as amended; the Clean Water Act, 33
U.S.C. Section 466 et seq., as amended; the Clean Air Act, 42 U.S.C. Section
7401 et seq., as amended; state and federal lien and environmental cleanup
programs; and U.S. Department of Transportation regulations.
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<PAGE> 12
"Environmental Lien" means a Lien in favor of any Public Authority for (a)
any liability under any Environmental Laws, or (b) damages arising from, or
costs incurred by such Public Authority in response to, a Release or threatened
Release of a Contaminant into the environment.
"Equipment" means all of each Borrower's now owned and hereafter acquired
machinery, equipment, furniture, furnishings, fixtures, and other tangible
personal property (except Inventory), including, without limitation, data
processing hardware and software, motor vehicles, aircraft, dies, tools, jigs,
and office equipment, as well as all of such types of property leased by any
Borrower and all of such Borrower's rights and interests with respect thereto
under such leases (including, without limitation, options to purchase);
together with all present and future additions and accessions thereto,
replacements therefor, component and auxiliary parts and supplies used or to be
used in connection therewith, and all substitutes for any of the foregoing, and
all manuals, drawings, instructions, warranties and rights with respect
thereto; wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with any Borrower within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for
purposes of provisions relating to Section 412 of the Code).
"ERISA Event" means, with respect to the Borrowers, any ERISA Affiliate or
any Pension Plan, the occurrence of any of the following: (a) a Reportable
Event; (b) a withdrawal by a substantial employer (as defined in Section 4001
(a)(12) of ERISA) subject to Section 4063 of ERISA; (c) a cessation of
operations which is treated as a withdrawal under Section 4062(e) of ERISA; (d)
a complete or partial withdrawal under Section 4203 or 4205 of ERISA from a
Multiemployer Plan; (e) a notification that a Multiemployer Plan is in
reorganization under Section 4242 of ERISA; (f) the filing of a notice of
intent to terminate a Pension Plan under 4041 of ERISA; (g) the treatment of an
amendment of a Pension Plan as a termination under 4041 of ERISA; (h) the
termination of a Multiemployer Plan under Section 4041A of ERISA; (i) the
commencement of proceedings by the PBGC to terminate a Pension Plan under 4042
of ERISA; (j) an event or condition which could reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, a Pension Plan; or (k) the imposition
of any liability under Title IV of ERISA, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA.
"Event" means any event or condition which, with notice, the passage of
time, the happening of any other condition or event, or any combination
thereof, would constitute an Event of Default.
"Event of Default" has the meaning specified in Section 12.1.
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<PAGE> 13
"Excess Cash Flow" means for any period the Borrowers' Adjusted Net
Earnings from Operations for such period, plus the sum of depreciation,
amortization and other non-cash charges deducted in the determination of net
income for that period, and less the sum of scheduled principal payments with
respect to Debt for borrowed money (including industrial revenue bonds and the
related IRB Reserve created in such period) and Capital Leases during that
period and the unfinanced portion of Capital Expenditures during that period.
"Facility Fee" has the meaning specified in Section 3.4.
"Fixed Charges" means as to the Borrowers on a consolidated basis, for any
fiscal period, the sum of (i) interest expenses paid or payable in cash, (ii)
scheduled installments of principal paid or payable with respect to Debt for
borrowed money and Capital Leases; (iii) that portion of Capital Expenditures
not financed by borrowings from third parties; and (iv) income taxes paid or
payable in cash.
"Fixed Charge Coverage Ratio" means as to the Borrowers on a consolidated
basis, for any fiscal period, the ratio of EBITDA to Fixed Charges.
"Financial Statements" means, according to the context in which it is
used, the financial statements attached hereto as Exhibit B-1, and the pro
forma balance sheet attached hereto as Exhibit B-2 or any financial statements
required to be given to the Lender pursuant to Section 8.2(a) (b) and (c), or
any combination thereof.
"Fiscal Year" means the Borrowers' fiscal year for financial accounting
purposes. The current Fiscal Year of the Borrowers will end on May 31, 1997.
"Funding Date" means the date on which a Borrowing occurs.
"GAAP" means at any particular time generally accepted accounting
principles as in effect at such time.
"General Intangibles" means general intangibles as such term is defined in
Article 9 of the UCC.
"GE Operating Lease" means the master lease agreement among General
Electric Capital Corporation, Parent and Packaging as lessees, relating to the
GECC Transaction.
"GE Operating Lease Documents" means collectively the GE Operating Lease,
the GE Operating Lease Guaranties and all other documents and agreements
delivered in connection with the GE Operating Lease.
"GE Operating Lease Guaranties" means guaranties of the operating lease
obligations by Parent with respect to the obligations of Packaging, by
Packaging with respect to the obligations of Parent and by each of the other
Borrowers with respect to the obligations of Parent and Packaging.
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<PAGE> 14
"GE Operating Lease Subordination" means a subordination agreement among
General Electric Capital Corporation, SWIB and Lender whereby the GE Operating
Lease Guaranties are subordinated in right of payment to the payment of the
Obligations hereunder and to payments under the SWIB Loan Documents.
"GECC Transaction" means the sale to, and lease from, General Electric
Capital Corporation by Parent and Packaging of the Equipment described on
Schedule 1.3.
"Guaranty" by any Person means all obligations of such Person which in any
manner directly or indirectly guarantee or assure, or in effect guarantee or
assure, the payment or performance of any indebtedness, dividend or other
obligation of any other Person (the "guaranteed obligations"), or to assure or
in effect assure the holder of the guaranteed obligations against loss in
respect thereof, including, without limitation, any such obligations incurred
through an agreement, contingent or otherwise: (a) to purchase the guaranteed
obligations or any Property constituting security therefor; (b) to advance or
supply funds for the purchase or payment of the guaranteed obligations or to
maintain a working capital or other balance sheet condition; (c) to lease
Property or to purchase any debt or equity securities or other Property or
services.
"Intercompany Accounts" means all assets and liabilities, however arising,
which are due to any Borrower from, which are due from any Borrower to, or
which otherwise arise from any transaction by any Borrower with, any Affiliate.
"Interest Period" means, as to any LIBOR Rate Loan, the period commencing
on the Funding Date of such Loan or on the Conversion/Continuation Date on
which the Loan is converted into or continued as a LIBOR Rate Loan, and ending
on the date one, two, or three months thereafter as selected by the Parent in
its Notice of Borrowing or Notice of Conversion/Continuation; provided,
however, that:
(i) if any Interest Period would otherwise end on a day that
is not a Business Day, that Interest Period shall be extended to
the following Business Day unless the result of such extension
would be to carry such Interest Period into another calendar month,
in which event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at
the end of such Interest Period; and
(iii) no Interest Period shall extend beyond the Stated
Termination Date or any renewal term.
"Inventory" means all of each Borrower's now owned and hereafter acquired
inventory, goods, merchandise, and other personal property, wherever located,
to be furnished under
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<PAGE> 15
any contract of service or held for sale or lease, all raw materials,
work-in-process, finished goods, returned goods, and materials and supplies of
any kind, nature or description which are or might be used or consumed in such
Borrower's business or used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods, merchandise and such
other personal property, and all documents of title or other documents
representing them.
"IRB Letters of Credit" means Letters of Credit in the aggregate face
amount of $5,600,000 issued in support of outstanding industrial revenue bonds
(whether by direct support or indirect support in the form of back-up letters
of credit to existing letters of credit providing direct support) under which
one or more of the Borrowers is obligated as described on Schedule 1.2 hereto.
"IRB Reserve" means to each Borrower or as to all Borrowers in the
aggregate, as applicable, as of any date of determination, the amount owing by
such Borrower or the Borrowers (as applicable) under industrial revenue bonds
outstanding, less the amount that would have been outstanding under those
industrial revenue bonds, if those industrial revenue bonds had amortized in
equal installments over a seven-year period commencing as of the Closing Date.
"IRS" means the Internal Revenue Service or any successor agency.
"Latest Projections" means: (a) on the Closing Date and thereafter until
the Lender receives new projections pursuant to Section 8.2(f), the projections
of the Borrowers' monthly financial condition, results of operations, and cash
flow for the three-year period ending May 31, 1999, attached hereto as Exhibit
B-3; and (b) thereafter, the projections most recently received by the Lender
pursuant to Section 8.2(f).
"Letter of Credit" has the meaning specified in Section 2.3.
"Letter of Credit Fee" has the meaning specified in Section 3.6.
"LIBOR Interest Payment Date" means, with respect to a LIBOR Rate Loan,
the last day of each Interest Period applicable to such Loan.
"LIBOR Interest Rate Determination Date" means each date of calculating
the LIBOR Rate for purposes of determining the interest rate with respect to an
Interest Period. The LIBOR Interest Rate Determination Date for any LIBOR Rate
Loan shall be the second Business Day prior to the first day of the related
Interest Period for such LIBOR Rate Loan.
"LIBOR Rate" means, for any Interest Period, with respect to LIBOR Rate
Loans comprising part of the same Borrowing, the rate of interest per annum
(rounded upward to the next 1/1000th of 1.0%) determined as follows:
<TABLE>
<S> <C>
LIBOR Rate = LIBOR
--------------------------------------------------
1.00 - Eurodollar Reserve Percentage
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<PAGE> 16
Where,
</TABLE>
"Eurodollar Reserve Percentage" means for any day for any
Interest Period the maximum reserve percentage (expressed as a
decimal, rounded upward to the next 1/100th of 1.0%) in effect on
such day (whether or not applicable to the Lender) under
regulations issued from time to time by the Federal Reserve Board
for determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement) with
respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities"); and
"LIBOR" means the rate of interest per annum (rounded upward
to the next 1/16 of 1%) notified to the Lender by Bank as the rate
of interest at which United States Dollar deposits in the
approximate amount of the Loan to be made or continued as, or
converted into, a LIBOR Rate Loan and having a maturity comparable
to such Interest Period would be offered by Bank's applicable
lending office to major banks in the London interbank market at
their request at approximately 11:00 a.m. (London time) two
Business Days prior to the commencement of such Interest Period.
"LIBOR Rate Loans" means, collectively, the LIBOR Revolving Loans and the
LIBOR Term Loans.
"LIBOR Revolving Loan" means a Revolving Loan during any period in which
it bears interest based on the LIBOR Rate.
"LIBOR Term Loan" means any portion of the Term Loan during any period in
which such portion bears interest based on the LIBOR Rate.
"Lien" means: (a) any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute, or contract, and including
without limitation, a security interest, charge, claim, or lien arising from a
mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment,
deposit arrangement, agreement, security agreement, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes; and (b) to
the extent not included under clause (a), any reservation, exception,
encroachment, easement, right-of-way, covenant, condition, restriction, lease
or other title exception or encumbrance affecting Property.
"Loans" means, collectively, all loans and advances provided for in
Section 2.
"Loan Documents" means this Agreement, the Term Note, the Patent and
Trademark Assignments, the Mortgages, and all other agreements, instruments,
and documents heretofore, now or hereafter evidencing, securing, guaranteeing
or otherwise relating to the Obligations, the Collateral, the Security
Interest, or any other aspect of the transactions contemplated by this
Agreement.
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<PAGE> 17
"Loan Year" means each period of twelve consecutive months commencing on
the Closing Date and each Anniversary Date.
"Make-Ready Inventory" means rejected stock used in the start-up of a
printing job to test quality.
"Maximum Revolving Credit Line" has the meaning specified in the
definition of "Availability."
"Mortgages" means each Leasehold Mortgage, Security Agreement, and
Assignments of Leases and Rents dated the date hereof between any Borrower and
the Lender and delivered to the Lender pursuant to Section 7.1(b).
"Multiemployer Plan" means a multiemployer as defined in Section
4001(a)(3) of ERISA to which any Borrower or any ERISA Affiliate makes, is
making, made, or was at any time during the current year or the immediately
preceding six (6) years obligated to make contributions.
"Net Amount of Eligible Accounts" means the gross amount of Eligible
Accounts less sales, excise or similar taxes, and less returns, discounts,
accrued rebates (including volume rebates), claims, credits and allowances of
any nature at any time issued, owing, granted, outstanding, available or
claimed in respect of such Eligible Accounts.
"Notice of Borrowing" has the meaning specified in Section 2.2(b).
"Notice of Conversion/Continuation" has the meaning specified in Section
3.2(b).
"Obligations" means all present and future loans, advances, liabilities,
obligations, covenants, duties, and Debt owing by any Borrower to the Lender,
whether or not arising under this Agreement, whether or not evidenced by any
note, or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment from others, and any participation by
the Lender in any Borrower's debts owing to others), absolute or contingent,
due or to become due, primary or secondary, as principal or guarantor, and
including, without limitation, all interest, charges, expenses, fees, attorneys
fees, filing fees and any other sums chargeable to any Borrower hereunder,
under another Loan Document, or under any other agreement or instrument with
the Lender. "Obligations" includes, without limitation, (a) all debts,
liabilities, and obligations (direct, contingent or otherwise) now or hereafter
owing from any Borrower to Lender under or in connection with the Letters of
Credit (including IRB Letters of Credit) and (b) all debts, liabilities and
obligations now or hereafter owing from the Borrowers to the Lender arising
from or related to ACH Transactions.
"Outlook Foods Private Label Inventory" means Inventory sold by Outlook
Foods to retailers for its own account under private label (as distinct from
goods packaged for nationally recognized consumer products companies under
their brand names).
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<PAGE> 18
"Other Taxes" means 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 hereunder or from the execution, delivery or registration of,
or otherwise with respect to, this Agreement or any other Loan Documents.
"Participating Lender" means any Person who shall have been granted the
right by the Lender to participate in the Loans and who shall have entered into
a participation agreement in form and substance satisfactory to the Lender.
"Patent and Trademark Assignment" means the Collateral Assignment of
Patents (Security Agreement) and the Collateral Assignment of Trademarks
(Security Agreement) each dated as of the date hereof, executed and delivered
by the Borrowers to the Lender to evidence and perfect the Lender's Security
Interest in the Borrowers' present and future patents, trademarks, and related
licenses and rights.
"Payment Account" means each blocked bank account or bank account
associated with a lock box, established pursuant to Section 7.10, to which the
funds of any Borrower (including, without limitation, Proceeds of Accounts and
other Collateral) are deposited or credited, and which is maintained in the
name of the Lender or such Borrower, as the Lender may determine, on terms
acceptable to the Lender.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to the functions thereof.
"Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA which such Borrower or an ERISA Affiliate
sponsors, maintains, or to which it makes, is making, or is obligated to make
contributions or, in the case of a Multiemployer Plan, has made contributions
at any time during the current year or the immediately preceding six (6) plan
years.
"Permitted Liens" means: (a) Liens for taxes not yet delinquent or Liens
for taxes in an amount not to exceed $100,000 being contested in good faith by
appropriate proceedings diligently pursued, provided that a reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made therefor on the applicable Financial Statements and that a stay of
enforcement of any such Lien is in effect; (b) Liens in favor of the Lender;
(c) Liens arising by operation of law in favor of warehouseman, landlords,
carriers, mechanics, materialmen, laborers, employees or suppliers, incurred in
the ordinary course of business of any Borrower and not in connection with the
borrowing of money, for sums not yet delinquent or which are being contested in
good faith and by proper proceedings diligently pursued, provided that a
reserve or other appropriate provision, if any, required by GAAP shall have
been made therefor on the applicable Financial Statements and a stay of
enforcement of any such Lien is in effect; (d) Liens in connection with
worker's compensation or other unemployment insurance incurred in the ordinary
course of any Borrower's business; (e) Liens created by deposits of cash to
secure performance of bids, tenders, leases (to the extent permitted under this
Agreement), or trade contracts, incurred in the ordinary
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<PAGE> 19
course of business of any Borrower and not in connection with the borrowing of
money; (f) Liens arising by reason of cash deposits for surety or appeal bonds
in the ordinary course of business of any Borrower; (g) Liens of or resulting
from any judgment or award, the time for the appeal or petition for rehearing
of which has not yet expired, or in respect of which the applicable Borrower is
in good faith prosecuting an appeal or proceeding for a review, and in respect
of which a stay of execution pending such appeal or proceeding for review has
been secured; (h) Liens on the assets described on Schedule 1.1 hereto in favor
of SWIB securing Debt in an amount not to exceed $10,770,400; (i) with respect
to any Premises: Liens in favor of SWIB pursuant to the SWIB Loan Documents,
easements, rights of way, zoning and similar covenants and restrictions and
similar encumbrances which customarily exist on properties of corporations
engaged in similar activities and similarly situated and which in any event do
not materially interfere with or impair the use or operation of the Collateral
by any Borrower or the value of the Lender's Security Interest therein, or
materially interfere with the ordinary conduct of the business of such Borrower
and (j) Liens, other than as described on Schedule 1.1, in existence on the
Closing Date and listed on Exhibit A.
"Permitted Rentals" has the meaning specified in Section 10.21.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, limited liability company
association, corporation, Public Authority, or any other entity.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which any Borrower or an ERISA Affiliate sponsors or maintains or to
which any Borrower or an ERISA Affiliate makes, is making, or is obligated to
make contributions and includes any Pension Plan.
"Premises" means the land (including leased premises) identified by
addresses on Schedule 9.13 together with all buildings, improvements, and
fixtures thereon and all tenements, hereditament, and appurtenances belonging
or in any way appertaining thereto, and which constitutes all of the real
property in which any Borrower has any interest on the Closing Date.
"Proceeds" means all products and proceeds of any Collateral, and all
proceeds of such proceeds and products, including, without limitation, all cash
and credit balances, all payments under any indemnity, warranty, or guaranty
payable with respect to any Collateral, all awards for taking by eminent
domain, all proceeds of fire or other insurance, and all money and other
Property obtained as a result of any claims against third parties or any legal
action or proceeding with respect to Collateral.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Proprietary Rights" means all of each Borrower's now owned and hereafter
arising or acquired: licenses, franchises, permits, patents, patent rights,
copyrights, works which are the subject matter of copyrights, trademarks, trade
names, trade styles, patent and trademark applications and licenses and rights
thereunder, including without limitation those patents, trademarks and
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<PAGE> 20
copyrights set forth on Schedule 9.14, and all other rights under any of the
foregoing, all extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing, and all rights to sue for past,
present, and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints,
surveys, reports, manuals, and operating standards; goodwill; customer and
other lists in whatever form maintained; and trade secret rights, copyright
rights, rights in works of authorship, and contract rights relating to computer
software programs, in whatever form created or maintained.
"Pro Rata Share" means, on the date of determination thereof, a fraction
(expressed as a percentage), the numerator of which is an amount equal to
$29,870,000 less the amount of principal payments made to the Term Loan through
the date of determination and the denominator of which is the sum of (x) an
amount equal to $29,870,000 less the amount of principal payments made to the
Term Loan through the date of determination plus (y) the principal amount of
loans then outstanding under the SWIB Loan Documents.
"Public Authority" means the government of any country or sovereign state,
or of any state, province, municipality, or other political subdivision
thereof, or any department, agency, public corporation or other instrumentality
of any of the foregoing.
"Receivables" means all of each Borrower's now owned and hereafter arising
or acquired: Accounts (whether or not earned by performance), including
Accounts owed to any Borrower by any of its Subsidiaries or Affiliates,
together with all interest, late charges, penalties, collection fees, and other
sums which shall be due and payable in connection with any Account; proceeds of
any letters of credit naming any Borrower as beneficiary; contract rights,
chattel paper, instruments, documents, investment property, general intangibles
(including without limitation chosen in action, causes of action, tax refunds,
tax refund claims, and Reversions and other amounts payable to any Borrower
from or with respect to any Plan) and all forms of obligations owing to any
Borrower (including, without limitation, in respect of loans, advances, and
extensions of credit by any Borrower to its Subsidiaries and Affiliates);
guarantees and other security for any of the foregoing; goods represented by or
the sale, lease or delivery of which gave rise to any of the foregoing;
merchandise returned to or repossessed by any Borrower and rights of stoppage
in transit, replevin, and reclamation; and other rights or remedies of an
unpaid vendor, lienor, or secured party.
"Reference Rate" means the rate of interest publicly announced from time
to time by the Bank as its reference rate. It is a rate set by the Bank based
upon various factors including the Bank's costs and desired return, general
economic conditions, and other factors, and is used as a reference point for
pricing some loans. However, the Bank may price loans at, above, or below such
announced rate. Any changes in the Reference Rate shall take effect on the day
specified in the public announcement of such change.
"Reference Rate Loans" means, collectively, the Reference Rate Revolving
Loans and the Reference Rate Term Loans.
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"Reference Rate Revolving Loans" means a Revolving Loan during any period
in which it bears interest based on the Reference Rate.
"Reference Rate Term Loans" means any portion of a Term Loan during any
period in which such portion bears interest based on the Reference Rate.
"Release" means a release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration of a Contaminant
into the indoor or outdoor environment or into or out of any real estate or
other property, including the movement of Contaminants through or in the air,
soil, surface water, groundwater or real estate or other property.
"Reportable Event" means, any of the events set forth in Section 4043(b)
of ERISA or the regulations thereunder, other than any such event for which the
30-day notice requirement under ERISA has been waived in regulations issued by
the PBGC.
"Requirement of Law" means any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or of a Public Authority.
