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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-6440
R.P. SCHERER INTERNATIONAL CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 38-1207288
(State of Incorporation) (I.R.S. Employer Identification Number)
2075 WEST BIG BEAVER ROAD, TROY, MICHIGAN 48084
(Address of principal executive offices) (Zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (810) 649-0900
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- - - ------------------- -----------------------------------------
6 3/4% SENIOR NOTES DUE 2004 NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [x] NO [ ]
The aggregate market value of all shares of common stock held by non-affiliates
of the registrant as of June 23, 1994 was $0.
Number of shares outstanding of each class of the registrant's common stock as
of June 23, 1994: 1,000 shares of common stock, par value $.01.
The registrant meets the conditions set forth in General Instructions J(1)(a)
and (b) of Form 10-K and is therefore filing this form with the reduced
disclosure format.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
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PART I
ITEM 1 BUSINESS
GENERAL
R.P. Scherer International Corporation ("Scherer International" and formerly
R.P. Scherer Corporation) was acquired in June 1989 by R.P. Scherer
Corporation (formerly RPS Corporation), a Delaware corporation organized in
1989 at the direction of Shearson Lehman Brothers Holdings Inc. ("Lehman") to
effect such acquisition. Scherer International is R.P. Scherer Corporation's
only subsidiary. R.P. Scherer Corporation essentially has no other operations.
Unless otherwise stated herein, the term "Company" refers to either or both of
Scherer International and R.P. Scherer Corporation.
The Company, an international developer and manufacturer of oral drug delivery
systems, is the world's largest producer of softgels. The Company has also
developed and is commercializing advanced drug delivery systems, including the
Scherersol(TM), Zydis(R) and Pulsincap(R) technologies. The Company's
proprietary drug delivery systems improve the efficacy of drugs by regulating
their dosage, rate of absorption and place of release.
The Company produces over 4,000 products in softgel form, which accounted for
approximately 90% of the Company's fiscal 1994 sales. Softgels are used for a
wide range of drug, vitamin, cosmetic and recreational products.
The Company has a broad domestic and international customer base consisting of
manufacturers and wholesalers of pharmaceutical, health and nutritional,
cosmetic and recreational products, with more than half of its total sales made
to the pharmaceutical industry. To meet the needs of its multinational
customers and to serve new markets, the Company operates softgel manufacturing
facilities in eleven countries throughout the world and manufactures hardshell
capsules in three of these countries. Approximately 73% of the Company's
fiscal 1994 sales and 79% of the Company's fiscal 1994 operating income were
derived from operations outside the United States.
The Company works closely with its customers in the development of new softgel
products. Using its expertise in softgel technology, the Company has developed
its Scherersol(TM) systems to broaden the range of pharmaceutical products
which may be encapsulated in softgel form. Scherersol(TM) systems, most of
which are patented, often enable pharmaceutical companies to combine the
advantages of drugs in liquid solution with the convenience and dosage accuracy
of softgels. Additionally, Scherersol(TM) technologies, by providing a unique,
patented dosage delivery system, can protect a pharmaceutical compound against
competition from generic drugs throughout the life of the Scherersol(TM)
patents.
In 1991, the Company formed a separate division, Scherer DDS, to focus on the
development of advanced drug delivery systems, including the Zydis(R) and
Pulsincap(R) technologies. Zydis(R) is an oral dosage form which dissolves
instantaneously on the tongue and does not require water to aid swallowing.
Pulsincap(R) is an oral drug delivery device which is designed to release a
drug at either a predetermined time following ingestion or a predetermined site
in the gastrointestinal tract. Through Scherer DDS, the Company is engaged in
the search for other advanced drug delivery systems which would complement the
Company's existing technologies. In January 1994, the Company acquired the
rights to a novel ophthalmic drug delivery system from Zeneca Limited. The
system, which is in the early stages of development, is intended to enable
accurate, sensation-free application of drugs to the eye. In March 1994, the
Company entered into an agreement with a United Kingdom-based drug research
concern to fund feasibility studies for a unique patent-pending dry powder
inhaler device and a patented controlled-release tablet product.
In September 1993, the Company formed its Advanced Therapeutic Products Group
("ATP"), based in the United Kingdom. ATP was formed to manage the development
and registration of pharmaceutical
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products using off-patent compounds and the Company's drug delivery
technologies. The Company expects that ATP will help it service the growing
global demand for therapeutically improved, cost-effective pharmaceutical
products.
Scherer International, which had been a public company before its acquisition,
was incorporated in Michigan in 1944 and reincorporated in Delaware in 1969.
SOFTGEL PRODUCTS AND MARKETS
There are three solid oral dosage delivery systems: tablets, hardshell gelatin
capsules, and softgel capsules. Softgel products accounted for 90% of the
Company's fiscal 1994 sales, and empty two-piece hardshell capsules represented
7% of sales.
The various softgel markets around the world were developed primarily by the
Company working in conjunction with its customers. The technical and
commercial staff of the Company work in close collaboration with the technical
and marketing staff of its customers to identify requirements and develop
commercial products.
Softgel capsules are used in the following three markets: (i) pharmaceutical
(both prescription and over-the-counter products); (ii) health and nutritional;
and (iii) other (cosmetics and recreational).
Pharmaceutical. The pharmaceutical markets in each country are relatively
similar due to the high degree of manufacturing regulation worldwide, together
with the globalization of the pharmaceutical industry. The Company performs
especially well in a highly regulated environment where the customers' main
focus is on quality and service as opposed to price. In fiscal 1994, 46% of
the Company's softgel sales were derived from the sale of pharmaceutical
products.
The Company assists pharmaceutical companies in the formulation of liquids and
solids in suspension to be used in softgels. The Company's development of its
Scherersol(R) systems broadens the range of pharmaceutical products which may
be encapsulated in softgel form. Scherersol(R) softgel systems are liquid
formulation technologies which are designed to improve bioavailability of
pharmaceutical compounds that are inconsistently, incompletely or too slowly
absorbed from traditional oral dosage forms. Scherersol(R) systems, most of
which are patented, often enable pharmaceutical companies to extend patent
protection and combine the advantages of active molecules in a solution with
the convenience and dosage accuracy of softgels.
To date, the most significant product which has been reformulated using the
Scherersol(R) systems is Sandimmun(R), a product developed and marketed by
Sandoz Pharma AG. Sandimmun(R) (cyclosporin A) is an immuno-suppressant which
typically is administered daily to organ transplant patients throughout their
lives in order to prevent post-operative organ rejection. Additionally, it has
recently received approval in Europe for treatment of psoriasis, and
applications are pending in the U.S. for both psoriasis and rheumatoid
arthritis. By reformulating the drug into softgel form, the Company was able
to mask Sandimmun's(R) unpleasant taste and regulate the dosage size. Sandoz
Pharma AG's annual worldwide sales of Sandimmun(R) are currently estimated at
$700 million. To date, the Company believes that a substantial portion of
Sandimmun(R) sales continue to be in non-softgel forms. Sandimmun(R)
represents approximately 2% of the Company's softgel sales.
Health and Nutritional. Health and nutritional products consist primarily of
vitamins, minerals, supplements, and plant and fish oils. Some of the
Company's products involve relatively simple encapsulation of oils, such as
vitamin E and cod liver oil, while others are specifically formulated to the
requirements of customers and are mutually developed Some health and
nutritional products can only be formulated in softgel form, and other products
are formulated in softgel form for convenience and quality product line image.
Health and nutritional products represented approximately 43% of the Company's
fiscal 1994 softgel sales.
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Other-Cosmetics and Recreational. Other products represented approximately 11%
of the Company's softgel sales in fiscal 1994, with approximately 6%
attributable to cosmetics and 5% to recreational products.
The Company's products for the cosmetics market consist principally of: (i)
specially shaped softgels containing various topical oils and creams; and (ii)
bath pearls or bath capsules containing various oils and fragrances. The
Company's largest cosmetics customer, Elizabeth Arden Co., introduced Ceramide
facial and eye cream products using special twist-off softgel capsules to
provide unit dosaging and prevent oxidation of the products before use. The
Company continues to develop and market new products for the growing cosmetics
market. An example is its fragrance softgel, which represents an economical,
biodegradable twist-off sampler for perfumes and similar products.
The Company manufactures paintball softgels for use in recreational "paintball
games." Various colors of water-washable paint are encapsulated in softgels and
sold by the Company to qualified distributors. Originally established in the
United States, this sport is now also growing in popularity internationally.
SCHERER DDS
In 1991, the Company formed a separate division, Scherer DDS, to focus on the
development of advanced drug delivery systems. This represents a broadening of
the Company's existing business within its existing infrastructure, and
reflects the Company's commitment to this rapidly growing market segment. The
Company believes that demand for advanced drug delivery systems has grown
because the pharmaceutical industry is recognizing limitations to improving
drug efficacy and tolerance with conventional dosage form technologies. In
addition, novel and patentable formulation technologies can often extend the
product life cycle of major drugs for many years, thus maximizing income
streams from the customers' significant research and development investments.
Scherer DDS, largely based in the United Kingdom, is responsible for the
development, manufacture and marketing of the Company's new advanced drug
delivery systems, including the Zydis(R) and Pulsincap(R) technologies.
Additionally, Scherer DDS is engaged in the search for other advanced drug
delivery systems which might complement the Company's existing technologies.
In January 1994, the Company acquired the rights to a novel ophthalmic drug
delivery system from Zeneca Limited. The system, which is in the early stages
of development, is intended to enable accurate, sensation-free application of
drugs to the eye. In March 1994, the Company entered into an agreement with a
United Kingdom-based drug research concern to fund feasibility studies for a
unique patent-pending dry powder inhaler device and a patented
controlled-release tablet product.
Zydis(R). Zydis(R) is a freeze-dried, porous wafer containing a drug substance
which dissolves instantaneously on the tongue and does not require water to aid
swallowing. This feature of Zydis(R) is expected to improve patient
compliance, particularly among children and the elderly who frequently
experience difficulties in swallowing conventional dosage forms. The Zydis(R)
system has been patented in major markets extending through the year 2002, with
such patent protection extending to the active ingredients being delivered
using Zydis(R). Products incorporating Zydis(R) technology have received
approvals for use in eighteen countries.
The Company currently produces Zydis(R) products containing the lorazepam and
oxazepam tranquilizers for Wyeth-Ayerst International, as well as Pfizer's
Feldene Melt anti-arthritic product. At present, such products are only sold
in Europe. There are currently eleven major products encompassing Zydis(R)
technology in different stages of development and regulatory approval. Because
patents covering active compounds in these products have expired or will expire
within the next few years, the manufacturers of such products have been seeking
alternative patent-protected dosage forms. Conventional dosage forms of the
active compounds in these products are marketed by large multinational
pharmaceutical companies, and these products had aggregate annual sales
exceeding $5.0 billion in calendar 1992. In general, agreements with customers
call for customers to pay option fees to the Company as well as to pay certain
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of the costs for development, clinical testing, obtaining regulatory approvals
and commercialization of the products. The Company will receive royalties, as
well as manufacturing revenues, assuming such products are successfully
commercialized. The Company recognized revenues of approximately $8.0 million
in fiscal 1994 related to Zydis(R) products.
Pulsincap(R). Pulsincap(R) is an oral drug delivery device which is designed
to release the drug in a pulsed fashion at a predetermined time in the
gastrointestinal tract or at a predetermined site in the body. This dosage
form consists of a capsule composed of a water insoluble body and a water
soluble cap. The drug formulation is contained within the capsule body and is
sealed in by a hydrogel plug. At a specified time after ingestion, the drug is
released into the small intestine or colon for absorption into the blood
stream.
The Company anticipates that the Pulsincap(R) system will have a broad range of
applications. Two major areas targeted are nocturnal (time-controlled)
delivery and colonic (site-specific) delivery.
The Pulsincap(R) technology is covered by patents in Europe, and has patents
pending in all other major markets. The Company has completed toxicology
studies on the hydrogel plug, and anticipates that several customer-funded
feasibility studies will be initiated in the next several months. The Company
further expects that several years of continued development and testing will be
required before any material commercial sales of Pulsincap(R) products are
realized.
Optidyne. Optidyne is a novel pocket-sized design which would enable the
transfer of atomized droplets of solutions of pharmaceutical compounds to the
corneal surface of the eye. The device will deliver a small (3 to 5
microlitres) and precise volume of a liquid in fine droplet size to the eye,
thus avoiding blinking, flooding, spillage and waste and ensuring a longer
contact time on the corneal surface. Side effects, which can arise with
standard drops from the effects of excess formulation draining into the nose
and being swallowed, would be avoided. The device is designed to be used in a
vertical or a horizontal position with no requirement for bending back the head
and thus has the potential for increasing therapeutic efficacy with minimal
side effects.
ADVANCED THERAPEUTIC PRODUCTS GROUP
In September 1993, the Company formed the Advanced Therapeutic Products Group,
based in the United Kingdom. This division was formed to manage the
development and registration of pharmaceutical products using the Company's
proprietary drug delivery technologies and incorporating off-patent compounds.
The Group s objective is to reformulate existing compounds using the Company's
proprietary drug delivery technologies to create new products with demonstrably
improved therapeutic and cost benefits over existing treatments. The Company
does not intend, however, to engage in any research aimed at the development of
new chemical entities.
INTERNATIONAL OPERATIONS
To serve new markets and to meet the needs of its multinational customers, the
Company operates softgel manufacturing facilities in eleven countries
throughout the world and manufactures hardshell capsules in three of these
countries. In addition, the Company has the flexibility to transfer some of
its production from one plant to another within its worldwide network. (For
information concerning the Company's geographic segments, see Note 15 to the
consolidated financial statements.)
Currently, the Company is not subject to any significant government
restrictions as to the availability of any material cash flows from its foreign
subsidiaries, however, transfer of profits from foreign subsidiaries could be
subject to foreign exchange controls and to regulations of foreign governments
which may be in effect from time to time. In addition, the consolidated
results of the Company's operations are affected by foreign currency
fluctuations. Laws or regulations have been proposed or enacted in various
foreign countries which, among other things, specify the number of national
directors and restrict borrowing by foreign-owned companies.
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The Company is also subject to certain restrictions pursuant to which R.P.
Scherer GmbH, the Company's 51% owned German subsidiary, has the exclusive
right to sell or manufacture softgels and hardshell capsules in eastern Europe
and certain countries in western Europe and Asia. These restrictions do not
apply to the Company's advanced drug delivery systems marketed by Scherer DDS.
COMPETITION
The greatest competition to the Company's softgel dosage form for
pharmaceuticals, its major softgel market, historically has come from the
manufacturers of tablets and hardshell capsules in instances where
technological barriers to their usage did not exist. The Company believes that
the most significant disadvantages of softgel capsules compared to tablets or
hardshell capsules for pharmaceutical and health and nutritional product
manufacturers have been the relatively higher cost of softgels and the lack of
control by such manufacturers over the softgel manufacturing process. Because
a relatively high unit volume is necessary to manufacture softgels
economically, no significant pharmaceutical manufacturer and only one
significant health and nutritional product manufacturer produces its own
softgels.
In recent years, a large number of pharmaceutical companies have become
increasingly interested in the development and commercialization of both
existing and newly developed pharmaceutical products incorporating advanced
drug delivery systems. A number of companies have been formed to develop new
drug formulations, products, and drug delivery systems.
The Company is the world's largest manufacturer of softgels. The Company
believes it has a competitive advantage in the softgel business due to its
greater experience in the manufacture of softgels, its advanced technology, its
extensive participation in customer product development, its strong acceptance
by customers and its geographic breadth. The Company's principal softgel
competitors are several manufacturers with substantially smaller softgel
operations. Although the Company faces varying degrees of competition in each
of its geographic markets, it believes it has a leading market share in each of
its major markets.
The largest producers of hardshell capsules are two multinational
pharmaceutical manufacturers which have substantially greater assets and sales
than the Company. In addition, the Company competes in various countries with
smaller hardshell manufacturers.
PRODUCT INFORMATION
The Company's business is not dependent upon a single product or a few
products. Softgels containing both natural and synthetic Vitamin E represent
approximately 11% of the Company's fiscal 1994 sales; no other product
represents 10% or more of the Company's sales.
CUSTOMERS
No material part of the Company's business is considered to be dependent upon a
single customer or a few customers, and no single customer represents 10% or
more of the Company's sales.
SOURCES OF MATERIALS
The principal raw material used in the manufacture of softgels and hardshell
capsules is gelatin. Gelatin is obtained primarily regionally and in most
instances is available from multiple sources (and is generally purchased based
on a coordinated worldwide basis by the Company to obtain favorable terms).
The Company has never experienced any significant shortage of gelatin or other
significant raw materials.
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PATENTS
The Company has a number of active patents on its specialized machinery,
processes, products and drug delivery systems. In addition, a number of
patent applications are pending and numerous trademarks are held. In the
opinion of management, the Company's businesses are not dependent upon any one
patent or trademark.
SEASONAL BUSINESS
No material portion of the Company's business is seasonal. However, second
quarter operating results are generally below the results of other quarters due
to the regularly scheduled vacation and annual summer maintenance shutdown of
substantially all northern hemisphere softgel facilities.
BACKLOG
The backlog of unfilled orders was approximately $136.3 million at March 31,
1994, as compared to approximately $110.2 million at March 31, 1993. The
Company believes that such backlog of orders at March 31, 1994 is firm and will
be filled within the next 12 months.
GOVERNMENT REGULATION
The Company's products and manufacturing processes and services are subject to
the applicable Good Manufacturing Practice standards for the pharmaceutical
industry and to other regulations by governmental agencies or departments in
each of the countries in which it operates. In the United States, the
Company's encapsulation products and manufacturing and packaging services are
subject to the Federal Food, Drug and Cosmetic Act, the Comprehensive Drug
Abuse Prevention and Control Act of 1970 and various rules and regulations of
the Bureau of Alcohol, Tobacco and Firearms of the United States Department of
Treasury, the Bureau of Narcotics of the United States Department of Justice
and state narcotic regulatory agencies. In other countries, the Company's
products and services are subject to analogous regulation.
The Company is regularly subjected to testing and inspection of its products
and facilities by representatives of various Federal agencies and in addition,
the Company comes under the regulation of various state, municipal and foreign
health agencies.
The Company is also generally required to obtain United States Food and Drug
Administration approval for sales in the United States, as well as approval of
the appropriate agencies in other jurisdictions, prior to commencing the sale
of many of the proprietary products under development.
The Company believes that it is in compliance in all material respects with
applicable environmental laws and regulations. Compliance with Federal, state
and local provisions relating to the protection of the environment has had no
material effect upon the capital expenditures, earnings or competitive position
of the Company and its subsidiaries. The Company was informed in August 1992
that soil at a manufacturing facility in North Carolina owned and operated by
the Company from 1975 to 1985 contained levels of certain substances which
exceeded environmental standards. The Company voluntarily initiated a remedial
investigation, and initial remedial and removal actions have been completed by
the Company and the current owner of the facility for the known soil
contamination at such site. The Company continues to perform additional
studies and remediation in the area, including testing and removal of
groundwater, which have indicated the necessity for additional remedial and
removal actions. On the basis of the results of investigations performed to
date, the Company does not believe that potential future costs associated with
either the investigation or any future remedial or removal action will
ultimately have an materially adverse impact on the Company's business or
financial condition. Based on current information, no other significant
expenditures for environmental compliance are contemplated in the foreseeable
future.
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RESEARCH AND DEVELOPMENT
Costs incurred in connection with the development of new products and
manufacturing methods, including both Company and customer-sponsored
expenditures, amounted to $16.0 million in fiscal 1994, $12.4 million in fiscal
1993, and $11.6 million in fiscal 1992.
EMPLOYEES
At March 31, 1994, the Company employed approximately 3,100 full-time
employees. The Company considers its relations with its employees to be good.
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EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The name, age and employment history, including all positions held concurrently
or successively in the past five years, of each of the Company's executive
officers and directors are shown below. In this table, the "Company" refers to
R.P. Scherer Corporation only.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OF EMPLOYMENT
------------------------------------------
NAME AGE AND FIVE-YEAR EMPLOYMENT HISTORY(1)
---- --- ------------------------------------
<S> <C> <C>
John P. Cashman 53 Chairman of the Company since August 1991 and Director of the Company
since June 1990. Chairman of Scherer International since June 1989.
Director of Scherer International since December 1989. Chairman and
President of Cashman Group Inc. since 1986. Chairman of Pharmaphil Group,
Inc. from January 1987 to June 1989. President of Manville International
and Mining Group and Senior Vice President and Officer of Manville
Corporation from 1984 to 1986.
Aleksandar Erdeljan 44 President of the Company since August 1991 and Director of the Company
since June 1990. President of Scherer International since June 1989.
Director of Scherer International since December 1989. President of
Pharmaphil Group, Inc. from January 1987 to June 1989. Director of
Corporate Development of the Company from June 1985 to January 1987.
Nicole S. Williams 49 Executive Vice President, Finance, Chief Financial Officer and Secretary
of the Company and Scherer International since January 1992. Treasurer of
the Company and Scherer International since June 1993. Executive Vice
President - Worldwide Operations, SPSS, Inc. from December 1990 to January
1992. Senior Vice President, Finance and Administration and Corporate
Secretary, SPSS, Inc. from July 1987 to December 1990. Vice President and
Treasurer, CECO Industries, November 1985 to July 1987.
Thomas J. Stuart 33 Vice President and Controller of the Company and Scherer International
effective June 1994. Controller of the Company since August 1991, and of
Scherer International since May 1990. Manager, Detroit office of Arthur
Andersen & Co. from June 1987 to May 1990.
Dennis R. McGregor 41 Assistant Treasurer and Director of Tax Operations of the Company and
Scherer International since August 1993. Manager of Tax Audit and
Planning, Allied-Lyons North America from December 1991 to August 1993.
International Tax Manager for Great Lakes Chemical from September 1990 to
November 1991. Manager of Tax Planning and Research for Brown Forman
Corporation from September 1983 to September 1990.
Lori G. Koffman 35 Director of the Company and Scherer International since September 1989.
Assistant Secretary of the Company since December 1989. Senior Vice
President, Lehman from 1990 to present. Vice President, Lehman from 1987
to 1990. Also a director of Shearson/SDI, Inc., the general partner of
Sun Distributors, L.P.
Frederick Frank 62 Director of the Company since June 1990. Director of Scherer
International since August 1988. Senior Managing Director of Lehman.
Also a director of Applied Bioscience International, Inc. and Physicians
Computer Network.
James A. Stern 43 Director of the Company and Scherer International since June 1990.
Chairman of The Cypress Group, a private merchant bank, since April 1994.
Managing Director of Lehman and head of its Merchant Banking Group from
1984 to 1994. Also a director of Noel Group, Inc., K & F Industries Inc.,
Loral Aerospace Holdings, Inc., Lear Seating Corporation, American
Marketing Industries Holdings Inc. and Infinity Broadcasting Corporation.
</TABLE>
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<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OF EMPLOYMENT
------------------------------------------
NAME AGE AND FIVE-YEAR EMPLOYMENT HISTORY(1)
---- --- ------------------------------------
<S> <C> <C>
Gilbert H. Lamphere 42 Director of the Company since August 1991. Director of Scherer
International since June 1992. Co-Chairman and Chief Executive Officer
of Noel Group, Inc. since November 1991. Chairman of the Board and Chief
Executive Officer of The Prospect Group, Inc. since January 1990.
Chairman of the Executive Committee of The Prospect Group from 1985 to
1989, and President from 1989 to 1991. Director and Chairman of the
Board of Illinois Central Corporation, Recognition International
Incorporated, and Belding Heminway Company. Also a director of The
Prospect Group, Inc., Children's Discovery Centers of America, Inc.,
Illinois Central Railroad Company, Global Natural Resources Inc., Sylvan
Foods Holdings, Inc., Noel Group, Inc., Lincoln Snacks Company, Simmons
Outdoor Corporation and Cleveland-Cliffs Inc. President of the Board of
Trustees of The Nightingale-Bamford School and trustee of the City Parks
Foundation.
Louis Lasagna, M.D 71 Director of the Company since September 1991. Director of Scherer
International since June 1992. Dean, Sackler School of Graduate
Biomedical Sciences, Tufts University; Academic Dean, Tufts University
School of Medicine; Professor of Psychiatry and Professor of
Pharmacology, Tufts University, in each case since 1984. Independent
consultant since 1965. Director of Tufts University Center for the Study
of Drug Development since 1975. Director of the United States branch of
Astra Pharmaceutical Products, Inc. Member of the Board of Trustees of
International Life Sciences Institute/Nutrition Foundation since 1980 and
Chairman since 1991. Director of the Foundation for Nutritional
Advancement since 1980. Chairman of the Drug Science Foundation from
1987-1988.
Robert H. Rock 44 Director of the Company since September 1991. Director of Scherer
International since June 1992. Chairman of IDD Enterprises, L.P. since
September 1991. Chairman of Metroweek Corporation since December 1988.
President of MLR Enterprises since October 1987. Chairman and Chief
Executive Officer of the Hay Group from October 1986 to October 1987.
Also a director of Hunt Manufacturing Company, Opinion Research
Corporation and the Wistar Institute.
</TABLE>
(1) Where no starting date is given for a principal occupation or
employment, such occupation or employment commenced prior to
1989.
All directors of the Company and Scherer International serve terms of one year
and until the election of their respective successors. Officers serve at the
pleasure of the Board of Directors.
There are three committees of the Board of Directors of the Company: the
Executive Committee, the Compensation Committee and the Audit Committee.
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ITEM 2 PROPERTIES
The Company develops and manufactures its products at nineteen principal
worldwide locations with an aggregate floor space of approximately 1,440,000
square feet. Fifteen of these facilities are owned in fee by the Company, and
four facilities, with an aggregate floor space of 548,000 square feet, are
leased. The U.S. softgel manufacturing facilities total two, of which one, of
25,000 square feet, is leased. The seventeen foreign manufacturing facilities
include fourteen owned facilities with an aggregate floor space of 732,000
square feet, and three leased facilities with 523,000 square feet aggregate
floor space. Approximately 80% of the foreign facilities primarily manufacture
softgels and related items, while 20% of the foreign facilities produce
hardshell capsules. The foreign facilities are located in Argentina,
Australia, Brazil, Canada (two facilities), France (two facilities), Germany
(three facilities), Italy (two facilities), Japan, South Korea, and the United
Kingdom (two facilities). Portions of these facilities are also used for
related research and development, administration, and warehousing activities.