"Restricted Investment" means any acquisition of Property by any Borrower
or any of its Subsidiaries in exchange for cash or other Property, whether in
the form of an acquisition of stock, debt security, or other indebtedness or
obligation, or the purchase or acquisition of any other Property, or a loan,
advance, capital contribution, or subscription, except acquisitions of the
following: (a) fixed assets to be used in the business of such Borrower, so
long as the acquisition costs thereof constitute Capital Expenditures permitted
hereunder; (b) current assets arising from the sale or lease of goods or
rendition of services in the ordinary course of business of such Borrower; (c)
direct obligations of the United States of America, or any agency thereof, or
obligations guaranteed by the United States of America, provided that such
obligations mature within one year from the date of acquisition thereof; (d)
certificates of deposit maturing within one year from the date of acquisition,
bankers acceptances, Eurodollar bank deposits, or overnight bank deposits, in
each case issued by, created by, or with a bank or trust company organized
under the laws of the United States or any state thereof having capital and
surplus aggregating at least $100,000,000; and (e) commercial paper given the
highest rating by a national credit rating agency and maturing not more than
270 days from the date of creation thereof.
"Reversions" means any funds which may become due to any Borrower in
connection with the termination of any Plan or other employee benefit plan.
"Revolver LIBOR Margin" has the meaning specified in Section 3.1(b)(i).
"Revolver Reference Margin" has the meaning specified in Section
3.1(b)(i).
"Revolving Loan Facility" has the meaning specified in Section 2.1.
"Revolving Loans" has the meaning specified in Section 2.2.
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"Security Interest" means collectively the Liens granted to the Lender in
the Collateral pursuant to this Agreement, the other Loan Documents, or any
other agreement or instrument.
"Senior Debt" means the Obligations and all other Debt constituting debt
for borrowed money or Capital Lease obligations incurred or guaranteed by any
Borrower, other than Debt for borrowed money that is expressly subordinated in
right of payment to the Obligations.
"Senior Debt/EBITDA Ratio" means as of the last day of any fiscal
quarter, the ratio of Borrowers' Senior Debt, on a consolidated basis, to
Borrowers' consolidated EBITDA for such quarter multiplied by four (4).
"Solvent" shall mean when used with respect to any Person that: (a) the
fair value of all its Property is in excess of the total amount of its debts
(including contingent liabilities); (b) it is able to pay its debts as they
mature; and (c) it does not have unreasonably small capital for the business in
which it is engaged or for any business or transaction in which it is about to
engage.
"Specified Capital Expenditures" means Capital Expenditures relating to
(i) the purchase by Parent of a heidelberg press, provided that the aggregate
consideration paid by Parent in connection therewith shall not exceed $765,000,
(ii) the purchase by Parent of a jagenberg sheeter, provided that the
aggregate consideration paid by Parent in connection therewith shall not exceed
$1,500,000, (iii) the purchase by Parent of various pieces of equipment
previously leased through MetLife Capital and Fleet Capital, provided that the
aggregate consideration paid by Parent in connection therewith shall not exceed
$345,000, and (iv) the purchase by Outlook Packaging of various pieces of
equipment previously leased through MetLife Capital and Fleet Capital, provided
that the aggregate consideration paid by Outlook Packaging in connection
therewith shall not exceed $94,000.
"Stated Termination Date" means the third anniversary of the Closing Date.
"Subsidiary" of a Person means any corporation, association, partnership,
joint venture or other business entity of which more than 50% of the voting
stock or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the Person, or
one or more of the Subsidiaries of the Person, or a combination thereof.
Unless the context otherwise clearly requires, references herein to a
"Subsidiary" refer to a Subsidiary of the Borrowers.
"SWIB" means the State of Wisconsin Investment Board.
"SWIB Debt" means loans and obligations owing by Borrowers to SWIB in an
aggregate principal amount not to exceed $10,770,400.
"SWIB Loan Documents" means any and all documents, agreements or
instruments evidencing Debt owed by any Borrower to SWIB.
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<PAGE> 23
"Taxes" means any and all present or future taxes, assessments, levies,
imposts, impositions, deductions, charges or withholdings, and all liabilities
with respect thereto, excluding, in the case of the Lender, such taxes
(including income taxes or franchise taxes) as are imposed on or measured by
the Lender's net income by the jurisdiction (or any political subdivision
thereof) under the laws of which the Lender is organized or maintains a lending
office.
"Term LIBOR Margin" has the meaning specified in Section 3.1(b)(ii).
"Term Loan" has the meaning specified in Section 2.4.
"Term Note" has the meaning specified in Section 2.4.
"Term Reference Rate Margin" has the meaning specified in Section
3.1(b)(ii).
"Total Facility" has the meaning specified in Section 2.1.
"UCC" means the Uniform Commercial Code (or any successor statute) of the
State of Illinois or of any other state the laws of which are required by
Section 9-103 thereof to be applied in connection with the issue of perfection
of security interests.
"Unused Line Fee" has the meaning specified in Section 3.l(d).
1.1 Accounting Terms. Any accounting term used in this Agreement shall
have, unless otherwise specifically provided herein, the meaning customarily
given in accordance with GAAP, and all financial computations hereunder shall
be computed, unless otherwise specifically provided herein, in accordance with
GAAP as consistently applied and using the same method for inventory valuation
as used in the preparation of the Financial Statements.
1.2 Other Terms. All other undefined terms contained in this Agreement
shall, unless the context indicates otherwise, have the meanings provided for
by the UCC to the extent the same are used or defined therein. Wherever
appropriate in the context, terms used herein in the singular also include the
plural, and vice versa, and each masculine, feminine, or neuter pronoun shall
also include the other genders.
2. LOANS AND LETTERS OF CREDIT.
2.1 Total Facility. Subject to all of the terms and conditions of this
Agreement, the Lender shall make available a total credit facility of up to
$29,870,000 (the "Total Facility") for Borrowers' use from time to time during
the term of this Agreement. The Total Facility shall be comprised of: (a) a
revolving line of credit up to the limits of the Availability, consisting of
revolving loans and Letters of Credit (including IRB Letters of Credit) as
described in Sections 2.2 and 2.3 (the "Revolving Loan Facility"); and (b) a
term loan as described in Section 2.4.
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<PAGE> 24
2.2 Revolving Loans.
(a) The Lender shall, upon the Parent's request from time to time, make
revolving loans (the "Revolving Loans") to the Borrowers up to the limits of
the Availability; provided however, that the aggregate Revolving Loans and
Letters of Credit (other than IRB Letters of Credit) outstanding to any
Borrower shall not exceed that Borrower's separate Borrowing Base. The Lender,
in its discretion, may elect to exceed the limits of the Availability on one or
more occasions, but if it does so, the Lender shall not be deemed thereby to
have changed the limits of the Availability or to be obligated to exceed the
limits of the Availability on any other occasion. If the unpaid balance of the
Revolving Loans and undrawn Letters of Credit cause Availability to be a
negative number or if the unpaid balance of Revolving Loans and Letters of
Credit (other than IRB Letters of Credit) outstanding to any Borrower exceeds
that Borrower's separate Borrowing Base, then the Lender may refuse to make or
otherwise restrict Revolving Loans on such terms as the Lender determines until
Availability is positive or such excess has been eliminated. The Parent may
request Revolving Loans either telephonically or in writing. Each oral request
for a Revolving Loan shall be conclusively presumed to be made by a person
authorized by each Borrower to do so and the crediting of a Revolving Loan to a
Borrower's deposit account, or transmittal to such Person as the Parent shall
direct, shall conclusively establish the obligation of the applicable Borrower
to repay such Revolving Loan as provided herein. The Lender will charge all
Revolving Loans and other Obligations (other than principal installments of the
Term Loan not yet due) to a loan account of each Borrower maintained with the
Lender. All fees, commissions, costs, expenses, and other charges under or
pursuant to the Loan Documents, and all payments made and out-of-pocket
expenses incurred by the Lender pursuant to the Loan Documents, will be charged
as Revolving Loans to the applicable Borrower's loan account as of the date due
from such Borrower or the date paid or incurred by the Lender, as the case may
be.
(b) Procedure for Borrowing.
(i) Each Borrowing shall be made upon the Parent's
irrevocable written notice delivered to the Lender in the form of a
Notice of Borrowing (which notice must be received by the Lender
prior to 11:00 a.m. (Chicago time) (1) three Business Days prior to
the requested Funding Date, in the case of LIBOR Rate Loans and (2)
no later than 11:00 a.m. on the requested Funding Date, in the case
of Reference Rate Loans, specifying:
(A) the amount of the Borrowing;
(B) the requested Funding Date, which shall be a
Business Day;
(C) whether the Revolving Loans requested are to be
Reference Rate Revolving Loans or LIBOR Revolving Loans;
(D) the duration of the Interest Period (one, two or
three months) if the requested Revolving Loans are to be
LIBOR Revolving Loans. If the Notice of Borrowing fails to
specify the duration of the Interest Period for any Borrowing
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<PAGE> 25
comprised of LIBOR Rate Loans, such Interest Period shall be
three months; provided, however, that with respect to the
Borrowings to be made on the Closing Date, such Borrowings
will consist of Reference Rate Revolving Loans only; and
(E) the aggregate principal amount of such Borrowing
attributable to each Borrower.
(ii) After giving effect to any Borrowing, there may not be
more than three (3) different Interest Periods in effect.
(iii) With respect to any request for Reference Rate Revolving
Loans, in lieu of delivering the above-described Notice of
Borrowing, the Parent may give the Lender telephonic notice of such
request by the required time, with such telephonic notice to be
confirmed in writing within 24 hours of the giving of such notice
but Lender shall be entitled to rely on the telephonic notice in
making such Revolving Loans.
2.3 Letters of Credit.
(a) (i) Subject to the terms and conditions of this Agreement, the Lender
shall, upon the Parent's request from time to time, cause merchandise or
standby letters of credit (including IRB Letters of Credit issued on the
Closing Date) to be issued for the applicable Borrower's account (the "Letters
of Credit"). The Lender will not cause to be opened any Letter of Credit
(other than IRB Letters of Credit) if: (i) the maximum face amount of the
requested Letter of Credit, plus the aggregate undrawn face amount of all
outstanding Letters of Credit (other than IRB Letters of Credit), would exceed
$3,000,000; (ii) the maximum face amount of the requested Letter of Credit, and
all commissions, fees, and charges due from Borrowers to Lender in connection
with the opening thereof, would cause the Availability to be exceeded at such
time or together with Revolving Loans outstanding to that Borrower and other
Letters of Credit (other than IRB Letters of Credit) outstanding to a
particular Borrower would exceed that Borrower's separate Borrowing Base; or
(iii) the expiration date of the Letter of Credit would exceed the Stated
Termination Date or any renewal term or be greater than twelve (12) months from
the date of issuance; provided, however that the IRB Letter of Credit issued to
the account of Outlook Packaging may have a final expiration date of October
20, 2000. All payments made and expenses incurred by the Lender pursuant to or
in connection with the Letters of Credit will be charged to the applicable
Borrower's loan account as Revolving Loans.
(ii) Subject to the terms and conditions of this Agreement, on the Closing
Date the Lender shall cause IRB Letters of Credit to be issued. The aggregate
undrawn face amount of the IRB Letters of Credit shall not exceed $5,600,000 at
any time outstanding and shall be permanently reduced as the underlying
industrial revenue bonds are amortized. The Lender will not cause to be opened
or extended any IRB Letter of Credit if the face amount of the requested IRB
Letter of Credit and all commissions, fees and charges due from the Borrowers
to the Lender in connection with the opening or extension thereof would cause
Availability to be exceeded. Except as otherwise provided in Section
2.3(a)(i)(iii), the term of each IRB Letter of Credit shall be for
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<PAGE> 26
twelve months, subject to annual renewals which shall be automatic subject to
the conditions of Section 11.2. Except as otherwise provided in Section
2.3(a)(i)(iii), the expiration of any IRB Letter of Credit shall not exceed
the Stated Expiration Date or any renewal term.
(b) Other Conditions. In addition to being subject to the satisfaction of
the applicable conditions precedent contained in Section 11, the obligation of
the Lender to cause to be issued or extended any Letter of Credit (including an
IRB Letter of Credit) is subject to the following conditions precedent having
been satisfied in a manner satisfactory to the Lender:
(1) The applicable Borrower shall have delivered to the proposed
issuer of such Letter of Credit, at such times and in such manner as such
proposed issuer may prescribe, an application in form and substance
satisfactory to such proposed issuer and the Lender for the issuance of
the Letter of Credit and such other documents as may be required pursuant
to the terms thereof, and the form and terms of the proposed Letter of
Credit shall be satisfactory to the Lender and such proposed issuer; and
(2) As of the date of issuance, no order of any court, arbitrator or
Public Authority shall purport by its terms to enjoin or restrain money
center banks generally from issuing letters of credit of the type and in
the amount of the proposed Letter of Credit, and no law, rule or
regulation applicable to money center banks generally and no request or
directive (whether or not having the force of law) from any Public
Authority with jurisdiction over money center banks generally shall
prohibit, or request that the proposed issuer of such Letter of Credit
refrain from, the issuance of letters of credit generally or the issuance
of such Letters of Credit.
(c) Issuance of Letters of Credit.
(1) Request for Issuance. The Parent shall give the Lender three
(3) Business Days' prior written notice of the Borrowers' request for the
issuance of a Letter of Credit (other than an IRB Letter of Credit issued
on the Closing Date). Such notice shall be irrevocable and shall specify
the original face amount of the Letter of Credit requested, the effective
date (which date shall be a Business Day) of issuance of such requested
Letter of Credit, whether such Letter of Credit may be drawn in a single
or in partial draws, the date on which such requested Letter of Credit is
to expire (which date shall be a Business Day), the purpose for which
such Letter of Credit is to be issued, and the beneficiary of the
requested Letter of Credit. The Parent shall attach to such notice the
proposed form of the Letter of Credit that the Lender is requested to
cause to be issued.
(2) No Extensions or Amendment. The Lender shall not be obligated
to cause any Letter of Credit (including an IRB Letter of Credit) to be
extended or amended unless the requirements of this Section 2.3 are met
as though a new Letter of Credit were being requested and issued.
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<PAGE> 27
(d) Payments Pursuant to Letters of Credit.
(1) Payment of Letter of Credit Obligations. Each Borrower that is
the account party as to a Letter of Credit (including an IRB Letter of
Credit) agrees to reimburse the issuer for any draw under such Letter of
Credit immediately upon demand, and to pay the issuer of such Letter of
Credit the amount of all other obligations and other amounts payable to
such issuer under or in connection with such Letter of Credit immediately
when due, irrespective of any claim, setoff, defense or other right which
such Borrower may have at any time against such issuer or any other
Person.
(2) Revolving Loans to Satisfy Reimbursement Obligations. In the
event that the issuer of any Letter of Credit (including an IRB Letter of
Credit) honors a draw under such Letter of Credit and the applicable
Borrower shall not have repaid such amount to the issuer of such Letter
of Credit pursuant to Section 2.3(d)(1), the Lender shall pay the issuer
and such amount when paid shall constitute a Revolving Loan to such
Borrower which shall be deemed to have been requested by the Parent.
(e) Compensation for Letters of Credit.
(1) Letter of Credit Fee. Each Borrower agrees to pay to the Lender
with respect to each Letter of Credit (including an IRB Letter of
Credit), the Letter of Credit Fee specified in, and in accordance with
the terms of, Section 3.6.
(2) Issuer Fees and Charges. Each applicable Borrower shall pay to
the issuer of any Letter of Credit (including an IRB Letter of Credit),
or to the Lender, for the account of the issuer of any such Letter of
Credit, solely for such issuer's account, such fees and other charges as
are charged by such issuer for letters of credit issued by it, including,
without limitation, its standard fees for issuing, administering,
amending, renewing, paying and canceling letters of credit and all other
fees associated with issuing or servicing letters of credit, as and when
assessed.
(f) Indemnification; Exoneration; Power of Attorney
(1) Indemnification. In addition to amounts payable as elsewhere
provided in this Section 2.3, the Borrowers, jointly and severally,
hereby agree to protect, indemnify, pay and save the Lender harmless from
and against any and all claims, demands, liabilities, damages, losses,
costs, charges and expenses (including reasonable attorneys' fees) which
the Lender may incur or be subject to as a consequence, direct or
indirect, of the issuance of any Letter of Credit (including an IRB
Letter of Credit) or the provision of any credit support or enhancement
in connection therewith. The agreement in this Section 2.3(f)(1) shall
survive payments of all Obligations and the termination of this
Agreement.
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(2) Assumption of Risk by the Borrowers. As among the Borrowers and
the Lender, the Borrowers assume all risks of the acts and omissions of,
or misuse of any of the Letters of Credit (including an IRB Letter of
Credit) by, the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, the Lender shall not
be responsible for: (A) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any Person in
connection with the application for and issuance of and presentation of
drafts with respect to any of the Letters of Credit, even if it should
prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any Letter
of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any
reason; (C) the failure of the beneficiary of any Letter of Credit to
comply duly with conditions required in order to draw upon such Letter of
Credit; (D) errors, omissions, interruptions, or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (E) errors in interpretation
of technical terms; (F) any loss or delay in the transmission or
otherwise of any document required in order make a drawing under any
Letter of Credit or of the proceeds thereof; (G) the misapplication by
the beneficiary of any Letter of Credit of the proceeds of any drawing
under such Letter of Credit; or (H) any consequences arising from causes
beyond the control of the Lender, including, without limitation, any act
or omission, whether rightful or wrongful, of any present or future de
jure or de facto Public Authority. None of the foregoing shall affect,
impair or prevent the vesting of any rights or powers of the Lender under
this Section 2.3.
(3) Exoneration. In furtherance and extension, and not in
limitation, of the specific provisions set forth above, any action taken
or omitted by the Lender under or in connection with any of the Letters
of Credit (including an IRB Letter of Credit) or any related
certificates, if taken or omitted in the absence of gross negligence or
willful misconduct, shall not put the Lender under any resulting
liability to any Borrower or relieve any Borrower of any of its
obligations hereunder to the Lender.
(4) Power of Attorney. In connection with all Inventory financed by
Letters of Credit, each Borrower hereby appoints the Lender, or the
Lender's designee, as its attorney, with full power and authority: (a) to
sign and/or endorse such Borrower's name upon any warehouse or other
receipts; (b) to sign such Borrower's name on bills of lading and other
negotiable and non-negotiable documents; (c) to clear Inventory through
customs in the Lender's or such Borrower's name, and to sign and deliver
to customs officials powers of attorney in such Borrower's name for such
purpose; (d) to complete in such Borrower's or the Lender's name, any
order, sale, or transaction, obtain the necessary documents in connection
therewith, and collect the proceeds thereof; and (e) to do such other
acts and things as are necessary in order to enable the Lender to obtain
possession of the Inventory and to obtain payment of the Obligations.
Neither the Lender nor its designee, as such Borrower's attorney, will be
liable for any acts or omissions, nor for any error of judgement or
mistakes of fact or law. This power, being coupled with an interest, is
irrevocable until all Obligations have been paid and satisfied.
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<PAGE> 29
(5) Account Party. Each Borrower hereby authorizes and directs any
issuer of a Letter of Credit (including an IRB Letter of Credit) to name
such Borrower as the "Account Party" therein and to deliver to the Lender
all instruments, documents and other writings and property received by
the issuer pursuant to the Letter of Credit, and to accept and rely upon
the Lender's instructions and agreements with respect to all matters
arising in connection with the Letter of Credit or the application
therefor.
(6) Control of Inventory. In connection with all Inventory financed
by Letters of Credit, each Borrower will, at the Lender's request,
instruct all suppliers, carriers, forwarders, warehouses or others
receiving or holding cash, checks, Inventory, documents or instruments in
which the Lender holds a security interest to deliver them to the Lender
and/or subject to the Lender's order, and if they shall come into such
Borrower's possession, to deliver them, upon request, to the Lender in
their original form. Each Borrower shall also, at the Lender's request,
designate the Lender as the consignee on all bills of lading and other
negotiable and non-negotiable documents.
(g) Supporting Letter of Credit; Cash Collateral. If, notwithstanding the
provisions of this Section 2.3 and Section 14 any Letter of Credit (including
an IRB Letter of Credit) is outstanding upon the termination of this Agreement,
then upon such termination the Borrowers shall deposit with the Lender, at its
discretion, with respect to each Letter of Credit then outstanding, either (A)
a standby letter of credit (a "Supporting Letter of Credit") in form and
substance satisfactory to the Lender, issued by an issuer satisfactory to the
Lender in an amount equal to the greatest amount for which such Letter of
Credit may be drawn, under which Supporting Letter of Credit the Lender is
entitled to draw amounts necessary to reimburse the Lender for payments made by
the Lender under such Letter of Credit or under any credit support or
enhancement provided through the Lender with respect thereto, or (B) cash in
amounts necessary to reimburse the Lender for payments made by the Lender under
such Letter of Credit or under any credit support or enhancement provided
through the Lender. Such Supporting Letter of Credit or deposit of cash shall
be held by the Lender, as security for, and to provide for the payment of, the
aggregate undrawn amount of such Letters of Credit remaining outstanding.
2.4 Term Loan. The Lender will make term loans (collectively, the "Term
Loan") to Borrowers in the respective amounts set forth on Schedule 2.4 hereto
on the Closing Date. The Term Loan will be in the aggregate principal amount
of $4,870,000, repayable as set forth in Section 4.2 hereof and evidenced by
the promissory notes (the "Term Notes") authorized, issued and delivered by
the relevant Borrower to Lender, in the form attached as Exhibit C. Upon
termination of this Agreement for whatever reason, the unpaid balance of the
Term Loan shall become immediately due and payable.
2.5 Automated Clearing House Transfers and Overdrafts. The Borrowers may
request and the Lender may, in its sole and absolute discretion, arrange for
the Borrowers to obtain from the Bank or Bank of America Illinois ACH
Transactions. The Borrowers, jointly and severally, agree to indemnify and
hold the Lender harmless from all losses, liabilities, costs, expenses and
claims incurred by the Lender arising from or related to such ACH Transactions.
The Borrowers
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<PAGE> 30
acknowledge and agree that the obtaining of ACH Transactions from the Bank or
Bank of America Illinois (a) is in the sole and absolute discretion of the Bank
(or Bank of America Illinois, as applicable), (b) is subject to all rules and
regulations of the Bank (or Bank of America Illinois, as applicable), and (c)
is due to the Bank (or Bank of America Illinois, as applicable) relying on the
indemnity of the Lender to the Bank with respect to all risks of loss
associated with the ACH Transactions.
3. INTEREST AND OTHER CHARGES.
3.1 Interest.
(a) All Obligations shall bear interest on the unpaid principal amount
thereof from the date made until paid in full in cash at a rate determined by
reference to the Reference Rate or the LIBOR Rate and Sections 3.1(a) and (b),
as applicable, but not to exceed the Maximum Rate. Subject to the provisions
of Section 3.2, any of the Loans may be converted into, or continued as,
Reference Rate Loans or LIBOR Rate Loans in the manner provided in Section 3.2.
If at any time Loans are outstanding with respect to which notice has not been
delivered to Lender in accordance with the terms of this Agreement specifying
the basis for determining the interest rate applicable thereto, then those
Loans shall be Reference Rate Loans and shall bear interest at a rate
determined by reference to the Reference Rate until notice to the contrary has
been given to the Lender and such notice has become effective. Except as
otherwise provided herein, the Obligations shall bear interest as follows:
(i) For all Term Loan Obligations, other than LIBOR Rate Loans, at a
fluctuating per annum rate equal to the Term Reference Rate Margin from
time to time in effect plus the Reference Rate;
(ii) If Term Loan Obligations are LIBOR Rate Loans, at a per annum
rate equal to three and one-quarter percent (3.25%) (the "Term LIBOR
Margin") plus the LIBOR Rate determined for the applicable Interest
Period;
(iii) For all Revolving Loan Obligations other than LIBOR Rate
Loans, at a fluctuating rate per annum rate equal to the Revolver
Reference Margin from time to time in effect plus the Reference Rate; and
(iv) For all Revolving Loan Obligations that are LIBOR Rate Loans,
at a per annum rate equal to the Revolver LIBOR Margin from time to time
in effect plus the LIBOR Rate determined for the applicable Interest
Period.
Each change in the Reference Rate shall be reflected in the interest rate
described in (i) and (iii) above as of the effective date of such change. All
interest charges shall be computed on the basis of a year of three hundred
sixty (360) days and actual days elapsed. All interest with respect to
Reference Rate Loans shall be payable to Lender on the first day of each month
hereafter. All
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interest with respect to Libor Rate Loans shall be payable to Lender on the
first day of each month hereafter and on the LIBOR Interest Payment Date.
(b)(i) The "Revolver Reference Margin" and "Revolver LIBOR Margin" mean
per annum rates of interest charged in addition to the applicable Reference
Rate or LIBOR Rate with respect to Revolving Loans. On the Closing Date, the
Revolver Reference Margin and Revolver LIBOR Margin shall equal three quarters
of one percent (.75%) and two and three quarters percent (2.75%), respectively.
Commencing with the first day of the month following the Lender's receipt of
the Borrowers' financial statements for the fiscal quarter ending November 30,
1996, and, prospectively, on the first day of each month following the Lender's
receipt of the Borrowers' financial statements for each fiscal quarter
thereafter, the Revolver Reference Margin and Revolver LIBOR Margin shall be
subject to adjustment (up or down) based on the following grid:
<TABLE>
<CAPTION>
- -------------------------------------------------------
IF BORROWERS' THE REVOLVER THE REVOLVER
SENIOR DEBT/EBITDA REFERENCE MARGIN LIBOR MARGIN
RATIO IS IS IS
- -------------------------------------------------------
<S> <C> <C>
<2.0* .25% 2.25%
>2.0, but <3.5 .50% 2.50%
- -------------------------------------------------------
>3.5, but <5.0 .75% 2.75%
- -------------------------------------------------------
>5.0, but <10 1.00% 3.00%
- -------------------------------------------------------
>10 1.25% 3.25%
- -------------------------------------------------------
</TABLE>
* Expressed, in each case, as a ratio of a specified number to 1.0.
(ii) The "Term Reference Rate Margin" and "Term LIBOR Margin" mean per
annum rates of interest charged in addition to the applicable Reference Rate or
LIBOR Rate with respect to Term Loans. On the Closing Date, the Term Reference
Rate Margin and Term LIBOR Margin shall equal one and one-quarter percent
(1.25%) and three and one-quarter percent (3.25%), respectively. Commencing
with the first day of the month following the Lender's receipt of the
Borrowers' financial statements for the fiscal quarter ending November 30,
1996, and, prospectively, on the first day of each month following the Lender's
receipt of the Borrowers' financial statements for each fiscal quarter
thereafter, the Term Reference Rate Margin and Term LIBOR Margin shall be
subject to adjustment (up or down) based on the following grid:
<TABLE>
<CAPTION>
- -------------------------------------------------------
IF BORROWERS' THE TERM REFERENCE THE TERM
SENIOR DEBT/EBITDA RATE MARGIN LIBOR MARGIN
RATIO IS IS IS
<S> <C> <C>
- -------------------------------------------------------
<2.0* .75% 2.75%
- -------------------------------------------------------
</TABLE>
-31-
<PAGE> 32
<TABLE>
<CAPTION>
- ------------------------------------------------------
IF BORROWERS' THE TERM REFERENCE THE TERM
SENIOR DEBT/EBITDA RATE MARGIN LIBOR MARGIN
RATIO IS IS IS
- ------------------------------------------------------
<S> <C> <C>
>2.0, but <3.5 1.00% 3.00%
- ------------------------------------------------------
>3.5, but <5.0 1.25% 3.25%
- ------------------------------------------------------
>5.0, but <10 1.50% 3.50%
- ------------------------------------------------------
>10 1.75% 3.75%
- ------------------------------------------------------
</TABLE>
*Expressed, in each case, as a ratio of a specified number to 1.0.
(c) If any Event of Default occurs, then, from the date such Event of
Default occurs until it is cured or a waiver is granted, or if not cured or
waived until all Obligations are paid and performed in full, the Borrowers will
pay interest on the unpaid principal balances of the Term Loan and the
Revolving Loans at a per annum rate 2.0% greater than the rates of interest
otherwise specified herein, and the Letter of Credit Fee shall be increased to
a rate two percent (2.0%) per annum greater than the Letter of Credit Fee
otherwise specified herein.
(d) For every month during the term of this Agreement, the Borrowers shall
pay the Lender a fee (the "Unused Line Fee") in an amount equal to
three-eighths of one percent (0.375%) per annum, multiplied by the average
daily amount by which the Maximum Revolving Credit Line exceeds the sum of (i)
the average daily outstanding amount of Revolving Loans and (ii) the undrawn
face amount of all outstanding Letters of Credit (other than IRB Letters of
Credit) during such month, with the unpaid balance calculated for this purpose
by applying payments immediately upon receipt. Such a fee, if any, shall be
calculated on the basis of a year of three hundred sixty (360) days and actual
days elapsed, and shall be payable to the Lender on the first day of each month
with respect to the prior month.
3.2 Conversion and Continuation Elections.
(a) The Parent may, upon irrevocable written notice to the Lender in
accordance with Subsection 3.2(b):
(i) elect, as of any Business Day, in the case of Reference Rate
Loans to convert any such Loans (or any part thereof in an amount not
less than $500,000, or that is in an integral multiple of $500,000 in
excess thereof) into LIBOR Rate Loans; or
(ii) elect, as of the last day of the applicable Interest Period, to
continue any LIBOR Rate Loans having Interest Periods expiring on such
day (or any part thereof in an amount not less than $500,000, or that is
in an integral multiple of $500,000 in excess thereof);
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<PAGE> 33
provided, that separate Loans to separate Borrowers may be aggregated for
purposes of determining the minimum amounts of LIBOR Loans; and provided
further, that if at any time the aggregate amount of LIBOR Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $500,000, such LIBOR Rate Loans shall
automatically convert into Reference Rate Loans, and on and after such date the
right of the Parent to continue such Loans as, and convert such Loans into,
LIBOR Rate Loans, as the case may be, shall terminate.
(b) The Parent shall deliver a notice ("Notice of
Conversion/Continuation") to be received by the Lender not later than 11:00
A.M. (Chicago time) at least three Business Days in advance of the date of
conversion or continuing, if the Loans are to be converted into or continued as
LIBOR Rate Loans and specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or
continued;
(C) the type of Loans resulting from the proposed
conversion or continuation; and
(D) the duration of the requested Interest Period,
provided, however, the Parent may not
select an Interest Period with respect to any portion of
the Term Loan which extends beyond an installment
payment date for the Term Loan unless, after giving
effect to such election, the portion of the Term Loan
not subject to Interest Periods ending after such
installment payment date is equal to or greater than the
principal due on such installment payment date.
(c) If upon the expiration of any Interest Period applicable to LIBOR Rate
Loans, the Parent has failed to select timely a new Interest Period to be
applicable to LIBOR Rate Loans or if any Default or Event of Default then
exists, the Borrowers shall be deemed to have elected to convert such LIBOR
Rate Loans into Reference Rate Loans effective as of the expiration date of
such Interest Period.
(d) During the existence of an Event or Event of Default, the Parent may
not elect to have a Loan converted into or continued as a LIBOR Rate Loan.
(e) After giving effect to any conversion or continuation of Loans, there
may not be more than three (3) different Interest Periods in effect.
3.3 Maximum Interest Rate. In no event shall any interest rate provided
for hereunder exceed the maximum rate permissible for corporate borrowers under
applicable law for loans of the type provided for hereunder (the "Maximum
Rate"). If, in any month, any interest rate, absent such limitation, would
have exceeded the Maximum Rate, then the interest rate for that month shall be
the Maximum Rate, and, if in future months, that interest rate would otherwise
be less than
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<PAGE> 34
the Maximum Rate, then that interest rate shall remain at the Maximum Rate
until such time as the amount of interest paid hereunder equals the amount of
interest which would have been paid if the same had not been limited by the
Maximum Rate. In the event that, upon payment in full of the Obligations under
this Agreement, the total amount of interest paid or accrued under the terms of
this Agreement is less than the total amount of interest which would, but for
this Section 3.3, have been paid or accrued if the interest rates otherwise set
forth in this Agreement had at all times been in effect, then the Borrowers
shall, to the extent permitted by applicable law, pay the Lender, an amount
equal to the difference between (a) the lesser of (i) the amount of interest
which would have been charged if the Maximum Rate had, at all times, been in
effect or (ii) the amount of interest which would have accrued had the interest
rates otherwise set forth in this Agreement, at all times, been in effect and
(b) the amount of interest actually paid or accrued under this Agreement. In
the event that a court determines that the Lender has received interest and
other charges hereunder in excess of the Maximum Rate, such excess shall be
deemed received on account of, and shall automatically be applied to reduce,
the Obligations other than interest, in the inverse order of maturity, and if
there are no Obligations outstanding, the Lender shall refund to the Borrowers
such excess.
3.4 Facility Fee. The Borrowers will pay the Lender on the Closing Date a
facility fee in the amount of $79,975 (the "Facility Fee"). The Lender and the
Borrowers agree that the Facility Fee shall be financed by the Lender as a
Revolving Loan to Parent.
3.5 Collateral Management Fee. The Borrowers will pay the Lender an
annual collateral management fee (the "Collateral Management Fee") on the
Closing Date and on each anniversary of the Closing Date thereafter prior to
the termination of this Agreement, in the amount of $25,000 for each year or
portion thereof. Each such fee shall be fully earned and non-refundable when
due.
3.6 Letter of Credit Fee. Each Borrower agrees to pay to the Lender a fee
(the "Letter of Credit Fee") equal to one and three-quarters percent (1.75%)
per annum of the undrawn face amount of each Letter of Credit (including each
IRB Letter of Credit) issued for such Borrower's account at the Parent's
request, plus all out-of-pocket costs, fees and expenses incurred by the Lender
in connection with the application for, issuance of, or amendment to any Letter
of Credit, which costs, fees and expenses could include a "fronting fee"
required to be paid by the Lender to such issuer for the assumption of the
settlement risk in connection with the issuance of such Letter of Credit. The
Letter of Credit Fee shall be payable monthly in arrears on the first day of
each month following any month in which a Letter of Credit (including an IRB
Letter of Credit) was issued and/or in which a Letter of Credit remains
outstanding. The Letter of Credit Fee shall be computed on the basis of a
360-day year for the actual number of days elapsed.
3.7 Early Termination Fee. Upon termination of the Revolving Loan
Facility for any reason prior to the Stated Termination Date or the date of any
extension thereof, the Borrowers shall pay to the Lender an early termination
fee as compensation to the Lender for its loss of anticipated profits and for
having made the Revolving Loan commitment. The early termination fee shall
equal three percent (3.0%) of the Maximum Revolving Credit Line for a
termination during the
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<PAGE> 35
first Loan Year; two percent (2.0%) of the Maximum Revolving Credit Line for a
termination during the second Loan Year and one percent (1.0%) of the Maximum
Revolving Credit Line for a termination during any Loan Year thereafter. In
addition, upon any termination of the Revolving Loan facility and prepayment of
any Revolving Loans, the Borrowers shall pay to the Lender all LIBOR breakage
costs with respect to LIBOR Loans repaid. Notwithstanding the foregoing, the
early termination fee shall not be payable if the Loans are refinanced by the
Bank or any Affiliate thereof.
4. PAYMENTS AND PREPAYMENTS.
4.1 Revolving Loans. Each Borrower shall repay the outstanding principal
balance of the Revolving Loans advanced to it, plus all accrued but unpaid
interest thereon, upon the termination of this Agreement for any reason. In
addition, and without limiting the generality of the foregoing, each Borrower
shall pay to the Lender, on demand, the amount by which the unpaid principal
balance of the Revolving Loans (together with the undrawn face amount of
Letters of Credit) at any time has caused Availability to be less than zero,
and the amount by which the unpaid balance of the Revolving Loans (together
with the undrawn face amount of Letters of Credit) made to that particular
Borrower at any time exceeds the separate Borrowing Base of that Borrower.
4.2 Repayment of Term Loan. The relevant Borrower shall repay the
principal of the Term Loan in thirty-six (36) consecutive monthly installments
of $34,000, in the case of Parent, $12,000, in the case of Outlook Label,
$6,000, in the case of Outlook Packaging, and $6,000, in the case of Barrier,
each commencing on December 1, 1996 and on the first day of each consecutive
month thereafter with a final installment in the amount of $1,646,000, in the
case of Parent, $568,000, in the case of Outlook Label, $284,000, in the case
of Outlook Packaging, and $284,000, in the case of Barrier (or the remaining
principal balance of the Term Loan) due on the Stated Termination Date, unless
sooner paid in full.
Upon termination of this Agreement for whatever reason, the unpaid balance of
the Term Loan as well as all other Obligations shall be immediately due and
payable in full.
4.3 Voluntary Prepayments of Term Loan. The Parent may prepay the
principal of the Term Loan in whole or in part at any time and from time to
time upon at least five (5) Business Days prior written notice to the Lender
without premium or penalty. All voluntary prepayments of the principal of the
Term Loan shall be accompanied by the payment of all accrued but unpaid
interest on the Term Loan to the date of prepayment and all LIBOR breakage
costs in accordance with Section 6.4. Amounts prepaid in respect of the Term
Loan pursuant to this Section 4.3 may not be reborrowed. Any voluntary
prepayment under this Section of less than all of the outstanding principal of
the Term Loan shall be applied to the installments of principal of the Term
Loan in the inverse order of maturity.
-35-
<PAGE> 36
4.4 Mandatory Prepayments of Term Loan.
(a) On the first day of the fourth month after the end of each Fiscal Year
while any principal of the Term Loan remains unpaid (including the Fiscal Year
in which the Closing Date occurs) the Borrowers shall make a prepayment of the
principal of the Term Loan in an amount equal to 25% of Excess Cash Flow for
such Fiscal Year. Each such prepayment shall be allocated ratably to the
separate Tem Loan obligations of each Borrower and applied to the installments
of principal on the Term Loan in the inverse order of maturity. Amounts
prepaid in respect of the Term Loan pursuant to this clause (a) may not be
reborrowed.
(b) If any Borrower issues capital stock, no later than the Business Day
following the date of receipt of the proceeds thereof, that Borrower shall
prepay the Loans in an amount equal to Lender's Pro Rata Share of such
proceeds, net of underwriting discounts and commissions and other reasonable
costs paid to non-Affiliates in connection therewith allocable to Lender's Pro
Rata Share. Each such prepayment shall be applied to the Loans in a manner to
be determined by Lender, and amounts prepaid in respect of the Term Loans
pursuant to this clause (b) may not be reborrowed.
4.5 Place and Form of Payments; Extension of Time. All payments of
principal, interest, premium, and other sums due to the Lender shall be made at
the Lender's address set forth in Section 15.10. Except for Proceeds received
directly by the Lender, all such payments shall be made in immediately
available funds. If any payment of principal, interest, premium, or other sum
to be made hereunder becomes due and payable on a day other than a Business
Day, the due date of such payment shall be extended to the next succeeding
Business Day and interest thereon shall be payable at the applicable interest
rate during such extension.
4.6 Application and Reversal of Payments. The Lender shall determine in
its sole discretion the order and manner in which Proceeds of Collateral and
other payments that the Lender receives are applied to the Revolving Loans, the
Term Loan, interest thereon, and the other Obligations then due and payable,
and each Borrower hereby irrevocably waives the right to direct the application
of any payment or Proceeds. The Lender shall have the continuing and exclusive
right to apply and reverse and reapply any and all such Proceeds and payments
to any portion of the Obligations then due and payable.
4.7 INDEMNITY FOR RETURNED PAYMENTS. IF AFTER RECEIPT OF ANY PAYMENT
WHICH IS APPLIED TO THE PAYMENT OF ALL OR ANY PART OF THE OBLIGATIONS, THE
LENDER IS FOR ANY REASON COMPELLED TO SURRENDER SUCH PAYMENT TO ANY PERSON
BECAUSE SUCH PAYMENT IS INVALIDATED, DECLARED FRAUDULENT, SET ASIDE, DETERMINED
TO BE VOID OR VOIDABLE AS A PREFERENCE, IMPERMISSIBLE SETOFF, OR A DIVERSION OF
TRUST FUNDS, OR FOR ANY OTHER REASON, THEN: THE OBLIGATIONS OR PART THEREOF
INTENDED TO BE SATISFIED SHALL BE REVIVED AND CONTINUE AND THIS AGREEMENT SHALL
CONTINUE IN FULL FORCE AS IF SUCH PAYMENT HAD NOT BEEN RECEIVED BY THE LENDER
AND THE BORROWERS SHALL BE LIABLE
-36-
<PAGE> 37
TO PAY TO THE LENDER AND HEREBY JOINTLY AND SEVERALLY INDEMNIFY THE LENDER AND
HOLD THE LENDER HARMLESS FOR THE AMOUNT OF SUCH PAYMENT SURRENDERED. The
provisions of this Section 4.7 shall be and remain effective notwithstanding
any contrary action which may have been taken by the Lender in reliance upon
such payment, and any such contrary action so taken shall be without prejudice
to the Lender's rights under this Agreement and shall be deemed to have been
conditioned upon such payment having become final and irrevocable. The
provisions of this Section 4.7 shall survive the termination of this Agreement.
5. LENDER'S BOOKS AND RECORDS; MONTHLY STATEMENTS. The Borrowers agree
that the Lender's books and records showing the Obligations and the
transactions pursuant to this Agreement and the other Loan Documents shall be
admissible in any action or proceeding arising therefrom, and shall constitute
prima facie proof thereof, irrespective of whether any Obligation is also
evidenced by a promissory note or other instrument. The Lender will provide to
the Borrowers a monthly statement of Loans, payments, and other transactions
pursuant to this Agreement. Such statement shall be deemed correct, accurate,
and binding on the Borrowers and as an account stated (except for reversals and
reapplications of payments made as provided in Section 4.6 and corrections of
errors discovered by the Lender), unless the Parent notifies the Lender in
writing to the contrary within forty-five (45) days after such statement is
rendered. In the event a timely written notice of objections is given by the
Parent, only the items to which exception is expressly made will be considered
to be disputed by the Borrowers.
6. TAXES, YIELD PROTECTION AND ILLEGALITY
6.1 Taxes.
(a) Any and all payments by any Borrower to the Lender under this
Agreement and any other Loan Document shall be made free and clear of, and
without deduction or withholding for any Taxes. In addition, the Borrowers
shall pay all Other Taxes.