The Company's primary leased facility, a German manufacturing facility of
approximately 377,000 square feet in size, has a lease term (including renewal
options) extending through December 2008. The Company also leases a production
facility in France of approximately 120,000 square feet, with a lease term
extending through March 2008. Additionally the Company leases its executive
offices in Troy, Michigan, and sales offices, research facilities and
warehouses at a variety of locations in the U.S. and abroad. All leases
generally provide for payment of taxes, utilities, insurance and maintenance by
the Company, and have terms extending for periods from one to fifteen years,
including renewal options.
In the opinion of the Company, its principal properties, whether owned or
leased, are well-maintained and in satisfactory condition, are adequately
insured, and are suitable and have capacities adequate for the purposes for
which they are used.
ITEM 3 LEGAL PROCEEDINGS
The Company's former subsidiary Paco Pharmaceutical Services, Inc. ("Paco"),
certain of Paco's subsidiaries, the Company and other defendants are parties to
a group of actions commenced, beginning in April 1990, in Federal and state
courts in New Jersey and in Federal courts in New York and Massachusetts by
limited partners of Paco Development Partners II ("PDP II"), a research and
development partnership in which a subsidiary of Paco serves as the general
partner. The defendants were granted summary judgment for dismissal with
respect to the New York actions on March 29, 1993, and the time to appeal this
decision has expired. In the New Jersey state court action (Nelson v. Dean
Witter Reynolds, Inc., MRS-L-5014-90), a class consisting of the 14 investors
who reside in New Jersey has been certified. On October 23, 1992, the Company,
Paco and its affiliates moved for summary judgment as to three counts of the
complaint. This motion was denied on January 6, 1993. A second action
commenced in New Jersey Federal court (Nelson v. Ian Ferrier, Civil Action
91-5334(JWB)), has been stayed pending resolution of the New Jersey state court
action. No class has been certified in this federal action.
Plaintiffs in each of these actions seek damages of an unspecified amount for,
among other things, alleged violations of state securities law, fraud,
misrepresentation, breach of contract, conversion and negligence in connection
with the $25 million private placement sale of PDP II limited partnership
interests and warrants in 1986. Plaintiffs in the state court action also seek
damages, derivatively, on behalf of PDP II, for alleged breaches of fiduciary
duty and breach of contract in connection with the management of PDP II. On
October 19, 1993, the plaintiffs in the New York federal court action described
above (in which the defendants were granted summary judgment) filed a new
complaint in state court in New Jersey. This complaint alleges state law
causes of action for fraud, negligent misrepresentation, breach of fiduciary
duty and breach of contract.
Subsequent to year end, the Company reached an agreement in principle with the
plaintiffs in the PDP II litigation, and is in the process of formalizing that
agreement and seeking all necessary approvals. The
10
<PAGE> 12
Company recognized during the fourth quarter of fiscal 1994 a special charge of
approximately $3.2 million representing the anticipated amount of all
settlement-related costs in excess of previously provided reserves.
On March 30, 1992, OCAP Acquisition Corp. ("OCAP") commenced an action in the
Supreme Court of the State of New York, County of New York, against Paco,
certain of its subsidiaries, the Company and Scherer International
(collectively, the "defendants"), arising out of the termination of an Asset
Purchase Agreement dated February 21, 1992 (the "Purchase Agreement") between
OCAP and the defendants providing for the purchase of substantially all the
assets of Paco. On May 15, 1992, OCAP served an amended verified complaint (the
"Amended Complaint"), asserting causes of action for breach of contract and
breach of the implied covenant of good faith and fair dealing, arising out of
defendants' March 25, 1992 termination of the Purchase Agreement, as well as
two additional causes of action that were subsequently dismissed by order of
the court. The Amended Complaint seeks $75 million in actual damages, $100
million in punitive damages, as well as OCAP's attorney fees and other
litigation expenses, costs and disbursements incurred in bringing this action.
Discovery with respect to the action has commenced; however, discovery was
temporarily stayed by OCAP's filing of a motion for partial summary judgment,
and the Company's subsequent cross-motion for dismissal. The Court recently
denied both motions, and the Company anticipates that discovery will resume or
the Court's decision will be appealed. Based upon the investigation conducted
by the Company to date, the Company believes that this action lacks merit and
intends to defend against it vigorously. In the opinion of management, the
ultimate outcome of this litigation will not have a material adverse effect on
the Company's business or financial condition.
The Company was informed in August 1992 that soil at a manufacturing facility
in North Carolina owned and operated by the Company from 1975 to 1985 contained
levels of tetrachlorethene and other substances which exceeded environmental
standards. The Company voluntarily initiated a remedial investigation, and
initial remedial and removal actions have been completed by the Company and the
current owner of the facility for the known soil contamination at such site.
The Company continues to perform additional studies and remediation of the
area, including testing and removal of groundwater, which have indicated the
necessity for additional remedial and removal actions. On the basis of the
results of investigations performed to date, the Company does not believe that
potential future costs associated with either the investigation or any
potential remedial or removal action will ultimately have a materially adverse
impact on the Company's business or financial condition.
The Company is a party to various other legal proceedings arising in the
ordinary course of business, none of which is expected to have a material
adverse effect on the Company's financial position, results of operations,
liquidity or capital resources.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during
the last quarter of its fiscal year ended March 31, 1994.
11
<PAGE> 13
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The common stock of Scherer International is not traded. All outstanding
shares of common stock are held by R.P. Scherer Corporation
Scherer International did not declare any dividends in the year ended March 31,
1994. Restrictions contained in certain of the Company's long-term debt
agreements limit the payment of dividends. The Company does not currently have
any plans to declare or pay cash dividends.
12
<PAGE> 14
ITEM 6 SELECTED FINANCIAL DATA
The financial data of the Company and the Predecessor are not comparable in all
respects (see Note 7).
<TABLE>
<CAPTION>
COMPANY PREDECESSOR(7)
---------------------------------------- --------------------------------
THREE
NINE MONTHS MONTHS YEAR
ENDED ENDED ENDED
YEAR ENDED MARCH 31, MARCH 31, JUNE 30, MARCH 31,
---------------------------------------- --------------------------------
1994 1993 1992 1991 1990 1990 1989
-------- -------- -------- -------- -------- ------- --------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA(1):
Net sales .................................. $449,297 $398,011 $337,786 $298,638 $191,451 $62,991 $236,944
Cost of sales .............................. 287,389 242,108 201,991 183,438 123,725 39,811 151,698
Selling, administrative
and other expense ......................... 74,517 67,806 58,758 52,216 33,041 18,313 50,979
Litigation settlement and
other(2) .................................. 4,478 - - - - - -
Stock and other compensation
expense(3) ................................ - - 13,060 - - - -
Operating income(2,3,4) .................... 82,913 88,097 63,977 62,984 34,685 4,867 34,267
Interest expense ........................... 22,480 25,436 35,348 45,045 35,352 765 2,986
Net income (loss) from continuing
operations(5) ............................. 30,914 28,960 (1,224) (6,425) (12,126) (9,270) 8,401
Net income (loss) from continuing operations
attributable to common shares(5) .......... 30,914 28,960 (7,596) (12,154) (13,972) (9,275) 6,217
Net income (loss) attributable
to common shares(5, 6) .................... 15,094 20,895 (31,118) (12,471) (16,204) (8,706) (7,865)
Depreciation
amortization(9) ........................... 25,314 22,678 19,940 19,774 17,922 3,686 11,910
Capital additions .......................... 39,503 33,192 20,947 11,993 9,038 1,998 13,014
BALANCE SHEET DATA (1)
(AT END OF PERIOD):
Working capital(8) ......................... $ 89,681 $ 82,874 $ 79,248 $ 47,624 $ 61,226 $ 79,569 $ 87,252
Total assets ............................... 613,414 532,184 525,977 501,859 493,189 293,729 281,864
Long-term debt, including
current portion ........................... 189,277 142,508 178,639 298,746 313,916 57,161 56,076
Minority interests ......................... 35,354 32,369 28,357 24,609 20,249 19,068 18,068
Shareholder's equity ....................... 214,710 203,001 191,634 35,582 45,981 136,876 149,165
</TABLE>
(See the notes to this table on the following page)
13
<PAGE> 15
NOTES TO SELECTED FINANCIAL DATA
1. Excludes the discontinued operations of Southern Optical Company, The
Lorvic Corporation, Franz Pohl GmbH, Scientific Associates, Inc., and Paco
Pharmaceutical Services, Inc. ("Paco").
2. Includes $4,478,000 special charge in the year ended March 31, 1994, for
the accrual of a proposed settlement of Paco Development Partners (PDP II)
litigation, which has been outstanding since 1990, and the write-down of
buildings and property related to the relocation of operations in
Australia.
3. Includes a one-time $12,345,000 non-cash charge for stock and other
compensation expense relating to R.P. Scherer Corporation's common stock
sale in October 1991 for the year ended March 31, 1992.
4. Includes provision for restructuring of operations of $5,376,000 for the
period ended June 30, 1989.
5. Includes $8,437,000 and $9,020,000 in non-operating expenses for the periods
ended June 30, 1989 and March 31, 1989, respectively, associated with a
proxy contest, negotiated severance agreements and the sale of the
Predecessor.
6. Includes extraordinary loss of $15,800,000 from debt extinguishments for
the year ended March 31, 1994; extraordinary loss of $8,392,000 from early
retirement of debt, a $647,000 loss from the sale of Paco, and $974,000
gain from cumulative effect of accounting change for year ended March 31,
1993; an estimated loss of $16,657,000 from disposal of Paco, an
extraordinary loss of $2,067,000 on the early retirement of debt, and a
$4,917,000 charge for an accounting change for postretirement benefits for
the year ended March 31,1992; and an extraordinary credit of $932,000 for
the year ended March 31, 1989.
7. In June 1989, R.P. Scherer Corporation acquired the common stock of Scherer
International pursuant to a tender offer. For financial reporting
purposes, the acquisition was deemed effective as of July 1, 1989. The
acquisition and the related application of purchase accounting resulted in
significant changes to the capital structure of the Company and the
historical bases of various assets and liabilities. The effect of such
changes significantly impairs comparability of the selected financial data
before and after the acquisition. Accordingly, the data prior to July 1,
1989, are entitled "Predecessor."
8. Includes notes payable but does not include current portion of long-term
debt.
9. Includes amortization of deferred financing costs and debt discount of
$1,330,000, $1,823,000, $2,007,000, $3,273,000, and $6,375,000 for the
years ended March 31, 1994, 1993, 1992, and 1991, and the nine months ended
March 31, 1990, respectively.
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<PAGE> 16
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
The following discussion and analysis of financial results and condition covers
the fiscal years ended March 31, 1994, 1993, and 1992. The discussion and
analysis also addresses the effects of the application of proceeds that R.P.
Scherer Corporation's October 1991 sale of 11.5 million shares of its common
stock had on the Company's results of operations and financial condition in the
1992 fiscal year (see Note 4 to the consolidated financial statements).
In August 1991, the Company adopted a plan to sell its wholly-owned subsidiary
Paco, a provider of design, engineering and contract packaging and
manufacturing services to U.S. pharmaceutical and consumer products companies.
In August 1992, Paco was disposed of through a public offering of Paco's common
stock. The assets, liabilities, and results of operations of Paco have been
reported as a discontinued operation in the consolidated financial statements
for all periods presented. The following discussion and analysis refers only
to continuing operations.
A majority of the Company's sales, income and cash flows is derived from its
international operations. With the exception of operations in highly
inflationary economies, which are measured in U.S. dollars, the financial
position and the results of operations of the Company's foreign operations are
measured using the local currencies of the countries in which they operate, and
are translated into U.S. dollars. Although the effects of foreign currency
fluctuations are mitigated by the fact that expenses of foreign subsidiaries
are generally incurred in the same currencies in which sales are generated, the
reported results of operations of the Company's foreign subsidiaries will be
higher or lower depending upon a weakening or strengthening of the U.S. dollar.
In addition, a substantial portion of the Company's net assets are based in its
foreign operations, and are translated into U.S. dollars at foreign currency
exchange rates in effect as of the end of each period. Accordingly, the
Company's consolidated shareholder's equity will fluctuate depending upon the
strengthening or weakening of the U.S. dollar.
RESULTS OF OPERATIONS
Fiscal Years Ended March 31, 1994 and 1993
Sales for fiscal 1994 reached a record high $449.3 million, representing a 13%
increase from the $398.0 million achieved in fiscal 1993. Pharmagel
operations, which were acquired July 1, 1993 (see Note 3 to the consolidated
financial statements) contributed $15.5 million to the fiscal 1994 sales gain.
A significantly stronger U.S. dollar in fiscal 1994 compared to fiscal 1993 had
the effect of depressing the reported growth in sales by approximately $25
million. On a constant exchange rate basis, the sales increase would have been
19% in fiscal 1994 versus fiscal 1993.
The Company's United States operations achieved sales of $120.7 million in
fiscal 1994, or a 39% gain from sales of $86.7 million in fiscal 1993. A
substantial majority of the fiscal 1994 improvement resulted from a 60%
increase in sales of nutritional softgels, primarily Vitamin E and other
anti-oxidants, in large part due to publicized recognition in the medical
community of the potential health benefits of these products. While the growth
in sales of nutritional softgels slowed somewhat during the fiscal 1994 fourth
quarter, management anticipates that nutritional softgels will be a continued
source of additional sales in the foreseeable future. A 75% rise in sales of
over-the-counter ("OTC") pharmaceutical softgels also contributed to the United
States sales improvement. Demand for the Company's cough/cold products, such
as A.H. Robins Robitussin and Burroughs-Wellcome's Sudafed line of softgels
remained strong in fiscal 1994. Launches of additional cough/cold and other
OTC branded softgels are scheduled for fiscal 1995.
15
<PAGE> 17
Sales in Europe increased by 1.6%, from $229.9 million in fiscal 1993 to $233.7
million in fiscal 1994. Without the $15.5 million in additional sales provided
by Pharmagel in fiscal 1994, European sales declined 5%. Such decline is
primarily attributable to the stronger U.S. dollar in fiscal 1994. On a
constant exchange rate basis, sales would have increased by 6% in fiscal 1994,
excluding the impact of Pharmagel. Sales growth in fiscal 1994 was also
adversely affected as a result of government healthcare reforms implemented in
Germany during calendar year 1993. These reforms, among other changes, reduced
or eliminated government reimbursement for a wide range of pharmaceutical
products. The effects of these reforms impacted mainly the last quarter of
fiscal 1993 and the first half of fiscal 1994 and, by the fourth quarter of
fiscal 1994, deutschemark sales in Germany had increased by 20% as compared to
last year's fourth quarter. Sales growth was strong elsewhere in Europe, most
notably in the United Kingdom, which generated increased sales of specialty
nutritional softgels.
The Company's Other International geographic segment posted a 17% sales gain,
with sales of $94.9 million in fiscal 1994 compared to $81.4 million in fiscal
1993. Significant sales gains of nutritional and pharmaceutical softgels were
achieved by the Company's subsidiaries in Australia and Japan. Both of these
subsidiaries set new record sales levels in fiscal 1994.
The Company's 12-month sales order backlog was $136.3 million at March 31,
1994, an increase of 24% from the same time last year. The backlog increase
reflects primarily an improvement in the pharmaceutical industry and economic
climate in Germany, and continuing strong demand for the Company's nutritional
softgel products in the United States. Through the acquisition of Pharmagel
and manufacturing capacity expansions now underway, the Company will be in a
position to more effectively service this demand in the coming months.
Gross margin increased by $6.0 million to $161.9 million in fiscal 1994,
compared to $155.9 million in fiscal 1993. Gross margin as a percentage of
sales, however, declined in fiscal 1994 to 36.0% from 39.2% in fiscal 1993.
This decline reflects a significant shift in the Company's product mix towards
nutritional softgels during fiscal 1994. Nutritional softgels generally have a
higher material cost content relative to their sales value compared to other
types of softgels. In addition, particularly in the United States, certain of
the Company's nutritional softgel products are subject to greater competition,
which restricts margin potential. The economic and pharmaceutical industry
situation in Germany also had a further negative impact on gross margin rates
in fiscal 1994.
The Company recorded a combined $4.5 million charge against operating income in
fiscal 1994 to account for the proposed settlement of litigation relating to
Paco Development Partners II and to write-down the Company's existing
production facility in Australia to net realizable value prior to its
replacement (see Note 2 and 14 to the consolidated financial statements).
Excluding this special charge, operating income was $87.4 million for fiscal
1994, essentially unchanged from fiscal 1993's operating income of $88.1
million. On a constant currency basis, however, operating income increased 3%
in fiscal 1994 as compared to fiscal 1993. Selling and administrative expenses
rose $5.0 million to $61.4 million, or an increase of 9% compared to fiscal
1993. Almost one-half of this increase is due to the addition of Pharmagel
during 1994. Before the inclusion of Pharmagel, selling and administrative
expenses declined to 13.1% of sales in fiscal 1994 from 14.2 % of sales in
fiscal 1993, reflecting the Company's emphasis on containing overhead costs.
The Company continued to increase its investment in research and development,
with spending of $13.1 million in fiscal 1994, representing a 15% increase from
the $11.4 million expensed in the prior fiscal year. These increased
expenditures reflect increased pharmaceutical softgel development work, as well
as research and development activities related to the Company's Advanced
Therapeutic Products Group and Pulsincap(R) drug delivery device.
16
<PAGE> 18
Income from continuing operations reached a record $30.9 million in fiscal
1994, despite the $4.5 million special charge described above. The earnings
improvement, before the special charge, stems in part from a $1.2 million
reduction in net interest expense resulting from the debt refinancing described
below, offset by interest expense on bank debt used to fund the Pharmagel
acquisition. A significant reduction in the Company's effective income tax
rate accounted for a majority of the income improvement for fiscal 1994. The
income tax provision was $18.7 million (30.1% of pretax income) in fiscal 1994,
compared to $24.1 million (36.3% of pretax income) in fiscal 1993. The lower
effective income tax rate in fiscal 1994 resulted from a shift in pretax income
towards lower tax rate countries (primarily the U.S.) and reduced statutory
corporate income tax rates in Germany and Australia. Minority interests in
income declined to $12.7 million in fiscal 1994, a reduction of $0.6 million
from the $13.3 million in fiscal 1993. Such decline resulted primarily from
reduced income of the Company's 51% owned German subsidiary.
In January 1994, the Company successfully refinanced, through defeasance, the
outstanding 14% Senior Subordinated Debentures of R.P. Scherer International
Corporation. The Company recorded an extraordinary loss of $15.5 million
related to the defeasance transaction, as well as a $0.3 million extraordinary
loss related to the replacement of its former bank credit facility. See
"Liquidity and Financial Condition" below for further discussion.
Fiscal Years Ended March 31, 1993 and 1992
Sales for fiscal 1993 were $398.0 million, exceeding by 18% the sales of $337.8
million recognized in fiscal 1992. Strong sales growth was experienced in all
of the Company's major operations, favorably impacted by a strengthening of
certain foreign currency exchange rates relative to the U.S. dollar. Sales
growth as measured on a constant currency basis would have been 16% for fiscal
1993 compared to fiscal 1992.
Sales of the Company's United States operations in fiscal 1993 increased to
$86.7 million, or 30%, as compared to sales of $66.8 million recorded in fiscal
1992. The United States results reflect significant increases in sales of
pharmaceutical softgels, particularly generic nifedipine and OTC cough/cold
medications. Additionally, the favorable studies and media reports confirming
the health benefits of anti-oxidant vitamins, and a stronger marketing focus
by the Company, resulted in substantial increases in sales of certain
nutritional softgels, especially Vitamin E. Sales in Europe rose by 16% to
$229.9 million in fiscal 1993, as compared to $198.4 million in fiscal 1992.
All European subsidiaries reported sales gains in fiscal 1993, with volume
growth in both pharmaceutical and nutritional softgel product sales. Sales
growth of the Company's largest subsidiary, located in Germany, slowed during
the latter half of fiscal 1993 as a result of difficult economic conditions and
recently introduced health care reforms which, among other things, restrict
government reimbursements for certain pharmaceutical products. Other
International operations recognized sales of $81.4 million in fiscal 1993,
representing a 12% increase over fiscal 1992 sales of $72.5 million. A
majority of such sales increase was achieved by the Company's subsidiaries in
Japan, with continued growth in sales of pharmaceutical softgels, and Canada,
primarily as a result of the increased demand for anti-oxidant softgels.
The Company's 12-month sales order backlog was $110.2 million as of March 31,
1993, comparable to the previous year, as measured both in U.S. dollars and in
local currencies.
The Company's gross margin increased by $20.1 million to $155.9 million in
fiscal 1993, compared to $135.8 million in fiscal 1992. Gross margin expressed
as a percentage of sales declined to 39.2% in fiscal 1993 from 40.2% in fiscal
1992. Such decrease in the margin rate reflects an increase in the current
year's sales mix toward nutritional softgels, which generally have a higher
material cost content relative to their sales value, and increases in costs of
raw materials (primarily vitamins) not yet fully offset by price increases for
the Company's products. The economic and regulatory situation in Germany also
had an unfavorable effect on the fiscal 1993 gross margin rate.
Operating income reached $88.1 million for fiscal 1993, representing a 16%
increase from $76.3 million recorded for fiscal 1992, before a $12.3 million
non-recurring charge for stock compensation (see Note 4 to the
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<PAGE> 19
financial statements). On a constant foreign currency exchange rate basis, the
increase would have amounted to 14%. The operating income improvement stems
primarily from the increases in sales described above, offset in part by a $6.1
million, or 12%, increase in selling and administrative expenses and a $2.9
million, or 35%, increase in net research and development expenses. Selling
and administrative expenses for fiscal 1993, which declined as a percentage of
sales, reflect additional investments in marketing staffs and activities,
increased incentive compensation related to the income improvements, general
inflationary factors and the higher foreign currency exchange rates. A
majority of the increase in research and development expenses is attributable
to pharmaceutical softgel product development activities in the U.S. and the
United Kingdom, and continued development of the Company's Pulsincap(R) drug
delivery device.
Income from continuing operations was $29.0 million for fiscal 1993, an
increase of $30.2 million from a loss of $1.2 million in fiscal 1992. In
addition to the higher operating income in fiscal 1993, a $9.9 million
reduction in interest expense contributed to such improvement. The lower
interest expense resulted primarily from a full year's interest savings in
fiscal 1993 due to the approximate $124.0 million reduction in bank debt
through the application of proceeds from the October 1991 R.P. Scherer
Corporation common stock sale, and, to a lesser extent, the Company's
repurchase of approximately $42.5 million face value of its 14% Senior
Subordinated Debentures during the third quarter of fiscal 1993 (see Notes 4
and 9 to the financial statements). In addition, the prior year results
included the $12.3 million charge for stock compensation expense. On a
pro-forma basis, assuming the October 1991 common stock sale and related
transactions had occurred as of April 1, 1991, income from continuing
operations would have been $22.0 million for fiscal 1992 (see Note 4 to the
financial statements).
The Company's income tax provisions were $24.1 million (36.3% of pre-tax
income) in fiscal 1993 and $22.3 million (69.5% of pre-tax income) in fiscal
1992. The reduction in the consolidated tax rate to a more normal level in
fiscal 1993 reflects improved U.S. operating results and income, including the
reduction in interest expense and the $12.3 million stock compensation expense
recorded in the prior year. A significant portion of expenses in the prior
year could not be tax benefited as the realization of such benefit could not be
assured. A significantly lower tax provision rate is associated with such
incremental income due to the Company's U.S. tax position and the utilization
of available foreign tax credits. Minority interests in net income of
subsidiaries increased by 21% to $13.3 million in fiscal 1993 from $11.0
million in fiscal 1992 due primarily to increased earnings of the Company's
partially-owned subsidiaries in Germany, France and Japan.
The Company earned net income of $20.9 million in fiscal 1993 after reflecting
an $8.4 million net extraordinary loss from the repurchase of the senior
subordinated debentures described above, a $0.6 million loss from the disposal
of the company's discontinued operation (Paco) and $1.0 million of income from
the cumulative effect of a change in accounting for income taxes in accordance
with SFAS 109 (see Note 6 to the consolidated financial statements). The
Company reported a net loss attributable to common shares of $31.1 million in
fiscal 1992, which included a $16.5 million estimated loss on disposal of Paco,
a $4.9 million charge related to a change in accounting for postretirement
medical and other benefits in accordance with SFAS 106 (see Note 11 to the
financial statements) and a $2.1 million extraordinary loss from the early
retirement of bank debt described above.
CASH FLOWS
Cash and cash equivalents decreased by $13.8 million for fiscal 1994, as
compared with a decrease of $14.4 million for the same period in 1993 and an
increase of $15.3 million in 1992. Operating activities provided net cash of
$47.7 million, $46.0 million, and $36.5 million during fiscal years 1994, 1993,
and 1992, respectively. In 1994, cash generated from continuing growth in the
Company s after-tax earnings was offset by a $22.5 million increase in net
working capital. This working capital increase reflected increases in
inventories and receivables associated with the 13% sales growth, as well as by
the previously discussed shift in sales mix to nutritional products customers
who are generally provided longer payment terms. The working capital increase
further reflects the approximate $6 million decrease in accrued interest
payable resulting from the Company's refinancing activities as discussed in the
"Liquidity and
18
<PAGE> 20
Financial Condition" section below. In 1993, increased cash from the Company's
after-tax earnings was offset by an $20.6 million increase in net working
capital. Such working capital increase included an aggregate 17% increase in
inventories and receivables associated with the sales gains previously
discussed. For fiscal 1992, the cash from operating earnings was partially
offset by a $8.7 million increase in working capital, primarily related to
increases in accounts receivable, as well as net value added taxes receivable
at the Company's German subsidiary.
Net cash used by investing activities was $74.7 million, $3.7 million and $20.3
million for the 1994, 1993 and 1992 fiscal years, respectively. Fiscal 1994
reflects the $33.8 million use of cash for the acquisitions of the capital
stock of Pharmagel and certain softgel assets of Gayoso Wellcome (as discussed
in Note 3 to the consolidated financial statements), as well as cash used for
capital expenditures of $39.5 million. Such capital expenditures consisted
primarily of expenditures in the United Kingdom related to the new Zydis(R)
production facility and in Australia for the construction of a replacement
manufacturing facility, as well as general facility and equipment additions and
improvements. Capital expenditures of $33.2 million and $20.9 million were
incurred in fiscal years 1993 and 1992, respectively, consisting primarily of
facility and equipment upgrades in the Company's German subsidiary, expansion
in the United Kingdom related primarily to Zydis(R) production and Pulsincap(R)
development facilities, and softgel manufacturing equipment and other facility
upgrades and improvements worldwide. Fiscal 1993 also reflects the disposal of
Paco, which provided $28.0 million of cash.
Financing activities for fiscal 1994 reflect the Defeasance (as defined
hereafter) of the 14% Senior Subordinated Debentures of Scherer International,
which used cash of $141.5 million. Such Defeasance was funded primarily
through the issuance of 6 3/4% Senior Notes, which provided cash of $99.3
million, as well as through borrowings under the Company's bank credit facility
(see discussion in the "Liquidity and Financial Condition" section below).
Other significant financing sources include $99.7 million of proceeds from the
Company's bank credit facility (primarily to fund the Defeasance and the
acquisition of Pharmagel), $7.0 million for the refinancing of an existing
capitalized lease obligation, and $2.4 million of proceeds from industrial
revenue bonds to finance a facility upgrade and expansion. Other significant
financing uses include $35.9 million repayments on the bank credit facility and
the retirement of the aforementioned capital lease obligation. Financing
activities for fiscal 1993 reflect primarily the third quarter repurchase of
$42.5 million principal amount of 14% Senior Subordinated Debentures for
approximately $49.3 million, funded primarily by cash on hand and borrowings
under the Company's bank credit facility. Other financing sources include $2.2
million of proceeds from industrial revenue bonds and $4.8 million of other
borrowings. Other significant financing uses include $29.6 million of
repayments on the bank credit facility. In the 1992 fiscal year, financing
activities include the $195.5 million of proceeds from R.P. Scherer
Corporation's October 1991 sale of common stock, net of cash used for related
purchases of exchangeable preferred stock and repayments of long-term bank
debt (see Note 4 to the consolidated financial statements).
LIQUIDITY AND FINANCIAL CONDITION
In January 1994, Scherer International completed the refinancing of a
significant portion of its outstanding debt through the issuance of $100.0
million face value 6 3/4% Senior Notes and the Defeasance of $125.1 million
face value of its 14% Senior Subordinated Debentures (see Note 9 to the
consolidated financial statements). The 6 3/4% Senior Notes are due February
1, 2004 and are noncallable and unsecured, ranking pari passu with all other
unsecured and senior indebtedness of Scherer International. Interest on the
Senior Notes is payable February 1 and August 1, commencing August 1, 1994.
The proceeds of the offering to the Company (prior to deducting underwriting
fees and certain other expenses related to the offering) were $99.3 million.
Using the net proceeds from the offering and additional proceeds from
borrowings under the Company's bank credit facility, the Company defeased its
Subordinated Debentures. The Company deposited into an irrevocable trust
account for the benefit of the holders of the Subordinated Debentures an amount
of United States government obligations sufficient to pay, with respect to the
Subordinated Debentures, all interest
19
<PAGE> 21
thereon through the first call date, the call premium thereon and the
outstanding principal thereof when due upon redemption. The Company remains
obligated to pay interest and principal on the Subordinated Debentures when due
but, subject to certain exceptions, is no longer subject to the terms,
agreements and covenants contained in the indenture under which the
Subordinated Debentures were issued ("Defeasance").
As a result of the Defeasance, the Company recognized an extraordinary loss for
accounting purposes of $15.5 million in the quarter ended December 31, 1993,
reflecting the estimated after-tax difference between the recorded value of the
Subordinated Debentures and their face value, the call premium, the prepayment
of net interest through the Call Date, and the write-off of unamortized
deferred financing costs related to the Subordinated Debentures. These actions
will result in interest savings of approximately $9 million annually related to
these debt securities.
During the next several years, a significant portion of the Company's cash flow
will be used to reduce and service indebtedness and fund capital expenditures.
The Company believes that its future cash flows from operations, together with
cash and short-term investments aggregating $22.6 million at March 31, 1994,
and amounts available under bank credit facilities will be adequate to meet
anticipated debt service, capital investment and operating cash requirements.
The Company actively reviews drug delivery systems businesses and technologies
for potential acquisition, consistent with its strategic objectives. An
example is the Company's acquisition of an ophthalmic drug delivery technology
from Zeneca Limited, and agreement to fund feasibility studies for a dry-powder
inhaler device and a controlled-release tablet product with another UK-based
drug research concern. Management presently anticipates that any acquisition
requiring significant funding would be financed largely through the issuance of
common stock, depending upon market conditions, so as not to increase the
Company's debt to equity relationship.
At March 31, 1994, the Company's outstanding long-term indebtedness consisted
of approximately $99.3 million of 6 3/4% Senior Notes (net of a $0.7 million
discount), $65.8 million of borrowings under the Company's bank credit
facility, $10.9 million of industrial development revenue bonds, and
approximately $13.3 million of other indebtedness. The Senior Notes bear
interest at 6 3/4% of face value, payable semi-annually, and mature in full in
February 2004. Annual interest expense on the Senior Notes outstanding is
approximately $6.8 million (excluding amortization of the original issue
discount and deferred financing fees). The Senior Notes have been listed on
the New York Stock Exchange.
In March 1994, the Company entered into a new bank credit facility as a
replacement for the Company's previous bank credit agreement. The new credit
facility allows for revolving credit borrowings up to an aggregate of $175.0
million in various currencies, and expires April 1, 1999. Interest is payable
quarterly at LIBOR plus .675% currently, with further reductions possible based
on certain financial performance criteria, or at the bank's prime rate. Unused
borrowing availability is subject to annual commitment fees of 1/4%.
Borrowings under this agreement are unsecured, and rank pari passu with all
other unsecured and senior indebtedness of Scherer International.
Pursuant to other revolving credit arrangements, the Company and certain of its
subsidiaries may borrow up to $15.5 million, subject to limitations imposed by
the bank credit facility discussed above. As of March 31, 1994, the Company
had outstanding approximately $2.6 million under these revolving credit
arrangements.
Capital expenditures in fiscal 1995 are expected to approximate $50 million and
will include facilities expansions or replacement in Australia, Europe, and
North America, continuing expenditures for the expansion of manufacturing
capacity for Zydis(R) fast dissolving dosage products, and general facility and
equipment upgrade and replacement costs worldwide. As of March 31, 1994, the
Company has approximately $5.9 million of commitments for future capital
expenditures. The Company expects to fund such capital expenditures primarily
from operating cash flows and, to the extent necessary, from its bank credit
facility.
20
<PAGE> 22
The bank credit facility requires the Company to satisfy various annual and
quarterly financial tests, including maintenance on a consolidated basis of a
specified minimum or maximum current level of tangible net worth and cash flow
coverage, leverage, and fixed charge ratios. The agreement also restricts the
Company's ability to incur additional indebtedness or liens, make investments
and loans, dispose of assets, or consummate a business combination, and limits
the ability of the Company to pay dividends. The indenture under which the
Senior Notes were issued also restricts the Company's ability to incur
additional liens, enter into sale-leaseback transactions, engage in certain
transactions with affiliates, and engage in certain business combinations. As
of March 31, 1994, the Company does not currently have plans to declare or pay
any cash dividends.
Inflation and Accounting Policies
In the view of management, the effects of inflation and changing prices on the
Company's net results of operations and financial condition were not
significant.
In November 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 112, Employer's Accounting for
Postemployment Benefits, which must be adopted for the Company's 1995 fiscal
year. This statement requires the use of the accrual method to recognize
liabilities for postemployment benefits. The Company has determined that the
adoption of this statement will not significantly affect the Company's future
financial results or position.
21
<PAGE> 23
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
R.P. SCHERER INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
(In thousands)
For the years ended March 31,
-----------------------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Net sales $449,297 $398,011 $337,786
Cost of sales 287,389 242,108 201,991
Selling and administrative expenses 61,427 56,413 50,305
Litigation settlement and other (Notes 2, 14) 4,478 - -
Stock and other compensation expense (Note 4) - - 13,060
Research and development expenses, net 13,090 11,393 8,453
-------- -------- --------
Operating income 82,913 88,097 63,977
Interest expense 22,480 25,436 35,348
Interest earned and other (1,911) (3,630) (3,390)
-------- -------- --------
Income from continuing operations before income
taxes, minority interests, and extraordinary loss 62,344 66,291 32,019
Income taxes 18,737 24,056 22,269
Minority interests 12,693 13,275 10,974
-------- -------- --------
Income (loss) from continuing operations before
extraordinary loss and accounting change 30,914 28,960 (1,224)
Loss from discontinued operation, net of
income taxes (Note 5) - (647) (16,538)
-------- -------- --------
Income (loss) before extraordinary loss
and accounting change 30,914 28,313 (17,762)
Extraordinary loss from debt extinguishments (Note 9) (15,820) (8,392) (2,067)
Cumulative effect of accounting change (Notes 6, 11) - 974 (4,917)
-------- -------- --------
Net income (loss) 15,094 20,895 (24,746)
Preferred stock dividends - - 6,372
-------- -------- --------
Net income (loss) attributable to common
shares (Note 4) $15,094 $20,895 $(31,118)
======== ======= ========
</TABLE>
The accompanying notes are an integral part of this statement.
22
<PAGE> 24
R.P. SCHERER INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
<TABLE>
<CAPTION>
(In thousands)
As of March 31,
----------------------------
1994 1993
---------- ----------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 16,576 $ 30,389
Short-term investments 6,041 3,476
Receivables, less reserves of: 1994 - $2,900,000;
1993 - $2,300,000 98,775 80,537
Inventories 56,492 48,310
Other current assets 5,260 4,573
---------- ----------
183,144 167,285
---------- ----------
PROPERTY:
Property, plant and equipment, at cost 284,992 243,538
Accumulated depreciation (63,277) (48,987)
---------- ----------
221,715 194,551
---------- ----------
OTHER ASSETS:
Intangibles, net of amortization 188,396 155,595
Deferred financing fees, net of amortization 1,658 4,407
Other assets 18,501 10,346
---------- ----------
208,555 170,348
---------- ----------
$613,414 $532,184
========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable and current portion of long-term debt $ 3,936 $ 2,465
Accounts payable 52,086 41,557
Accrued liabilities 36,802 34,410
Accrued income taxes 1,967 7,336
---------- ----------
94,791 85,768
---------- ----------
LONG-TERM LIABILITIES AND OTHER:
Long-term debt 187,949 141,151
Other long-term liabilities 49,865 38,812
Deferred income taxes 30,745 31,083
Minority interests in subsidiaries 35,354 32,369
---------- ----------
303,913 243,415
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 14)
SHAREHOLDER'S EQUITY (Note 4):
Common stock, $.01 par value, 1,000 shares authorized
and outstanding 1 1
Additional paid-in capital 234,389 233,743
Retained deficit (9,857) (24,951)
Currency translation adjustment (9,823) (5,792)
---------- ----------
214,710 203,001
---------- ----------
$613,414 $532,184
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
23
<PAGE> 25
R.P. SCHERER INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands)
For the years ended March 31,
------------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 15,094 $ 20,895 $ (24,746)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation 17,121 16,530 13,629
Amortization of intangible assets 5,519 4,325 4,304
Amortization of deferred financing costs and debt discount 1,330 1,823 2,007
Minority interests in net income 12,693 13,275 10,974
Deferred tax provision and other 2,631 1,682 2,359
Extraordinary loss from debt extinguishments (Note 9) 15,820 8,392 2,067
Loss from discontinued operation (Note 5) - 647 16,657
Stock option and other compensation expense (Note 4) - - 13,060
Cumulative effect of accounting change - (974) 4,917
Increase in receivables (12,458) (16,160) (14,187)
Increase in inventories and other current assets (8,056) (6,161) (5,881)
Increase (decrease) in accounts payable and accrued
expenses (1,972) 1,699 11,374
-------- -------- --------
Net cash provided by operating activities 47,722 45,973 36,534
-------- -------- --------
INVESTING ACTIVITIES:
Purchases of plant and equipment (39,503) (33,192) (20,947)
Acquisition of businesses, net of cash acquired (Note 3) (33,761) - -
Proceeds from sales of plant and equipment 1,859 187 564
Proceeds from disposition of subsidiary - 28,047 -
Other (3,279) 1,221 85
-------- -------- --------
Net cash used by investing activities (74,684) (3,737) (20,298)
-------- -------- --------
FINANCING ACTIVITIES:
Contribution of proceeds from issuance of parent common stock - - 136,785
Proceeds from issuance of 6 3/4% Senior Notes (Note 9) 99,268 - -
Defeasance of 14% Senior Subordinated Debentures (Note 9) (141,546) - -
Proceeds from other long-term borrowings 109,788 34,609 9,082
Other long-term debt retirements and payments (47,608) (80,177) (127,167)
Short-term borrowings, net 642 (726) (11,897)
Cash dividends paid to minority shareholders of subsidiaries (7,022) (9,979) (8,022)
-------- -------- --------
Net cash provided (used) by financing activities 13,522 (56,273) (1,219)
-------- -------- --------
Effect of currency translation on cash and cash equivalents (373) (335) 317
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (13,813) (14,372) 15,334
Cash and cash equivalents, beginning of period 30,389 44,761 29,427
-------- -------- --------
Cash and cash equivalents, end of period $ 16,576 $ 30,389 $ 44,761
========= ======== =========
</TABLE>
The accompanying notes are an integral part of this statement.
24
<PAGE> 26
R.P. SCHERER INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
(In thousands)
For the years ended March 31,
-----------------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
COMMON STOCK (Note 4):
Balance at beginning of period $1 $1 $1
Common stock activity - - -
--------- --------- ---------
Balance at end of period $1 $1 $1
========= ========= =========
ADDITIONAL PAID-IN CAPITAL (Note 4):
Balance at beginning of period $233,743 $233,166 $ 53,711
Contributions from parent stock options exercised 646 577 -
Contribution from issuance of parent common stock, net - - 135,552
Compensation related to stock options - - 12,343
Redemptions of parent preferred stock - - 37,932
17% Senior cumulative exchangeable preferred stock:
Stock dividends - - (5,336)
Accretion - - (1,036)
--------- --------- ---------
Balance at end of period $234,389 $233,743 $233,166
========= ========= =========
RETAINED DEFICIT:
Balance at beginning of period $(24,951) $(45,846) $(21,100)
Net income (loss) 15,094 20,895 (24,746)
--------- --------- ---------
Balance at end of period $(9,857) $(24,951) $(45,846)
========= ========= =========
CURRENCY TRANSLATION ADJUSTMENT:
Balance at beginning of period $(5,792) $4,313 $2,970
Adjustment for the period (4,031) (10,105) 1,343
--------- --------- ---------
Balance at end of period $(9,823) $(5,792) $4,313
========= ========= =========
TOTAL SHAREHOLDER'S EQUITY $214,710 $203,001 $191,634
========= ========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
25
<PAGE> 27
R.P. SCHERER INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated statement of financial position as of March 31, 1994 and 1993,
and the consolidated statements of operations, shareholder's equity and cash
flows for the years ended March 31, 1994, 1993, and 1992 include the accounts
of R.P. Scherer International Corporation (the "Company" and formerly R.P.
Scherer Corporation), a Delaware corporation, and its subsidiaries, some of
which are less than wholly-owned. Scherer International is a wholly-owned
subsidiary of R.P. Scherer Corporation (formerly RPS Corporation). R.P.
Scherer Corporation's only operating asset is its investment in Scherer
International. Unless otherwise stated herein, the term "Company" refers to
either or both of Scherer International and R.P. Scherer Corporation.
2. ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Company in preparing the consolidated financial statements.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
all of its direct and indirect domestic and foreign subsidiaries, some of which
are less than wholly-owned. All intercompany accounts and transactions have
been eliminated.
Revenue Recognition and Concentration of Credit Risk
Revenues from sales of the Company's products to its customers are recognized
primarily upon shipment of such products. The majority of the Company's
customers are concentrated in the pharmaceutical, health and nutritional, and
cosmetic markets.
Translation of Foreign Currencies
With the exception of operations in highly inflationary economies, which are
measured in U.S. dollars, the financial position and the results of operations
of the Company's foreign operations are measured using the local currencies of
the countries in which they operate and are translated into U.S. dollars in
conformity with Statement of Financial Accounting Standards No. 52, Foreign
Currency Translation. Accordingly, the reported sales and net income of the
Company's foreign subsidiaries are affected by changes in foreign currency
exchange rates, and as compared to prior periods are reported at higher or
lower amounts depending upon a weakening or strengthening of the U.S. dollar.
Aggregate sales of operations in highly inflationary economies represented less
than 5% of consolidated sales for each period presented in the consolidated
statement of operations.
Borrowings under any long-term foreign currency loans are used to hedge against
declines in the value of net investments in certain foreign subsidiaries. The
Company also periodically enters into foreign exchange contracts to hedge
certain exposures related to foreign currency transactions, and does not engage
in speculation. Gains and losses on the forward contracts are recognized
concurrently with the gains or losses from the underlying transactions. At
March 31, 1994, the Company was party to foreign currency forward exchange
sales contracts of approximately $10.9 million (notional amount) denominated in
European currencies. The contracts generally mature in less than one year and
are intended to hedge various foreign
26
<PAGE> 28
currency commitments due from foreign subsidiaries. The Company is exposed to
credit loss in the event of nonperformance by the counterparties of these
agreements, but does not anticipate any such nonperformance. Foreign currency
exchange and translation adjustments (reflecting primarily the translation of
net assets at historical exchange rates for operations in highly inflationary
economies) included in net income resulted in net decreases in income of $7.1
million, $3.5 million, and $1.4 million for the years ended March 31, 1994,
1993 and 1992, respectively.
Litigation Settlement and Other
In the fourth quarter of fiscal year 1994, the Company recognized a pretax
charge in the amount of $4.5 million as a result of the accrual of a potential
settlement for pending Paco Development Partners II ("PDP II") litigation (see
Note 14 for discussion) and a decision made by the Company to relocate its
Australian production operations. The Company has purchased a new facility in
Australia, and recognized a charge to operations of approximately $1.3 million
representing the anticipated costs of disposal related to the existing facility
and land.
Cash and Cash Equivalents and Short-Term Investments
The carrying value of cash and cash equivalents and short-term investments
approximates fair value due to the short maturities of these instruments. For
purposes of reporting cash flows, all highly liquid investments which are
readily convertible to known amounts of cash and have an original maturity of
three months or less when purchased are considered cash equivalents.
Inventories
Inventories are stated at the lower of cost or market with cost determined on a
first-in, first-out basis for substantially all inventories. Market is the
lower of replacement cost or estimated net realizable value. Finished goods
and work-in-process inventories include material, labor and manufacturing
overhead costs. The components of inventories are as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
-------- ---------
<S> <C> <C>
Raw materials and supplies $26,760 $23,881
Work in process 10,289 7,365
Finished goods 19,443 17,064
-------- ----------
$56,492 $48,310
======== ==========
</TABLE>
Property, Plant & Equipment
Property, plant and equipment is recorded at cost and is depreciated over
related estimated useful lives primarily using the straight-line method for
financial reporting and accelerated methods for tax reporting. Maintenance and
repair costs are expensed as incurred. Upon sale or retirement, property cost
and related depreciation is eliminated, and resulting gains or losses are
reflected in income. Interest cost capitalized as part of the construction
cost of capital assets amounted to $0.9 million in fiscal 1994, and was not
significant in fiscal 1993 and 1992. A summary of property follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
-------- ---------
<S> <C> <C>
Land and improvements $16,844 $16,932
Building and equipment 68,767 61,302
Machinery and equipment 174,203 151,828
Construction in progress 25,178 13,476
-------- --------
$284,992 $243,538
======== ========
</TABLE>
27
<PAGE> 29
Intangibles and Deferred Financing Fees
Intangibles include principally goodwill (consisting of purchase price and
related acquisition costs in excess of the fair value of identifiable net
assets of businesses acquired, primarily related to the acquisition of the
Company in June 1989 and the acquisition of Pharmagel on July 1, 1993) as well
as other intangible assets. Intangibles are being amortized on a straight-line
basis over their estimated useful lives, ranging from 5 to 40 years. The
accumulated amortization of intangibles is $21.5 million and $15.9 million as
of March 31, 1994 and 1993, respectively. Deferred financing fees are
amortized over the life of the related obligations using the effective interest
method. The accumulated amortization of deferred financing fees is $0.1
million and $9.7 million as of March 31, 1994 and 1993, respectively.
Research and Development Costs
Costs incurred in connection with the development of new products and
manufacturing methods are charged to income as incurred. Customer
reimbursements in the amount of $2.9 million, $1.1 million and $3.1 million
were received for the fiscal years ended March 31, 1994, 1993, and 1992,
respectively. The amounts reflected in the consolidated statement of
operations are net of such reimbursements.
Income Taxes
Deferred U.S. and foreign income taxes are provided on earnings of subsidiary
companies which are intended to be remitted to the parent company in the
future, based on enacted tax laws and rates. Unremitted earnings on which
deferred taxes have not been provided would, if remitted, be taxed at
substantially reduced effective rates due to the utilization of available
foreign tax credits.
Reclassifications
Certain items in the prior years' financial statements and notes thereto have
been reclassified to conform with the current year presentation.
3. ACQUISITIONS
On July 1, 1993, the Company acquired all outstanding capital stock of
Pharmagel S.p.A. (Italy) and Pharmagel S.A. (France) (jointly "Pharmagel"), a
manufacturer of softgels which had been privately held. The Company accounted
for the acquisition as a purchase for financial reporting purposes, and has
included the net assets and results of operations of Pharmagel in the Company's
consolidated financial statements beginning July 1, 1993. The aggregate
purchase price, which approximated $30 million, was allocated to assets and
liabilities based on estimates of their fair values as of the date of
acquisition, as well as to a $3.0 million non-compete agreement with the former
owners of Pharmagel. The purchase was funded primarily by borrowings under the
Company's bank credit facility, plus an additional amount payable to the
sellers during the next six years not to exceed $4.5 million plus interest.
Approximately $28.2 million of estimated tangible assets were acquired, and
approximately $24.4 million of estimated liabilities were assumed. The
purchase price exceeded the preliminary estimated fair value of the net assets
acquired by approximately $26.2 million, which is classified as goodwill in the
accompanying statement of financial position and is being amortized on a
straight-line basis over forty years. A final allocation of the purchase price
will be determined during fiscal 1995 when appraisals and other studies are
completed.
The following unaudited pro forma summary presents the consolidated results of
operations of the Company and Pharmagel as if the acquisition had occurred at
the beginning of the periods presented after giving effect to certain
adjustments, including amortization of goodwill, increased interest expense on
acquisition borrowings, and related income tax effects. The pro forma
information is not necessarily indicative of what would have occurred had the
acquisition been made as of those dates, and is not intended to be a projection
of future results or trends.
28
<PAGE> 30
<TABLE>
<CAPTION>
(In thousands) For the year ended
March 31,
--------------------------
1994 1993
---------- ---------
<S> <C> <C>
Net sales $456,434 $426,498
Income from continuing operations 30,767 27,972
Net income 14,947 19,907
</TABLE>
As of September 1, 1993, the Company also acquired certain tangible and
intangible assets of Gayoso Wellcome S.A., a softgel manufacturer in Spain, for
a purchase price of approximately $9.5 million. Gayoso Wellcome's operations
are not material in relation to the Company's consolidated financial
statements, and pro forma information for this acquisition is therefore not
presented.
4. SALE OF R.P. SCHERER CORPORATION COMMON STOCK AND RELATED TRANSACTIONS
October 1992 Offering
In October 1992, R.P. Scherer Corporation completed a secondary offering of
3.5 million shares of its common stock. The shares were sold by Shearson
Lehman Brothers Holdings Inc. and certain affiliated merchant banking
partnerships (collectively "Lehman"). The offering did not result in any
additional shares outstanding of the common stock, and R.P. Scherer Corporation
did not receive any proceeds from the sale. Subsequent to completion of the
offering, Lehman's beneficial ownership amounted to approximately 30% of R.P.
Scherer Corporation's common shares outstanding (see Note 13).
October 1991 Offering
In October 1991, R.P. Scherer Corporation completed a public sale of 11.5
million shares of its common stock, representing approximately 47% of common
equity on a fully diluted basis. Net proceeds realized were approximately
$195.5 million, of which approximately $124.0 million was used in October 1991
to repurchase long-term debt under Scherer International's former senior bank
credit agreement and $58.7 million was used in November 1991 to redeem all
outstanding shares of R.P. Scherer Corporation's 17% Exchangeable Preferred
Stock. Remaining funds were used for general corporate purposes. Prior to
June 1992, all outstanding obligations under the former bank credit arrangement
were paid through a contribution of capital by R.P. Scherer Corporation to
Scherer International.
In connection with and upon consummation of the common stock sale, all shares
of R.P. Scherer Corporation's Series B and Series C preferred stocks were
converted into common stock at the ratio of five (5) common shares for nine (9)
preferred shares (based upon the ratio of the liquidation value of preferred
shares to the initial public offering price) and previously existing common
shares were converted at the ratio of 4.35:1.
Also in connection with the common stock sale, the vesting periods for certain
management stock options were accelerated. Additionally, notes receivable
aggregating $400,000 from certain officers were canceled upon completion of the
common stock sale (Note 13). The year ended March 31, 1992 reflects a one-time
$12.3 million non-cash charge for compensation expense relating to these items.
The Company also recorded an extraordinary loss in the amount of $2.1 million
for the year ended March 31, 1992 relating to the early retirement of the
long-term debt, representing a write-off of unamortized deferred financing
costs associated with the debt.
5. DISCONTINUED OPERATION
In August 1991, the Company's Board of Directors reached a decision to dispose
of Paco Pharmaceutical Services, Inc. ("Paco"), through an active program to
sell the stock or substantially all assets of Paco. Accordingly, the operating
results of Paco have been classified as discontinued operations in the
29
<PAGE> 31
accompanying consolidated financial statements and notes thereto for all years
presented. During the fiscal year ended March 31, 1992, an estimated loss from
disposal of $16.7 million, which represented a write-down of Paco's goodwill,
was recorded by the Company. No income tax benefit was recorded during fiscal
1992, as its realization could not be assured.
On August 26, 1992, Paco completed an initial public offering of its common
stock as a result of which the Company's ownership of Paco's common stock was
reduced to less than 1% of the outstanding stock. In the offering, Paco sold
4,000,000 shares of its common stock for aggregate net proceeds of
approximately $36.5 million. With the proceeds of such offering, Paco paid
$28.0 million to the Company in connection with the satisfaction of an
intercompany promissory note. In connection with the offering, the Company
agreed to indemnify Paco for any liabilities and costs incurred subsequent to
March 31, 1992, related to the litigation involving Paco specifically described
in Note 14. In addition, the Company has indemnified Paco for any additional
U. S. Federal and state income tax liabilities arising from the date of the
Company's acquisition of Paco through the date of completion of the offering.