(b) The Borrowers agree, jointly and severally, to indemnity and hold
harmless the Lender for the full amount of Taxes or Other Taxes (including any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section) paid by the Lender and any liability (including penalties, interest,
additions to tax and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
Payment under this indemnification shall be made within 30 days after the date
the Lender makes written demand therefor.
(c) If any Borrower shall be required by law to deduct or withhold any
Taxes or Other Taxes from or in respect of any sum payable hereunder to Lender,
then:
(i) the sum payable shall be increased as necessary so that after
making all required deductions and withholdings (including deductions and
withholdings applicable to
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<PAGE> 38
additional sums payable under this Section) the Lender receives an amount
equal to the sum it would have received had no such deductions or
withholdings been made;
(ii) the applicable Borrower shall make such deductions and
withholdings;
(iii) the applicable Borrower shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in
accordance with applicable law; and
(iv) the applicable Borrower shall also pay to the Lender at the
time interest is paid, all additional amounts which the Lender specifies
as necessary to preserve the after-tax yield the Lender would have
received if such Taxes or Other Taxes had not been imposed.
(d) Within 30 days after the date of any payment by any Borrower of Taxes
or Other Taxes, such Borrower shall furnish the Lender the original or a
certified copy of a receipt evidencing payment thereof, or other evidence of
payment satisfactory to the Lender.
6.2 Illegality.
(a) If the Lender determines that the introduction of any Requirement of
Law, or any change in any Requirement of Law, or in the interpretation or
administration of any Requirement of Law, has made it unlawful, or that any
central bank or other Public Authority has asserted that it is unlawful, for
the Lender or its applicable lending office to make LIBOR Rate Loans, then, on
notice thereof by the Lender to the Parent, any obligation of the Lender to
make LIBOR Rate Loans shall be suspended until the Lender notifies the
Borrowers that the circumstances giving rise to such determination no longer
exist.
(b) If the Lender determines that it is unlawful to maintain any LIBOR
Rate Loan, each Borrower shall, upon Parent's receipt of notice of such fact
and demand from the Lender, prepay in full such LIBOR Rate Loans then
outstanding, together with interest accrued thereon and amounts required under
Section 6.4, either on the last day of the Interest Period thereof, if the
Lender may lawfully continue to maintain such LIBOR Rate Loans to such day, or
immediately, if the Lender may not lawfully continue to maintain such LIBOR
Rate Loan. If a Borrower is required to so prepay any LIBOR Rate Loan, then
concurrently with such prepayment, such Borrower shall borrow from the Lender,
in the amount of such repayment, a Reference Rate Loan.
6.3 Increased Costs and Reduction of Return.
(a) If the Lender determines that, due to either (i) the introduction of
or any change in the interpretation of any law or regulation or (ii) the
compliance by the Lender with any guideline or request from any central bank or
other Public Authority (whether or not having the force of law), there shall be
any increase in the cost to the Lender of agreeing to make or making, funding
or maintaining any LIBOR Rate Loans, then the Borrowers shall be liable for,
and shall from time to time, upon demand, pay to the Lender, additional amounts
as are sufficient to compensate the Lender for such increased costs.
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<PAGE> 39
(b) If the Lender shall have determined that (i) the introduction of any
Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Public Authority
charged with the interpretation or administration thereof, or (iv) compliance
by the Lender or any corporation controlling the Lender with any Capital
Adequacy Regulation, affects or would affect the amount of capital, reserves,
or special deposits required or expected to be maintained by the Lender or any
corporation controlling the Lender and (taking into consideration such Lender's
or such corporation's policies with respect to capital adequacy and such
Lender's desired return on capital) determines that the amount of such capital,
reserves, or special deposits is increased as a consequence of its loans,
credits or obligations under this Agreement, then, upon demand of the Lender to
the Parent, the Borrowers shall pay to the Lender, from time to time as
specified by the Lender, additional amounts sufficient to compensate the Lender
for such increase. Notwithstanding the foregoing, all such amounts shall be
subject to the provisions of Section 3.3. Any request for additional amounts
pursuant to this Section 6.3 shall be accompanied by a statement setting forth
in reasonable detail the calculations forming the basis for such request.
6.4 Funding Losses. The Borrowers, jointly and severally, shall reimburse
the Lender and hold the Lender harmless from any loss or expense which the
Lender may sustain or incur as a consequence of:
(a) the failure of any Borrower to make on a timely basis any
payment of principal of any LIBOR Rate Loan;
(b) the failure of any Borrower to borrow, continue or convert a
Loan after Parent has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/Continuation;
(c) the prepayment or other payment (including after acceleration
thereof) of an LIBOR Rate Loan on a day that is not the last day of the
relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its LIBOR Rate Loans or from fees payable
to terminate the deposits from which such funds were obtained.
6.5 Inability to Determine Rates. If the Lender determines that for any
reason adequate and reasonable means do not exist for determining the LIBOR
Rate for any requested Interest Period with respect to a proposed LIBOR Rate
Loan, or that the LIBOR Rate for any requested Interest Period with respect to
a proposed LIBOR Rate Loan does not adequately and fairly reflect the cost to
the Lender of funding such Loan, the Lender will promptly so notify the Parent.
Thereafter, the obligation of the Lender to make or maintain LIBOR Rate Loans
hereunder shall be suspended until the Lender revokes such notice in writing.
Upon receipt of such notice, the Parent may revoke any Notice of Borrowing or
Notice of Conversion/Continuation then submitted by it. If the Parent does not
revoke such Notice, the Lender shall make, convert or continue the Loans, as
proposed by the Parent, in the amount specified in the applicable notice
submitted by the
-39-
<PAGE> 40
Parent, but such Loans shall be made, converted or continued as Reference Rate
Loans instead of LIBOR Rate Loans.
6.6 Survival. The agreements and obligations of the Borrowers in this
Section 6 shall survive the payment of all other Obligations.
7. COLLATERAL.
7.1 Grant of Security Interest.
(a) As security for the Obligations, each Borrower hereby grants to the
Lender a continuing security interest in, lien on, and assignment of: (i) all
of each Borrower's Receivables, Inventory, Equipment, General Intangibles,
Proprietary Rights, documents, instruments, chattel paper, and Proceeds,
wherever located and whether now existing or hereafter arising or acquired;
(ii) all moneys, securities, financial assets, investment property and other
property and the Proceeds thereof, now or hereafter held or received by, or in
transit to, the Lender from or for the Borrowers, whether for safekeeping,
pledge, custody, transmission, collection or otherwise, including, without
limitation, all of the Borrowers' deposit accounts, credits and balances with
the Lender and all claims of the Borrowers against the Lender at any time
existing; (iii) all of each Borrower's deposit accounts with any financial
institutions with which Borrowers maintain deposits; and (iv) all books,
records and other Property relating to or referring to any of the foregoing,
including, without limitation, all books, records, ledger cards, data
processing records, computer software and other property, relating to the
Receivables, General Intangibles, Inventory, Equipment, Proprietary Rights,
Proceeds, and other property referred to above (all of the foregoing, and all
other property in which the Lender may at any time be granted a Lien, being
herein collectively referred to as the "Collateral"). The Lender shall have
all of the rights of a secured party with respect to the Collateral under the
UCC and other applicable laws.
(b) As additional security for the Obligations, each Borrower shall
simultaneously herewith execute and deliver to the Lender the Mortgages to
grant to the Lender continuing and perfected leasehold mortgage liens on the
real estate leased to it and Parent shall simultaneously herewith execute and
deliver to the Lender a Stock Pledge Agreement and share certificates and stock
powers to pledge to the Lender all of the outstanding capital stock of each of
the Subsidiaries.
(c) All Obligations shall constitute a single loan secured by all of the
Collateral. The Lender may, in its sole discretion, (i) exchange, waive, or
release any of the Collateral, (ii) apply Collateral and direct the order or
manner of sale thereof as the Lender may determine, and (iii) settle,
compromise, collect, or otherwise liquidate any Collateral in any manner, all
without affecting the Obligations or the Lender's right to take any other
action with respect to any other Collateral.
7.2 Perfection and Protection of Security Interest. Each Borrower shall,
at its expense, perform all steps requested by the Lender at any time to
perfect, maintain, protect, and
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<PAGE> 41
enforce the Security Interest including, without limitation: (a) executing and
recording of the Mortgages and the Patent and Trademark Assignments and
executing and filing financing or continuation statements, and amendments
thereof, in form and substance satisfactory to the Lender; (b) delivering to
the Lender, for notation of its Security Interest, the original certificates of
title for motor vehicles; (c) delivering to the Lender the originals of all
instruments, documents, and chattel paper, and all other Collateral of which
the Lender determines it should have physical possession in order to perfect
and protect the Security Interest therein, duly endorsed or assigned to the
Lender without restriction; (d) delivering to the Lender warehouse receipts
covering any portion of the Collateral located in warehouses and for which
warehouse receipts are issued; (e) at any time during which an Event of Default
shall have occurred and be continuing, transferring Inventory to warehouses
designated by the Lender; (f) placing notations on each Borrower's books of
account to disclose the Security Interest; (g) executing and delivering to the
Lender a security agreement relating to the Reversions in form and substance
satisfactory to the Lender; (h) delivering to the Lender all letters of credit
on which the Borrowers are named beneficiary; and (i) taking such other steps
as are deemed necessary by the Lender to maintain the Security Interest. To
the extent permitted by applicable law, the Lender may file, without any
Borrower's signature, one or more financing statements disclosing the Security
Interest. The Borrowers agree that a carbon, photographic, photostatic, or
other reproduction of this Agreement or of a financing statement is sufficient
as a financing statement. If any Collateral is at any time in the possession
or control of any warehouseman, bailee or any agents or processors of any
Borrower, then such Borrower shall notify the Lender thereof and shall notify
such Person of the Security Interest in such Collateral and, upon the Lender's
request, instruct such Person to hold all such Collateral for the Lender's
account subject to the Lender's instructions. If at any time any Collateral is
located on any Premises that are not owned by a Borrower, then the applicable
Borrower shall obtain written waivers, in form and substance satisfactory to
the Lender, of all present and future Liens to which the owner or lessor or any
mortgagee of such Premises may be entitled to assert against the Collateral.
From time to time, each Borrower shall, upon Lender's request, execute and
deliver confirmatory written instruments pledging to the Lender the Collateral,
but such Borrower's failure to do so shall not affect or limit the Security
Interest or the Lender's other rights in and to the Collateral. So long as
this Agreement is in effect and until all Obligations have been fully
satisfied, the Security Interest shall continue in full force and effect in all
Collateral (whether or not deemed eligible for the purpose of calculating the
Availability or as the basis for any advance, loan, extension of credit, or
other financial accommodation).
7.3 Location of Collateral. The Borrowers, jointly and severally,
represent and warrant to the Lender that: (a) Schedule 7.3 hereto is a correct
and complete list of each Borrower's chief executive office, the location of
its books and records, the locations of the Collateral, and the locations of
all of its other places of business and (b) Schedule 7.3 correctly identifies
any of such facilities and locations that are not owned by a Borrower and sets
forth the names of the owners and lessors or sub-lessors of, and, to the best
of the Borrowers' knowledge, the holders of any mortgages on, such facilities
and locations. Each Borrower covenants and agrees that it will not maintain
any Collateral at any location other than those listed on Schedule 7.3, and it
will not otherwise change or add to any of such locations, unless it gives the
Lender at least 30 days prior written notice thereof
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and executes any and all financing statements and other documents that the
Lender requests in connection therewith.
7.4 Title to, Liens on, and Sale and Use of Collateral. The Borrowers,
jointly and severally, represent and warrant to the Lender that: (a) all
Collateral is and will continue to be owned by the applicable Borrower free and
clear of all Liens whatsoever, except for the Security Interest and other
Permitted Liens; (b) the Security Interest will not be subject to any prior
Lien except for the Liens described in (c), (e), (f), (h) and (j) of the
definition of Permitted Liens; (c) each Borrower will use, store, and maintain
the Collateral with all reasonable care and will use the Collateral for lawful
purposes only; and (d) no Borrower will, without the Lender's prior written
approval, sell, lease, or dispose of or permit the sale or disposition of the
Collateral or any portion thereof, except for sales of Inventory in the
ordinary course of business and as permitted by Section 7.12. The inclusion of
Proceeds in the Collateral shall not be deemed the Lender's consent to any sale
or other disposition of the Collateral except as expressly permitted herein.
7.5 Appraisals. Whenever an Event or Event of Default exists, and, so
long as any IRB Letter of Credit or the Term Loan remains outstanding, at such
other times not more frequently than once a year as the Lender requests, the
Borrowers shall, at their expense and upon the Lender's request, provide the
Lender with appraisals or updates thereof of any or all of the Collateral from
an appraiser.
7.6 Access and Examination. The Lender may at all reasonable times have
access to, examine, audit, make extracts from and inspect each Borrower's
records, files, and books of account and the Collateral and may discuss each
Borrower's affairs with its officers and management. Each Borrower will
deliver to the Lender any instrument necessary for the Lender to obtain records
from any service bureau maintaining records for the Borrowers. The Lender may,
at any time when an Event of Default exists and at the Borrowers' expense, make
copies of all of the Borrowers' books and records, or require the Borrowers to
deliver such copies to the Lender. The Lender may, without expense to the
Lender, use such of the Borrowers' personnel, supplies, and Premises as may be
reasonably necessary for maintaining or enforcing the Security Interest.
Lender shall have the right, at any time, in Lender's name or in the name of a
nominee of the Lender, to verify the validity, amount or any other matter
relating to the Accounts, by mail, telephone, or otherwise.
7.7 Insurance. The Borrowers shall insure the Collateral against loss or
damage by fire with extended coverage, theft, burglary, pilferage, loss in
transit, and such other hazards as the Lender shall specify, in amounts, under
policies and by insurers acceptable to the Lender. The Borrowers shall also
maintain flood insurance for real estate covered by the Mortgages and for any
Equipment and Inventory located on such real estate, in the event of a
designation of the area in which real estate is located as a "flood prone" or a
"flood risk area," (hereinafter "SFHA") as defined by the Flood Disaster
Protection Act of 1973, in an amount to be reasonably determined by the Lender,
and shall comply with the additional requirements of the National Flood
Insurance Program as set forth therein. Each Borrower shall cause the Lender
to be named in each such policy as secured party and loss payee with respect to
the Collateral or additional insured, in a manner
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acceptable to the Lender. Each policy of insurance shall contain a clause or
endorsement requiring the insurer to give not less than thirty (30) days prior
written notice to the Lender in the event of cancellation of the policy for any
reason whatsoever and a clause or endorsement stating that the interest of the
Lender shall not be impaired or invalidated by any act or neglect of the
Borrowers or the owner of any premises where Collateral is located nor by the
occupation of such premises for purposes more hazardous than are permitted by
such policy. The Borrowers shall pay, upon Lender's request, all fees incurred
by the Lender to determine whether any of the real estate and other Collateral
is located in a SFHA. The Borrowers shall also pay all premiums for such
insurance when due, and shall deliver to the Lender certificates of insurance
and, if requested, photocopies of the policies. If the Borrowers fail to pay
such fees or to procure such insurance or the premiums therefor when due, the
Lender may (but shall not be required to) do so and charge the costs thereof to
the Borrowers' loan account as a Revolving Loan. The Borrowers shall promptly
notify the Lender of any loss, damage, or destruction to the Collateral or
arising from its use, whether or not covered by insurance. The Lender is
hereby authorized to collect all insurance proceeds directly. After deducting
from such proceeds the expenses, if any, incurred by Lender in the collection
or handling thereof, the Lender may apply such proceeds, in such order as
Lender determines, to the Loans if (x) an Event of Default has occurred and is
continuing or (y) the aggregate amount of such proceeds exceeds $150,000 during
any Fiscal Year, or, at the Lender's option, may permit or require the
Borrowers to use such money, or any part thereof, to replace, repair, restore
or rebuild the Collateral in a diligent and expeditious manner with materials
and workmanship of substantially the same quality as existed before the loss,
damage or destruction.
7.8 Collateral Reporting. Each Borrower will provide the Lender with the
following documents at the following times in form satisfactory to the Lender:
(a) on a daily basis, a Borrowing Base Certificate together with a schedule of
credit memos and reports, a schedule of collections of accounts receivable, a
schedule of Accounts created since the last such schedule; (b) on a weekly
basis, a schedule of remittance advices no later than five Business Days
following the end of the week; (c) upon request, copies of invoices, credit
memos, shipping and delivery documents; (d) monthly ageings of accounts
receivable no later than the 15th day of the following month; (e) monthly, no
later than the 15th day of the following month, a report of Inventory balances,
by location and category based on perpetual inventory systems where available
or physical counts where perpetual inventory systems have not been installed;
(f) monthly ageings of accounts payable no later than the 15th day of the
following month; (g) upon request, copies of purchase orders, invoices, and
delivery documents for Inventory and Equipment acquired by each Borrower; (h)
such other reports as to the Collateral as the Lender shall reasonably request
from time to time or reports as set forth above, but more frequently than
specified above, if requested by the Lender; and (i) certificates of an officer
of the Parent certifying as to the foregoing. If any Borrower's records or
reports of the Collateral are prepared by an accounting service or other agent,
such Borrower hereby authorizes such service or agent to deliver such records,
reports, and related documents to the Lender.
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7.9 Accounts.
(a) Each Borrower hereby represents and warrants to the Lender and agrees
with the Lender that: (i) each existing Account represents, and each future
Account will represent, a bona fide sale or lease and delivery of goods by such
Borrower, or rendition of services by such Borrower, in the ordinary course of
such Borrower's business; (ii) each existing Account is, and each future
Account will be, for a liquidated amount payable by the Account Debtor thereon
on the terms set forth in the invoice therefor or in the schedule thereof
delivered to the Lender, without offset, deduction, defense, or counterclaim;
(iii) no payment will be received with respect to any Account, and no credit,
discount, or extension, or agreement therefor will be granted on any Account,
except as reported to the Lender in accordance with this Agreement; (iv) each
copy of an invoice delivered to the Lender by the Borrowers will be a genuine
copy of the original invoice sent to the Account Debtor named therein; and (v)
all goods described in each invoice will have been delivered to the Account
Debtor and all services of the Borrowers described in each invoice will have
been performed.
(b) No Borrower shall re-date any invoice or sale or make sales on
extended dating beyond that customary in the Borrowers' business or extend or
modify any Account. If any Borrower becomes aware of any matter affecting any
Account, including information regarding the Account Debtor's creditworthiness,
such Borrower will promptly so advise the Lender.
(c) No Borrower shall accept any note or other instrument (except a check
or other instrument for the immediate payment of money) with respect to any
Account without the Lender's written consent. If the Lender consents to the
acceptance of any such note or other instrument, it shall be considered as
evidence of the Account and not payment thereof, and the applicable Borrower
will promptly deliver such note or instrument to the Lender appropriately
endorsed. Regardless of the form of presentment, demand, notice of dishonor,
protest, and notice of protest with respect thereto, the applicable Borrower
will remain liable thereon until such note or instrument is paid in full.
(d) Each Borrower shall notify the Lender promptly of all disputes and
claims with Account Debtors and settle or adjust them at no expense to the
Lender, but no discount, credit or allowance shall be granted to any Account
Debtor without the Lender's consent, except for discounts, credits and
allowances made or given in the ordinary course of such Borrower's business
when no Event of Default exists hereunder. Each Borrower shall send the Lender
a copy of each credit memoranda in excess of $50,000 as soon as issued and
copies of all credit memorandum on a weekly basis. The Lender may at all times
when an Event of Default exists hereunder settle or adjust disputes and claims
directly with customers or Account Debtors for amounts and upon terms which the
Lender considers advisable and, in all cases, the Lender will credit the
applicable Borrower's loan account with only the net amounts received by the
Lender in payment of any Accounts.
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(e) If an Account Debtor returns any Inventory to any Borrower when no
Event of Default exists, then the applicable Borrower shall promptly determine
the reason for such return and shall issue a credit memorandum to the Account
Debtor in the appropriate amount. The applicable Borrower shall immediately
report to the Lender any return involving an amount in excess of $50,000 and
shall report all returns to the Lender on a weekly basis. Each such report
shall indicate the reasons for the returns and the locations and condition of
the returned Inventory. In the event any Account Debtor returns Inventory to a
Borrower when an Event of Default exists, such Borrower shall: (i) hold the
returned Inventory in trust for the Lender; (ii) segregate all returned
Inventory from all of its other Property; (iii) dispose of the returned
Inventory solely according to the Lender's written instructions; and (iv) not
issue any credits or allowances with respect thereto without the Lender's prior
written consent. All returned Inventory shall remain subject to the Security
Interest. Whenever any Inventory is returned, the related Account shall be
deemed ineligible, and Availability shall be adjusted accordingly.