The Company recorded an additional $0.6 million loss in connection with the
final accounting for the disposition of Paco, representing the after-tax
difference between net proceeds received and the Company's carrying value of
Paco as of August 26, 1992.
For the fiscal year beginning April 1, 1992 through August 26, 1992 (the "date
of disposal"), Paco recognized net sales of $30.2 million, interest expense
(allocated portion of consolidated interest expense based on debt attributable
to Paco) of $1.1 million, income tax expense of $1.0 million, and no net
income. For the fiscal year ended March 31, 1992, Paco recognized net sales of
$69.9 million, interest expense (as derived above) of $4.0 million, income
taxes of $0.5 million, and net income of $0.1 million.
Net current assets of $3.2 million and net non-current assets of $25.5 million
were disposed of through the sale of Paco. The consolidated statement of cash
flows excludes Paco's net cash provided (used) of ($0.6) million and $0.8
million for the fiscal years ended March 31, 1993 and 1992, respectively.
6. INCOME TAXES
Effective April 1, 1992, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes.
SFAS 109 requires that deferred income taxes reflect the tax consequences on
future years of differences between the tax bases of assets and liabilities and
the financial reporting amounts. Prior to fiscal year 1992, provisions were
made for deferred income taxes where differences existed between the time that
transactions affected taxable income and the time that these transactions
entered into the determination of income for financial reporting purposes. As
of April 1, 1992, the Company recorded income of approximately $1.0 million,
which represented the net decrease in deferred tax liabilities resulting from
the adoption of SFAS 109. Such amount was reflected in the consolidated
statement of operations as the cumulative effect of an accounting change.
Prior years' financial statements have not been restated to apply the
provisions of SFAS 109.
A summary of income (loss) from continuing operations before income taxes,
minority interests and extraordinary items is as follows:
<TABLE>
<CAPTION>
(In thousands) For the years ended March 31,
---------------------------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Income (loss) from continuing operations
before income taxes, minority interest
and extraordinary items:
United States $ 1,505 $ 3,194 $(26,408)
Foreign 60,839 63,097 58,427
-------- -------- --------
$62,344 $66,291 $32,019
======== ======== ========
</TABLE>
30
<PAGE> 32
Such income is exclusive of various intercorporate income/expense items, such
as royalties, interest, dividends and similar items, which are
taxable/deductible in the respective locations. Therefore, the relationship of
domestic and foreign taxes to reported domestic and foreign income is not
representative of actual tax rates.
<TABLE>
<CAPTION>
(In thousands) For the years ended March 31,
------------------------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Provision (credit) for currently payable
income taxes:
United States $ 1,120 $ 1,570 $ (127)
Foreign 17,453 21,442 20,924
--------- --------- ----------
18,573 23,012 20,797
--------- --------- ----------
Provision (credit) for deferred
income taxes:
United States (21) (125) -
Foreign 185 1,169 1,472
--------- --------- ----------
164 1,044 1,472
--------- --------- ----------
Total taxes $18,737 $24,056 $22,269
========= ========= ==========
</TABLE>
The deferred tax provision for fiscal year 1994 includes a credit of $1.7
million from net reductions in enacted statutory tax rates in certain
countries, as well as a $0.8 million charge resulting from an increase in
deferred tax valuation allowances during the period. The deferred tax
provision for fiscal year 1993 includes a charge of $4.5 million resulting from
increases in deferred tax valuation allowances during the period. In fiscal
year 1992, the primary sources and tax effects of the deferred tax timing
differences were depreciation and property retirements ($1.2 million) and
interest ($0.3 million).
The components of deferred taxes as of March 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
--------------------------------- -----------------------------
Deferred Tax Deferred Tax Deferred Tax Deferred Tax
Assets Liabilities Assets Liabilities
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
Property, plant and equipment $ 852 $35,974 $ - $35,611
Foreign tax credit carryforwards 9,050 - 10,542 -
Capital loss carryforwards 6,379 - 5,953 -
Pensions and other postretirement 5,782 1,299 5,501 1,500
benefits
Stock options 3,665 - 3,679 -
Defeasance of debt (Note 9) 4,758 - - -
Miscellaneous other 8,678 790 6,168 702
------------ ------------- ------------- -------------
Subtotal 39,164 38,063 31,843 37,813
Valuation allowances (25,390) - (23,777) -
Total deferred taxes ------------ ------------- ------------- -------------
$13,774 $38,063 $ 8,066 $37,813
============ ============= ============= =============
</TABLE>
At March 31, 1994, net current future tax benefits of $1.8 million were
included in other current assets, while $0.1 million of net current deferred
tax liabilities were included in accrued liabilities in the accompanying
consolidated statement of financial position. In addition, $4.8 million of net
long-term future tax benefits were included in other assets, and $30.7 million
of net long-term deferred tax liabilities are reflected in that statement. At
March 31, 1993, net current future tax benefits of $1.5 million were included
in other current assets, while $0.1 million of net current deferred tax
liabilities were included in accrued liabilities in the accompanying
consolidated statement of financial position. In addition, $31.1 million of
net long-term deferred tax liabilities are included in deferred income taxes in
that statement.
31
<PAGE> 33
The difference between consolidated income taxes as computed at the United
States statutory rate and as reported in the consolidated statement of
operations is summarized as follows:
<TABLE>
<CAPTION>
For the years ended March 31,
-------------------------------------------
(In thousands) 1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
United States statutory tax $21,820 $22,539 $10,886
Increases (reductions) in taxes due to:
Difference in effective foreign tax rates (2,467) 1,590 4,840
Foreign tax credit carryforwards (1,803) 2,388 -
(utilized) generated
Stock option compensation 115 124 4,290
Domestic losses - - 799
Goodwill amortization 1,490 1,252 1,291
Translation losses (595) (1,752) 407
Changes in valuation allowances
and other items, net 177 (2,085) (244)
--------- --------- ---------
Consolidated income taxes $18,737 $24,056 $22,269
========= ========= =========
</TABLE>
The capital loss carryforwards noted above expire in 1998. The foreign tax
credit carryforwards noted above expire through 1998. At March 31, 1994,
foreign earnings of approximately $69.7 million have been retained indefinitely
by subsidiaries for reinvestment, and accordingly no provision is made for
income taxes that would be payable upon the distribution of such earnings. It
is not practicable to determine the amount of the related unrecognized deferred
income tax liability, if any.
The Company's U.S., Australian, and certain German income tax returns are
undergoing routine reviews encompassing several fiscal years. Various open
issues involving the U.S. tax returns are awaiting final resolution with the
Internal Revenue Service, however, the Company believes that the impact of the
resolution of such issues will not be material to its financial position.
While the Company has not received any formal notification from either the
Australian or German tax authorities, preliminary communications indicate the
Company's positions on deductibility of certain expenses may be challenged.
Based upon review of these issues by management and legal and tax advisors, the
Company does not believe the ultimate outcome of these matters will have a
material adverse impact on its business or financial position.
Income tax payments, net of refunds, were $18.9 million, $22.5 million and
$12.3 million for the years ended March 31, 1994, 1993 and 1992.
7. ACCRUED AND OTHER LONG-TERM LIABILITIES
Accrued and other long-term liabilities consist of the following as of March
31, 1994 and 1993:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
------ ------
<S> <C> <C>
Accrued Liabilities:
Salaries, wages and bonuses $11,606 $ 8,994
Interest 1,695 7,780
Other 23,501 17,636
-------- --------
$36,802 $34,410
======== ========
Other Long-Term Liabilities:
Pension and welfare benefits $28,808 $27,836
(Note 11)
Postretirement benefits (Note 11) 5,968 5,534
Other 15,089 5,442
-------- --------
$49,865 $38,812
======== ========
</TABLE>
32
<PAGE> 34
8. SHORT-TERM BORROWINGS AND LINES OF CREDIT
The Company has short-term line of credit arrangements with foreign banking
institutions whereunder, at March 31, 1994, the Company and its subsidiaries
may borrow up to approximately $15.5 million subject to limitations imposed by
the bank credit facility (Note 9). There are no compensating balance
requirements related to these lines of credit. The total indebtedness
outstanding under such arrangements was $2.6 million and $1.1 million at March
31, 1994 and 1993, respectively.
Short-term borrowings, based on the amounts outstanding at the end of each
month, were as follows:
<TABLE>
<CAPTION>
(In thousands) As of March 31,
--------------------------------------------
1994 1993 1992
------ ------ -------
<S> <C> <C> <C>
Maximum amount outstanding $2,607 $1,551 $10,374
Average amount outstanding 2,052 1,163 5,212
Weighted average interest rate
during the year 9.0% 7.9% 10.3%
Weighted average interest rate at
March 31 8.5% 7.5% 9.3%
</TABLE>
9. LONG-TERM DEBT
Long-term debt consists of the following as of March 31, 1994 and 1993:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
--------- ---------
<S> <C> <C>
Senior notes (net of discount of $723 in 1994) $ 99,277 $ -
Borrowings under bank credit agreement 65,842 2,270
Senior subordinated debentures (net of
discount of $5,482 in 1993) - 119,656
Capitalized lease obligations (Note 10) 1,398 10,485
Industrial development revenue bonds 10,922 8,561
Other 11,838 1,536
--------- ---------
189,277 142,508
Less - current portion (1,328) (1,357)
--------- ---------
$187,949 $141,151
========= =========
</TABLE>
In January 1994, Scherer International completed a public offering of $100
million aggregate principal amount of its 6 3/4% Senior Notes ("Senior Notes")
due February 1, 2004 ("Offering"). The Senior Notes are noncallable and are
unsecured obligations, ranking pari passu with all other unsecured and senior
indebtedness of Scherer International. Interest on the Senior Notes is payable
February 1 and August 1, commencing August 1, 1994. The indenture under which
the Senior Notes were issued contains certain covenants which, among other
things, limit the ability of the Company and its subsidiaries to incur liens,
to enter into sale and lease-back transactions, to engage in certain
transactions with affiliates, and to merge or consolidate with, or transfer all
or substantially all, of its assets to another person. The proceeds of the
Offering to the Company were $99.3 million.
On January 28, 1994, with the net proceeds from the Offering and additional
proceeds from borrowings under the Company's bank credit facility, the Company
defeased its 14% Senior Subordinated Debentures ("Subordinated Debentures"),
which have an outstanding principal amount of $125.1 million. The Company
deposited into an irrevocable trust account for the benefit of the holders of
the Subordinated Debentures an amount of United States government obligations
sufficient to pay, with respect to the Subordinated Debentures, all interest
thereon through the November 1, 1994 call date ("Call Date"), the call premium
thereon and the outstanding principal thereof when due upon redemption
("Defeasance"). The Company remains obligated to pay interest and principal on
the Subordinated Debentures when due
33
<PAGE> 35
but, subject to certain exceptions, is no longer subject to the terms,
agreements and covenants related to the Subordinated Debentures.
As a result of the Defeasance, the Company recognized an extraordinary loss of
$15.5 million in the quarter ended December 31, 1993, reflecting the estimated
after-tax difference between the recorded value of the Subordinated Debentures
and their face value, the call premium, the prepayment of net interest through
the Call Date, and the write-off of unamortized deferred financing costs
related to the Subordinated Debentures. The Company also recognized future tax
benefits of approximately $4.8 million related to the Defeasance.
In March 1994, the Company entered into a new bank credit facility as a
replacement for the Company's previous bank credit agreement. The new credit
facility allows for revolving credit borrowings up to an aggregate of $175.0
million, in various currencies, and expires April 1, 1999. Interest is payable
quarterly at LIBOR plus .675% currently, with further reductions possible based
on certain financial performance criteria, or at the bank's prime rate. Unused
borrowing availability is subject to annual commitment fees of 1/4%.
Borrowings under this agreement are unsecured, and rank pari passu with all
other unsecured and senior indebtedness of Scherer International. In
connection with the new credit facility, the Company recognized a $0.3 million
extraordinary loss, reflecting the write-off of unamortized deferred financing
costs related to the former credit agreement, net of $0.1 million tax effects.
The bank credit facility requires the Company to satisfy various annual and
quarterly financial tests, including maintenance on a consolidated basis of a
specified minimum or maximum current level of tangible net worth and cash flow
coverage, leverage, and fixed charge ratios. The agreement also restricts the
Company's ability to incur additional indebtedness or liens, make investments
and loans, dispose of assets, or engage in certain business combinations, and
limits the ability of the Company to pay dividends. The indenture under which
the Senior Notes were issued also restricts the Company's ability to incur
additional liens, enter into sale-leaseback transactions, engage in certain
transactions with affiliates, and engage in certain business combinations. As
of March 31, 1994, the Company does not currently have plans to declare or pay
any cash dividends.
The Company has variable interest rate industrial development revenue bonds
aggregating $10.9 million due through fiscal years ending in 2015. The
interest rates in effect at March 31, 1994, ranged from 4.6% to 4.8%.
The annual maturities of long-term debt, excluding amounts payable under
capitalized lease obligations, for the five succeeding fiscal years are: 1995
- - - - $1.3 million; 1996 - $1.3 million; 1997 - $2.1 million; 1998 - $0.8 million;
and 1999 - $0.6 million. Interest paid was $28.1 million, $23.7 million, and
$45.0 million for the years ended March 31, 1994, 1993, and 1992, respectively.
The fair value of the Senior Notes, estimated based on quoted market prices as
of March 31, 1994, was approximately $88.5 million. Fair values of other
long-term debt, determined based on interest rates that are currently available
to the Company for similar types of borrowings, approximate carrying value.
34
<PAGE> 36
10. LEASES
Total rental expense under operating leases was $7.1 million, $7.6 million, and
$7.5 million for the years ended March 31, 1994, 1993, and 1992, respectively.
The present value of capitalized lease obligations is classified as long-term
debt and the related assets are classified as land, buildings and equipment.
As of March 31, 1994, the minimum rental commitments under long-term operating
and capitalized leases are as follows:
<TABLE>
<CAPTION>
(In thousands) Capital Operating
Leases Leases
-------------- --------------
<S> <C> <C>
1995 $ 229 $ 6,019
1996 174 5,913
1997 174 5,606
1998 174 5,109
1999 174 4,890
2000 and thereafter 1,529 36,145
-------------- --------------
2,454 $63,682
Less - amount representing interest (1,056) ==============
--------------
Present value of net minimum lease payments $1,398
==============
</TABLE>
11. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
Pensions
The Company has several pension plans covering substantially all salaried and
hourly employees. In general, the Company's domestic plans provide defined
pension benefits based on years of service and the level of compensation.
Foreign subsidiaries provide for pension benefits in accordance with local
customs or law. The Company funds its pension plans at amounts required by the
applicable regulations. Pension expense included the following:
<TABLE>
<CAPTION>
(In thousands) For the years ended March 31,
---------------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Service cost of benefits earned during year $3,255 $2,474 $1,965
Interest cost on projected benefit obligation 4,191 3,665 3,217
Actual return on plan assets (3,602) (2,633) (2,475)
Net amortization and deferral 774 705 338
----------- ----------- -----------
$4,618 $4,211 $3,045
=========== =========== ===========
</TABLE>
35
<PAGE> 37
The following table shows the status of the various plans and amounts included
in the Company's consolidated statement of financial position as of March 31,
1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
-------------------------------- --------------------------------
(In thousands) Plans whose Plans whose Plans whose Plans whose
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation $4,723 $41,507 $4,479 $31,865
Non-vested benefit obligation 293 4,331 122 4,509
Accumulated benefit -------------- -------------- -------------- --------------
obligation 5,016 45,838 4,601 36,374
Effects of anticipated future
compensation increases 987 8,228 1,168 7,350
Projected benefit -------------- -------------- -------------- --------------
obligation 6,003 54,066 5,769 43,724
Plan assets at fair value 9,504 18,576 8,660 12,773
Projected benefit -------------- -------------- -------------- --------------
obligation in excess
of (less than) plan
assets (3,501) 35,490 (2,891) 30,951
Unamortized net gain (loss) 44 (5,794) (858) (2,576)
Unrecognized prior service cost (152) (386) (180) (430)
-------------- -------------- -------------- --------------
Accrued pension (asset)
liability recorded in the
consolidated statement of
financial position $(3,609) $29,310 $(3,929) $27,945
============== ============== ============== ==============
</TABLE>
Plan assets consist primarily of annuities, marketable securities and mortgage
notes receivable.
The average of the assumptions used as of March 31, 1994, 1993 and 1992 in
determining the pension expense and benefit obligation information shown above
were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Discount rate 7.4% 8.0% 8.4%
Rate of compensation increase 5.0 5.0 5.0
Long-term rate of return on plan assets 9.9 9.9 10.5
</TABLE>
Postretirement and Other Benefits
In fiscal year 1992, the Company adopted Statement of Financial Accounting
Standards No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions ("SFAS 106") effective as of April 1, 1991. SFAS 106 requires that
the expected cost of postretirement benefits be charged to expense during the
years that eligible employees render service. Upon adoption of SFAS 106, the
Company charged the cumulative effect of the unfunded obligation of $4.9
million against earnings during 1992.
36
<PAGE> 38
The following table reconciles the status of the accrued postretirement
liability as of March 31 (based on January 1 measurement dates):
<TABLE>
<CAPTION>
(In thousands) 1994 1993
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $2,940 $4,408
Active employees 1,171 910
--------- ---------
Accumulated postretirement benefit obligation
in excess of plan assets 4,111 5,318
Unrecognized net gain (loss) 2,057 416
--------- ---------
Accrued postretirement benefit liability
(including $200 in current liabilities) $6,168 $5,734
========= ==========
</TABLE>
Net postretirement benefits cost for the years ended March 31, 1994, 1993 and
1992 included:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Service cost $173 $129 $96
Interest cost on accumulated
postretirement benefit obligation 441 468 447
------ ------ ------
Net postretirement benefit cost $614 $597 $543
====== ======= ======
</TABLE>
For measurement purposes, an 11% annual rate of increase in the per capita
costs of covered health care claims was assumed for 1994, and 12% for 1993 and
1992. The rate was assumed to decrease by 1% in fiscal 1995 and each year
thereafter to a rate of 6% beyond 1999. The health care cost trend rate
assumption has a significant effect on the amounts reported. To illustrate,
increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated postretirement benefit obligation as
of the measurement date of January 1, 1994, by $514,500 and the aggregate of
the service and interest cost components of net postretirement cost for fiscal
1994 by $87,000. The discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% for fiscal 1994 and 8.25% for fiscal
1993.
In November 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 112, Employers' Accounting for
Postemployment Benefits, which must be adopted for the Company's 1995 fiscal
year. This statement requires the use of the accrual method to recognize
liabilities for postemployment benefits. The Company has determined that the
adoption of this statement will not significantly affect the Company's future
financial results or position.
12. STOCK COMPENSATION PLANS
1992 Stock Option Plan
In February 1992, the Board of Directors approved a new management stock option
plan designed to provide key management personnel stock options for maximizing
shareholder value through improved Company financial performance. Under such
plan, management participants are required to purchase options for R.P. Scherer
Corporation common stock at a cost equal to 10% of an average market value per
share at the beginning of the fiscal year. The exercise price of such options
is set at the average beginning of the year common stock market value per
share, net of the purchase cost, increased by a 10% annual rate compounded over
five years. The number of stock options a participant is required to purchase
is based upon a financial performance formula established by the Compensation
Committee of the Board of Directors.
37
<PAGE> 39
As an added incentive to increase shareholder value, participants are provided
one standard stock option for each purchased stock option. Each standard stock
option is exercisable at an average market value per share at the beginning of
the fiscal year, and may only be exercised when the purchased option is
exercised. Both types of options vest after three years from the date of
grant, and expire four years after the date of vesting.
A total of 334,877 stock options were granted for fiscal 1994. For such
grants, the purchased options, costing $2.77 each, will be exercisable at
$40.07 per share, and the standard options will be exercisable at $27.65 per
share. Compensation expense of $0.3 million was recorded for fiscal 1994 in
connection with the 1992 Stock Option Plan.
A total of 325,981 stock options were granted for fiscal 1993. For fiscal 1993
grants, the purchased options, costing $2.74 each, will be exercisable at
$39.67 per share, and the standard options will be exercisable at $27.38 per
share. No compensation expense was recorded for fiscal 1993 in connection with
this plan.
A total of 381,452 stock options were granted for fiscal 1992. For fiscal 1992
grants, the purchased options, costing $1.80 each, will be exercisable at
$26.09 per share, and the standard options will be exercisable at $18.00 per
share. Compensation expense of $0.7 million was recorded for fiscal 1992 in
connection with this plan.
During 1994, none of the 1992 Plan options were exercised. As of March 31,
1994, a total of 157,690 options for common shares remain available for grant
for up to the next two fiscal years.
Director Stock Options
In fiscal 1992, a total of 36,000 options were granted to the Company's three
outside directors. These options are exercisable at $18.00 per share, vest
after three years from the date of grant, and expire seven years after the date
of vesting. None of these options were exercised in 1993 or 1994.
1990 Stock Option Plans
In November 1990 R.P. Scherer Corporation implemented three stock option plans
under which a total of an adjusted 1,239,612 options for shares of the
Company's common stock were authorized for issuance to key management
personnel. As a result of R.P. Scherer Corporation's sale of common stock in
October 1991, all options granted under such plans became fully vested (Note
4). Information on the number of shares under option for the 1990 Plan,
exercisable at $5.49 per share, is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Number of shares under stock options - 1990 Plan:
Outstanding at beginning of year 1,099,272 1,204,225 1,159,111
Granted during year - - 45,114
Exercised (25,607) (104,953) -
--------- --------- ---------
Outstanding at end of year 1,073,665 1,099,272 1,204,225
========= ========= =========
</TABLE>
The amounts set forth above are adjusted to reflect the 4.35:1 common stock
split and conversion of Series B Preferred Stock described in Note 4.
38
<PAGE> 40
13. RELATED PARTY TRANSACTIONS
Certain foreign subsidiaries purchase gelatin materials and Scherer
International's German subsidiary leases plant facilities, purchases other
services and receives loans from time-to-time from a German company which is
also the minority shareholder of the Company's German and certain other
European subsidiaries.
Gelatin purchases, at prices comparable to estimated market prices, amounted to
$18.7 million, $19.6 million, and $17.7 million for the years ended March 31,
1994, 1993, and 1992, respectively. Rental payments amounted to $4.7 million,
$4.7 million, and $4.4 million and purchased services amounted to $4.6 million,
$5.4 million, and $5.5 million for each of the respective years.
Lehman and certain of its affiliates have received fees for services in
connection with public offerings of the Company's securities and other matters.
During the year ended March 31, 1994, the Company paid $0.7 million for
underwriting fees to Lehman in connection with the January 1994 Senior Notes
offering (Note 9). During the year ended March 31, 1992, the Company paid $3.5
million for underwriting fees in connection with R.P. Scherer Corporation's
October 1991 initial public offering (Note 4). No fees were paid by the
Company to Lehman or its affiliates during the year ended March 31, 1993.
On October 30, 1990, the Company loaned to Messrs. Cashman and Erdeljan
$400,000, which loan was to mature October 26, 1992 and did not bear interest.
In connection with the October 1991 stock offering, the Company forgave the
loan and paid the related income taxes (Note 4).
14. COMMITMENTS AND CONTINGENCIES
The Company's former subsidiary Paco Pharmaceutical Services, Inc. ("Paco"),
certain of Paco's subsidiaries, the Company and other defendants are parties to
a group of actions commenced, beginning in April 1990, in Federal and state
courts in New Jersey and in Federal courts in New York and Massachusetts by
limited partners of Paco Development Partners II ("PDP II"), a research and
development partnership in which a subsidiary of Paco serves as the general
partner. The defendants were granted summary judgment for dismissal with
respect to the New York actions on March 29, 1993, and the time to appeal this
decision has expired. In the New Jersey state court action (Nelson v. Dean
Witter Reynolds, Inc., MRS-L-5014-90), a class consisting of the 14 investors
who reside in New Jersey has been certified. On October 23, 1992, the Company,
Paco and its affiliates moved for summary judgment as to three counts of the
complaint. This motion was denied on January 6, 1993. A second action
commenced in New Jersey Federal court (Nelson v. Ian Ferrier, Civil Action
91-5334(JWB)), has been stayed pending resolution of the New Jersey state court
action. No class has been certified in this federal action.
Plaintiffs in each of these actions seek damages of an unspecified amount for,
among other things, alleged violations of state securities law, fraud,
misrepresentation, breach of contract, conversion and negligence in connection
with the $25 million private placement sale of PDP II limited partnership
interests and warrants in 1986. Plaintiffs in the state court action also seek
damages, derivatively, on behalf of PDP II, for alleged breaches of fiduciary
duty and breach of contract in connection with the management of PDP II. On
October 19, 1993, the plaintiffs in the New York federal court action described
above (in which the defendants were granted summary judgment) filed a new
complaint in state court in New Jersey. This complaint alleges state law
causes of action for fraud, negligent misrepresentation, breach of fiduciary
duty and breach of contract.
Subsequent to year end, the Company reached an agreement in principle with the
plaintiffs in the PDP II litigation, and is in the process of formalizing that
agreement and seeking all necessary approvals. The Company recognized during
the fourth quarter of fiscal 1994 a special charge of approximately $3.2
million representing the anticipated amount of all settlement-related costs in
excess of previously provided reserves.
On March 30, 1992, OCAP Acquisition Corp. ("OCAP") commenced an action in the
Supreme Court of the State of New York, County of New York, against Paco,
certain of its subsidiaries, the Company and Scherer
39
<PAGE> 41
International (collectively, the "defendants"), arising out of the termination
of an Asset Purchase Agreement dated February 21, 1992 (the "Purchase
Agreement") between OCAP and the defendants providing for the purchase of
substantially all the assets of Paco. On May 15, 1992, OCAP served an amended
verified complaint (the "Amended Complaint"), asserting causes of action for
breach of contract and breach of the implied covenant of good faith and fair
dealing, arising out of defendants' March 25, 1992 termination of the Purchase
Agreement, as well as two additional causes of action that were subsequently
dismissed by order of the court. The Amended Complaint seeks $75 million in
actual damages, $100 million in punitive damages, as well as OCAP's attorney
fees and other litigation expenses, costs and disbursements incurred in
bringing this action. Discovery with respect to the action has commenced;
however, discovery was temporarily stayed by OCAP's filing of a motion for
partial summary judgment, and the Company's subsequent cross-motion for
dismissal. The Court recently denied both motions and the Company anticipates
that discovery will resume or the Court's decision will be appealed. Based
upon the investigation conducted by the Company to date, the Company believes
that this action lacks merit and intends to defend against it vigorously. In
the opinion of management, the ultimate outcome of this litigation will not
have a material adverse effect on the Company's business or financial
condition.
The Company was informed in August 1992 that soil at a manufacturing facility
in North Carolina owned and operated by the Company from 1975 to 1985 contained
levels of tetrachlorethene and other substances which exceeded environmental
standards. The Company voluntarily initiated a remedial investigation, and
initial remedial and removal actions have been completed by the Company and the
current owner of the facility for the known soil contamination at such site.
The Company continues to perform additional studies and remediation of the
area, including testing and removal of groundwater, which have indicated the
necessity for additional remedial and removal actions. On the basis of the
results of investigations performed to date, the Company does not believe that
potential future costs associated with either the investigation or any
potential remedial or removal action will ultimately have a materially adverse
impact on the Company's business or financial condition.
The Company is a party to various other legal proceedings arising in the
ordinary course of business, none of which is expected to have a material
adverse effect on the Company's financial position, results of operations,
liquidity or capital resources.
As of March 31, 1994, the Company has capital expenditure commitments related
primarily to plant expansions amounting to approximately $5.9 million.
40
<PAGE> 42
15. SEGMENT DATA
The Company is engaged principally in the production of softgels, hardshells
and other drug delivery systems for the pharmaceutical, health and nutritional
and cosmetic products industries. The Company's operations are divided into
three geographical areas: United States, Europe and Other International.
Europe represents operations in the United Kingdom, France, Italy and Germany.
Other International consists of operations in Canada, the Pacific and Latin
America.
<TABLE>
<CAPTION>
For the years ended March 31,
-------------------------------------------
(In thousands) 1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Sales:
United States $120,687 $ 86,687 $ 66,802
Europe 233,716 229,937 198,445
Other international 94,894 81,387 72,539
-------- -------- --------
Net sales 1 $449,297 $398,011 $337,786
======== ======== ========
Operating Income:
United States $ 28,241 $ 23,327 $ 18,147
Europe 46,249 53,941 48,896
Other International 19,238 13,450 13,070
Unallocated 2 (10,815) (2,621) (16,136)
-------- -------- --------
Operating income $ 82,913 $ 88,097 $ 63,977
======== ======== ========
Identifiable assets:
United States $ 86,410 $ 74,886 $ 64,997
Europe 316,623 263,099 255,345
Other International 121,318 106,372 105,474
Unallocated 3 89,063 87,827 100,161
-------- -------- --------
Total assets $613,414 $532,184 $525,977
======== ======== ========
Capital expenditures:
Drug Delivery Systems $ 39,294 $ 33,132 $ 20,780
Unallocated 4 209 60 167
-------- -------- --------
Total capital expenditures $ 39,503 $ 33,192 $ 20,947
======== ======== ========
Depreciation and amortization:
Drug Delivery Systems $ 21,008 $ 19,589 $ 16,771
Unallocated 4 2,962 3,089 3,169
-------- -------- --------
Total depreciation and amortization $ 23,970 $ 22,678 $ 19,940
======== ======== ========
</TABLE>
(1) No single customer or product represents 10% or more of sales, and
intersegment sales are not significant.
(2) Unallocated operating income includes principally general corporate
expenses, including in 1992 the stock compensation expense
related to R.P. Scherer Corporation's October 1991 sale of common stock
(Note 4), and in 1994 $4.5 million related to the special charges for
the litigation settlement and plant revaluation (Note 2).
(3) Unallocated identifiable assets are principally cash, cash
equivalents, short-term investments, other assets and net assets of
discontinued operations.
(4) Unallocated capital expenditures and depreciation and amortization
represent primarily corporate amounts.
The net assets of foreign subsidiaries were $216.5 million at March 31, 1994,
$216.6 million at March 31, 1993, and $190.7 million at March 31, 1992. The
Company's share of foreign net income was $34.6 million for the year ended
March 31, 1994, $27.9 million for the year ended March 31, 1993, and $26.4
million for the year ended March 31, 1992, after deducting minority interests,
income taxes on unremitted earnings and various charges billed by the parent
company.
41
<PAGE> 43
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
--------------- ---------------- ------------------- ------------------
1994 1993(1) 1994 1993(2) 1994(4) 1993(3) 1994(4) 1993
---- ------- ---- ------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $108,454 $103,353 $105,179 $ 97,671 $114,820 $ 97,966 $120,844 $ 99,021
Gross profit 40,708 43,080 35,464 37,387 39,972 37,426 45,764 38,010
Income from continuing
operations before
extraordinary
loss and accounting change 8,596 8,388 6,557 6,059 8,904 7,103 6,857 7,410
Net income (loss) $ 8,596 $ 9,362 $ 6,557 $ 5,412 $ (6,596) $ (1,289) $ 6,537 $ 7,410
=================== ================== ===================== ===================
</TABLE>
(1) Net income includes the $974,000 cumulative effect of
accounting change for income taxes, SFAS 109.
(2) Net income includes loss on disposal of discontinued
operation of $647,000.
(3) Net income includes extraordinary loss of $8,392,000 related
to the early retirement of debt (see Note 9).
(4) Net income includes extraordinary loss of $15,500,000 and
$320,000 related to debt extinguishment in the third and
fourth quarters of fiscal 1994, respectively.
42
<PAGE> 44
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To R.P. Scherer International Corporation:
We have audited the accompanying consolidated statement of financial position
of R.P. SCHERER INTERNATIONAL CORPORATION (a Delaware Corporation), and
subsidiaries as of March 31, 1994 and 1993, and the related consolidated
statements of operations, cash flows and shareholder's equity for the years
ended March 31, 1994, 1993 and 1992. These financial statements and the
schedules referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of March 31,
1994 and 1993, and the results of its operations and cash flows for the years
ended March 31, 1994, 1993 and 1992, in conformity with generally accepted
accounting principles.
As explained in Note 6 to the consolidated financial statements, effective
April 1, 1992, the Company changed its method of accounting for income taxes.
As explained in Note 11 to the consolidated financial statements, effective
April 1, 1991, the Company changed its method of accounting for postretirement
benefits other than pensions.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules listed in the index to financial
schedules are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly state in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Detroit, Michigan,
April 26, 1994.
ARTHUR ANDERSEN & CO.
43
<PAGE> 45
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable for this report.
44
<PAGE> 46
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
ITEM 11 EXECUTIVE COMPENSATION
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
ITEM 13 DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Certain information required by Items 10 through 13 is omitted in accordance
with General Instruction J(2)(c) to Form 10-K. Information with respect to
executive officers of the Company is included on pages 8 and 9 of this Annual
Report on Form 10-K.
45
<PAGE> 47
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS - the consolidated financial statements
of R.P. Scherer International Corporation and Subsidiaries and
the related report of independent public accountants are
included in Item 8 of this Annual Report on Form 10-K.
2. FINANCIAL STATEMENT SCHEDULES - the financial statement
schedules for R.P. Scherer International Corporation and
Subsidiaries are listed in the accompanying index to financial
statement schedules (see page 49).
3. EXHIBITS - The following exhibits are filed as part of this
Annual Report on Form 10-K or, where indicated, were
heretofore filed and are hereby incorporated by reference:
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation of the Company dated May 15, 1990.
Incorporated by reference to Exhibit 3.1 filed with R.P. Scherer
Corporation's Registration Statement on Form S-4, No. 33-30999.
3.2 Certificate of Amendment of Restated Certificate of Incorporation of the
Company dated August 21, 1991. Incorporated by reference to Exhibit 3.4
filed with R.P. Scherer Corporation's Registration Statement on Form S-1,
No. 33-42392.
3.3 Certificate of Amendment of Restated Certificate of Incorporation of the
Company dated October 11, 1991. Incorporated by reference to Exhibit 3.5
filed with R.P. Scherer Corporation's Registration Statement on Form S-1,
No. 33-42392.
3.4 Certificate of Correction of Restated Certificate of Incorporation of the
Company dated November 25, 1991. Incorporated by reference to Exhibit 3.3
filed with the R.P. Scherer Corporation's Quarterly Report on Form 10-Q for
the quarter ended December 31, 1991.
3.5 By-Laws of the Company. Incorporated by reference to Exhibit 3.2 filed with
the R.P. Scherer Corporation's Registration Statement on Form S-4, No. 33-
30999.
4.1 Form of Senior Subordinated Debenture Indenture, dated as of November 1,
1989, between R.P. Scherer International Corporation and the First National
Bank of Boston, as Trustee (including form of Senior Subordinated Debenture).
Incorporated by reference to Exhibit 4.1 filed with Scherer International's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1989.
</TABLE>
46
<PAGE> 48
<TABLE>
<S> <C>
4.2 Indenture dated as of January 1, 1994, between the Registrant and Comerica
Bank, Trustee. Incorporated by reference to Exhibit 2.1 filed with Scherer
International's Registration Statement on Form 8-A, dated May 2, 1994.
10.1 Amended and Restated $175,000,000 Credit Agreement, dated as of March 30,
1994, among R.P. Scherer International Corporation, certain of its
subsidiaries, Comerica Bank, NBD Bank, N.A., Societe Generale, The Bank of
Nova Scotia, and ABN AMRO Bank N.V. Filed herewith.
10.2 R.P. Scherer Corporation Management Incentive Compensation Plan, Amended and
Restated July, 1993. Incorporated by reference to Exhibit A.2 filed with
R.P. Scherer Corporation's Proxy Statement dated August 24, 1993.
10.3 Stock Option Plan of R.P. Scherer Corporation and Subsidiaries, Amended and
Restated July, 1993. Incorporated by reference to Exhibit B.2 filed with
R.P. Scherer Corporation's Proxy Statement dated August 24, 1993.
10.4 Executive Supplemental Benefit Plan for senior executives of R.P. Scherer
International Corporation, dated as of April 1, 1981. Incorporated by
reference to Exhibit 10.15 filed with the Company's Annual Report on Form 10-
K for the year ended March 31, 1988.
10.5 Extended Severance Plan of R.P. Scherer International Corporation dated
November 10, 1988. Incorporated by reference to Exhibit 19a filed with
Scherer International's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1988.
10.6 R.P. Scherer International Corporation Employees' Retirement Income Plan
effective August 6, 1986. Incorporated by reference to Exhibit 10.33 of the
Company's Registration Statement on Form S-1, No. 33-30362.
10.7 Employment Agreement, dated June 1, 1994, between the Company and John P.
Cashman. Filed herewith.
10.8 Employment Agreement, dated June 1, 1994, between the Company and Aleksandar
Erdeljan. Filed herewith.
10.9 Employment Agreement, dated June 1, 1994, between the Company and Nicole S.
Williams. Filed herewith.
21 Subsidiaries of the registrant. Filed herewith.
23 Consent of Arthur Andersen & Co. Filed herewith.
</TABLE>
(b) No reports on Form 8-K were filed with the Securities and Exchange
Commission during the period for which this report is filed.
47
<PAGE> 49
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, R.P. Scherer International Corporation has duly caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized, on June 24, 1994.
R.P. SCHERER INTERNATIONAL CORPORATION
By: /s/ John P. Cashman
-----------------------------------------
John P. Cashman
Chairman and Co-Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1934, as amended, this
Report has been signed below by the following persons on behalf of R.P. Scherer
International Corporation in the capacities indicated on June 24, 1994.:
SIGNATURES TITLE
/s/ John P. Cashman Chairman and Co-Chief
------------------- Executive Officer
John P. Cashman
/s/ Aleksandar Erdeljan President and Co-Chief
----------------------- Executive Officer
Aleksandar Erdeljan
/s/ Nicole S. Williams Executive Vice President, Finance,
---------------------- Chief Financial Officer, Treasurer
Nicole S. Williams and Secretary
/s/ Thomas J. Stuart Vice President and Controller
-------------------- (Principal Accounting Officer)
Thomas J. Stuart
/s/ Frederick Frank Director
-------------------
Frederick Frank
/s/ Lori G. Koffman Director, Assistant Secretary
-------------------
Lori G. Koffman
/s/ Gilbert H. Lamphere Director
-----------------------
Gilbert H. Lamphere
/s/ Louis Lasagna Director
-----------------
Louis Lasagna
/s/ Robert H. Rock Director
------------------
Robert H. Rock
/s/ James A. Stern Director
------------------
James A. Stern
48
<PAGE> 50
INDEX TO FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Financial Schedules Page
- - - ------------------- ----
<S> <C> <C>
II. Amounts Receivable from Employees 50
V. Property, Plant and Equipment 51
VI. Accumulated Depreciation of Property, Plant and Equipment 52
VIII. Valuation Accounts 53
X. Supplementary Income Statement Information 54
</TABLE>
All other schedules are omitted as data is contained in the consolidated
financial statements or are not applicable or not required.
49
<PAGE> 51
R.P. SCHERER INTERNATIONAL CORPORATION AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM EMPLOYEES
<TABLE>
<CAPTION>
(In thousands) Balance at Balance at
Beginning Amounts End of
Name of Debtor of Period Additions Collected Period
-------------- --------- --------- --------- ------
<S> <C> <C> <C> <C>
For the year ended March 31, 1994: $ 0 $ - $ - $ 0
======== ========= ========== ==========
For the year ended March 31, 1993: $ 0 $ - $ - $ 0
======== ========= ========== ==========
For the year ended March 31, 1992:
J. Cashman, Chairman and
A. Erdeljan, President........... $ 400 $ - $ (400) (a) $ 0
======== ========= ========= ==========
</TABLE>
(a) The above note was forgiven in entirety as agreed to due to a
successful stock offering in October 1991.
50
<PAGE> 52
R.P. SCHERER INTERNATIONAL CORPORATION AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
(In thousands) Balance at Balance at
Beginning of Additions Other End
Description Period to Cost Retirements Changes (b) of Period
----------- --------- ---------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1994:
-------------------------
Land and improvements $16,932 $32 $0 ($120) $16,844
Buildings and equipment 55,480 5,628 0 (1,030) 60,078
Machinery and equipment 141,200 27,433 (1,028) (6,131) 161,474
Furniture and fixtures 9,483 1,096 (349) 701 10,931
Transportation equipment 1,145 697 (99) 56 1,799
Leasehold improvements 5,822 222 (24) 2,669 8,689
Construction in progress 13,476 4,395 (a) (1,236) 8,542 25,177
--------- ------- ------- ------ --------
$243,538 $39,503 ($2,736) $4,687 $284,992
========= ======= ======= ====== ========
Year ended March 31, 1993:
-------------------------
Land and improvements $17,881 $279 ($2) ($1,226) $16,932
Buildings and equipment 46,844 4,746 (61) 3,951 55,480
Machinery and equipment 105,718 18,623 (3,976) 20,835 141,200
Furniture and fixtures 6,792 3,458 (910) 143 9,483
Transportation equipment 478 839 (311) 139 1,145
Leasehold improvements 6,119 24 (522) 201 5,822
Construction in progress 7,125 5,223 (a) (8) 1,136 13,476
--------- ------- ------- ------ --------
$190,957 $33,192 ($5,790) $25,179 $243,538
========= ======= ======= ====== ========
Year ended March 31, 1992:
-------------------------
Land and improvements $17,520 $381 ($42) $22 $17,881
Buildings and equipment 43,039 3,370 (1) 436 46,844
Machinery and equipment 92,899 11,764 (2,563) 3,618 105,718
Furniture and fixtures 4,613 2,256 (349) 272 6,792
Transportation equipment 331 298 (169) 18 478
Leasehold improvements 5,853 251 (167) 182 6,119
Construction in progress 2,312 2,627 (a) (125) 2,311 7,125
--------- ------- ------- ------ --------
$166,567 $20,947 ($3,416) $6,859 $190,957
========= ======= ======= ====== ========
</TABLE>
(a) Net of transfers to various property, plant and equipment categories.
(b) Includes changes due to fluctuations in foreign currency exchange rates,
purchase accounting adjustments, and disposals of certain discontinued
businesses. Also included in fiscal year 1993 are changes due to adoption
of SFAS 109.
51
<PAGE> 53
R.P. SCHERER INTERNATIONAL CORPORATION AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
(In thousands) Balance at Additions Charged Balance at
Beginning to Costs and Other End
Description of Period Expenses (b) Retirements Changes (a) of Period
----------- ----------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1994:
Land and improvements $83 $23 -- ($3) $103
Buildings and equipment 6,375 2,157 -- (1,535) 6,997
Machinery and equipment 37,722 12,227 ($794) (651) 48,504
Furniture and fixtures 3,701 1,915 (325) (419) 4,872
Transportation equipment 297 393 (68) 55 677
Leasehold improvements 809 406 (24) 933 2,124
----------- ------------ ---------- ---------- ----------
$48,987 $17,121 ($1,211) ($1,620) $63,277
=========== ============ ========== ========== ==========
Year ended March 31, 1993:
Land and improvements $12 $32 -- $39 $83
Buildings and equipment 3,940 1,832 (26) 629 6,375
Machinery and equipment 25,398 12,137 (4,064) 4,251 37,722
Furniture and fixtures 2,524 1,848 (883) 212 3,701
Transportation equipment (26) 334 (198) 187 297
Leasehold improvements 1,480 347 (515) (503) 809
----------- ------------ ---------- ---------- ----------
$33,328 $16,530 ($5,686) $4,815 $48,987
=========== ============ ========== ========== ==========
Year ended March 31, 1992:
Land and improvements $8 $4 -- -- $12
Buildings and equipment 1,710 1,855 (2) 377 3,940
Machinery and equipment 14,980 9,710 (2,364) 3,072 25,398
Furniture and fixtures 1,179 1,454 (312) 203 2,524
Transportation equipment (76) 152 (120) 18 (26)
Leasehold improvements 1,122 454 (124) 28 1,480
----------- ------------ ---------- ---------- ----------
$18,923 $13,629 ($2,922) $3,698 $33,328
=========== ============ ========== ========== ==========
</TABLE>
(a) Includes changes due to fluctuations in foreign currency exchange
rates, purchase accounting adjustments, and disposals of certain
discontinued businesses. Also included in fiscal year 1993 are
changes due to adoption of SFAS 109.
(b) The Company provided for depreciation at the following annual rates:
Buildings and improvements - 2% to 5%
Machinery, equipment, furniture and fixtures, etc. - 5% to 33 1/3%.
52
<PAGE> 54
R.P. SCHERER INTERNATIONAL CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION ACCOUNTS
<TABLE>
<CAPTION>
(In thousands) Balance at Charged to Other Balance at
Beginning Costs and Changes Add End of
Description of Period Expenses (Deduct) (a) Deductions Period
----------- --------- -------- ------------ ---------- ------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED MARCH 31, 1994:
Valuation accounts deducted from
related assets -
Reserve for doubtful accounts $ 2,260 $1,123 $ (53) $ (427) $ 2,903
Reserve for unmerchantable
inventories 2,188 828 (44) (1,271) 1,701
Reserve for future tax benefits 23,777 1,613 0 0 25,390
======= ====== ======== ======== =======
FOR THE YEAR ENDED MARCH 31, 1993:
Valuation accounts deducted from
related assets -
Reserve for doubtful accounts $2,064 $ 638 $ (35) $ (407) $2,260
Reserve for unmerchantable
inventories 1,900 706 (43) (375) 2,188
Reserve for future tax benefits 0 4,460 19,317 (b) 0 23,777
======= ======= ========= ======== ======
FOR THE YEAR ENDED MARCH 31, 1992:
Valuation accounts deducted from
related assets -
Reserve for doubtful accounts $1,416 $ 873 $ 22 $ (247) $2,064
Reserve for unmerchantable
inventories 1,920 289 26 (335) 1,900
======= ======= ========= ======== ======
</TABLE>
(a) Includes changes due to fluctuations in foreign currency exchange
rates.
(b) Resulting from initial adoption of SFAS 109, included in net
cumulative effect of accounting change.
53
<PAGE> 55
R.P. SCHERER INTERNATIONAL CORPORATION AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
<TABLE>
<CAPTION>
(In thousands) Twelve Months
Ended March 31,
--------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Charged to Costs and Expenses -
Maintenance and repairs $10,463 $11,197 $ 9,121
Amortization of intangible and other
assets 6,849 6,148 7,850
Taxes, other than payroll and income
taxes 2,586 2,231 2,987
======= ======= =======
</TABLE>
Amounts charged to costs and expenses for (1) royalties and (2) advertising
costs have been omitted since each is less than 1% of net sales.