7.10 Collection of Accounts; Payments.
(a) Until the Lender notifies a Borrower to the contrary and subject to
the last sentence of this Section 7.10 (a), each Borrower shall make
collections of all Accounts and other Collateral for the Lender, shall receive
all payments as the Lender's trustee, and shall immediately deliver all
payments to the Lender in their original form duly endorsed in blank or deposit
them into a Payment Account established at the Lender's request, as the Lender
may direct. The Parent shall establish a lock-box service for collections of
Accounts of each Borrower at a bank mutually acceptable to the Lender and the
Parent and pursuant to documentation satisfactory to the Lender. The Parent
shall instruct all Account Debtors of each Borrower to make all payments
directly to the address established for such service. The Parent shall provide
to the Lender by 10:00 a.m. (Chicago time) of each Business Day a written
reconciliation statement of the receipts of each Borrower as of the Business
Day immediately preceding the date of such statement. If, notwithstanding such
instructions, a Borrower receives any Proceeds of Accounts, it shall receive
such payments as the Lender's trustee, and shall immediately deliver such
payments to the Lender in their original form duly endorsed in blank or deposit
them into a Payment Account, as the Lender may direct. All collections
received in any such lock box or Payment Account or directly by any Borrower or
the Lender, and all funds in any Payment Account or other account to which such
collections are deposited, shall be the sole property of the Lender and subject
to the Lender's sole control. The Lender or the Lender's designee may, at any
time after the occurrence of an Event or Event of Default, notify obligors that
the Accounts have been assigned to the Lender and of the Security Interest
therein, and may collect them directly and charge the collection costs and
expenses to such Borrower's loan account as a Revolving Loan. At the Lender's
request, each Borrower shall execute and deliver to the Lender such documents
as the Lender shall require to grant the Lender access to any post office box
in which collections of Accounts are received.
(b) If sales of Inventory are made for cash, the applicable Borrower shall
immediately deliver to the Lender the identical checks, cash, or other forms of
payment which such Borrower receives.
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(c) All payments received by the Lender on account of Accounts or as
Proceeds of other Collateral will be the Lender's sole property and will be
credited to the Borrowers' loan account after allowing one (1) Business Day
after receipt of good funds by the Lender.
7.11 Inventory. Each Borrower represents and warrants to the Lender that
all of the Inventory is and will be held for sale or lease, or to be furnished
in connection with the rendition of services in the ordinary course of the
applicable Borrower's business and is and will be fit for such purposes. Each
Borrower will keep the Inventory in good and marketable condition, at its own
expense. No Borrower will, without prior written notice to the Lender, acquire
or accept any Inventory on consignment or approval. Each Borrower agrees that
all Inventory will be produced in accordance with the Federal Fair Labor
Standards Act of 1938, as amended, and all rules, regulations, and orders
thereunder. Each Borrower will maintain a perpetual inventory reporting system
at all times or implement such a system in accordance with Section 10.24. Each
Borrower will conduct a physical count of the Inventory at least once per
Fiscal Year, and at such other times as the Lender requests, and shall promptly
supply the Lender with a copy of such count accompanied by a report of the
value of such Inventory (valued at the lower of cost, on a first-in, first-out
basis, or market value). No Borrower will, without the Lender's prior written
consent, sell any Inventory on a bill-and-hold, guaranteed sale, sale and
return, sale on approval, consignment, or other repurchase or return basis.
7.12 Equipment. Each Borrower represents and warrants to the Lender that
all of the Equipment is and will be used or held for use in the applicable
Borrower's business and is and will be fit for such purposes. Each Borrower
shall keep and maintain the Equipment in good operating condition and repair
(ordinary wear and tear excepted) and shall make all necessary replacements
thereof. Each Borrower shall promptly inform the Lender of any material
additions to or deletions from the Equipment. No Borrower shall permit any
Equipment to become a fixture to real property or an accession to other
personal property, unless the Lender has a valid, perfected, and first priority
Security Interest in such real or personal property. No Borrower will, without
the Lender's prior written consent, alter or remove any identifying symbol or
number on the Equipment. No Borrower shall, without the Lender's prior written
consent, sell, lease as a lessor, or otherwise dispose of any of the Equipment
provided, however, that Borrowers may dispose of obsolete or unusable Equipment
having an orderly liquidation value no greater than $50,000 individually and
$200,000 in the aggregate in any Fiscal Year, without the Lender's consent,
subject to the conditions set forth below. In the event any of the Equipment
is sold, transferred or otherwise disposed of with the Lender's prior written
consent or as otherwise permitted hereby and: (a) such sale, transfer or
disposition is effected without replacement of such Equipment, or such
Equipment is replaced by Equipment leased by a Borrower, or by Equipment
purchased by such Borrower subject to a lien or other right constituting a
Permitted Lien, then such Borrower shall deliver all of the cash proceeds of
any such sale, transfer or disposition to the Lender, which proceeds shall be
applied to the repayment of the Obligations; or (b) such sale, transfer or
disposition is made in connection with the purchase by the applicable Borrower
of replacement Equipment (other than subject to a Permitted Lien), then such
Borrower shall use the proceeds of such sale, transfer or disposition to
finance the purchase by such Borrower of replacement Equipment and shall
deliver to the Lender written evidence of the use of the proceeds for such
purchase; provided that proceeds of SWIB Collateral
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need not be applied as set forth above so long as such proceeds are applied to
the SWIB Debt as a permitted reduction thereof. All replacement Equipment
purchased by a Borrower shall be free and clear of all liens, claims and
encumbrances, except for the Security Interest and other Permitted Liens.
7.13 Documents, Instruments, and Chattel Paper. Each Borrower represents
and warrants to the Lender that: (a) all documents, instruments, and chattel
paper describing, evidencing, or constituting Collateral, and all signatures
and endorsements thereon, are and will be complete, valid, and genuine; and (b)
all goods evidenced by such documents, instruments, and chattel paper are and
will be owned by the applicable Borrower free and clear of all Liens other than
Permitted Liens.
7.14 Right to Cure. The Lender may, in its sole discretion and at any
time, pay any amount or do any act required of any Borrower hereunder to
preserve, protect, maintain or enforce the Obligations, the Collateral or the
Security Interest, and which such Borrower fails to pay or do, including,
without limitation, payment of any judgment against a Borrower, any insurance
premium, any warehouse charge, any finishing or processing charge, any
landlord's claim, and any other Lien upon or with respect to the Collateral.
All payments that the Lender makes under this Section 7.14 and all
out-of-pocket costs and expenses that the Lender pays or incurs in connection
with any action taken by it hereunder shall be charged to the applicable
Borrower's loan account as a Revolving Loan. Any payment made or other action
taken by the Lender under this Section 7.14 shall be without prejudice to any
right to assert an Event of Default hereunder and to proceed thereafter as
herein provided.
7.15 Power of Attorney. Each Borrower hereby appoints the Lender and the
Lender's designees as such Borrower's attorney, with power: (a) to endorse a
Borrower's name on any checks, notes, acceptances, money orders, or other forms
of payment or security that come into the Lender's possession; (b) to sign a
Borrower's name on any invoice, bill of lading, or other document of title
relating to any Collateral, on drafts against customers, on assignments of
Accounts, on notices of assignment, financing statements and other public
records, on verifications of Accounts and on notices to Account Debtors; (c) to
notify the post office authorities, when an Event of Default exists, to change
the address for delivery of the applicable Borrowers' mail to an address
designated by the Lender and to receive, open and dispose of all mail addressed
to such Borrower; (d) to send requests for verification of Accounts to Account
Debtors; and (e) to do all things necessary to carry out this Agreement.
Neither the Lender nor the attorney will be liable for any acts or omissions or
for any error of judgment or mistake of fact or law except to the extent
resulting from the gross negligence or wilful misconduct of the Lender, its
officers, directors, employees or agents. This power, being coupled with an
interest, is irrevocable until this Agreement has been terminated and the
Obligations have been fully satisfied.
7.16 Lender's Rights, Duties, and Liabilities. Each Borrower assumes all
responsibility and liability arising from or relating to the use, sale, or
other disposition of the Collateral. Neither the Lender nor any of its
officers, directors, employees, and agents shall be liable or responsible in
any way for the safekeeping of any of the Collateral, or for any act or failure
to act
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with respect to the Collateral, or for any loss or damage thereto, or for any
diminution in the value thereof, or for any act of default or any warehouseman,
carrier, forwarding agency or other person whomsoever, except to the extent
resulting from the gross negligence or willful misconduct of the Lender, its
officers, directors, employees or agents, all of which shall be at such
Borrower's sole risk. The Obligations shall not be affected by any failure of
the Lender to take any steps to perfect the Security Interest or to collect or
realize upon the Collateral, nor shall loss of or damage to the Collateral
release any Borrower from any of the Obligations. The Lender may (but shall
not be required to), without notice to or consent from the applicable Borrower,
sue upon or otherwise collect, extend the time for payment of, modify or amend
the terms of, compromise or settle for cash, credit, or otherwise upon any
terms, grant other indulgences, extensions, renewals, compositions, or
releases, and take or omit to take any other action with respect to the
Collateral, any security therefor, any agreement relating thereto, any
insurance applicable thereto, or any Person liable directly or indirectly in
connection with any of the foregoing, without discharging or otherwise
affecting the liability of such Borrower for the Obligations or under this
Agreement or any other agreement now or hereafter existing between the Lender
and such Borrower.
8. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.
8.1 Books and Records. Each Borrower shall maintain, at all times,
correct and complete books, records and accounts in which complete, correct and
timely entries are made of its transactions in accordance with GAAP consistent
with those applied in the preparation of the Financial Statements. Each
Borrower shall, by means of appropriate entries, reflect in such accounts and
in all Financial Statements proper liabilities and reserves for all taxes and
proper provision for depreciation and amortization of Property and bad debts,
all in accordance with GAAP. Each Borrower shall maintain at all times books
and records pertaining to the Collateral in such detail, form, and scope as the
Lender shall reasonably require, including without limitation records of: (a)
all payments received and all credits and extensions granted with respect to
the Accounts; (b) the return, rejections repossession, stoppage in transit,
loss, damage, or destruction of any Inventory; and (c) all other dealings
affecting the Collateral.
8.2 Financial Information. Each Borrower shall promptly furnish to the
Lender or its agents all such financial information as the Lender shall
reasonably request, and notify its auditors and accountants that the Lender is
authorized to obtain such information directly from them. Without limiting the
foregoing, each Borrower and its Subsidiaries will furnish to the Lender, in
such detail as the Lender shall request, the following:
(a) As soon as available, but in any event not later than 90 days
after the close of each Fiscal Year, consolidated and consolidating
audited balance sheets, and statements of income and expense, and cash
flow statements for the Borrowers and their consolidated Subsidiaries for
such Fiscal Year, and the accompanying notes thereto, setting forth in
each case in comparative form figures for the previous Fiscal Year, all
in reasonable detail, fairly presenting the financial position and the
results of operations of the Borrowers and their consolidated
Subsidiaries as at the date thereof and for the Fiscal Year then ended,
and
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prepared in accordance with GAAP. Such statements shall be examined in
accordance with generally accepted auditing standards and accompanied by
a report thereon unqualified as to scope by independent certified public
accountants selected by the Parent and reasonably satisfactory to the
Lender.
(b) As soon as available, but in any event not later than 45 days
after the close of each fiscal quarter, consolidated and consolidating
unaudited balance sheets of the Borrowers and their consolidated
Subsidiaries as at the end of such quarter, and consolidated and
consolidating unaudited statements of income and expense and cash flow
statements for the Borrowers and their consolidated Subsidiaries for such
quarter and for the period from the beginning of the Fiscal Year to the
end of such quarter, together with the accompanying notes thereto, all in
reasonable detail, fairly presenting the financial position and results
of operation of Borrowers and their consolidated Subsidiaries as at the
date thereof and for such periods, prepared in accordance with GAAP
consistent with the audited Financial Statements required pursuant to
Section 8.2(a). Such statements shall be certified to be correct by the
chief financial or accounting officer of the Parent, subject to normal
year-end adjustments.
(c) As soon as available, but in any event not later than 30 days
after the end of each month, consolidated and consolidating unaudited
balance sheets of the Borrowers and their consolidated Subsidiaries as at
the end of such month, and consolidated and consolidating unaudited
statements of income and expenses and cash flow statements for the
Borrowers and their consolidated Subsidiaries for such month and for the
period from the beginning of the Fiscal Year to the end of such month,
all in reasonable detail, fairly presenting the financial position and
results of operations of the Borrowers and their consolidated
Subsidiaries as at the date thereof and for such periods, and prepared in
accordance with GAAP consistent with the audited Financial Statements
required pursuant to Section 8.2(a). Such statements shall be certified
to be correct by the chief financial or accounting officer of the Parent,
subject to normal year-end adjustments.
(d) With each of the audited Financial Statements delivered pursuant
to Section 8.2(a), a certificate of the independent certified public
accountants that examined such statements to the effect that they have
reviewed and are familiar with the Loan Documents and that, in examining
such Financial Statements, they did not become aware of any fact or
condition which then constituted an Event or Event of Default, except for
those, if any, described in reasonable detail in such certificate.
(e) With each of the annual audited and quarterly unaudited
Financial Statements delivered pursuant to Sections 8.2(a) and 8.2(b), a
certificate of the chief executive or chief financial officer of the
Parent (i) setting forth in reasonable detail the calculations required
to establish that the Borrowers were in compliance with its covenants set
forth in Sections 10.19 through 10.23 during the period covered in such
Financial Statements, and (ii) stating that, except as explained in
reasonable detail in such certificate, (A) all of the representations and
warranties of the Borrowers contained in this Agreement and the other
Loan Documents are correct and complete as at the date of such
certificate as if made at such
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time, (B) no Event or Event of Default then exists or existed during the
period covered by such Financial Statements and (iii) describing and
analyzing in reasonable detail all material trends, changes and
developments in such Financial Statements. If such certificate discloses
that a representation or warranty is not correct or complete, or that a
covenant has not been complied with, or that an Event or Event of Default
existed or exists, such certificate shall set forth what action the
Borrowers have taken or propose to take with respect thereto.
(f) No sooner than 90 days and no later than 30 days prior to the
beginning of each Fiscal Year, consolidated and consolidating projected
balance sheets, statements of income and expense, and statements of cash
flow for each Borrower and its Subsidiaries as at the end of and for each
month of such Fiscal Year.
(g) Promptly after their preparation, copies of any and all proxy
statements, financial statements, and reports which any Borrower makes
available to its stockholders.
(h) Promptly after filing with the PBGC, DOL, or IRS, a copy of each
annual report or other filing or notice filed with respect to each Plan
of any Borrower or any ERISA Affiliate.
(i) Promptly, and in any event within 30 days of the receipt
thereof, copies of any management letter received from the independent
certified accountants retained by each Borrower.
(j) Such additional information as the Lender may from time to time
reasonably request regarding the financial and business affairs of any
Borrower or any Subsidiary, including, without limitation, projections
of future operations on both a consolidated and consolidating basis.
8.3 Notices to Lender. Each Borrower shall notify the Lender in writing
of the following matters at the following times:
(a) Immediately after becoming aware of the existence of any Event
or Event of Default.
(b) Immediately after becoming aware that the holder of any capital
stock of any Borrower or of any Debt has given notice or taken any action
with respect to a claimed default.
(c) Immediately after becoming aware of any material adverse change
in any Borrower's Property, business, operations, or condition (financial
or otherwise).
(d) Immediately after becoming aware of any pending or threatened
action, suit, proceeding, or counterclaim by any Person, or any pending
or threatened investigation by a Public Authority, which may materially
and adversely affect the Collateral, the repayment
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of the Obligations, the Lender's rights under the Loan Documents, or any
Borrower's Property, business, operations, or condition (financial or
otherwise).
(e) Immediately after becoming aware of any pending or threatened
strike, work stoppage, material unfair labor practice claim, or other
material labor dispute affecting any Borrower or any of its Subsidiaries.
(f) Immediately after becoming aware of any violation of any law,
statute, regulation, or ordinance of a Public Authority applicable to any
Borrower, any Subsidiary, or their respective Properties which may
materially and adversely affect the Collateral, the repayment of the
Obligations, the Lender's rights under the Loan Documents, or such
Borrower's Property, business, operations, or condition (financial or
otherwise).
(g) Immediately after becoming aware of any violation by any
Borrower of Environmental Laws or immediately upon receipt of and any
notice that a Public Authority has asserted that such Borrower is not in
compliance with Environmental Laws or that its compliance is being
investigated.
(h) Thirty (30) days prior to any Borrower changing its name or the
address of its chief executive office.
(i) Immediately after becoming aware of any ERISA Event, accompanied
by any materials required to be filed with the PBGC with respect thereto;
immediately after any Borrower's receipt of any notice concerning the
imposition of any withdrawal liability under Section 4042 of ERISA with
respect to a Plan; immediately upon the establishment of any Pension Plan
not existing at the Closing Date or the commencement of contributions by
any Borrower to any Pension Plan to which such Borrower was not
contributing at the Closing Date; and immediately upon becoming aware of
any other event or condition regarding a Plan or any Borrower's or an
ERISA Affiliate's compliance with ERISA, which may materially and
adversely affect such Borrower's Property, business, operation, or
condition (financial or otherwise).
Each notice given under this Section 8.3 shall describe the subject matter
thereof in reasonable detail and shall set forth the action that the applicable
Borrower has taken or proposes to take with respect thereto.
9. GENERAL WARRANTIES AND REPRESENTATIONS.
The Borrowers, jointly and severally, continuously warrant and represent
to the Lender, at all times during the term of this Agreement and until all
Obligations have been satisfied, that, except as hereafter disclosed to and
accepted by the Lender in writing:
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9.1 Authorization, Validity, and Enforceability of this Agreement and the
Loan Documents. Each Borrower has the corporate power and authority to
execute, deliver and perform this Agreement and the other Loan Documents, to
incur the Obligations, and to grant the Security Interest. Each Borrower has
taken all necessary corporate action (including, without limitation, obtaining
approval of its stockholders) to authorize its execution, delivery, and
performance of this Agreement and the other Loan Documents. No consent,
approval, or authorization of, or declaration or filing with, any Public
Authority, and no consent of any other Person, is required in connection with
any Borrower's execution, delivery, and performance of this Agreement and the
other Loan Documents, except for those already duly obtained. This Agreement
and the other Loan Documents have been duly executed and delivered by each
Borrower and constitutes the legal, valid and binding obligation of each
Borrower, enforceable against it in accordance with its terms without defense,
setoff, or counterclaim. No Borrower's execution, delivery, and performance of
this Agreement and the other Loan Documents does or will conflict with, or
constitute a violation or breach of, or constitute a default under, or result
in the creation or imposition of any Lien upon the Property of such Borrower or
any of its Subsidiaries (except as contemplated by this Agreement and the other
Loan Documents) by reason of the terms of (a) any mortgage, lease, agreement,
or instrument to which such Borrower or any of its Subsidiaries is a party or
which is binding upon it, (b) any judgment, law, statute, rule or governmental
regulation applicable to such Borrower or any of its Subsidiaries, or (c) the
Certificate or Articles of Incorporation or By-Laws of such Borrower or any of
its Subsidiaries.
9.2 Validity and Priority of Security Interest. The provisions of this
Agreement, the Mortgages, and the other Loan Documents create legal and valid
Liens on all the Collateral in the Lender's favor, and when all proper filings,
recordings, and other actions necessary to perfect such Liens have been made or
taken, such Liens will constitute perfected and continuing Liens on all the
Collateral, having priority over all other Liens on the Collateral except for
the Permitted Liens identified in Section 7.4 and enforceable against each
Borrower and all third parties.
9.3 Organization and Qualification. Each Borrower: (a) is duly
incorporated and organized and validly existing in good standing under the laws
of the State of its incorporation; (b) is qualified to do business as a foreign
corporation and is in good standing in all jurisdictions in which the failure
to so qualify would not have a material adverse effect on its business or
financial condition or on its ability to enforce collection of Accounts; and
(c) has all requisite power and authority to conduct its business and to own
its Property.
9.4 Corporate Name; Prior Transactions. No Borrower has, during the past
five years, been known by or used any other corporate or fictitious name, or
been a party to any merger or consolidation, or acquired all or substantially
all of the assets of any Person, or acquired any of its Property out of the
ordinary course of business, except as set forth on Schedule 9.4.
9.5 Subsidiaries and Affiliates. Schedule 9.5 is a correct and complete
list of the name and relationship to each Borrower of each and all of the
applicable Borrower's Subsidiaries and other Affiliates (other than Affiliates
of Parent of the type described in clause (b) of the definition "Affiliate").
Each Subsidiary is (a) duly incorporated and organized and validly existing
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in good standing under the laws of its state of incorporation set forth on
Schedule 9.5, and (b) qualified to do business as a foreign corporation and in
good standing in all jurisdictions in which the failure to do so would have a
material adverse effect on its business or financial condition or on its
ability to enforce collection of Accounts.
9.6 Financial Statements and Projections.
(a) The Borrowers have delivered to the Lender the audited balance sheet
and related statements of income, retained earnings, changes in financial
position, and changes in stockholders equity for the Borrowers as of May 31,
1996 and for the Fiscal Year then ended, accompanied by the report thereon of
the Borrowers' independent certified public accountants, Coopers & Lybrand.
The Borrowers have also delivered to the Lender the unaudited balance sheet and
related statements of income and changes in financial position for Borrowers,
as at August 30, 1996 and for the 3 months then ended. Such financial
statements are attached hereto as Exhibit B-1. All such financial statements
have been prepared in accordance with GAAP and present accurately and fairly
the Borrowers' financial position as at the dates thereof and its results of
operations for the periods then ended.
(b) The Latest Projections represent the Borrowers' best estimate of
Borrowers' future financial performance for the periods set forth therein. The
Latest Projections have been prepared on the basis of the assumptions set forth
therein, which the Borrowers believe are fair and reasonable in light of
current and reasonably foreseeable business conditions.
(c) The pro forma consolidated balance sheet of the Borrowers as at
September 30, 1996, attached hereto as Exhibit B-2, presents fairly and
accurately the Borrowers' financial condition as at such date as if the
transactions contemplated hereby had occurred on such date and the Closing Date
had been such date, and has been prepared in accordance with GAAP.
9.7 Capitalization. (a) As of the October 25, 1996, Parent's authorized
capital stock consists of (i) 15,000,000 shares of common stock, par value $.01
per share, of which 5,099,382 shares are validly issued and outstanding and
(ii) 1,000,000 shares of preferred stock, par value of $.01 per share, of which
no shares are issued and outstanding.
(b) Outlook Label's authorized capital stock consists of 500,000 shares of
common stock, no par value, of which 2,828 shares are validly issued and
outstanding and are owned beneficially and of record by Parent;
(c) Outlook Food's authorized capital stock consists of 9,000 shares of
common stock, par value $1.00 per share, of which 100 shares are validly issued
and outstanding and are owned beneficially and of record by Parent;
(d) Outlook Packaging's authorized capital stock consists of 9,000 shares
of common stock, par value $1.00 per share, of which 10 shares are validly
issued and outstanding and are owned beneficially and of record by Parent; and
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(e) Barrier's authorized capital stock consists of 200,000 shares of
common stock, par value $.01 per share, of which 91,100 shares are validly
issued and outstanding, fully paid and non-assessable, and are owned
beneficially and of record by Parent.
(f) All such shares of capital stock referred to in this Section 9.7 are
fully paid and non-assessable, except insofar as personal liability may be
imposed upon a shareholder pursuant to Section 180.0622(2)(b) of the Wisconsin
Business Corporation Law, as judicially interpreted, for debts owing to
employees for services performed.
9.8 Solvency. Parent, on a consolidated basis, is Solvent prior to and
after giving effect to the making of the Term Loans and each Revolving Loan and
the issuance of each Letter of Credit.
9.9 Debt. No Borrower has any Debt, except (a) the Obligations, (b) Debt
set forth in the most recent Financial Statements delivered to the Lender, or
the notes thereto, (c) trade payables and other contractual obligations arising
in the ordinary course of business since the date of such Financial Statements,
and (d) Debt incurred since the date of such Financial Statements to finance
Capital Expenditures permitted hereby.
9.10 Distributions. Since May 31, 1996, no Distribution has been
declared, paid, or made upon or in respect of any capital stock or other
securities of Parent.
9.11 Title to Property. Except for Property which a Borrower leases, each
Borrower has good and marketable title in fee simple to, or a valid leasehold
interest in, its Premises and good, indefeasible, and merchantable title to all
of its other Property including, without limitation, the assets reflected on
the most recent Financial Statements delivered to the Lender, except as
disposed of since the date thereof in the ordinary course of business.
9.12 Adequate Assets. Each Borrower possesses adequate assets for the
conduct of its business.
9.13 Real Property; Leases. Schedule 9.13 is a correct and complete list
of all real property owned by each Borrower, all leases and subleases of real
or personal property by such Borrower as lessee or sublessee, and all leases
and subleases of real or personal property by such Borrower as lessor or
sublessor. Each of such leases and subleases is valid and enforceable in
accordance with its terms and is in full force and effect and no default by any
party to any such lease or sublease exists.
9.14 Proprietary Rights. Schedule 9.14 is a correct and complete list of
each Borrower's Proprietary Rights. None of the Proprietary Rights are subject
to any licensing agreement or similar arrangement except as set forth on
Schedule 9.14. None of the Proprietary Rights infringe on or conflict with any
other Person's Property and no other Person's Property infringes on or
conflicts with the Proprietary Rights. The Proprietary Rights described on
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Schedule 9.14 constitute all of the Property of such type necessary to the
current and anticipated future conduct of each Borrower's business.
9.15 Trade Names and Terms of Sale. All trade names or styles under which
each Borrower will sell Inventory or create Accounts, or to which instruments
in payment of Accounts may be made payable, are listed on Schedule 9.15.
9.16 Litigation. Except as set forth on Schedule 9.16, there is no
pending or, to the best of any Borrower's knowledge, threatened, action, suit,
proceeding, or counterclaim by any Person, or investigation by any Public
Authority, or any basis for any of the foregoing, which may materially and
adversely affect the Collateral, the repayment of the Obligations, the Lender's
rights under the Loan Documents, or any Borrower's Property, business,
operations, or condition (financial or otherwise).
9.17 Restrictive Agreements. No Borrower is a party to any contract or
agreement, or subject to any charter or other corporate restriction, which
affects its ability to execute, deliver, and perform the Loan Documents and
repay the Obligations or which materially and adversely affects such Borrower's
Property, business, operations, or condition (financial or otherwise).
9.18 Labor Disputes. Except as set forth on Schedule 9.18: (a) there is
no collective bargaining agreement or other labor contract covering employees
of any Borrower or any of its Subsidiaries; (b) no such collective bargaining
agreement or other labor contract is scheduled to expire during the term of
this Agreement; (c) no union or other labor organization is seeking to
organize, or to be recognized as, a collective bargaining unit of employees of
any Borrower or any of its Subsidiaries or for any similar purpose; and (d)
there is no pending or, to the best of any Borrower's knowledge, threatened
strike, work stoppage, material unfair labor practice claims, or other material
labor dispute against or affecting any Borrower, or any of its Subsidiaries or
their respective employees.
9.19 Environmental Laws. Except as otherwise disclosed on Schedule 9.19:
(a) Each Borrower and its Subsidiaries have complied in all material
respects with all Environmental Laws applicable to its Premises and
business, and no Borrower or any Subsidiary nor any of its present
Premises or operations, nor its past property or operations, is subject
to any enforcement order from or liability agreement with any Public
Authority or private Person respecting (i) compliance with any
Environmental Law or (ii) any potential liabilities and costs or remedial
action arising from the Release or threatened Release of a Contaminant.
(b) Each Borrower and its Subsidiaries have obtained all permits
necessary for their current operations under Environmental Laws, and all
such permits are in good standing and each Borrower and its Subsidiaries
are in compliance with all terms and conditions of such permits.
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(c) No Borrower or any of its Subsidiaries, nor, to the best of any
Borrower's knowledge, any of its predecessors in interest, has stored,
treated or disposed of any hazardous waste on any Premises, as defined
pursuant to 40 CFR Part 261 or any equivalent Environmental Law.
(d) No Borrower or any of its Subsidiaries has received any
summons, complaint, order or similar written notice that it is not
currently in compliance with, or that any Public Authority is
investigating its compliance with, any Environmental Laws or that it is
or may be liable to any other Person as a result of a Release or
threatened Release of a Contaminant.
(e) None of the present or past operations of any Borrower or its
Subsidiaries is the subject of any investigation by any Public Authority
evaluating whether any remedial action is needed to respond to a Release
or threatened Release of a Contaminant.
(f) There is not now, nor to the best of any Borrower's knowledge
has there ever been on or in such Borrower's Premises:
(i) any underground storage tanks or surface impoundments,
(ii) any asbestos containing material, or
(iii) any polychlorinated biphenyls (PCB's) used in hydraulic oils,
electrical transformers or other equipment.
(g) No Borrower or any of its Subsidiaries has filed any notice
under any requirement of Environmental Law reporting a spill or
accidental and unpermitted release or discharge of a Contaminant into the
environment.
(h) No Borrower or any of its Subsidiaries has entered into any
negotiations or settlement agreements with any Person (including, without
limitation, the prior owner of its property) imposing material
obligations or liabilities on such Borrower or any of its Subsidiaries
with respect to any remedial action in response to the Release of a
Contaminant or environmentally related claim.
(i) None of the products manufactured, distributed or sold by any
Borrower or any of its Subsidiaries contain asbestos material.
(j) No Environmental Lien has attached to any Premises of any
Borrower or any of its Subsidiaries.
9.20 No Violation of Law. No Borrower is in violation of any law,
statute, regulation, ordinance, judgment, order, or decree applicable to it
which violation would in any respect materially and adversely affect the
Collateral, the repayment of the Obligations, the Lender's
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rights under the Loan Documents, or such Borrower's Property, business,
operations, or condition (financial or otherwise).
9.21 No Default. No Borrower is in default with respect to any note,
indenture, loan agreement, mortgage, lease, deed, or other agreement to which
such Borrower is a party or bound, which default could reasonably be expected
to materially and adversely affect the Collateral, the repayment of the
Obligations, the Lender's rights under the Loan Documents, or such Borrower's
Property, business, operations, or condition (financial or otherwise).
9.22 ERISA Compliance. Except as specifically disclosed in Schedule 9.22:
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law.
Each Plan which is intended to qualify under Section 401(a) of the Code
has received a favorable determination letter from the IRS and to the
best knowledge of each Borrower, nothing has occurred which would cause
the loss of such qualification. Each Borrower and each ERISA Affiliate
has made all required contributions to any Plan subject to Section 412 of
the Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made
with respect to any Plan.
(b) There are no pending or, to the best knowledge of any Borrower,
threatened claims, actions or lawsuits, or action by any Public
Authority, with respect to any Plan which has resulted or could
reasonably be expected to result in a material adverse effect on such
Borrower's business or operations. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with
respect to any Plan which has resulted or could reasonably be expected to
result in a material adverse effect on any Borrower's business or
operations.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any unfunded pension liability; (iii) no
Borrower or any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension
Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) no Borrower or any ERISA Affiliate has incurred, or
reasonably expects to incur, any liability (and no event has occurred
which, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 or 4243 of ERISA with
respect to a Multiemployer Plan; and (v) neither any Borrower nor any
ERISA Affiliate has engaged in a transaction that could subject any
Person to Section 4069 or 4212(c) of ERISA.
9.23 Taxes. Each Borrower and its Subsidiaries have filed all tax returns
and other reports required to be filed and have paid all Taxes, assessments,
fees and other governmental charges levied or imposed upon them or their
properties, income or assets that are otherwise due and payable.
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9.24 Use of Proceeds. (a) None of the transactions contemplated in this
Agreement (including, without limitation, the use of proceeds from the Loans)
will violate or result in the violation of Section 7 of the Securities Exchange
Act of 1934, as amended, or any regulations issued pursuant thereto, including
without limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System ("Federal Reserve Board"), 12 CFR, Chapter II. No
Borrower owns or intends to carry or purchase any "margin stock" within the
meaning of said Regulation U or G. None of the proceeds of the Loans will be
used, directly or indirectly, to purchase or carry (or refinance any borrowing,
the proceeds of which were used to purchase or carry) any "security" within the
meaning of the Securities Exchange Act of 1934, as amended.
(b) Attached hereto as Schedule 9.24 is a summary of the sources
and uses of funds on the date of the initial Borrowing.
9.25 Private Offerings. No Borrower has, directly or indirectly, offered
the Loans for sale to, or solicited offers to buy part thereof from, or
otherwise approached or negotiated with respect thereto with any prospective
purchaser other than Lender. Each Borrower hereby agrees that neither it nor
anyone acting on its behalf has offered or will offer the Loans or any part
thereof or any similar securities for issue or sale to or solicit any offer to
acquire any of the same from anyone so as to bring the issuance thereof within
the provisions of Section 5 of the Securities Act of 1933, as amended.
9.26 Broker's Fees. No Person is entitled to any brokerage or finder's
fee with respect to the transactions described in this Agreement.
9.27 No Material Adverse Change. Except as disclosed on Schedule 9.27, no
material adverse change has occurred in any Borrower's Property, business,
operations, or condition (financial or otherwise) since July 31, 1996.
9.28 Disclosure. Neither this Agreement nor any document or statement
furnished to the Lender by or on behalf of any Borrower hereunder contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements contained herein or therein not
misleading.
10. AFFIRMATIVE AND NEGATIVE COVENANTS. The Borrowers, jointly and
severally, covenant that, so long as any of the Obligations remain outstanding
or this Agreement is in effect:
10.1 Taxes and Other Obligations. Each Borrower and each of its
Subsidiaries shall: (a) file when due, subject to any extensions granted by the
applicable taxing authority, all tax returns and other reports which it is
required to file, pay, or provide for the payment, when due, of all Taxes,
fees, assessments and other governmental charges against it or upon its
Property, income, and franchises, make all required withholding and other tax
deposits, and establish adequate reserves for the payment of all such items,
and shall provide to the Lender, upon request, satisfactory evidence
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of its timely compliance with the foregoing; and (b) pay when due all Debt owed
by it and perform and discharge in a timely manner all other obligations
undertaken by it; provided, however that any such Borrower and its Subsidiaries
need not pay any tax, fee, assessment, governmental charge, or Debt, or perform
or discharge any other obligation, that it is contesting in good faith by
appropriate proceedings diligently pursued.
10.2 Corporate Existence and Good Standing. Each Borrower and each of its
Subsidiaries shall maintain its corporate existence and its qualification and
good standing in all states necessary to conduct its business and own its
Property, and shall obtain and maintain all licenses, permits, franchises and
governmental authorizations necessary to conduct its business and own its
Property.
10.3 Compliance with Law and Agreements. Each Borrower and each of its
Subsidiaries shall comply with the terms and provisions of each judgment, law,
statute, rule, and governmental regulation applicable to it and each contract,
mortgage, lien, lease, indenture, order, instrument, agreement, or document to
which it is a party or by which it is bound.
10.4 Maintenance of Property and Insurance. Each Borrower and each of its
Subsidiaries shall: (a) maintain all of its Property necessary and useful in
its business in good operating condition and repair, ordinary wear and tear
excepted; and (b) in addition to the insurance required by Section 7.7,
maintain with financially sound and reputable insurers such other insurance
with respect to its Property and business against casualties and contingencies
of such types (including, without limitation, business interruption,
environmental liability, public liability, product liability, and larceny,
embezzlement or other criminal misappropriation) and in such amounts as is
customary for Persons of established reputation engaged in the same or a
similar business and similarly situated, naming the Lender, at its request, as
additional insured under each such policy.
10.5 Environmental Laws. Each Borrower shall conduct its business in full
compliance with all Environmental Laws applicable to it, including, without
limitation, those relating to such Borrower's generation, handling, use,
storage, and disposal of hazardous and toxic wastes and substances. Each
Borrower shall take prompt and appropriate action to respond to any
non-compliance with Environmental Laws and shall regularly report to the Lender
on such response. Without limiting the generality of the foregoing, whenever
any Borrower gives notice to the Lender pursuant to Section 8.3(g) such
Borrower shall, at the Lender's request and the applicable Borrowers' expense:
(a) cause an independent environmental engineer acceptable to the Lender to
conduct such tests of the site where such Borrower's noncompliance or alleged
noncompliance with Environmental Laws has occurred and prepare and deliver to
the Lender a report setting forth the results of such tests, a proposed plan
for responding to any environmental problems described therein, and an estimate
of the costs thereof; and (b) provide to the Lender a supplemental report of
such engineer whenever the scope of the environmental problems, or the
Borrowers' response thereto or the estimated costs thereof, shall change.
10.6 ERISA. Each Borrower shall cause each Plan, which has been
designated to be so, to be qualified within the meaning of Section 401(a) of
the Code and to be administered in all
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respects in compliance with Section 401(a) of the Code. Each Borrower shall
cause each Plan to be administered in all respect in compliance with ERISA.
10.7 Mergers, Consolidations, Acquisitions, or Sales. No Borrower or any
of its Subsidiaries shall enter into any transaction of merger, reorganization,
or consolidation, or transfer, sell, assign, lease, or otherwise dispose of all
or any part of its Property, or wind up, liquidate or dissolve, or agree to do
any of the foregoing, except sales of Inventory in the ordinary course of its
business and sales of Equipment permitted by Section 7.12.
10.8 Distributions; Capital Changes. No Borrower or any of its
Subsidiaries shall: (a) directly or indirectly declare or make, or incur any
liability to make, any Distribution, except Distributions to a Borrower by a
Subsidiary wholly owned by such Borrower subject to the limitations set forth
in Section 10.13; or (b) make any change in its capital structure which could
adversely affect the repayment of the Obligations.
10.9 Transactions Affecting Collateral or Obligations. No Borrower or any
of its Subsidiaries shall enter into any transaction which materially and
adversely affects the Collateral or such Borrower's ability to repay the
Obligations.
10.10 Guaranties. No Borrower or any of its Subsidiaries shall make,
issue, or become liable on any Guaranty, except (i) Guaranties in favor of the
Lender and endorsements of instruments for deposit, (ii) Guaranties of the
obligations of a Borrower under the SWIB Loan Documents and (iii) the GE
Operating Lease Guaranties.
10.11 Debt. No Borrower or any of its Subsidiaries shall incur or
maintain any Debt, other than: (a) the Obligations; (b) trade payables and
contractual obligations to suppliers and customers incurred in the ordinary
course of business; (c) other Debt existing on the Closing Date and reflected
in the Financial Statements attached as Exhibit B-1 or any refinancing thereof
(provided that in the case of industrial revenue bonds and SWIB Debt, once such
Debt has been repaid it may not be refinanced or reborrowed and provided
further that any refinancing of the SWIB Debt shall comply with the provisions
of Section 10.27 applicable to amendments of the SWIB Loan Documents); and (d)
Debt consisting of Capital Leases or purchase money Debt in each case, incurred
solely to acquire an item of Equipment, incurred concurrently with the
acquisition thereof and secured solely by a Lien on the Equipment so acquired;
provided that the amount of each such Debt does not exceed the price of the
Equipment so purchased and the aggregate amount of all such Debt shall not
exceed $250,000.
10.12 Prepayment. No Borrower or any of its Subsidiaries shall
voluntarily prepay any Debt, except the Obligations; provided that Borrowers
may refinance the SWIB Debt on terms consistent with the amendment thereof
permitted under Section 10.27.
10.13 Transactions with Affiliates. Except as set forth below and as
disclosed on Schedule 9.5, no Borrower or any of its Subsidiaries shall: sell,
transfer, distribute, or pay any money or Property to any Affiliate, or lend or
advance money or Property to any Affiliate, or invest in (by
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capital contribution or otherwise) or purchase or repurchase any stock or
indebtedness or any Property of any Affiliate, or become liable on any Guaranty
of the indebtedness, dividends, or other obligations of any Affiliate, except
(a) so long as no Event of Default has occurred and is continuing, each
Borrower and its Subsidiaries may engage in transactions with Affiliates in the
ordinary course of business in amounts and upon terms fully disclosed to the
Lender and no less favorable to such Borrower or such Subsidiary than would
obtain in a comparable arm's length transaction with a third party who is not
an Affiliate, (b) Borrowers may pay Distributions to the Parent and (c) Parent
may make intercompany loans to any other Borrower and each Borrower (other than
Parent) may make intercompany loans to any other Borrower; provided that in the
case of Distributions permitted by clause (b) above and intercompany loans
permitted by clause (c) above: (i) no Event of Default shall have occurred and
be continuing after giving effect to any such intercompany loan or Distribution
and (ii) after giving effect to any such intercompany loan or Distribution,
the Revolving Loans and Letters of Credit (other than IRB Letters of Credit)
outstanding to each Borrower shall not exceed 90% of that Borrower's separate
borrowing Base.
10.14 Business Conducted. No Borrower or any of its Subsidiaries shall
engage, directly or indirectly, in any line of business other than the
businesses in which such Borrower and its Subsidiaries are engaged on the
Closing Date.
10.15 Liens. No Borrower or any of its Subsidiaries shall create, incur,
assume, or permit to exist any Lien on any Property now owned or hereafter
acquired by any of them, except Permitted Liens.
10.16 Sale and Leaseback Transactions. No Borrower or any of its
Subsidiaries shall, directly or indirectly, enter into any arrangement with any
Person providing for such Borrower or a Subsidiary to lease or rent Property
that such Borrower or a Subsidiary has or will sell or otherwise transfer to
such Person, except that Parent and Outlook Packaging may effect the GECC
Transaction so long as Lender, on or prior to the date of the consummation of
the GECC Transaction, shall have received fully executed originals of each GECC
Operating Lease Document, each such GECC Operating Lease Document to be in form
and substance satisfactory to Lender.
10.17 New Subsidiaries. No Borrower shall, directly or indirectly,
organize or acquire any Subsidiary.
10.18 Restricted Investments. No Borrower or any of its Subsidiaries
shall make any Restricted Investment.