54
<PAGE> 56
INDEX TO EXHIBITS
Exhibit Description Page
- - - ------------------- ----
Exhibit 10.1 - Amended and Restated $175,000,000 Credit Agreement 56
Exhibit 10.7 - Employment Agreement - John P. Cashman 134
Exhibit 10.8 - Employment Agreement - Aleksandar Erdeljan 140
Exhibit 10.9 - Employment Agreement - Nicole S. Williams 146
Exhibit 21 - Subsidiaries 153
Exhibit 23 - Consent of Arthur Andersen & Co. 155
55
<PAGE> 1
EXHIBIT 10.1
56
<PAGE> 2
EXHIBIT 10.1
EXECUTION COPY
3/30/94
R.P. SCHERER INTERNATIONAL CORPORATION
AMENDED AND RESTATED $175,000,000 CREDIT AGREEMENT
DATED AS OF MARCH 30, 1994
NBD BANK, N.A. and COMERICA BANK, AS AGENTS
57
<PAGE> 3
TABLE OF CONTENTS
Page
----
1. DEFINITIONS ....................................................1-20
1.1 "Account Party(ies)" ..............................................1
1.2 "Accumulated Funding Deficiency" ..................................1
1.3 "Administrative Agent" ............................................1
1.4 "Advance(s)" ..................................................1-2
1.5 "Affiliate" ....................................................2
1.6 "Agents" ....................................................2
1.7 "Agent's Correspondent" .........................................2-3
1.8 "Agents' Fees" ....................................................3
1.9 "Alternate Base Rate" .............................................3
1.10 "Alternative Currency" ............................................3
1.11 "Applicable Fee Percentage" .......................................3
1.12 "Applicable Fixed Rate" ...........................................3
1.13 "Applicable Interest Rate" ........................................3
1.14 "Australian Amalgamation" .........................................4
1.15 "Australian Domestic Rate" ........................................4
1.16 "Bankers Acceptances" .............................................4
1.17 "Banks" ......................................................4
1.18 "Bill" ......................................................4
1.19 "Business Day" ....................................................4
1.20 "Canadian Domestic Rate" ........................................4-5
1.21 "Capital Stock" ...................................................5
1.22 "Capitalized Lease" ...............................................5
1.23 "Capitalized Lease Obligation" ....................................5
1.24 "Company" ....................................................5
1.25 "Company Guaranty" ................................................5
1.26 "Consolidated" ....................................................5
1.27 "Consolidated Cash Flow Coverage Ratio" ...........................6
1.28 "Consolidated Fixed Charge Ratio" .................................6
1.29 "Consolidated Income Taxes" .......................................6
1.30 "Consolidated Interest Expense" ...................................6
1.31 "Consolidated Leverage Ratio" .....................................6
1.32 "Consolidated Net Income" .........................................6
1.33 "Consolidated Net Tangible Assets" ................................6
1.34 "Consolidated Net Worth" ........................................6-7
1.35 "Consolidated Subsidiary(ies)" ....................................7
1.36 "Consolidated Tangible Net Worth" .................................7
1.37 "Covenant Compliance and Interest Rate Adjustment Report" ........7
1.38 "Current Dollar Equivalent" .......................................7
1.39 "Default" .........................................................7
1.40 "Defined Contribution Plan" .......................................7
58
<PAGE> 4
TABLE OF CONTENTS
(Continued)
Page
----
1.41 "Documentation Agent" .....................................7
1.42 "Dollar Amount" .........................................7-8
1.43 "Dollars" and the sign "$" ................................8
1.44 "Domestic Advance" ........................................8
1.45 "Employee Benefit Plan" ...................................8
1.46 "ERISA" .................................................8
1.47 "ERISA Affiliate" .........................................8
1.48 "Eurocurrency-based Advance" ..............................8
1.49 "Eurocurrency-based Rate" ...............................8-9
1.50 "Eurocurrency-Interest Period" ............................9
1.51 "Eurocurrency Lending Office" .............................9
1.52 "Event of Default" ........................................9
1.53 "Existing Letters of Credit" .............................10
1.54 "F&F Holding" ............................................10
1.55 "Federal Funds Effective Rate" ...........................10
1.56 "Fees" ...................................................10
1.57 "Foreign Plan" ...........................................10
1.58 "Funded Debt" ............................................10
1.59 "GAAP" ...................................................10
1.60 "Guaranties" .............................................10
1.61 "Hazardous Material" .....................................11
1.62 "Hazardous Material Law(s)" ..............................11
1.63 "Hereof", "hereto", "hereunder" ..........................11
1.64 "Indebtedness" ...........................................11
1.65 "Intercompany Loan" ......................................11
1.66 "Intercompany Loans, Advances or Investments" ............11
1.67 "Interest Period" ........................................11
1.68 "Internal Revenue Code" ..................................12
1.69 "Issuing Office" .........................................12
1.70 "Joint Venture" ..........................................12
1.71 "Letter of Credit Agreement" .............................12
1.72 "Letter of Credit Fees" ..................................12
1.73 "Letter of Credit Maximum Amount" ........................12
1.74 "Letter of Credit Obligation" ............................12
1.75 "Letter of Credit Payment" ...............................12
1.76 "Letter(s) of Credit" .................................12-13
1.77 "Lien" ..................................................13
1.78 "Loan Documents" .........................................13
1.79 "Majority Banks" .........................................13
1.80 "Margin" ................................................13
1.81 "Material Property" ......................................13
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(Continued)
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1.82 "Multiemployer Plan" .....................................13
1.83 "Net Income" .............................................13
1.84 "Notes" .............................................13
1.85 "Parent" .............................................13
1.86 "Parent Guaranty" ........................................14
1.87 "Pension Plan" ...........................................14
1.88 "Percentage" ...........................................14
1.89 "Permitted Borrower(s)" ..................................14
1.90 "Permitted Borrowers Guaranty" ...........................14
1.91 "Permitted Company Encumbrances" .........................14
1.92 "Permitted Currencies" ...................................14
1.93 "Permitted Encumbrances" ..............................14-16
1.94 "Permitted Encumbrances of the Subsidiaries" .............16
1.95 "Person" .................................................16
1.96 "Prime Rate" .............................................16
1.97 "Prime-based Advance" ....................................16
1.98 "Prime-based Rate" .......................................16
1.99 "Prior Credit Agreement" .................................16
1.100 "R.P.S. Canada" ..........................................16
1.101 "R.P.S. Limited" .........................................17
1.102 "Reportable Event" .......................................17
1.103 "Request for Advance" ....................................17
1.104 "Reserved Availability" ..................................17
1.105 "Revolving Credit" .......................................17
1.106 "Revolving Credit Closing Fee" ...........................17
1.107 "Revolving Credit Commitment Fee" ........................17
1.108 "Revolving Credit Maturity Date" .........................17
1.109 "Revolving Credit Maximum Amount" ........................17
1.110 "Scherer DDS" ............................................17
1.111 "Scherer France" .........................................18
1.112 "Scherer Holdings Ltd." ..................................18
1.113 "Scherer Holdings Pty." ..................................18
1.114 "Scherer Italy" ..........................................18
1.115 "Scherer Pty." ..........................................18
1.116 "Shares" ..........................................18
1.117 "Single Employer Plan" ...................................18
1.118 "Special Purpose Letter of Credit" .......................18
1.119 "Sublimit" ..........................................18
1.120 "Subsidiary(ies)" ........................................18
1.121 "Substitute Bank" ........................................18
1.122 "Swing Line Facility(ies)" ...............................19
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TABLE OF CONTENTS
(Continued)
Page
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1.123 "Term Loan(s)" ...........................................19
1.124 "Term Loan Commitment" ...................................19
1.125 "Term Loan Maturity Date" ................................19
1.126 "Yield Maintenance Payment" ...........................19-20
2. REVOLVING CREDIT ......................................20-34
2.1 Commitment ............................................20-21
2.2 Accrual of Interest and Maturity .........................21
2.3 Prime-based Interest Payments ............................22
2.4 Eurocurrency-based Interest Payments .....................22
2.5 Interest Payments on Conversions .........................22
2.6 Interest on Default ...................................22-23
2.7A Requests for Advances and Requests for Refundings
and Conversions of Advances ...........................23-25
2.7B Advances of Reserved Availability .....................25-27
2.7C Determination, Denomination and Redenomination of
Alternative Currency Advances .........................27-28
2.8 Disbursement of Advances ..............................28-29
2.9 Prepayment ............................................29-30
2.10 Characterization of Advances in Absence of Election
or Upon Default ..........................................30
2.11 Revolving Credit Commitment Fee .......................30-31
2.12 Currency Appreciation; Sublimits; Mandatory Reduction
of Indebtedness .......................................31-32
2.13 Optional Reduction or Termination of Revolving Credit
Maximum Amount ........................................32-33
2.14 Limited Election not to Gross-up .........................33
2.15 Revolving Credit as Refinancing; Application of
Advances Thereafter ...................................33-34
3. LETTERS OF CREDIT .....................................34-44
3.1 Letters of Credit ........................................34
3.2A Conditions to Issuance ................................34-36
3.2B Special Purpose Letters of Credit ........................36
3.3 Notice ..................................................36
3.4 Letter of Credit Fees .................................36-37
3.5 Other Fees ............................................37-38
3.6 Draws and Demands for Payment Under Letters of Credit..38-41
3.7 Obligations Irrevocable ...............................41-42
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(Continued)
Page
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3.8 Risk Under Letters of Credit ..........................42-43
3.9 Indemnification .......................................43-44
3.10 Right of Reimbursement ...................................44
4. TERM LOANS ....................................................44-48
4.1 Commitment ...............................................44
4.2 Repayment of Principal ................................44-45
4.3 Accrual of Interest ......................................45
4.4 Interest on Default ......................................45
4.5 Yield Maintenance Payments ...............................45
4.6 Requests for Funding Term Loans .......................45-47
4.7 Unavailability ...........................................47
4.8 No Gross-up Election ..................................47-48
4.9 Term Loan Allocation .....................................48
4.10 Application of Term Loan Proceeds ........................48
5. CONDITIONS ....................................................48-50
5.1 Execution of Notes and This Agreement ....................48
5.2 Corporate Authority ......................................48
5.3 Company Guaranty ......................................48-49
5.4 Permitted Borrowers Guaranty and Parent Guaranty .........49
5.5 Representations and Warranties -- All Parties ............49
5.6 Compliance with Certain Documents and Agreements .........49
5.7 Opinion of Counsel .......................................49
5.8 Company's Certificate ....................................49
5.9 Payment of Agents' and Other Fees .....................49-50
5.10 Other Documents and Instruments ..........................50
5.11 Continuing Conditions ....................................50
6. REPRESENTATIONS AND WARRANTIES ................................51-57
6.1 Corporate Authority ......................................51
6.2 Due Authorization -- Company .............................51
6.3 Due Authorization -- Parent and Subsidiaries .............51
6.4 Title to Material Property ...............................51
6.5 Encumbrances .............................................51
6.6 Subsidiaries .............................................52
6.7 Taxes ....................................................52
6.8 No Defaults ..............................................52
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TABLE OF CONTENTS
(Continued)
Page
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6.9 Enforceability of Agreement and Loan Documents --
Company ..................................................52
6.10 Enforceability of Loan Documents -- Other Parties ........52
6.11 Non-contravention -- Company .............................53
6.12 Non-contravention -- Other Parties .......................53
6.13 No Litigation -- Company .................................53
6.14 No Litigation -- Other Parties ........................53-54
6.15 Consents, Approvals and Filings, Etc .....................54
6.16 Agreements Affecting Financial Condition .................54
6.17 No Investment Company ....................................54
6.18 No Margin Stock .......................................54-55
6.19 ERISA ....................................................55
6.20 Environmental Matters and Safety Matters ..............55-56
6.21 Accuracy of Information ...............................56-57
7. AFFIRMATIVE COVENANTS .........................................57-61
7.1 Preservation of Existence, Etc ...........................57
7.2 Keeping of Books .........................................57
7.3 Reporting Requirements ................................57-58
7.4 Consolidated Tangible Net Worth ..........................58
7.5 Consolidated Leverage Ratio ..............................59
7.6 Consolidated Fixed Charge Ratio ..........................59
7.7 Consolidated Cash Flow Coverage Ratio ....................59
7.8 Taxes ....................................................59
7.9 Inspections ..............................................59
7.10 Further Assurances .......................................59
7.11 Insurance ................................................59
7.12 Indemnification .......................................59-60
7.13 Governmental and Other Approvals .........................60
7.14 Compliance with Laws .....................................60
7.15 ERISA .................................................60-61
8. NEGATIVE COVENANTS ............................................61-66
8.1 Capital Structure, Business Objects or Purpose ...........61
8.2 Limitations on Fundamental Changes ....................61-62
8.3 Guaranties ...............................................62
8.4 Indebtedness ..........................................62-63
8.5 Liens ....................................................63
8.6 Limitation on Sales of Assets .........................63-64
8.7 Dividends ................................................64
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TABLE OF CONTENTS
(Continued)
Page
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8.8 Investments ...........................................64-65
8.9 Transactions with Affiliates .............................66
8.10 Prohibition Against Certain Restrictions .................66
9. DEFAULTS ......................................................66-70
9.1 Events of Default .....................................66-68
9.2 Exercise of Remedies ..................................68-69
9.3 Rights Cumulative ........................................69
9.4 Waiver by the Company of Certain Laws ....................69
9.5 Waiver of Defaults .......................................69
9.6 Deposits and Accounts .................................69-70
10. PAYMENTS, RECOVERIES AND COLLECTIONS; SPECIAL LIMITATIONS......70-73
10.1 Payment Procedure .....................................70-72
10.2 Application of Proceeds ...............................72-73
10.3 Pro-rata Recovery ........................................73
11. CHANGES IN LAW OR CIRCUMSTANCES; INCREASED COSTS ..............73-78
11.1 Reimbursement of Prepayment Costs ........................73
11.2 Agent's Eurocurrency Lending Office ......................73
11.3 Availability of Alternative Currency .....................74
11.4 Circumstances Affecting Eurocurrency-based Rate
Availability .............................................74
11.5 Laws Affecting Eurocurrency-based or Alternative
Currency Advance Availability .........................74-75
11.6 Increased Cost of Eurocurrency-based or Alternative
Currency Advances .....................................75-76
11.7 Indemnity .............................................76-77
11.8 Judgment Currency ........................................77
11.9 Other Increased Costs .................................77-78
11.10 Substitute Banks .........................................78
12. AGENTS ........................................................78-83
12.1 Appointment of Agents .................................78-79
12.2 Deposit Account with Agents ..............................79
12.3 Scope of Agents' Duties ...............................79-80
12.4 Successor Agents .........................................80
12.5 Loans by Agents .......................................80-81
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(Continued)
Page
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12.6 Credit Decisions .........................................81
12.7 Agents' Fees .............................................81
12.8 Authority of Agents to Enforce Notes and This Agreement ..81
12.9 Indemnification .......................................81-82
12.10 Knowledge of Default .....................................82
12.11 Agents' Authorization; Action by Banks ...................82
12.12 Enforcement Actions by the Agents .....................82-83
13. MISCELLANEOUS ....................................................83
13.1 Accounting Principles ....................................83
13.2 Consent to Jurisdiction ..................................83
13.3 Law of Michigan ..........................................83
13.4 Interest ..............................................83-84
13.5 Closing Costs and Other Costs ............................84
13.6 Notices ..................................................84
13.7 Further Action ........................................84-85
13.8 Successors and Assigns; Participations ...................85
13.9 Indulgence ...............................................85
13.10 Counterparts .............................................86
13.11 Amendment and Waiver .....................................86
13.12 Taxes and Fees ...........................................86
13.13 Confidentiality .......................................86-87
13.14 Withholding Taxes .....................................87-88
13.15 Effective Upon Execution .................................88
13.16 Waiver of Jury Trial .....................................88
13.17 Complete Agreement; Severability .........................88
13.18 Table of Contents and Headings ...........................88
13.19 Construction of Certain Provisions .......................89
13.20 Independence of Covenants ................................89
13.21 Reliance on and Survival of Various Provisions ...........89
EXHIBITS
FORM OF REQUEST FOR ADVANCE .......................................A
FORM OF REVOLVING CREDIT NOTE -- COMPANY ........................B-1
FORM OF REVOLVING CREDIT NOTE -- PERMITTED BORROWER .............B-2
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TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
<S> <C>
FORM OF TERM NOTE................................................................................. C
FORM OF REQUEST FOR TERM LOAN FUNDING............................................................. D
FORM OF NOTICE OF LETTERS OF CREDIT............................................................... E
PERCENTAGES....................................................................................... F
FORM OF COVENANT COMPLIANCE AND INTEREST RATE
ADJUSTMENT REPORT.............................................................................. G
FORM OF COMPANY GUARANTY.......................................................................... H
FORM OF PARENT GUARANTY........................................................................... I
FORM OF PERMITTED BORROWERS GUARANTY.............................................................. J
SUBLIMITS......................................................................................... K
</TABLE>
SCHEDULES
Schedule 1.11 -- Pricing Matrix
Schedule 1.53 -- Existing Letters of Credit
Schedule 1.91 -- Permitted Company Encumbrances
Schedule 1.94 -- Permitted Encumbrances of the Subsidiaries
Schedule 1.122 -- Swing Line Facilities
Schedule 6.6 -- Existing Subsidiaries
Schedule 6.13 -- Litigation (Company)
Schedule 6.14 -- Litigation (Subsidiaries)
Schedule 6.21 -- Material Contingent Obligations
Schedule 8.8 -- Permitted Investments, Loans and Advances
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AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT ("Agreement") is made as of
the 30th day of March, 1994, among Comerica Bank, NBD Bank, N.A., Societe
Generale, The Bank of Nova Scotia and ABN AMRO Bank N.V. (individually, "Bank",
and collectively "Banks"), NBD Bank, N.A., as administrative agent for the
Banks (in such capacity, "Administrative Agent"), Comerica Bank, as
documentation agent for the Banks (in such capacity, "Documentation Agent"),
R.P. Scherer International Corporation, a Delaware corporation ("Company") and
the Permitted Borrowers designated below and signatories hereto.
RECITALS:
A. The Company has requested that the Banks amend and extend to it
and to the Permitted Borrowers (defined below) the revolving credit previously
extended to the Company and to certain of the Permitted Borrowers pursuant to
the Prior Credit Agreement (defined below) among the Company, the Permitted
Borrowers, the Banks and the Agents, and extend additional credit to the
Permitted Borrowers in the form of the Term Loans (as defined below), all on
the terms and conditions set forth herein.
B. The Banks are prepared to amend and extend such credit as
aforesaid, but only upon the terms and conditions set forth in this Agreement.
NOW THEREFORE, THE COMPANY, THE PERMITTED BORROWERS, THE AGENTS AND THE
BANKS AGREE:
1. DEFINITIONS
For the purposes of this Agreement the following terms will have the
following meanings:
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"Account Party(ies)" shall mean, with respect to any Letter of
Credit, the account party or parties (which shall be the Company or a Permitted
Borrower) named in an application to the Administrative Agent for the issuance
of such Letter of Credit.
"Accumulated Funding Deficiency" shall mean an "accumulated
funding deficiency" as defined in Section 412 of the Internal Revenue Code or
Section 302 of ERISA.
"Administrative Agent" shall mean NBD Bank, N.A., or any
successor administrative agent appointed in accordance with Section 12.4
hereof.
"Advance(s)" shall mean a borrowing requested by the Company or
by a Permitted Borrower and made by the Banks under Section 2.1 of this
Agreement, including without limitation any readvance, refunding or conversion
of such borrowing pursuant to Section 2.7A hereof or any advance requested by a
Bank on behalf of a Permitted Borrower under Section 2.7B hereof, any advance
in respect of a Letter of Credit under Section 3.6 hereof, and shall include,
as applicable, a Eurocurrency-based Advance and a Prime-based Advance, and any
Term Loan funded by a Bank to a Permitted Borrower under Section 4.1 hereof.
"Affiliate" shall mean, with respect to any Person, any other
Person or group acting in concert in respect of the first Person that, directly
or indirectly, through one or more intermediaries, controls, or is controlled
by, or is under common control with such first Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person or group of Persons, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of management and policies of
such Person, whether through the ownership of voting securities or by contract
or otherwise.
"Agents" shall mean Administrative Agent and Documentation
Agent, or any successors appointed in accordance with Section 12.4 hereof and,
unless the context otherwise specifically indicates to the contrary, shall
include either of them.
"Agent's Correspondent" shall mean the Administrative Agent's
correspondent banks, as follows:
(a) for Advances in DEM, Landeszentralbank, Frankfurt,
Germany;
(b) for Advances in GBP, Lloyds Bank PLC, London, England;
(c) for Advances in FRF, Societe Generale, Paris, France;
(d) for Advances in AUD, Commonwealth Bank of Australia,
Adelaide, South Australia, Australia;
(e) for Advances in CAD, The Bank of Nova Scotia, Toronto,
Ontario, Canada;
(f) for Advances in ITL, Banca Nazionale Del Lavora S.p.A.,
Rome, Italy;
(g) for Advances in other Alternative Currencies, such
other bank or banks as designated by Administrative Agent by
written notice to the Company, the Permitted Borrowers and the
Banks and which are reasonably acceptable to the Company;
(h) for Eurocurrency-based Advances in Dollars,
Administrative Agent's branch office located at 28 Finsbury
Circus, London, England EC2M 7AU (or for the account of said
branch office, at Agent's main office in Detroit, Michigan,
United States);
or at such other bank or banks as Administrative Agent may from time to time
designate by written notice to the Company, the Permitted Borrowers and the
Banks.
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"Agents' Fees" shall mean those agency, placement, letter of
credit issuance and other fees and expenses required to be paid by Company to
Agents (or either of them) under Sections 3.5 and 12.7 hereof.
"Alternate Base Rate" shall mean, for any day, an interest rate
per annum equal to the Federal Funds Effective Rate in effect on such day, plus
one-half of one percent (1/2%).
"Alternative Currency" shall mean each of the following
Euro-currencies, as applicable hereunder: French Francs ("FRF"); Deutsche Marks
("DEM"); British Pounds Sterling ("GBP"); Australian Dollars ("AUD"); Canadian
Dollars ("CAD"); Italian Lire ("ITL") and, subject to availability and to the
terms and conditions of this Agreement, such other freely convertible foreign
currencies (which, when referred to herein or in any of the Loan Documents,
shall be referred to using the currency codes in effect from time to time under
ISO International Standard 4217, or any such successor publication or standard)
as requested by the Company or the Permitted Borrowers and acceptable to
Administrative Agent and the Banks, in their reasonable discretion.
"Applicable Fee Percentage" shall mean, as of any date of
determination, the applicable percentage used to calculate the Letter of Credit
Fee due and payable hereunder, determined (based on the Cash Flow Coverage
Ratio) by reference to the pricing matrix attached to this Agreement as
Schedule 1.11.
"Applicable Fixed Rate" shall mean that per annum fixed rate of
interest established by each of the Banks pursuant to Section 4.3 hereof for
each Term Loan to be funded by it hereunder, such rate to be based on (a) the
cost of funds of such Bank at the time the applicable Term Loan is funded
(taking into account any cross- currency or other hedges or swap costs, whether
in the inter-bank swap market or otherwise, recognized or incurred by such Bank
in funding the applicable Term Loan), plus (b) the applicable Margin in effect
at the time of funding.
"Applicable Interest Rate" shall mean, in respect of an Advance
of the Revolving Credit, the Eurocurrency-based Rate or the Prime-based Rate,
applicable to such Advance (in the case of a Eurocurrency-based Advance, for
the relevant Interest Period) as selected by the Company or a Permitted
Borrower from time to time subject to the terms and conditions of this
Agreement and, in respect of each of the Term Loans, the Applicable Fixed Rate.
"Australian Amalgamation" shall mean the merger of Scherer Pty.
into Scherer Holdings Pty. conducted in compliance with the requirements set
forth herein.
"Australian Domestic Rate" shall mean, with respect to any
Eurocurrency-Interest Period, the per annum interest rate which is determined
by the Administrative Agent by taking the rates quoted on the page numbered
"BBSW" of the Reuters Monitor System at or about 10:00 a.m. (Sydney time) two
(2) Business Days prior to the first day of such Eurocurrency-Interest Period
for not less than five Australian trading banks (selected by the Administrative
Agent in its sole discretion and appearing on that page and so quoting) as
being the mean buying rate for a Bill having a tenor equal to such
Eurocurrency-Interest Period, eliminating the highest and the lowest mean rates
and taking the average of the remaining mean rates, provided that, if in
respect of any Eurocurrency- Interest Period less than five Australian trading
banks have quoted rates on the page numbered "BBSW" of the Reuters Monitor
System, the rate shall be calculated as in the manner set forth above by taking
the rates otherwise quoted by five Australian trading banks upon application by
the Administrative Agent for a Bill of the same tenor.
"Bankers Acceptances" shall mean bills of exchange within the
meaning of the Bills of Exchange Act (Canada), denominated in CAD, drawn by
Canadian business corporations of credit standing comparable to the Company and
accepted by NBD Bank Canada.
"Banks" shall mean Comerica Bank, successor by merger to
Manufacturers Bank, N.A. ("Comerica"), NBD Bank, N.A. ("NBD"), Societe
Generale, The Bank of Nova Scotia, ABN AMRO Bank N.V. and any Substitute Bank.
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"Bill" shall mean a bill of exchange as defined in the
Australian Bills of Exchange Act 1909, as amended, or any successor act or
code, but shall not include a check.
"Business Day" shall mean any day on which commercial banks are
open for domestic and international business (including dealings in foreign
exchange) in Detroit, London and New York, and, if funds are to be paid or made
available in an Alternative Currency, in the place where such funds are to be
paid or made available.
"Canadian Domestic Rate" shall mean, with respect to any
Eurocurrency-Interest Period, the per annum interest rate which is determined
by the Administrative Agent in accordance with the following formula (such sum
to be rounded upward, if necessary, to the nearest whole multiple of 1/16th of
1%):
1/x = 1/y - z/365
where:
"x" is the Canadian Domestic Rate;
"y" is the discount rate (expressed as a decimal)
quoted by NBD Bank Canada at its main office in Toronto at 10:00 a.m. (Toronto
time) two (2) Business Days prior to the first day of such Eurocurrency-
Interest Period as the discount rate at which NBD Bank Canada would purchase
Bankers Acceptances having a tenor and aggregate face principal amount the same
as such Eurocurrency-Interest Period applicable to, and the principal amount
of, the relevant Eurocurrency-based Advance requested by R.P.S. Canada; and
"z" is the duration in days of such
Eurocurrency-Interest Period.
"Capital Stock" means, with respect to any Person, any and all
shares, share capital, interests, participations, warrants, options or other
equivalents (however designated) of capital stock of a corporation and any and
all equivalent ownership interests in a Person (other than a corporation), in
each case whether now outstanding or hereafter issued.
"Capitalized Lease" means, as applied to any Person, any lease
of any property (whether real, personal or mixed) which, in conformity with
GAAP, is required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligation" means the discounted present
value of the rental obligations of any Person under any Capitalized Lease,
determined in accordance with GAAP.
"Company" shall mean R.P. Scherer International Corporation, a
Delaware corporation.
"Company Guaranty" shall mean that certain guaranty of all of
the Indebtedness outstanding of each of the Permitted Borrowers hereunder in
the form attached as Exhibit H, executed and delivered by the Company to the
Documentation Agent, on behalf of the Banks, as of the date hereof, as may be
amended from time to time.
"Consolidated" or "Consolidating" shall, when used with
reference to any financial information pertaining to (or when used as a part of
any defined term or statement pertaining to the financial condition of) the
Company and its Subsidiaries mean the accounts of the Company and its
Subsidiaries determined on a consolidated or consolidating basis, as the case
may be, all determined as to principles of consolidation and, except as
otherwise specifically required by the definition of such term or by such
statements, as to such accounts, in accordance with GAAP (to the extent
applicable thereto).
"Consolidated Cash Flow Coverage Ratio" shall mean as of any
date of determination, a ratio the numerator of which shall be the sum of
Consolidated Net Income, excluding extraordinary items, income from
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<PAGE> 16
minority interests and any changes in deferred taxes, plus depreciation and
amortization (all determined in accordance with GAAP) for the period of four
consecutive fiscal quarters ended at such date, and the denominator of which
shall be Funded Debt as of such date of determination.
"Consolidated Fixed Charge Ratio" shall mean as of any date of
determination, a ratio, the numerator of which shall be the sum of Consolidated
Net Income, plus Consolidated Interest Expense, Consolidated Income Taxes and
income from minority interests (determined in accordance with GAAP), excluding
extraordinary items (determined in accordance with GAAP), for the period of
four consecutive fiscal quarters ended on such date, and the denominator of
which shall be the sum of Consolidated Interest Expense for such period plus
Consolidated Income Taxes for such period, plus the current maturities of long
term debt (excluding Indebtedness under this Agreement), determined in
accordance with GAAP as of such date of determination.
"Consolidated Income Taxes" shall mean for any period the
aggregate amount of taxes based on income or profits for such period of the
operations of the Company and its Consolidated Subsidiaries determined in
accordance with GAAP.
"Consolidated Interest Expense" shall mean for any period the
aggregate gross interest expense (including amortization of original issue
discount and non-cash interest payments or accruals and the interest component
of Capitalized Lease Obligations) of the Company and its Consolidated
Subsidiaries for such period as determined in accordance with GAAP.
"Consolidated Leverage Ratio" shall mean as of any date of
determination, a ratio, the numerator of which shall be Funded Debt of Company
and its Consolidated Subsidiaries and the denominator of which shall be Funded
Debt of the Company and its Consolidated Subsidiaries, plus Consolidated Net
Worth.
"Consolidated Net Income" for any period means the Net Income
of Company and its Consolidated Subsidiaries for such period.
"Consolidated Net Tangible Assets" shall mean, as of any date
of determination, the amount that would be classified on a balance sheet as the
total assets at such time of the Company and its Consolidated Subsidiaries,
minus all intangible assets of the Company and its Consolidated Subsidiaries,
minus all current liabilities of the Company and its Consolidated Subsidiaries,
all as determined in accordance with GAAP.
"Consolidated Net Worth" means as of any date of determination
all amounts that would be included under stockholders' equity on a Consolidated
balance sheet of the Company and its Consolidated Subsidiaries determined in
accordance with GAAP, excluding, however, the effect of the currency
translation adjustment.
"Consolidated Subsidiary(ies)" shall mean those subsidiaries of
the Company which are treated as Consolidated for purposes of GAAP.
"Consolidated Tangible Net Worth" shall mean as of any date of
determination, the Consolidated equity of the common stockholders of the
Company less Consolidated intangible assets, all as determined in accordance
with GAAP. For purposes of this definition, the effect of the currency
translation adjustment shall be excluded.
"Covenant Compliance and Interest Rate Adjustment Report" shall
mean the report to be furnished by the Company to the Administrative Agent, in
the form of attached Exhibit "G" and certified by the chief financial officer
of the Company (or in such officer's absence, a responsible senior officer)
pursuant to Sections 7.3(b) and (c), hereof, in which report the Company shall
set forth, among other things, its calculations and the resultant ratios or
financial tests with respect to the financial covenants contained in Sections
7.4 through 7.7, inclusive, of this Agreement.
"Current Dollar Equivalent" shall mean at any date of
determination, with respect to any Advance in an Alternative Currency, the
amount of Dollars which is equivalent to the then outstanding principal amount
of
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<PAGE> 17
such Advance at the most favorable spot exchange rate determined by the
Administrative Agent to be available to it for the sale of Dollars for such
Alternative Currency at approximately 9:00 A.M. (Detroit time) two (2) Business
Days after such date. Alternative Currency equivalents of Advances in Dollars
(to the extent used herein) shall be determined by the Administrative Agent in
a manner consistent herewith.
"Default" shall mean any event which with the giving of notice
or the passage of time, or both, would constitute an Event of Default under
this Agreement.
"Defined Contribution Plan" shall mean each Employee Benefit
Plan which is an individual account plan or a defined contribution plan as
defined in Section 3(34) of ERISA.
"Documentation Agent" shall mean Comerica Bank, successor by
merger to Manufacturers Bank, N.A., or any successor documentation agent
appointed in accordance with Section 12.4 hereof.