10.19 Capital Expenditures. Borrowers and their Subsidiaries shall not
make or incur any Capital Expenditure if, after giving effect thereto, the
aggregate amount of all Capital Expenditures (other than Specified Capital
Expenditures) by Borrowers on a consolidated basis would exceed the following
respective amounts in the following respective Fiscal Years:
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<PAGE> 62
<TABLE>
<CAPTION>
CapEx Limit Fiscal Year
----------- ----------------------
<S> <C>
$2,000,000 1997
$3,000,000 1998
$4,000,000 1999 and each Fiscal
Year thereafter
</TABLE>
10.20 Operating Lease Obligations. The Borrowers and their Subsidiaries
shall not enter into any lease of real or personal property as lessee or
sublessee (other than Capital Leases), if, after giving effect thereto, the
aggregate amount of Rentals (as hereinafter defined) payable by the Borrowers
and their Subsidiaries in any Fiscal Year in respect of such lease and all
other such leases would exceed (such amount being referred to herein as
"Permitted Rentals") (x) prior to the consummation of the GECC transaction,
$4,214,000 for the 1997 Fiscal Year, $4,428,000 for the 1998 Fiscal Year, and
$4,628,000 for each Fiscal Year thereafter and (y) after the consummation of
the GECC Transaction, $3,600,000 for the 1997 Fiscal Year, $3,200,000 for the
1998 Fiscal Year, and $3,400,000 for each Fiscal Year thereafter. The term
"Rentals" means all payments due from the lessee or sublessee under a lease,
including, without limitation, basic rent, percentage rent, property taxes,
utility or maintenance costs, and insurance premiums.
10.21 Fixed Charge Coverage Ratio. The Borrowers will maintain a Fixed
Charge Coverage Ratio, (i) for the fiscal quarter ended November 30, 1996, of
not less than .90 to 1.0, (ii) for the two consecutive fiscal quarters (taken
as one accounting period) ended February 28, 1997, of not less than 1.10 to
1.0, (iii) for the three consecutive fiscal quarters (taken as one accounting
period) ended May 31, 1997, 1.20 to 1.0, and (iv) for any period of four
consecutive fiscal quarters (in each case taken as one accounting period) ended
on each date set forth below of less than the ratio set forth opposite such
date below:
<TABLE>
<CAPTION>
Ratio Fiscal Quarter
- ----- Ended
-----
<S> <C>
August 31 and November 30, 1997
1.25 to 1.0 February 28, 1998 and each fiscal
1.20 to 1.0 quarter thereafter
</TABLE>
10.22 Debt Ratio. The Borrowers will not permit the ratio of Debt to
Adjusted Tangible Net Worth to exceed the following amounts during the following
periods:
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<TABLE>
<CAPTION>
Ratio Fiscal Quarter
- ----- Ended
-----
<S> <C>
1.60 to 1.0 From and including
the last day of the
fiscal quarter
ended in November,
1996 to but
excluding the last
day of the fiscal
quarter ended in
February, 1997
1.50 to 1.0 Thereafter from and
including the last
day of the fiscal
quarter ended in
February, 1997 to
but excluding the
last day of the
fiscal quarter
ended in May, 1997
1.40 to 1.0 Thereafter from and
including the last
day of the fiscal
quarter ended in
May, 1997 to but
excluding the last
day of the fiscal
quarter ended in
November, 1997
1.30 to 1.0 Thereafter from and
including the last
day of the fiscal
quarter ended in
November, 1997 to
but excluding the
last day of the
fiscal quarter
ended in May, 1998
1.20 to 1.0 Thereafter from and
including the last
day of the fiscal
quarter ended in
May, 1998 to but
excluding the last
day of the fiscal
quarter ended in
November, 1998
1.10 to 1.0 Thereafter from and
including the last
day of the fiscal
quarter ended in
November, 1998 to
but excluding the
last day of the
fiscal quarter
ended in May, 1999
1.00 to 1.0 Thereafter
</TABLE>
10.23 Adjusted Tangible Net Worth. The Borrowers will maintain Adjusted
Tangible Net Worth of not less than the following amounts during the following
periods:
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<TABLE>
<CAPTION>
Amount Period
- ------ ------
<S> <C>
$33,000,000 From and including
the last day of the
fiscal quarter
ended in November,
1996 to but
excluding the last
day of the fiscal
quarter ended in
February, 1997
$34,000,000 Thereafter from and
including the last
day of the fiscal
quarter ended in
February, 1997 to
but excluding the
last day of the
fiscal quarter
ended in May, 1997
$35,000,000 Thereafter from and
including the last
day of the fiscal
quarter ended in
May, 1997 to but
excluding the last
day of the fiscal
quarter ended in
August, 1997
$36,000,000 Thereafter from and
including the last
day of the fiscal
quarter ended in
August, 1997 to but
excluding the last
day of the fiscal
quarter ended in
November, 1997
$36,500,000 Thereafter from and
including the last
day of the fiscal
quarter ended in
November, 1997 to
but excluding the
last day of the
fiscal quarter
ended in February,
1998
$37,500,000 Thereafter from and
including the last
day of the fiscal
quarter ended in
February, 1998 to
but excluding the
last day of the
fiscal quarter
ended in May, 1998
$38,500,000 Thereafter from and
including the last
day of the fiscal
quarter ended in
May, 1998 to but
excluding the last
day of the fiscal
quarter ended in
August, 1998
</TABLE>
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<PAGE> 65
<TABLE>
<CAPTION>
Amount Period
- ------ ------
<S> <C>
$39,500,000 Thereafter from and
including the last
day of the fiscal
quarter ended in
August, 1998 to but
excluding the last
day of the fiscal
quarter ended in
November, 1998
$41,000,000 Thereafter from and
including the last
day of the fiscal
quarter ended in
November, 1998 to
but excluding the
last day of the
fiscal quarter
ended in February,
1999
$42,500,000 Thereafter from and
including the last
day of the fiscal
quarter ended in
February, 1999 to
but excluding the
last day of the
fiscal quarter
ended in May, 1999
$43,500,000 Thereafter from and
including the last
day of the fiscal
quarter ended in
May, 1999 to but
excluding the last
day of the fiscal
quarter ended in
August, 1999
Thereafter from and
$43,500,000 plus including the last
$1,250,000 for each day of the fiscal
fiscal quarter quarter then last
ending after the ended to but
fiscal quarter excluding the last
ended in August, day of the
1999 and prior to immediately
the date of succeeding fiscal
determination quarter ended
</TABLE>
10.24 Perpetual Inventory System. The Borrowers will perform monthly
physical inventory counts and audits at Outlook Packaging, Outlook Foods and
Barrier and deliver the results thereof to the Lender within fifteen (15) days
after the last day of each calendar month until the Borrowers have implemented
perpetual inventory systems for those Borrowers and the Lender is satisfied
with the test count results as a verification of the accuracy of those
perpetual inventory systems.
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10.25 Inventory Systems. Prior to November 30, 1996, the Borrowers shall
implement an Inventory ageing system for each Borrower.
10.26 Material Contracts. The Borrowers shall notify the Lender promptly
upon the execution, modification, or termination of, or assertion of breach (or
receipt of a notice of breach) with respect to any material purchase, supply or
other agreement and, if requested by the Lender, shall supply true and correct
copies of such agreements to the Lender. For the purposes of this Section a
"material agreement" is any agreement pursuant to which any Borrower's
aggregate annual funds expended or revenues received equals or exceeds
$1,000,000.
10.27 SWIB Debt; IRB Debt; GE Operating Lease Documents. No Borrower
shall amend or modify any SWIB Loan Document, any industrial revenue bond
agreement or any GE Operating Lease Document if the effect of such amendment or
modification is to (a) increase the rate of interest, fees or rentals payable
with respect thereto; (b) change the dates on which any payments are due
thereunder other than to extend such dates; (c) make more restrictive the
covenants or defaults contained therein; (d) accelerate the date for payment or
redemption of any such Debt or lease payments; or (e) grant any Lien to secure
the payment thereof other than Liens in effect on the date hereof or
contemplated by the SWIB Loan Documents as in effect on the date hereof.
10.28 Further Assurances. The Borrowers shall execute and deliver, or
cause to be executed and delivered, to the Lender such documents and
agreements, and shall take or cause to be taken such actions, as the Lender
may, from time to time, request to carry out the terms and conditions of this
Agreement and the other Loan Documents.
11. CLOSING; CONDITIONS TO CLOSING. The Lender will not be obligated to
make the initial Loans or to obtain any Letters of Credit (including any IRB
Letter of Credit) on the Closing Date, unless the following conditions
precedent have been satisfied in a manner satisfactory to Lender:
11.1 Conditions Precedent to Making of Loans on the Closing Date.
(a) Representations and Warranties; Covenants. The Borrowers'
representations and warranties contained in this Agreement and the other
Loan Documents shall be correct and complete; the Borrowers shall have
performed and complied with all covenants, agreements, and conditions
contained herein and in the other Loan Documents which are required to
have been performed or complied with.
(b) Delivery of Documents. The Borrowers shall have delivered, or
caused to be delivered, to the Lender such documents, instruments and
agreements as the Lender shall request in connection herewith, duly
executed by all parties thereto other than the Lender, and in form and
substance satisfactory to the Lender and its counsel.
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<PAGE> 67
(c) Termination of Liens. The Lender shall have received duly
executed UCC-3 Termination Statements and other instruments, in form and
substance satisfactory to the Lender, as shall be necessary to terminate
and satisfy all Liens on the Property of the Borrowers and their
Subsidiaries except Permitted Liens.
(d) Appraisals. The Lender shall have received written reports of
appraisals of the Equipment performed by independent appraisers
acceptable to the Lender and on a basis satisfactory to the Lender, and
stating a fair market value of the Premises and an orderly liquidation
value of the Equipment satisfactory to the Lender.
(e) Environmental Compliance. The Lender shall have received
evidence satisfactory to it that there does not exist on the Premises or
in connection with the operation thereof or of the Borrowers' business,
any material violation of any Environmental Laws.
(f) Facility Fee and Collateral Management Fee. The Borrowers shall
have paid in full the Facility Fee and initial Collateral Management Fee.
(g) Payment of Fees and Expenses. The Borrowers shall have paid all
fees and expenses of the Lender's outside counsel and all other fees and
expenses of the Lender incurred in connection with any of the Loan
Documents and the transactions contemplated thereby.
(h) Required Approvals. The Lender shall have received certified
copies of all consents or approvals of any Public Authority or other
Person which the Lender determines is required in connection with the
transactions contemplated by this Agreement.
(i) No Material Adverse Change. There shall have occurred no
material adverse change in the Borrowers' business, operations, profits,
prospects or financial condition or in the Collateral and no changes in
key management, loss of customers, decline in sales or profits,
disposition or purchase of material assets, and no occurrence of material
casualties to assets since July 26, 1996, and the Lender shall have
received a certificate of Parent's chief executive officer to such
effect.
(j) Projections. The Borrowers shall have fiscal year to date net
income before income taxes through the Closing Date in an amount equal to
or in excess of the amount of net income before income taxes for that
period reflected in the financial performance projections dated August
20, 1996 and delivered to the Lender.
(k) Pro Forma. The Lender shall have received a pro forma balance
sheet of the Borrowers dated as of the Closing Date which shall reflect
no material changes from the latest pro forma balance sheet of the
Borrowers delivered to the Lender prior to August 27, 1996.
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<PAGE> 68
(l) Annual Financials. The Lender shall have received the
Borrowers' annual audited financial statements for their fiscal year
ending May 31, 1996.
(m) SWIB Loan Documents. The Lender shall have received current and
complete copies of all SWIB Loan Documents, as amended.
(n) SWIB Intercreditor. The Lender shall have entered into an
intercreditor agreement with SWIB.
(o) Lien Waivers. The Lender shall have received landlord,
mortgagee, bailee and consignee waivers as requested by Lender.
(p) No Material Suits. No action, suit, investigation, litigation
or proceeding shall be pending or threatened in any court or before any
arbitrator or Public Authority that (i) could have a material adverse
effect on the business, condition (financial or otherwise), operations,
performance or properties of the Borrowers or which could impair the
Borrowers' ability to repay the Obligations or (ii) in the Lender's
judgment could materially affect the transaction contemplated hereby.
(q) Opinions. The Lender shall have received satisfactory opinions
of counsel to the Borrowers with respect to the transactions contemplated
hereby (including opinions of local counsel as to the Collateral and
Lender's Security Interest in the Collateral).
(r) Insurance. The Lender shall have received copies of the
Borrowers' insurance policies and loss payee endorsements.
(s) Consents. Third party consents and approvals necessary in
connection with the transactions contemplated hereby shall have been
obtained.
(t) Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement, and all documents,
contemplated in connection herewith, shall be satisfactory in form and
substance to the Lender and its counsel.
(u) Excess Availability. After taking into account the Revolving
Loans and the Letters of Credit (including IRB Letters of Credit) issued
on the Closing Date and with all obligations of the Borrowers being
current, there shall be remaining Availability of at least $1,600,000 and
the Revolving Loans and Letters of Credit (excluding IRB Letters of
Credit) made to each Borrower shall not exceed 90% of that Borrower's
separate Borrowing Base.
11.2 Conditions Precedent to Each Loan. The obligation of the Lender to
make each Loan or to provide for the issuance or extension of any Letter of
Credit (including any IRB Letter of Credit) shall be subject to the conditions
precedent that on the date of any such extension of credit the following
statements shall be true, and the acceptance by any Borrower of any extension
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<PAGE> 69
of credit shall be deemed to be a statement to the effect set forth in clauses
(a) and (b), with the same effect as the delivery to the Lender of a
certificate signed by the chief executive officer and chief financial officer
of Parent, dated the date of such extension of credit, stating that:
(a) The representations and warranties contained in this Agreement
and the other Loan Documents are correct in all material respects on and
as of the date of such extension of credit as though made on and as of
such date, except to the extent the Lender has been notified by the
Parent that any representation or warranty is not correct and the Lender
has explicitly waived in writing compliance with such representation or
warranty; and
(b) No Event or Event of Default has occurred and is continuing, or
would result from such extension of credit.
12. DEFAULT.
12.1 Events of Default. It shall constitute an event of default ("Event
of Default") if any one or more of the following shall occur for any reason:
(a) failure to make payment of principal, interest, fees or premium
on any of the Obligations when due;
(b) any representation or warranty made or deemed made by any
Borrower in this Agreement, any of the other Loan Documents, any
Financial Statement, or any certificate furnished by any Borrower or any
Subsidiary at any time to the Lender shall prove to be untrue in any
material respect as of the date when made, deemed made, or furnished;
(c) (i) any default shall occur in the observance or performance of
any of the covenants or agreements contained in any of Article 7, Section
8.2, 8.3, 10.4 or 10.7 through 10.29 hereof (other than a default under
Section 10.16 as a result of a Lien involuntarily incurred, which is not
otherwise an Event of Default hereunder) or (ii) any default shall occur
in the observance or performance of any of the other covenants and
agreements contained in this Agreement or under Section 10.16 hereof as a
result of a Lien involuntarily incurred, any other Loan Documents, or any
other agreement entered into at any time to which any Borrower or any
Subsidiary thereof and the Lender are party in each case referred to in
this clause (ii), if the same shall not have been cured within twenty
(20) days following notice by the Lender to the Parent of the breach
thereof, or if any such agreement or document shall terminate (other than
in accordance with its terms or the terms hereof or with the written
consent of the Lender) or become void or unenforceable, without the
written consent of the Lender;
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<PAGE> 70
(d) default shall occur in the payment of any principal or interest
on any indebtedness for borrowed money (other than the Obligations)
beyond any period of grace provided with respect thereto or any Event of
Default shall occur and be continuing under the SWIB Loan Documents;
(e) any Borrower or any Subsidiary shall: (i) file a voluntary
petition in bankruptcy or file a voluntary petition or an answer or
otherwise commence any action or proceeding seeking reorganization,
arrangement or readjustment of its debts or for any other relief under
the Federal Bankruptcy Code, as amended, or under any other bankruptcy or
insolvency act or law, state or federal, now or hereafter existing, or
consent to, approve of, or acquiesce in, any such petition, action or
proceeding; (ii) apply for or acquiesce in the appointment of a receiver,
assignee, liquidator, sequestrator, custodian, trustee or similar officer
for it or for all or any part of its Property; (iii) make an assignment
for the benefit of creditors; or (iv) be unable generally to pay its
debts as they become due;
(f) an involuntary petition shall be filed or an action or
proceeding otherwise commenced seeking reorganization, arrangement or
readjustment of any Borrower's or any Subsidiary's debts or for any other
relief under the Federal Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency act or law, state or federal, now or hereafter
existing, and such case or proceeding shall remain undismissed or
unstayed for sixty (60) days or more or any court shall enter a decree or
order granting the relief sought in such case or proceeding;
(g) a receiver, assignee, liquidator, sequestrator, custodian,
trustee or similar officer for any Borrower or any Subsidiary or for all
or any part of their Property shall be appointed involuntarily or a
warrant of attachment, execution or similar process shall be issued
against any part of the Property of such Borrower or any Subsidiary, and
such appointment, warrant or similar process shall not be stayed or
discharged within sixty (60) days;
(h) any Borrower or any Subsidiary shall: (i) file a certificate of
dissolution under applicable state law or shall be liquidated, dissolved
or wound-up; (ii) commence any action or proceeding for dissolution,
winding-up or liquidation, or shall take any corporate action in
furtherance thereof; or (iii) have commenced against it any action or
proceeding for dissolution, or shall take any corporate action in
furtherance thereof and such case or proceeding shall remain undismissed
or unstayed for sixty (60) days or more or any court shall enter a decree
or order granting relief sought in such case or proceeding;
(i) all or any part of the Property of any Borrower shall be
nationalized, expropriated or condemned, seized or otherwise
appropriated, or custody or control of such Property or of such Borrower
shall be assumed by any Public Authority or any court of competent
jurisdiction at the instance of any Public Authority, except where
contested in good faith by proper proceedings diligently pursued where a
stay of enforcement is in effect;
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(j) any guaranty of the Obligations shall be terminated, revoked or
declared void or invalid;
(k) one or more final judgments for the payment of money aggregating
in excess of $100,000 (whether or not covered by insurance) shall be
rendered against any Borrower or any Subsidiary and such Borrower or such
Subsidiary shall fail to discharge the same within thirty (30) days from
the date of notice of entry thereof or to appeal therefrom;
(l) any loss, theft, damage or destruction of any item or items of
Collateral occurs which: (i) materially and adversely affects the
operation of any Borrower's business or (ii) is material in amount and is
not adequately covered by insurance;
(m) Parent ceases to own all of the issued and outstanding capital
stock of each other Borrower or any person or group of persons (within
the meaning of the Securities Exchange Act of 1934) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the
SEC) of 30% or more of the outstanding capital stock of Parent;
(n) any event or condition shall occur or exist with respect to a
Plan that could, in the Lender's reasonable judgment, subject any
Borrower or any Subsidiary to any tax, penalty or liability under ERISA,
the Code or otherwise which in the aggregate is material in relation to
the business, operations, Property or financial or other condition of
such Borrower; or
(o) there occurs any material adverse change in any Borrower's
Property, business, operations, or condition (financial or otherwise).
13. REMEDIES.
(a) If an Event of Default exists, the Lender may, do one or more of the
following at any time or times and in any order: (i) reduce the Availability or
one or more of the elements thereof; (ii) restrict the amount of or refuse to
make Revolving Loans and restrict or refuse to arrange for or extend Letters of
Credit (including IRB Letters of Credit); (iii) terminate this Agreement; (iv)
declare any or all Obligations to be immediately due and payable (provided
however that upon the occurrence of any Event of Default described in Sections
12.1(e), 12.1(f), 12.1(g), or 12.1(h), all Obligations shall automatically,
without notice or demand, become immediately due and payable); and (v) pursue
its other rights and remedies under the Loan Documents and applicable law.
(b) If an Event of Default exists: (i) the Lender shall have, in addition
to all other rights, the rights and remedies of a secured party under the UCC;
(ii) the Lender may, at any time, take possession of the Collateral and keep it
on any Borrower's premises, at no cost to the Lender, or remove any part of it
to such other place or places as the Lender may desire, or each Borrower shall,
upon the Lender's demand, at such Borrower's cost, assemble the Collateral and
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make it available to the Lender at a place reasonably convenient to the Lender;
and (iii) the Lender may sell and deliver any Collateral at public or private
sales, for cash, upon credit or otherwise, at such prices and upon such terms
as the Lender deems advisable, in its sole discretion, and may, if the Lender
deems it reasonable, postpone or adjourn any sale of the Collateral by an
announcement at the time and place of sale or of such postponed or adjourned
sale without giving a new notice of sale. Without in any way requiring notice
to be given in the following manner, each Borrower agrees that any notice by
the Lender of sale, disposition or other intended action hereunder or in
connection herewith, whether required by the UCC or otherwise, shall constitute
reasonable notice to such Borrower if such notice is mailed by registered or
certified mail, return receipt requested, postage prepaid, or is delivered
personally against receipt, at least ten (10) days prior to such action to
Parent's address specified in or pursuant to Section 15.10. If any Collateral
is sold on terms other than payment in full at the time of sale, no credit
shall be given against the Obligations until the Lender receives payment, and
if the buyer defaults in payment, the Lender may resell the Collateral without
further notice to the applicable Borrower. In the event the Lender seeks to
take possession of all or any portion of the Collateral by judicial process,
each Borrower irrevocably waives: (a) the posting of any bond, surety or
security with respect thereto which might otherwise be required; (b) any demand
for possession prior to the commencement of any suit or action to recover the
Collateral; and (c) any requirement that the Lender retain possession and not
dispose of any Collateral until after trial or final judgment. Each Borrower
agrees that the Lender has no obligation to preserve rights to the Collateral
or marshal any Collateral for the benefit of any Person. The Lender is hereby
granted a license or other right to use, without charge, each Borrower's
labels, patents, copyrights, name, trade secrets, trade names, trademarks, and
advertising matter, or any similar property, in completing production of,
advertising or selling any Collateral, and each Borrower's rights under all
licenses and all franchise agreements shall inure to the Lender's benefit. The
proceeds of sale shall be applied first to all expenses of sale, including
attorney's fees, and second, in whatever order the Lender elects, to all
Obligations. The Lender will return any excess to the applicable Borrower or
such other Person as shall be legally entitled thereto and each Borrower shall
remain liable for any deficiency.
(c) If an Event of Default occurs, each Borrower hereby waives (i) all
rights to notice and hearing prior to the exercise by the Lender of the
Lender's rights to repossess the Collateral without judicial process or to
replevy, attach or levy upon the Collateral without notice or hearing, and (ii)
all rights of set-off and counterclaim against Lender.
(d) If the Lender terminates this Agreement upon an Event of Default, the
Borrowers shall pay the Lender, immediately upon termination, a fee equal to
the early termination fee that would have been payable under Section 3.7 if
this Agreement had been terminated on that date pursuant to the Borrowers'
election.
14. TERM AND TERMINATION. This Agreement shall expire on the Stated
Termination Date unless earlier terminated. This Agreement may be renewed on
the Stated Termination Date, unless this Agreement is terminated as provided
below. To renew this Agreement, the Parent must notify the Lender at least
ninety (90) days prior to the Stated
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Termination Date and the Lender must notify the Parent at least forty-five (45)
days prior to the Stated Termination Date if the Lender elects to accept that
renewal request, which notice by the Lender shall specify the terms of the
renewal, if any. The Lender and the Borrowers shall have the right to
terminate this Agreement, without premium or penalty, at the end of the Stated
Termination Date or at the end of any renewal term by giving the other written
notice not less than sixty (60) days prior to the end of such term by
registered or certified mail. The Parent may also terminate this Agreement at
any time prior to the Stated Termination Date or any renewal term if: (a) it
gives the Lender sixty (60) days prior written notice of termination by
registered or certified mail; (b) it pays and performs all Obligations on or
prior to the effective date of termination; and (c) it pays the Lender, on or
prior to the effective date of termination, the early termination fee required
by Section 3.7 and the LIBOR breakage costs required by Section 6.4. The
Lender may also terminate this Agreement upon an Event of Default pursuant to
Section 13 (a). Upon the effective date of termination of this Agreement for
any reason whatsoever, all Obligations shall become immediately due and payable
and each Borrower shall immediately arrange for the cancellation of Letters of
Credit (including IRB Letters of Credit) then outstanding. Notwithstanding the
termination of this Agreement, until all Obligations (including, without
limitation, all unpaid principal of and accrued interest on the Term Loan) are
paid and performed in full, the Lender shall retain all its rights and remedies
hereunder (including, without limitation, in all then existing and
after-arising Collateral).
15. MISCELLANEOUS.
15.1 Cumulative Remedies; No Prior Recourse to Collateral. The
enumeration herein of the Lender's rights and remedies is not intended to be
exclusive, and such rights and remedies are in addition to and not by way of
limitation of any other rights or remedies that the Lender may have under the
UCC or other applicable law. The Lender shall have the right, in its sole
discretion, to determine which rights and remedies are to be exercised and in
which order. The exercise of one right or remedy shall not preclude the
exercise of any others, all of which shall be cumulative. The Lender may,
without limitation, proceed directly against any or all of the Borrowers to
collect the Obligations without any prior recourse to the Collateral.
15.2 No Implied Waivers. No act, failure or delay by the Lender shall
constitute a waiver of any of its rights and remedies. No single or partial
waiver by the Lender of any provision of this Agreement or any other Loan
Document, or of breach or default hereunder or thereunder, or of any right or
remedy which the Lender may have, shall operate as a waiver of any other
provision, breach, default, right or remedy or of the same provision, breach,
default, right or remedy on a future occasion. No waiver by the Lender shall
affect its rights to require strict performance of this Agreement.
15.3 Severability. If any provision of this Agreement shall be prohibited
or invalid, under applicable law, it shall be is effective only to such extent,
without invalidating the remainder of this Agreement.
15.4 Governing Law. This Agreement shall be deemed to have been made in
the
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State of Illinois and shall be governed by and interpreted in accordance with
the laws of such state, except that no doctrine of choice of law shall be used
to apply the laws of any other state or jurisdiction.
15.5 Consent to Jurisdiction and Venue; Service of Process. Each Borrower
agrees that, in addition to any other courts that may have jurisdiction under
applicable laws, any action or proceeding to enforce or arising out of this
Agreement or any of the other Loan Documents may be commenced in the Circuit
Court of the State of Illinois for Cook County, or in the United States
District Court for the Northern District of Illinois, and each Borrower
consents and submits in advance to such jurisdiction and agrees that venue will
be proper in such courts on any such matter. Each Borrower hereby waives
personal service of process and agrees that a summons and complaint commencing
an action or proceeding in any such court shall be properly served and shall
confer personal jurisdiction if served by registered or certified mail to such
Borrower. The choice of forum set forth in this section shall not be deemed to
preclude the enforcement of any judgment obtained in such forum, or the taking
of any action under this Agreement to enforce the same, in any appropriate
jurisdiction.
15.6 Waiver of Jury Trial. EACH BORROWER HEREBY WAIVES TRIAL BY JURY,
RIGHTS OF SETOFF, AND THE RIGHT TO IMPOSE COUNTERCLAIMS IN ANY LITIGATION IN
ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL, OR ANY
INSTRUMENT OR DOCUMENT DELIVERED PURSUANT HERETO OR THERETO, OR ANY OTHER CLAIM
OR DISPUTE HOWSOEVER ARISING, BETWEEN ANY BORROWER AND THE LENDER. EACH
BORROWER CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND FREELY MADE.
15.7 Survival of Representations and Warranties. All of each Borrower's
representations and warranties contained in this Agreement shall survive the
execution, delivery, and acceptance thereof by the parties, notwithstanding any
investigation by the Lender or its agents.
15.8 Other Security and Guaranties. The Lender may, without notice or
demand and without affecting any Borrower's obligations hereunder, from time to
time: (a) take from any Person and hold collateral (other than the Collateral)
for the payment of all or any part of the Obligations and exchange, enforce or
release such collateral or any part thereof; and (b) accept and hold any
endorsement or guaranty of payment of all or any part of the Obligations and
release or substitute any such endorser or guarantor, or any Person who has
given any Lien in any other collateral as security for the payment of all or
any part of the Obligations, or any other Person in any way obligated to pay
all or any part of the Obligations.
15.9 Fees and Expenses. The Borrowers shall pay to the Lender on demand
all costs and expenses that the Lender pays or incurs in connection with the
negotiation, preparation, consummation, administration, enforcement, and
termination of this Agreement and the other Loan Documents, including, without
limitation: (a) attorneys' and paralegal's fees and disbursements of
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counsel to the Lender (including, without limitation, $7,500 representing the
allocable cost of in-house counsel and staff) for negotiation and closing of
this Agreement; (b) costs and expenses including attorneys' and paralegals'
fees and disbursements (including, without limitation, a reasonable estimate of
the allocable cost of in-house counsel and staff) for any amendment,
supplement, waiver, consent, or subsequent closing in connection with the Loan
Documents and the transactions contemplated thereby; (c) costs and expenses of
lien searches; (d) Taxes, fees and other charges for recording the mortgages,
filing financing statements and continuations, and other actions to perfect,
protect, and continue the Security Interest; (e) sums paid or incurred to pay
any amount or take any action required of a Borrower under the Loan Documents
that such Borrower fails to pay or take; (f) costs of appraisals, inspections,
and verifications of the Collateral, including, without limitation, travel,
lodging, and meals together with an allocated charge of $500 per day for each
auditor employed by the Lender for inspections of the Collateral and each
Borrower's operations; (g) costs and expenses of forwarding loan proceeds,
collecting checks and other items of payment, and establishing and maintaining
Payment Accounts and lock boxes; (h) all amounts that a Borrower is required to
pay under any letter of credit agreement with an issuing bank; (i) costs and
expenses of preserving and protecting the Collateral; and (j) costs and
expenses including attorneys' and paralegals' fees and disbursements
(including, without limitation, a reasonable estimate of the allocable cost of
in-house counsel and staff) paid or incurred to obtain payment of the
Obligations, enforce the Security Interest, sell or otherwise realize upon the
Collateral, and otherwise enforce the provisions of the Loan Documents, or to
defend any claims made or threatened against the Lender arising out of the
transactions contemplated hereby (including without limitation, preparations
for and consultations concerning any such matters). The foregoing shall not be
construed to limit any other provisions of the Loan Documents regarding costs
and expenses to be paid by the Borrowers. All of the foregoing costs and
expenses shall be charged to the Borrowers' loan accounts as Revolving Loans.
15.10 Notices. Except as otherwise provided herein, all notices, demands,
and requests that either party is required or elects to give to the other shall
be in writing, shall be delivered personally against receipt, or sent by
recognized overnight courier services, or mailed by registered or certified
mail, return receipt requested, postage prepaid, and shall be addressed to the
party to be notified as follows:
If to the Lender: BankAmerica Business Credit, Inc.
231 South LaSalle Street
16th Floor
Chicago, Illinois 60697
Attention: Portfolio Manager
with a copy to: Bank of America NT&SA, Legal Department
10124 Old Grove Road
San Diego, California 92131
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If to any Borrower
c/o Parent at: Outlook Group Corp.
1180 American Drive
Neenah, Wisconsin 54957
Attention: Chief Financial Officer
with a copy to: Quarles & Brady
411 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Jennifer V. Powers;
or to such other address as each party may designate for itself by like notice.
Any such notice, demand, or request shall be deemed given when received if
personally delivered or sent by overnight courier, or when deposited in the
United States mails, postage paid, if sent by registered or certified mail.
15.11 Indemnification. THE BORROWERS, JOINTLY AND SEVERALLY, HEREBY
INDEMNIFY, DEFEND AND HOLD LENDER, AND ITS DIRECTORS, OFFICERS, AGENTS,
EMPLOYEES AND COUNSEL, HARMLESS FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS,
DAMAGES, LIABILITIES, DEFICIENCIES, JUDGMENTS, PENALTIES OR EXPENSES IMPOSED
ON, INCURRED BY OR ASSERTED AGAINST ANY OF THEM, WHETHER DIRECT, INDIRECT OR
CONSEQUENTIAL ARISING OUT OF OR BY REASON OF ANY LITIGATION, INVESTIGATIONS,
CLAIMS, OR PROCEEDINGS (WHETHER BASED ON ANY FEDERAL, STATE OR LOCAL LAWS OR
OTHER STATUTES OR REGULATIONS, INCLUDING, WITHOUT LIMITATION, SECURITIES,
ENVIRONMENTAL, OR COMMERCIAL LAWS AND REGULATIONS, UNDER COMMON LAW OR AT
EQUITY, OR ON CONTRACT OR OTHERWISE) COMMENCED OR THREATENED, WHICH ARISE OUT
OF OR ARE IN ANY WAY BASED UPON THE NEGOTIATION, PREPARATION, EXECUTION,
DELIVERY, ENFORCEMENT, PERFORMANCE OR ADMINISTRATION OF THIS AGREEMENT, ANY
OTHER LOAN DOCUMENT, OR ANY UNDERTAKING OR PROCEEDING RELATED TO ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR ANY ACT, OMISSION TO ACT, EVENT OR
TRANSACTION RELATED OR ATTENDANT THERETO, INCLUDING, WITHOUT LIMITATION,
AMOUNTS PAID IN SETTLEMENT, COURT COSTS, AND THE FEES AND EXPENSES OF COUNSEL
REASONABLY INCURRED IN CONNECTION WITH ANY SUCH LITIGATION, INVESTIGATION,
CLAIM OR PROCEEDING AND FURTHER INCLUDING, WITHOUT LIMITATION, ALL LOSSES,
DAMAGES (INCLUDING CONSEQUENTIAL DAMAGES), EXPENSES OR LIABILITIES SUSTAINED BY
THE LENDER IN CONNECTION WITH ANY ENVIRONMENTAL
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INSPECTION, MONITORING, SAMPLING, OR CLEANUP OF THE ENCUMBERED REAL ESTATE
REQUIRED OR MANDATED BY ANY ENVIRONMENTAL LAW; PROVIDED, HOWEVER, THAT NO
BORROWER SHALL INDEMNIFY LENDER, ITS DIRECTORS, OFFICERS, AGENTS, EMPLOYEES AND
COUNSEL FROM SUCH DAMAGES RESULTING FROM THEIR GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. Without limiting the foregoing, if, by reason of any suit or
proceeding of any kind, nature, or description against any Borrower, or by any
Borrower or any other party against Lender, which in Lender's sole discretion
makes it advisable for Lender to seek counsel for protection and preservation
of its liens and security assets, or to defend its own interest, such expenses
and counsel fees shall be allowed to Lender. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in this Section 15.11
may be unenforceable because it is violative of any law or public policy, the
Borrowers shall contribute the maximum portion which they are permitted to pay
and satisfy under applicable law, to the payment and satisfaction of all
indemnified matters incurred by Lender. The foregoing indemnity shall survive
the payment of the Obligations and the termination of this Agreement. All of
the foregoing costs and expenses shall be part of the Obligations and secured
by the Collateral.
15.12 Waiver of Notices. Unless otherwise expressly provided herein, each
Borrower waives presentment, protest and notice of demand or dishonor and
protest as to any instrument, as well as any and all other notices to which it
might otherwise be entitled. No notice to or demand on any Borrower which the
Lender may elect to give shall entitle such Borrower or any other Borrower to
any or further notice or demand in the same, similar or other circumstances.
15.13 Binding Effect; Assignment. The provisions of this Agreement shall
be binding upon and inure to the benefit of the respective representatives,
successors and assigns of the parties hereto; provided, however, that no
interest herein may be assigned by any Borrower without the prior written
consent of the Lender. The rights and benefits of the Lender hereunder shall,
if the Lender so agrees, inure to any party acquiring any interest in the
Obligations or any part thereof.
15.14 Modification. This Agreement is intended by the Borrowers and the
Lender to be the final, complete, and exclusive expression of the agreement
between them. This Agreement supersedes any and all prior oral or written
agreements relating to the subject matter hereof and may not be contradicted by
evidence of prior, contemporaneous or subsequent oral agreements of the
parties. There are no oral agreements between the parties. No modification,
rescission, waiver, release, or amendment of any provision of this Agreement
shall be made, except by a written agreement signed by each Borrower and a duly
authorized officer of the Lender.
15.15 Counterparts. This Agreement may be executed in any number of
counterparts, and by the Lender and each Borrower in separate counterparts,
each of which shall be an original, but all of which shall together constitute
one and the same agreement.
15.16 Captions. The captions contained in this Agreement are for
convenience only, are without substantive meaning and should not be construed
to modify, enlarge, or restrict any provision.
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15.17 Right of Set-Off. Whenever an Event of Default exists, the Lender
is hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Lender or any affiliate of the Lender to
or for the credit or the account of any Borrower against any and all of the
Obligations, whether or not then due and payable. Lender agrees promptly to
notify the applicable Borrower after any such set-off and application made by
Lender, provided that the failure to give such notice shall not affect the
validity of such set-off and application.
15.18 Participating Lender's Security Interests. The Lender may, without
notice to or consent by any Borrower, grant one or more participations in the
Loans to Participating Lenders. If a Participating Lender shall at any time
with the Parent's knowledge participate with the Lender in the Loans, each
Borrower hereby grants to such Participating Lender, and the Lender and such
Participating Lender shall have and are hereby given, a continuing lien on and
security interest in any money, securities and other property of such Borrower
in the custody or possession of the Participating Lender, including the right
of setoff, to the extent of the Participating Lender's participation in the
Obligations, and such Participating Lender shall be deemed to have the same
right of setoff to the extent of Participating Lender's participation in the
Obligations under this Agreement as it would have it were a direct lender.
15.19 Joint and Several Liability. Each Borrower unconditionally
guarantees the payment in full and performance of the other Borrowers'
Obligations hereunder. Each Borrower shall be liable for all amounts due to
the Lender under this Agreement, regardless of which Borrower actually receives
Loans or other extensions of credit hereunder or the amount of such Loans
received or the manner in which the Lender accounts for such Loans or other
extensions of credit on its books and records. Each Borrower's Obligations
with respect to Loans made to it, and each Borrower's Obligations arising as a
result of the joint and several liability of the Borrowers hereunder, with
respect to Loans made to the other Borrowers hereunder, shall be separate and
distinct obligations, but all such Obligations shall be primary obligations of
that Borrower.
Each Borrower's Obligations arising as a result of the joint and several
liability of such Borrower hereunder with respect to Loans or other extensions
of credit made to the other Borrowers hereunder shall, to the fullest extent
permitted by law, be unconditional irrespective of (i) the validity or
enforceability, avoidance or subordination of the Obligations of the other
Borrowers or of any promissory note or other document evidencing all or any
part of the Obligations of the other Borrowers, (ii) the absence of any attempt
to collect the Obligations from any other Borrower, any other guarantor, or any
other security therefor, or the absence of any other action to enforce the
same, (iii) the waiver, consent, extension, forbearance or granting of any
indulgence by the Lender with respect to any provision of any instrument
evidencing the Obligations of any other Borrower, or any part thereof, or any
other agreement now or hereafter executed by any other Borrower and delivered
to the Lender, (iv) the failure by the Lender to take any steps to perfect and
maintain its security interest in, or to preserve its rights to, any security
or collateral for the Obligations of any other Borrower, (v) the Lender's
election, in any proceeding instituted under the Bankruptcy Code, of the
application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any
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borrowing or grant of a security interest by any other Borrower, as
debtor-in-possession under Section 364 of the Bankruptcy Code, (vii) the
disallowance of all or any portion of the Lender's claim(s) for the repayment
of the Obligations of any other Borrower under Section 502 of the Bankruptcy
Code, or (viii) any other circumstances which might constitute a legal or
equitable discharge or defense of a guarantor or of any other Borrower. With
respect to each Borrower's Obligations arising as a result of the joint and
several liability of that Borrower hereunder with respect to Loans or other
extensions of credit made to the other Borrowers hereunder, each Borrower
waives, until the Obligations shall have been paid in full and the Loan
Agreement shall have been terminated, any right to enforce any right of
subrogation and any remedy which the Lender now has or may hereafter have
against any other Borrower, any endorser or any guarantor of all or any part of
the Obligations, and any benefit of, and any right to participate in, any
security or collateral given to the Lender to secure payment of the Obligations
or any other liability of any other Borrower to the Lender.
Upon any Event of Default, the Lender may proceed directly and at once,
without notice, against any or all Borrowers to collect and recover the full
amount, or any portion of the Obligations, without first proceeding against any
other Borrower or any other Person, or against any security or collateral for
the Obligations. Each Borrower consents and agrees that the Lender shall be
under no obligation to marshal any assets in favor of that Borrower or against
or in payment of any or all of the Obligations.
The Obligations of each Borrower under this Section 15.19 (the
Guarantor-Borrower) with respect to Loans (and interest, fees, and expenses
with respect thereto) which were advanced to or incurred by the other Borrowers
(and were not reloaned to the Guarantor-Borrower) shall be limited to an amount
equal to the maximum amount of the claim which could be recovered from the
Guarantor-Borrower under this Section 15.19 without rendering such claim
voidable or avoidable under Section 548 of the Bankruptcy Code or under any
similar state statute or common law.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have entered into this Agreement on the
date first above written.
OUTLOOK GROUP CORP.
By:_________________________
Title:______________________
OUTLOOK LABEL SYSTEMS, INC.
By:_________________________
Title:______________________
OUTLOOK FOODS, INC.
By:_________________________
Title:______________________
OUTLOOK PACKAGING, INC.
By:_________________________
Title:______________________
BARRIER FILMS CORPORATION
By:_________________________
Title:______________________
BANKAMERICA BUSINESS
CREDIT, INC.
By:_________________________
Title:______________________
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OUTLOOK GROUP CORP.
-------------------
EXHIBIT 11 - COMPUTATION OF EARNINGS PER COMMON SHARE
-----------------------------------------------------
<TABLE>
<CAPTION>
Three-Month Period Ended Six-Month Period Ended
November 29, November 30, November 29, November 30,
1996 1995 1996 1995
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Primary:
Weighted average
shares outstanding 4,649,382 4,649,382 4,649,382 4,674,382
Equivalent shares--
dilutive stock options
based on Treasury stock
method using average
market price . . . . -- -- -- --
---------- ---------- ----------- ----------
4,649,382 4,649,382 4,649,382 4,674,382
=========== ============= ============ =============
Net loss from continuing
operations . . . . . $ (393,000) $ (658,000) $ (472,000) $ (780,000)
Net earnings (loss)
from discontinued
operations . . . . . (566,000) 339,000 (925,000) 344,000
----------- ------------- ------------ -------------
Net earnings (loss) $ (959,000) $ (319,000) $(1,397,000) $ (436,000)
=========== ============= ============ =============
Net earnings (loss) per share:
- continuing $ (0.08) $ (0.14) $ (0.10) $ (0.17)
- discontinued (0.13) 0.07 (0.20) 0.08
----------- ------------- ------------ -------------
Total: $ (0.21) $ (0.07) $ (0.30) $ (0.09)
=========== ============= ============ =============
</TABLE>
There is no significant difference between primary and fully diluted earnings
per common share.