"Dollar Amount" shall mean (i) with respect to each Advance
made, refunded or converted in Dollars, the principal amount thereof and (ii)
with respect to each Advance made, refunded or converted in an Alternative
Currency, the amount of Dollars which is equivalent to the principal amount of
such Advance at the most favorable spot exchange rate determined by the
Administrative Agent to be available to it for the sale of Dollars for such
Alternative Currency at approximately 9:00 A.M. (Detroit time) two (2) Business
Days before such Advance is made, refunded or converted, as the case may be.
"Dollars" and the sign "$" shall mean lawful money of the
United States of America.
"Domestic Advance" shall mean any Advance other than a
Eurocurrency-based Advance.
"Employee Benefit Plan" shall mean any pension, profit-sharing,
retirement, deferred compensation, bonus, severance, hospitalization, medical
insurance, life insurance or other agreement, assignment or understanding that
is an employee benefit plan within the meaning of Section 3(3) of ERISA
(including without limitation any Multiemployer Plan) that the Company or any
ERISA Affiliate is a party to, is required to make employer contributions to,
or otherwise maintains, for the benefit of its employees.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, or any successor act or code and the regulations in effect
from time to time thereunder.
"ERISA Affiliate" shall mean any trade or business (whether or
not incorporated) which is under common control with the Company within the
meaning of Section 4001 of ERISA or is part of a group which includes the
Company and would be treated as a single employer under Section 414 of the
Internal Revenue Code, and any Domestic Subsidiary.
"Eurocurrency-based Advance" shall mean an Advance which bears
interest at the Eurocurrency- based Rate.
"Eurocurrency-based Rate" shall mean, with respect to any
Eurocurrency-Interest Period, the per annum interest rate which is equal to the
sum of (a) the Margin (subject, if applicable, to adjustment under Section
2.2(b) hereof), plus (b)(i) in the case of any Eurocurrency-based Advance other
than an Advance of CAD to R.P.S. Canada described in clause (ii) below or an
Advance of AUD to Scherer Holdings Pty. described in clause (iii) below, the
quotient of:
(A) the arithmetic average of the per annum interest rates at which
deposits in the relevant currency are offered to the Eurocurrency Lending
Office of each of the Agents by other prime banks in the London interbank
market in an amount comparable to the relevant Eurocurrency-based Advance and
for a period equal to the relevant Eurocurrency-Interest Period at
approximately 9:00 A.M. Detroit time two (2) Business Days prior to the first
day of such Eurocurrency-Interest Period, divided by
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(B) an amount equal to one minus the stated maximum rate (expressed
as a decimal) of all reserve requirements (including, without limitation, any
marginal, emergency, supplemental, special or other reserves) that is specified
on the first day of such Eurocurrency-Interest Period by the Board of Governors
of the Federal Reserve System (or any successor agency thereto) for determining
the maximum reserve requirement with respect to Eurocurrency funding (currently
referred to as "Eurocurrency liabilities" in Regulation D of such Board)
maintained by a member bank of such System,
all as conclusively determined by the Administrative Agent (absent manifest
error), such sum to be rounded upward, if necessary, to the nearest whole
multiple of 1/16th of 1%; or (ii) in the case of any Advances of CAD to R.P.S.
Canada, the greater of (C) the rate determined under clause (b)(i), above, and
(D) the Canadian Domestic Rate, or (iii) in the case of any Advances of AUD to
Scherer Holdings Pty., the greater of (E) the rate determined under clause
(b)(i) above, and (F) the Australian Domestic Rate.
"Eurocurrency-Interest Period" shall mean an Interest Period of
one, two, three or six months (or any lesser or greater number of days agreed
to in advance by the Company, or by a Permitted Borrower, as applicable, and by
the Administrative Agent and the Banks) as selected by the Company or by a
Permitted Borrower, as applicable, for a Eurocurrency-based Advance pursuant to
Section 2.7A, provided, however, that (a) any Eurocurrency-Interest Period
which commences on the last Business Day of a calendar month (or on any day for
which there is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the appropriate
subsequent calendar month, (b) each Eurocurrency-Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day or, if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day, and (c) no
Eurocurrency-Interest Period which would end after the Revolving Credit
Maturity Date shall be permitted with respect to any such Eurocurrency-based
Advance.
"Eurocurrency Lending Office" shall mean, (a) with respect to
the Administrative Agent, Administrative Agent's principal office located at
London, England or such other branch or branches of Administrative Agent,
domestic or foreign, as it may hereafter designate as a Eurocurrency Lending
Office by notice to Company, the Permitted Borrowers and the Banks and (b) as
to each of the Banks and the Documentation Agent, its offices, branches or
affiliates located at its address set forth on the signature pages hereof (or
identified thereon as a Eurocurrency Lending Office), or at such other office,
branch or affiliate of such Bank or Documentation Agent as it may hereafter
designate as its Eurocurrency Lending Office by notice to Company and
Administrative Agent.
"Event of Default" shall mean each of the Events of Default
specified in Section 9.1 hereof, after the expiration of any applicable grace
or cure periods stated therein.
"Existing Letters of Credit" shall mean those letters of credit
listed on Schedule 1.53 hereto which were issued by Administrative Agent under
the Prior Credit Agreement.
"F&F Holding" shall mean F&F Holding GmbH, a German corporation
and a subsidiary of the Company.
"Federal Funds Effective Rate" shall mean, for any day, a
fluctuating interest rate per annum equal to the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such day (or, if
such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Administrative Agent from three federal funds brokers
of recognized standing selected by it, all as conclusively determined by the
Administrative Agent, such sum to be rounded upward, if necessary, to the
nearest whole multiple of 1/16th of 1%.
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"Fees" shall mean the Revolving Credit Commitment Fee, the
Revolving Credit Closing Fee, the Letter of Credit Fee, the Agents' Fees and
the other fees and charges (including without limitation any commitment
recovery fees) payable by Company to the Banks or Agents hereunder.
"Foreign Plan" shall mean each plan, program or other
arrangement which would be deemed an Employee Benefit Plan of any Subsidiary
outside of the United States of America if Section 4(b)(4) of ERISA were not
applicable thereto, that a Subsidiary is a party to, is required to make
employer contributions to, or otherwise maintains for the benefit of its
employees.
"Funded Debt" shall mean, with respect to the Company and its
Consolidated Subsidiaries, without duplication as of the date of any
determination thereof, (a) any obligations for borrowed money and any note
payable or draft accepted representing an extension of credit, (b) any
obligation owed for all or any part of the purchase price of property or other
assets or for the cost of property or other assets constructed or of
improvements thereto, (c) any obligation of the type described in (a) or (b)
above, secured by any lien in respect of property of the Company or any
Subsidiary even though the Person owning the property has not assumed or become
liable for the payment of such obligation, and (d) the principal portion of any
Capitalized Lease Obligation.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect from time to time.
"Guaranties" shall mean the Company Guaranty, the Parent
Guaranty and the Permitted Borrowers Guaranty.
"Hazardous Material" shall mean and include any hazardous,
toxic or dangerous waste, substance or material defined as such in (or for
purposes of) the Hazardous Material Laws.
"Hazardous Material Law(s)" shall mean all laws, codes,
ordinances, rules, regulations, orders, decrees and directives issued by any
federal, state, provincial, local, foreign or other governmental or quasi-
governmental authority or body (or any agency, instrumentality or political
subdivision thereof) pertaining to Hazardous Material on or about any Material
Property, or any portion thereof including, without limitation, those relating
to soil, surface, subsurface ground water conditions and the condition of the
ambient air; and any state, provincial and local laws and regulations
pertaining to Hazardous Material and/or asbestos; any so-called "superfund" or
"superlien" law; and any other federal, state, foreign or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to, or
imposing liability or standards of conduct concerning, any hazardous, toxic or
dangerous waste, substance or material, as now or at any time hereafter in
effect.
"Hereof", "hereto", "hereunder" and similar terms shall refer
to this Agreement and not to any particular paragraph or provision of this
Agreement.
"Indebtedness" shall mean all indebtedness and liabilities
(including without limitation interest, fees and other charges), whether direct
or indirect, absolute or contingent, of the Company or any of the Permitted
Borrowers to the Banks or to the Agents, in any manner and at any time, under
this Agreement or the Loan Documents, whether evidenced by the Revolving Credit
Notes, the Term Notes, arising under the Company Guaranty, the Permitted
Borrowers Guaranty, or any of the other Loan Documents, due or hereafter to
become due, now owing or that may hereafter be incurred by the Company, or any
of the Permitted Borrowers to, or acquired by, the Banks or the Agents (or
either or any of them) hereunder or thereunder, and any judgments (if not
reversed or stayed) that may hereafter be rendered on such indebtedness or any
part thereof, with interest according to the rates and terms specified, or as
provided by law, and any and all consolidations, amendments, renewals,
replacements or extensions of any of the foregoing.
"Intercompany Loan" shall mean any loan by the Company or any
Consolidated Subsidiary to another Consolidated Subsidiary which is not a
Permitted Borrower.
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"Intercompany Loans, Advances or Investments" shall mean any
Intercompany Loan, and any advance or investment by the Company or any
Consolidated Subsidiary to or in another Consolidated Subsidiary which is not a
Permitted Borrower.
"Interest Period" shall mean a Eurocurrency-Interest Period.
"Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated thereunder.
"Issuing Office" shall mean Administrative Agent's office
located at 611 Woodward, Detroit, Michigan 48226 or such other office as
Administrative Agent shall designate as its Issuing Office.
"Joint Venture" shall mean any corporation, partnership,
association, joint stock company, business trust or other combined enterprise,
other than a Consolidated Subsidiary, in which (or to which) the Company or any
of its Subsidiaries has made a loan, investment or advance (but excluding
investments permitted under Section 8.8(e) through (j) hereof) or has an
ownership stake or interest, whether in the nature of Capital Stock or
otherwise.
"Letter of Credit Agreement" shall mean, in respect of each
Letter of Credit, the application and related documentation satisfactory to the
Administrative Agent of an Account Party requesting Administrative Agent to
issue such Letter of Credit.
"Letter of Credit Fees" shall mean the commission payable to
Administrative Agent for the accounts of the Banks in connection with Letters
of Credit pursuant to Section 3.4 hereof.
"Letter of Credit Maximum Amount" shall mean as of any date of
determination the lesser of: (a) Thirty Million Dollars ($30,000,000); or (b)
the aggregate Revolving Credit Available Commitments of the Banks as of such
date (less the Reserved Availability), minus the aggregate Dollar Amount of
Advances outstanding as of such date under the Notes.
"Letter of Credit Obligation" shall mean the obligation of an
Account Party under each Letter of Credit Agreement to reimburse the
Administrative Agent for each payment made by the Administrative Agent under
the Letter of Credit issued pursuant to such Letter of Credit Agreement,
together with all other sums, fees, charges and amounts which may be owing to
the Administrative Agent under such Letter of Credit Agreement, and, to the
extent not named as the Account Party thereunder, shall include the obligation
of the Company, the Parent and the Permitted Borrowers to make reimbursement
pursuant to their respective guaranties of such obligations under the Loan
Documents.
"Letter of Credit Payment" shall mean any amount paid or
required to be paid by the Administrative Agent in its capacity hereunder as
issuer of a Letter of Credit as a result of a draft or other demand for payment
under any Letter of Credit.
"Letter(s) of Credit" shall mean any standby, direct-pay or
commercial letters of credit issued by Administrative Agent at the request of
or for the account of an Account Party pursuant to Article 3 hereof,
specifically including the Existing Letters of Credit and any Special Purpose
Letter of Credit.
"Lien" shall mean any pledge, assignment, hypothecation,
mortgage, security interest, deposit arrangement, option, trust receipt,
conditional sale or title retaining contract, sale and leaseback transaction,
or any other type of lien, charge or encumbrance, whether based on common law,
statute or contract.
"Loan Documents" shall mean, collectively, this Agreement, the
Notes, the Letter of Credit Agreements, the Letters of Credit, the Guaranties
and any other documents, certificates, instruments or agreements executed
pursuant to or in connection with any such document or this Agreement as such
documents may be amended from time to time.
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<PAGE> 21
"Majority Banks" shall mean at any time Banks holding not less
than 61% (including risk participations in Letters of Credit) of the aggregate
principal amount of the Indebtedness then outstanding under the Revolving
Credit Notes or available to be drawn under Letters of Credit (and, but only
upon the occurrence and during the continuance of an Event of Default, the Term
Notes), or, if no Indebtedness is then outstanding, Banks holding not less than
61% of the Percentages.
"Margin" shall mean, as of any date of determination, the
applicable interest rate margin for Advances of the Revolving Credit or for
Term Loans, as the case may be, determined (based on the Consolidated Cash Flow
Coverage Ratio) by reference to the appropriate columns in the pricing matrix
attached to this Agreement as Schedule 1.11.
"Material Property" shall mean any property, whether personal
or real, owned, leased or otherwise occupied or used from time to time by the
Company or any of its Subsidiaries which is material to the operations of
Company and its Subsidiaries, taken as a whole.
"Multiemployer Plan" shall mean any Pension Plan which is a
multiemployer plan as defined in Section 4001(a)(3) of ERISA.
"Net Income" of any Person for any period means the net income
(loss) of such Person for such period, determined in accordance with GAAP.
"Note(s)" shall mean the revolving credit notes ("Revolving
Credit Note(s)") described in Section 2.1 hereof and the term notes ("Term
Note(s)") described in Section 4.1 hereof, as such notes may be amended from
time to time, and any other notes issued in substitution or replacement thereof
from time to time.
"Parent" shall mean R.P. Scherer Corporation, a Delaware
corporation and the corporate parent of the Company.
"Parent Guaranty" shall mean that certain guaranty agreement in
the form attached as Exhibit I containing the unconditional guaranty of the
Indebtedness of the Company and each of the Permitted Borrowers hereunder,
executed and delivered by the Parent to Documentation Agent on behalf of the
Banks as of the date hereof, as amended from time to time.
"Pension Plan" shall mean each Employee Benefit Plan which is
an employee pension benefit plan as defined in Section 3(2) of ERISA (including
any Multiemployer Plan) which is subject to Title IV of ERISA or to the minimum
funding standards of Section 412 of the Internal Revenue Code.
"Percentage" shall mean, with respect to any Bank, its
percentage share of the Revolving Credit or the Letters of Credit, as the case
may be, such percentage shares being set forth on Exhibit "F" hereto.
"Permitted Borrower(s)" shall mean the following Subsidiaries
of the Company: R.P.S. Canada; R.P.S. Limited; F&F Holding; Scherer Holdings
Ltd.; Scherer DDS; Scherer Holdings Pty.; Scherer Italy and Scherer France;
provided however that, until completion of the Australian Amalgamation, Scherer
Pty. shall also be considered a "Permitted Borrower" for all purposes and
provisions of this Agreement, except that it shall not be entitled to any
Advances of the Revolving Credit, any Term Loans or to be an Account Party
hereunder.
"Permitted Borrowers Guaranty" shall mean that certain guaranty
agreement in the form attached as Exhibit "J" containing the guaranties of the
Indebtedness of the Permitted Borrowers hereunder executed and delivered by the
Permitted Borrowers to the Banks as of the date hereof, as amended from time to
time.
"Permitted Company Encumbrances" shall mean, in addition to
Permitted Encumbrances, those Liens and encumbrances of the Company identified
in Schedule 1.91, hereto, and any re-grant, restatement or confirmation of such
scheduled Lien or encumbrance given on substantially the same terms as existing
on the
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date hereof (in connection with the renewal or refinancing of the indebtedness
secured thereby) which does not expand the indebtedness secured or the property
covered thereby and which does not otherwise violate this Agreement.
"Permitted Currencies" shall mean Dollars or any Alternative
Currency.
"Permitted Encumbrances" shall mean, with respect to any Person:
(a) Liens for taxes not yet due and payable or which are
being contested in good faith by appropriate proceedings diligently pursued,
provided that provision for the payment of all such taxes known to such Person
has been made on the books of such Person as may be required by GAAP;
(b) mechanics', materialmen's, carriers', warehousemen's
and similar Liens and encumbrances arising in the ordinary course of business
and securing obligations of such Person that are not overdue for a period of
more than 60 days or are being contested in good faith by appropriate
proceedings diligently pursued, provided that in the case of any such contest
(i) any proceedings commenced for the enforcement of any such Liens and
encumbrances shall have been duly suspended; and (ii) such provision for the
payment of such Liens and encumbrances has been made on the books of such
Person as may be required by GAAP;
(c) Liens arising in connection with worker's compensation,
unemployment insurance, old age pensions (subject to the applicable provisions
of this Agreement) and social security benefits which are not overdue or are
being contested in good faith by appropriate proceedings diligently pursued,
provided that in the case of any such contest (i) any proceedings commenced for
the enforcement of such Liens shall have been duly suspended; and (ii) such
provision for the payment of such Liens has been made on the books of such
Person as may be required by GAAP;
(d) Liens incurred in the ordinary course of business,
other than in connection with indebtedness for borrowed money, including,
without limitation, (i) Liens to secure the performance of statutory
obligations arising in connection with progress payments or advance payments
due under contracts with the United States or any foreign government or any
agency thereof entered into in the ordinary course of business and (ii) Liens
incurred or pledges or deposits made in the ordinary course of business to
secure the performance of statutory obligations, worker's compensation,
unemployment insurance and other social security legislation, bids, leases, fee
and expense arrangements with trustees and fiscal agents and other similar
obligations (exclusive of obligations incurred in connection with the borrowing
of money, any lease-purchase arrangements or the payment of the deferred
purchase price of property), provided that full provision for the payment of
any such obligations set forth in this subparagraph (d) has been made on the
books of such Person as may be required by GAAP;
(e) easements, rights-of-way, building and use restrictions
and other similar encumbrances incurred in the ordinary course of business that
do not materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business thereon.
(f) any Lien arising out of judgments or awards against
Company or any Subsidiary with respect to which Company or such Subsidiary
shall in good faith be prosecuting an appeal or proceedings for review, or
Liens which are discharged within sixty (60) days of entry of judgment, or
Liens (including without limitation appellate bonds) incurred by the Company or
a Subsidiary for the purpose of obtaining a stay or discharge in the course of
any on-going legal proceedings to which Company or any such Subsidiary is a
party;
(g) Subject to the terms hereof, Liens in favor of the
Company or a Subsidiary;
(h) Liens extending, renewing or replacing any Lien
permitted by subparagraphs (a) through (g) above; and
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(i) Liens securing indebtedness the proceeds of which are
deposited, promptly upon receipt, with a trustee solely for the purpose of
effecting a legal defeasance or covenant defeasance as set forth in any
indenture to which the Company or any Subsidiary is, from time to time, a
party, provided that, immediately before and immediately after the granting of
such Lien (giving effect thereto) no Default or Event of Default has occurred
and is continuing.
"Permitted Encumbrances of the Subsidiaries" shall mean, in
addition to Permitted Encumbrances, those Liens and encumbrances of the
Permitted Borrowers or the Subsidiaries, as the case may be, identified in
Schedule 1.94, hereto, and any re-grant, restatement or confirmation of such
scheduled Lien or encumbrance given on substantially the same terms as existing
on the date hereof (in connection with the renewal or refinancing of the
indebtedness secured thereby) which does not expand the indebtedness secured or
the property covered thereby and which does not otherwise violate this
Agreement.
"Person" shall mean an individual, corporation, partnership,
trust, incorporated or unincorporated organization, joint venture, joint stock
company, or a government or any agency or political subdivision thereof or
other entity of any kind.
"Prime Rate" shall mean the per annum rate of interest
announced by NBD Bank, N.A., at its main office from time to time as its "prime
rate" (it being acknowledged that such announced rate may not necessarily be
the lowest rate charged by NBD Bank, N.A., to any of its customers), which
Prime Rate shall change simultaneously with any change in such announced rate.
"Prime-based Advance" shall mean an Advance which bears
interest at the Prime-based Rate.
"Prime-based Rate" shall mean, for any day, that rate of
interest which is equal to the greater of (i) the Prime Rate or (ii) the
Alternate Base Rate.
"Prior Credit Agreement" shall mean that certain R.P. Scherer
International Corporation $120,000,000 Credit Agreement among Company, the
Permitted Borrowers, Banks, and Agents dated as of June 30, 1992, as amended.
"R.P.S. Canada" shall mean R.P. Scherer Canada Inc., an Ontario
corporation and a Subsidiary of the Company.
"R.P.S. Limited" shall mean R.P. Scherer Limited, an
English company and a Subsidiary of the Company.
"Reportable Event" shall mean a "reportable event" within the
meaning of Section 4043 of ERISA and the regulations thereunder, which is
material to the Company and its Subsidiaries, taken as a whole.
"Request for Advance" shall mean a Request for Advance issued
by the Company or by one of the Permitted Borrowers and countersigned by the
Company under Section 2.7A of this Agreement in the form annexed hereto as
Exhibit "A".
"Reserved Availability" shall mean, on any date of
determination, a portion of the Revolving Credit Maximum Amount in the amount
of Fourteen Million Dollars ($14,000,000), plus the amount, if any, by which
the aggregate of the Swing Line Amounts (or the equivalent amount in Dollars
for Swing Line Amounts denominated in Alternative Currencies, determined at the
spot rate of exchange determined by the Administrative Agent to be available to
it for the sale of Dollars for such Alternative Currencies on such date of
determination) exceeds Fourteen Million Dollars ($14,000,000) reserved solely
for the funding of Advances of the Revolving Credit pursuant to Section 2.7B
hereof, in respect of advances under any Swing Line Facility, as such portion
may be decreased from time to time pursuant to Section 2.7B(e) hereof.
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"Revolving Credit" shall mean the revolving credit loan to be
advanced to the Company or the Permitted Borrowers by the Banks pursuant to
Section 2, hereof, in an aggregate amount, subject to the terms hereof, not to
exceed One Hundred Seventy Five Million Dollars ($175,000,000).
"Revolving Credit Closing Fee" shall mean the closing fee in
the amount of Two Hundred Eighteen Thousand Seven Hundred Fifty Dollars
($218,750) payable to Administrative Agent for pro rata distribution to the
Banks.
"Revolving Credit Commitment Fee" shall mean the commitment fee
payable to Administrative Agent for distribution to the Banks pursuant to
Section 2.11 hereof.
"Revolving Credit Maturity Date" shall mean the earlier to
occur of (i) April 1, 1999 and (ii) the date on which the Revolving Credit
Maximum Amount shall be terminated pursuant to Section 2.13 or Section 9.2.
"Revolving Credit Maximum Amount" shall mean One Hundred
Seventy Five Million Dollars ($175,000,000), less any reductions in the
Revolving Credit Maximum Amount under Section 2.13 hereof.
"Scherer DDS" shall mean Scherer DDS Limited, a company
organized under the laws of Scotland and a Subsidiary of the Company.
"Scherer France" shall mean R.P. Scherer S.A., a French
corporation and a Subsidiary of the Company.
"Scherer Holdings Ltd." shall mean R.P. Scherer Holdings Ltd.,
an English company and a Subsidiary of the Company.
"Scherer Holdings Pty." shall mean R.P. Scherer Holdings Pty.
Ltd., an Australian corporation and Subsidiary of the Company.
"Scherer Italy" shall mean R.P. Scherer S.p.A., an Italian
company and a Subsidiary of the Company.
"Scherer Pty." shall mean R.P. Scherer Pty. Ltd., an Australian
corporation and Subsidiary of the Company.
"Shares", "share capital", "capital stock", "stock" and words
of similar import shall mean and refer to the equity capital interest under
applicable law of any Person in a corporation, howsoever such interest is
created or arises, whether such capital consists of common stock, preferred
stock or preference shares, or other stock, and whether such capital is
evidenced by a certificate, share register entry or otherwise.
"Single Employer Plan" shall mean any Pension Plan other than a
Multiemployer Plan.
"Special Purpose Letter of Credit" shall mean any Letter of
Credit which is issued for the purpose of supporting industrial development
revenue bonds or other obligations of the Company or an Account Party for
borrowed money.
"Sublimit" shall mean the maximum aggregate amount of Advances
of the Revolving Credit available at any time to each of the Permitted
Borrowers hereunder, as set forth on Exhibit "K" hereto.
"Subsidiary(ies)" shall mean any other corporation,
association, joint stock company, or business trust of which more than fifty
percent (50%) of the outstanding voting stock is owned either directly or
indirectly by the Company or one or more of its Subsidiaries or by the Company
and one or more of its
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Subsidiaries, or the management of which is otherwise controlled, directly, or
indirectly through one or more intermediaries, or both, by the Company and/or
its Subsidiaries. "100% Subsidiaries" shall mean any Subsidiary whose stock
(other than directors' or qualifying shares to the extent required under
applicable law) is owned 100% by the Company or any Permitted Borrower.
"Substitute Bank" means a Bank appointed pursuant to Section
11.10 hereof.
"Swing Line Facility(ies)" shall mean any foreign short-term
borrowing facility of a Permitted Borrower, as disclosed on Schedule 1.122
hereto, obtained from any Bank or its affiliate (each, a "Swing Line Bank") up
to an aggregate principal amount for all such facilities of Fourteen Million
Dollars ($14,000,000), or the Alternative Currency equivalent thereof as
determined on any date of determination at the spot rate of exchange determined
by the Administrative Agent to be available to it for the sale of Dollars for
such Alternative Currency, subject to adjustment under Section 2.7B(d) hereof;
provided, however, that the aggregate amount of Advances under Section 2.7B
hereof available to each Swing Line Bank for its Swing Line Facility (to the
applicable Permitted Borrower identified therein) shall not exceed the amount
in Dollars or the applicable Alternative Currency (if so denominated) set forth
from time to time for such bank (and such Permitted Borrower) on Schedule 1.122
hereto ("Swing Line Amount(s)").
"Term Loan(s)" shall mean the term loan(s) to be funded
severally by each of the Banks, subject to the terms hereof, in accordance with
Section 4 of this Agreement.
"Term Loan Commitment" shall mean the several (and not joint)
commitment of each of the Banks to fund Term Loans hereunder in an amount up to
Twelve Million Dollars ($12,000,000) in aggregate amount for each Bank, based
on the Dollar Amount of any Term Loans initially funded in Alternative
Currencies determined as of the date of funding each such Term Loan, provided,
however, that the respective Term Loan Commitments of the Banks may be
re-allocated pursuant to Section 4.9 hereof.
"Term Loan Maturity Date" shall mean that date selected by the
applicable Permitted Borrower for each Term Loan, as selected by the applicable
Permitted Borrower (subject to the terms hereof) under the applicable Request
for Term Loan funding and as set forth in the applicable Term Note evidencing
said Term Loan, provided that no such maturity date shall extend beyond the
Revolving Credit Maturity Date in effect on the date of funding of the
applicable Term Loan.
"Yield Maintenance Payment" shall mean a yield maintenance
payment calculated to make such Bank whole (to the extent of the interest which
would have been earned by such Bank but/for the occurrence of such prepayment)
on the basis of the discounted net present values of the interest payments that
would otherwise be payable on the principal amount of the Term Loan being
prepaid, after taking into account the amount of interest which would be
payable on each interest payment due date if the principal amount being repaid
were reinvested at a current market rate reasonably established by the
applicable Bank in connection with such prepayment based on its then-current
cost of funds for the applicable Alternative Currency, plus the Margin,
together with any breakage or other funding costs or reimbursements recognized,
assumed or incurred by such Bank in connection with any swap, hedge or other
contracts entered into, recognized assumed or incurred by such Bank in funding
or carrying any Term Loan so prepaid, all in accordance with the applicable
formula for calculating the Yield Maintenance Payment to be set forth in the
applicable Term Note.
2. REVOLVING CREDIT
2.1 Commitment. Subject to the terms and conditions of this
Agreement (including without limitation Section 2.7A(c) hereof and the
post-amble, below), each Bank severally and for itself alone agrees to make
Advances of the Revolving Credit in any one or more of the Permitted Currencies
to the Company or to any of the Permitted Borrowers from time to time on any
Business Day during the period from the effective date hereof until (but
excluding) the Revolving Credit Maturity Date in an aggregate amount, based on
the Dollar Amount of any Advances outstanding in Dollars and the Current Dollar
Equivalent of any Advances outstanding in Alternative Currencies, not to exceed
at any one time outstanding each such Bank's Percentage of the
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Revolving Credit Maximum Amount. Except as provided in Section 2.12, for
purposes of this Agreement, Advances in Alternative Currencies shall be
determined, denominated and redenominated as set forth in Section 2.7C hereof.
All of the Advances of the Revolving Credit hereunder shall be evidenced by
Revolving Credit Notes made by Company or the Permitted Borrowers to each of
the Banks in the form attached hereto as Exhibit "B-1" or "B-2", as the case
may be, subject to the terms and conditions of this Agreement. Advances of the
Revolving Credit shall be subject to the following additional conditions and
limitations:
(a) No Permitted Borrower (other than Scherer France or
Scherer Italy) shall be entitled to request an Advance of the Revolving Credit
hereunder after it ceases to be a 100% Subsidiary of the Company.
(b) Scherer France shall not be entitled to request an
Advance of the Revolving Credit hereunder (or to become an Account Party under
any Letter of Credit) after any reduction in the indirect or direct ownership
by the Company of Scherer France, other than deminimis reductions which do not
affect the Company's direct or indirect majority ownership or control of
Scherer France resulting from any additional directors shares subsequently
required under French law. Scherer Italy shall not be entitled to request an
Advance of the Revolving Credit hereunder (or to become an Account Party under
any Letter of Credit) after any reduction in the indirect or direct ownership
by the Company of Scherer Italy.
(c) The maximum aggregate amount of Advances of the
Revolving Credit available to each of the Permitted Borrowers at any time
hereunder, plus the aggregate principal amount of Term Loans outstanding from
each such Permitted Borrower to a Bank or Banks, as applicable (using the
Current Dollar Equivalent of any Term Loans outstanding in any Alternative
Currency), shall not exceed, for Advances in Dollars, the Dollar Amount of the
Sublimit applicable to such Permitted Borrower, and for Advances in Alternative
Currencies, the Current Dollar Equivalent of the applicable Sublimit.
The obligation of each Bank to fund its Percentage of the Revolving Credit
Maximum Amount shall not be affected by the making by such Bank of a Term Loan,
except that the aggregate amount of Indebtedness (including Term Loans)
outstanding to any Bank hereunder shall not at any time exceed such Bank's
Percentage of the amount of the Revolving Credit Maximum Amount then in effect.
In the event that any Bank has reached or, upon the funding of any Advance of
the Revolving Credit requested hereunder, would reach such credit exposure
limitation ("Credit Exposure Limitation"), the other Banks which have not
reached said Credit Exposure Limitation shall fund all Advances of the
Revolving Credit requested while such condition exists pro rata (based on their
respective Percentages) with each other.
2.2 Accrual of Interest and Maturity. (a) The Revolving Credit
Notes, and all principal and interest outstanding thereunder, shall mature and
become due and payable in full on the Revolving Credit Maturity Date, and each
Advance evidenced by the Revolving Credit Notes from time to time outstanding
hereunder shall, from and after the date of such Advance, bear interest at its
Applicable Interest Rate. The amount and date of each Advance, its Applicable
Interest Rate, its Interest Period, and the amount and date of any repayment
shall be noted on Administrative Agent's records, which records will be
conclusive evidence thereof, absent manifest error, provided, however, that any
failure by the Administrative Agent to record any such information shall not
relieve the Company or any Permitted Borrower of its obligation to repay the
outstanding principal amount of such Advance, all interest accrued thereon and
any amount payable with respect thereto in accordance with the terms of this
Agreement and the Loan Documents.
(b) Adjustments in the applicable Margin, based on the
Consolidated Cash Flow Coverage Ratio, shall be implemented on a quarterly
basis as follows:
(i) Such Margin adjustments shall be given prospective
effect only, effective upon the expiration of the applicable Interest
Period(s), if any, in effect on the required date of delivery of the latest of
the financial statements required to be delivered during such Interest Period
under Section 7.3(b) and 7.3(c) hereof establishing applicability of the
appropriate adjustments, if any, in each case with no retroactivity or
claw-back.
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(ii) An adjustment hereunder, after becoming effective,
shall remain in effect only through the end of the applicable Interest
Period(s) for Eurocurrency-based Advances if any; provided, however, that upon
the delivery of quarterly financial statements, as aforesaid, demonstrating any
change in such ratio or the occurrence of any event which under the terms
hereof causes such adjustment no longer to be applicable, then any such
subsequent adjustment or no adjustment, as the case may be, shall be effective
(and said pricing shall thereby be adjusted up or down, as applicable), in
accordance with subparagraph 2.2(b)(i), above.
2.3 Prime-based Interest Payments. Interest on the unpaid balance
of all Prime-based Advances from time to time outstanding shall accrue from the
date of such Advance to the Revolving Credit Maturity Date (and until paid), at
a per annum interest rate equal to the Prime-based Rate, and shall be payable
in immediately available funds quarterly commencing on June 30, 1994, and on
the last day of each calendar quarter thereafter. Interest accruing at the
Prime-based Rate shall be computed on the basis of a 365/366 day year and
assessed for the actual number of days elapsed, and in such computation effect
shall be given to any change in the interest rate resulting from a change in
the Prime-based Rate on the date of such change in the Prime-based Rate.
2.4 Eurocurrency-based Interest Payments. Interest on each
Eurocurrency-based Advance having a related Eurocurrency-Interest Period of 3
months or less shall accrue at its Applicable Interest Rate and shall be
payable in immediately available funds on the last day of the Interest Period
applicable thereto. Interest shall be payable in immediately available funds on
each Eurocurrency-based Advance outstanding from time to time having a
Eurocurrency-Interest Period of 6 months or longer, at intervals of 3 months
after the first day of the applicable Interest Period, and shall also be
payable on the last day of the Interest Period applicable thereto. Interest
accruing at the Eurocurrency-based Rate shall be computed on the basis of a 360
day year (except that any such Advances made in GBP or any other Alternative
Currency with respect to which market custom requires shall be calculated based
on a 365 day year) and assessed for the actual number of days elapsed from the
first day of the Interest Period applicable thereto to but not including the
last day thereof. Interest due on a Eurocurrency-based Advance made in an
Alternative Currency shall be paid in such Alternative Currency.
2.5 Interest Payments on Conversions. Notwithstanding anything to
the contrary in Sections 2.2, 2.3 and 2.4, all accrued and unpaid interest on
any Advance refunded or converted, as the case may be, pursuant to Section 2.7
hereof shall be due and payable in full on the date such Advance is refunded or
converted.
2.6 Interest on Default. Notwithstanding anything to the contrary
set forth in Sections 2.3 and 2.4, in the event and so long as any Event of
Default shall exist under this Agreement, interest shall be payable daily on
the principal amount of all Advances from time to time outstanding at a per
annum rate equal to the Applicable Interest Rate in respect of each such
Advance plus two percent (2%) per annum for the remainder of the then existing
Interest Period, if any, and at all other such times, with respect to Domestic
Advances from time to time outstanding, at a per annum rate equal to the
Prime-based Rate plus two percent (2%), and, with respect to Eurocurrency-based
Advances from time to time outstanding, (i) at a per annum rate calculated by
the Administrative Agent, whose determination shall be conclusive absent
manifest error, on a daily basis, equal to two percent (2%) above the interest
rate per annum at which one (1) day deposits (or, if such amount due remains
unpaid for more than three (3) Business Days, then for such other period of
time as the Administrative Agent may elect which shall in no event be longer
than six (6) months) in the relevant eurocurrency in the amount of such overdue
payment are offered to the Administrative Agent's Eurocurrency Lending Office
for the applicable period determined as provided above, such rate to be
determined by the Administrative Agent as provided in the definition of
"Eurocurrency-based Rate" as though such periods selected by the Administrative
Agent were Eurocurrency-Interest Periods or (ii) if at any such time such
deposits are not offered to such Eurocurrency Lending Office, then at a rate
per annum equal to two percent (2%) above the rate reasonably determined by the
Administrative Agent to be its aggregate marginal cost (including the cost of
maintaining any required reserves or deposit insurance) of carrying the amount
of such Eurocurrency-based Advance.
2.7A Requests for Advances and Requests for Refundings and
Conversions of Advances. The Company or any of the Permitted Borrowers may
request an Advance, refund any Advance in the same type of
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Advance or convert any Advance to any other type of Advance only after
delivery to Administrative Agent of a Request for Advance executed by an
authorized signer, subject to the following and to the remaining provisions
hereof:
(a) each such Request for Advance shall set forth the
information required on the Request for Advance form annexed hereto as Exhibit
"A", including without limitation:
(i) the proposed date of Advance, which must be a
Business Day;
(ii) whether the Advance is a refunding or conversion
of an outstanding Advance, and, if such outstanding Advance is denominated in an
Alternative Currency, the Permitted Currency in which such outstanding Advance
is to be redenominated by refunding or conversion, subject to Section 2.7C
hereof;
(iii) whether such Advance is to be a Prime-based
Advance or a Eurocurrency-based Advance, and, except in the case of a Prime-
based Advance, the first Interest Period applicable thereto; and
(iv) in the case of a Eurocurrency-based Advance, the
Permitted Currency in which such Advance is to be made;
(b) each such Request for Advance shall be delivered to
Administrative Agent by 11:00 a.m. (Detroit time) three (3) Business Days
prior to the proposed date of Advance, except in the case of a Prime-based
Advance, for which the Request for Advance must be delivered by 11 a.m.
(Detroit time) on such proposed date;
(c) (i) the principal amount (or Dollar Amount of the
principal amount, if such Advance is being initially funded in an Alternative
Currency) of such requested Advance, plus the principal amount of all other
Advances then outstanding hereunder (using the Current Dollar Equivalent
of any Advances outstanding in any Alternative Currency, determined pursuant to
the terms hereof as of the date of such requested Advance), the aggregate
undrawn portion of any Letters of Credit which shall be outstanding as of the
date of the requested Advance (based on the Dollar Amount of the undrawn
portion of any Letters of Credit denominated in Dollars and the Current Dollar
Equivalent of the undrawn portion of any Letters of Credit denominated in any
Alternative Currency) and the aggregate face amount of Letters of Credit
requested but not yet issued (determined as aforesaid), plus the aggregate
principal amount of Term Loans outstanding hereunder (using the Current Dollar
Equivalent of any Term Loan outstanding in any Alternative Currency) shall not
exceed the Revolving Credit Maximum Amount, less (except for Advances pursuant
to Section 2.7B hereof) the Reserved Availability; and (ii) in the case of a
Permitted Borrower, the principal amount of the requested Advance (determined
as aforesaid), plus the principal amount of any other Advances then outstanding
to such Permitted Borrower hereunder (determined as aforesaid), the aggregate
undrawn portion of any Letters of Credit which shall be outstanding as of the
date of the requested Advance for the account of such Permitted Borrower
hereunder (determined as aforesaid) and the aggregate face amount of Letters of
Credit requested but not yet issued for the account of such Permitted Borrower
hereunder (determined as aforesaid), plus the aggregate principal amount of
Term Loans outstanding to such Permitted Borrower, if any (using the Current
Dollar Equivalent of any Term Loans Outstanding in any Alternative Currency)
plus the Current Dollar Equivalent of the maximum aggregate Swing Line Amounts
available to be borrowed by such Permitted Borrower under the Swing Line
Facilities (if any) established for it (regardless of the amounts actually
outstanding thereunder), shall not exceed the Sublimit applicable to such
Permitted Borrower;
(d) the principal amount of such Advance, plus the amount
of any other outstanding Indebtedness under this Agreement to be then combined
therewith having the same Applicable Interest Rate and Interest Period, if any,
shall be (i) in the case of a Prime-based Advance at least Five Hundred
Thousand Dollars ($500,000) and (ii) in the case of a Eurocurrency-based
Advance at least Two Million Dollars ($2,000,000) or the equivalent thereof in
an Alternative Currency, and at any one time there shall not be in effect more
than twenty (20) Applicable Interest Rates and Interest Periods;
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(e) each Request for Advance, once delivered to
Administrative Agent, shall not be revocable by the Company or the Permitted
Borrowers, and shall constitute and include a certification by the Company and
the Permitted Borrowers requesting such Advance, if applicable, as of the date
thereof that:
(i) both before and after the Advance, the
obligations of the Company, its Subsidiaries and the Permitted Borrowers set
forth in this Agreement and the Loan Documents to which such Persons are
parties are valid, binding and enforceable obligations of the Company, its
Subsidiaries and the Permitted Borrowers, as the case may be, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law);
(ii) all applicable conditions to Advances of the
Revolving Credit hereunder have been satisfied, and (to the belief of the
Company) shall remain satisfied to the date of Advance;
(iii) there is no Default or Event of Default in
existence, and (to the belief of the Company) none will exist upon the making
of the Advance; and
(iv) the representations and warranties contained in
this Agreement and the Loan Documents are true and correct in all material
respects and (to the belief of the Company) shall be true and correct in all
material respects as of the making of the Advance.
(f) Within two (2) Business Days after the funding,
refunding or conversion of each Advance hereunder (but without liability to the
Company or the Permitted Borrowers for failing to do so), Administrative Agent
shall provide written confirmation thereof to the Company, specifying the
Applicable Interest Rate accruing thereon.
2.7B Advances of Reserved Availability. Subject to the terms and
conditions hereof,
(a) Each of the Banks shall be entitled, on behalf of the
Permitted Borrowers hereunder (by written request to Administrative Agent in
compliance with this Section 2.7B), to request Advances of the Revolving Credit
in order to obtain reimbursement for sums due to it or its affiliate as a
Swing Line Bank and not timely paid by the applicable Permitted Borrower under
a Swing Line Facility extended to such Permitted Borrower, up to its
applicable Swing Line Amount; provided, however, that (i) the indebtedness
under the Swing Line Facility for which reimbursement is sought was incurred
not later than the third Business Day following receipt by the requesting Bank
and its Swing Line Bank affiliate (if any) of written notice from
Administrative Agent that an Event of Default has occurred and is continuing
hereunder and (ii) if the request for an Advance is made following the
termination of the Banks' commitment hereunder to make Advances of Revolving
Credit pursuant to the provisions of Section 9.2 hereof, such request must be
made not later than thirty (30) days following receipt by the requesting Bank
and its Swing Line Bank affiliate (if any) of written notice from
Administrative Agent of the date of such termination.
(b) Each of the Company and the Permitted Borrowers hereby
irrevocably authorizes each Bank to make requests for Advances under this
Section 2.7B without prior notice to the Company and the Permitted Borrowers,
solely in connection with the reimbursement of amounts outstanding under a
Swing Line Facility, as aforesaid. Upon receipt of an Advance under this
Section 2.7B, such Bank shall apply or cause its affiliate to apply the
proceeds thereof against the sums then outstanding under its Swing Line
Facility. Each request for an Advance submitted by a Bank hereunder shall be
irrevocable and shall meet the requirements for Requests for Advances set forth
in Section 2.7A hereof (but expressly excluding subparagraphs (d) and (e)
thereof). Each Advance of Dollars under this Section 2.7B(a)-(d) shall bear
interest at the Prime-based Rate, and each Advance in an Alternative Currency
shall bear interest at the applicable Eurocurrency-based Rate for an Interest
Period of one month. Administrative Agent and the Banks (other than the
requesting Swing Line Bank) shall be entitled to rely solely upon the request
for Advance submitted by the requesting Bank (for its Swing Line Bank
affiliate) under this Section 2.7B and shall have no obligation whatsoever to
make any investigation as to
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the entitlement of the requesting Bank (or its affiliate) to reimbursement of
any sums due under any Swing Line Facility, or any other fact or matter in
connection therewith.
(c) The aggregate amount of Advances available to be funded
under this Section 2.7B during the entire term of this Agreement, whether such
Advances are funded in Dollars or any Alternative Currency, shall not exceed
Fourteen Million Dollars ($14,000,000), plus the excess over such sum, if any,
determined on the basis of the Current Dollar Equivalents of the Swing Line
Amounts (if denominated in Alternative Currencies) on the date funding of
Fourteen Million Dollars ($14,000,000) has been provided hereunder.
(d) The Company may, from time to time subject to the terms
hereof, upon not less than five (5) days prior written notice to Administrative
Agent, change the Swing Line Banks or reallocate the maximum amounts of the
Swing Line Facilities available to the Swing Line Banks hereunder (as set
forth in Schedule 1.122 hereto), provided, however, that each such notice (i)
shall be countersigned by each of the Swing Line Banks (including any proposed
new Swing Line Bank), but excluding any Swing Line Bank whose Swing Line
Facility is terminated (and all of the indebtedness thereunder paid and
discharged in full), and (ii) shall be accompanied by a revised Schedule 1.122
reflecting such changes in the Swing Line Banks and/or such reallocations of
maximum amounts of the Swing Line Facilities available to the Swing Line Banks,
as aforesaid (which revised Schedule 1.122 shall become effective upon the
effective date of the changes and/or reallocations thereby made); and provided
further that, on a quarterly basis commencing June 30, 1994, to the extent as
of such date that the aggregate Swing Line Amounts (calculated on the basis of
the sum of any such amounts denominated in Dollars, plus the Current Dollar
Equivalents of any such amounts denominated in Alternative Currencies) exceed
Fourteen Million Dollars ($14,000,000), the Company shall (in compliance with
this Section) reduce the aggregate Swing Line Amounts by an amount not less
than the amount of such excess.
(e) The Company may upon not less than five (5) Business
Days' prior written notice to the Administrative Agent, permanently reduce the
amount of the Reserved Availability in whole, at any time, or in part, from
time to time, without premium or penalty, provided that: (i) each partial
reduction of the Reserved Availability shall be in an aggregate amount equal to
Five Hundred Thousand Dollars ($500,000) or an integral multiple thereof; (ii)
each request for a decrease of the Reserved Availability (x) shall be
countersigned by the Swing Line Banks (excluding any Swing Line Bank whose
Swing Line Facility is terminated, and all of the indebtedness under such Swing
Line Facility paid and discharged in full), (y) shall demonstrate on a basis
reasonably satisfactory to the Administrative Agent that the aggregate amount
of Swing Line Facilities outstanding to the Permitted Borrowers has been
reduced to an amount not greater than the amount of the Reserved Availability
which shall remain after such reduction (and the maximum amount of each of the
Swing Line Facilities disclosed on Schedule 1.122 hereto shall, upon the
effective date of such reduction in the Reserved Availability, be deemed
automatically reduced to such amount) and (2) shall include a revised Schedule
1.122 reflecting appropriate reductions (consistent with the requested
reduction of the Reserved Availability) in the maximum aggregate amounts of the
Advances under this Section 2.7B available to each of the Swing Line Banks for
its Swing Line Facility (which revised Schedule 1.122 shall become effective
upon the effective date of such reduction in the Reserved Availability); and
(iii) no request for an Advance under this Section 2.7B shall be pending.
Neither of the Agents shall have any duty whatsoever to inform any of the Swing
Line Banks of the occurrence of any Default or Event of Default, or of the
termination of the Banks' commitment to make Advances of the Revolving Credit,
provided however, that Advances of the Reserved Availability shall be available
to the Banks pursuant to Section 2.7B(a), above, to the extent set forth
therein, until the furnishing of written notice by Administrative Agent under
said Section 2.7B(a)(i) or (ii), as applicable.
2.7C Determination, Denomination and Redenomination of Alternative
Currency Advances. Whenever, pursuant to any provision of this Agreement:
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(a) an Advance is initially funded, as opposed to any
refunding or conversion thereof, in an Alternative Currency, the amount to be
advanced hereunder will be the equivalent in such Alternative Currency of the
Dollar Amount of such Advance;
(b) an existing Advance denominated in an Alternative
Currency is to be refunded, in whole or in part, with an Advance denominated
in the same Alternative Currency, the amount of the new Advance shall be
continued in the amount of the Alternative Currency so refunded;
(c) an existing Advance denominated in an Alternative
Currency is to be converted, in whole or in part, to an Advance denominated in
another Alternative Currency, the amount of the new Advance shall be that
amount of the Alternative Currency of the new Advance which may be purchased,
using the quoted spot rate at which the Administrative Agent's Eurocurrency
Lending Office in London offers to sell Dollars for such other Alternative
Currency at approximately 9:00 a.m. (Detroit time) two (2) Business Days prior
to the last day of the Eurocurrency Interest Period applicable to the existing
Advance, with the Dollar Amount of the existing Advance, or portion thereof
being converted; and
(d) an existing Advance denominated in an Alternative
Currency is to be converted, in whole or in part, to an Advance denominated in
Dollars, the amount of the new Advance shall be the Dollar Amount of the
existing Advance, or portion thereof being converted.
2.8 Disbursement of Advances.
(a) Upon receiving any Request for Advance from Company
or any of the Permitted Borrowers under Section 2.7A hereof or from a
requesting Bank (on behalf of a Permitted Borrower) under Section 2.7B hereof,
Administrative Agent shall promptly notify each Bank by wire, telex or by
telephone (confirmed by wire, telecopy or telex) of the amount and currency of
such Advance to be made and the date such Advance is to be made by said Bank
pursuant to its Percentage of the Advance. Unless such Bank's commitment to
make Advances hereunder shall have been suspended or terminated in accordance
with this Agreement, each Bank shall make available the amount of its
Percentage of the Advance in same day funds in the currency of the Advance to
Administrative Agent, as follows:
(i) for Domestic Advances, at the office of
Administrative Agent located at 611 Woodward, Detroit, Michigan 48226, not
later than 2:00 p.m. (Detroit time) on the date of such Advance; and
(ii) for Eurocurrency-based Advances, at the relevant
Agent's Correspondent for the account of the Eurocurrency Lending Office of the
Administrative Agent, not later than 11:00 A.M. (the time of the Agent's
Correspondent) on the date of such Advance.
(b) Subject to submission of an executed Request for
Advance by the Company or one of the Permitted Borrowers without exceptions
noted in the compliance certification therein, Administrative Agent shall make
available to the Company or to the applicable Permitted Borrower, as the case
may be, the aggregate of the amounts so received by it from the Banks in
respect of Section 2.7A hereof, in like funds and currencies:
(i) for Domestic Advances, not later than 4:00 p.m.
(Detroit time) on the date of such Advance by credit to an account of the
Company or the applicable Permitted Borrower maintained with Administrative
Agent or to such other domestic account or third party as the Company or the
applicable Permitted Borrower may reasonably direct; and
(ii) for Eurocurrency-based Advances, not later than
4:00 p.m. (the time of the Agent's Correspondent) on the date of such Advance,
by credit to an account of the Company or the applicable Permitted Borrower
maintained with Agent's Correspondent or to such other account or third party
as the Company or the applicable Permitted Borrower may reasonably direct.
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Funds received by the Administrative Agent from the Banks in respect of
Advances requested under Section 2.7B hereof shall be promptly paid to the
requesting Bank, subject to the terms of said Section 2.7B.
(c) Unless Administrative Agent shall have been notified
by any Bank prior to the date of any proposed Advance that such Bank does not
intend to make available to Administrative Agent such Bank's Percentage of the
Advance, Administrative Agent may assume that such Bank has made such amount
available to Administrative Agent on such date and in such currency, as
aforesaid and may in, its sole discretion and without obligation to do so, in
reliance upon such assumption, make available to the Company or to the
applicable Permitted Borrower, as the case may be, a corresponding amount.
If such amount is not in fact made available to Administrative Agent by such
Bank in accordance with Section 2.8(b), as aforesaid, Administrative Agent
shall be entitled to recover such amount on demand from such Bank. If such Bank
does not pay such amount forthwith upon Administrative Agent's demand therefor,
Administrative Agent shall promptly notify the Company and the Company shall
pay such amount to Administrative Agent within two (2) Business Days of such
notice. Administrative Agent shall also be entitled to recover from such Bank
or the Company, as the case may be, interest on such amount in respect of each
day from the date such amount was made available by Administrative Agent to
Company to the date such amount is recovered by Administrative Agent, at a rate
per annum equal to:
(i) in the case of such Bank, with respect to
Prime-based Advances, the Federal Funds Effective Rate, and with respect to
Eurocurrency-based Advances, Administrative Agent's aggregate marginal cost
(including the cost of maintaining any required reserves or deposit insurance
and of any fees penalties, overdraft charges or other costs or expenses
incurred by Administrative Agent as a result of such failure to deliver funds
hereunder) of carrying such amount; and
(ii) in the case of the Company or a Permitted
Borrower, the rate of interest then applicable to the Advance.
The obligation of any Bank to make any Advance hereunder shall not be affected
by the failure of any other Bank to make any Advance hereunder, and no Bank
shall have any liability to the Company or any of its Subsidiaries, the Agents,
any other Bank, or any other party for another Bank's failure to make any loan
or Advance hereunder (except to the extent set forth in Sections 3.6(c) through
(f) hereof).
2.9 Prepayment. The Company or the applicable Permitted Borrower
may prepay all or part of the outstanding balance of any Prime-based Advance(s)
under the Revolving Credit Notes at any time (subject to not less than one (1)
Business Day's notice to Administrative Agent), provided that the amount of any
partial prepayment shall be at least Five Hundred Thousand Dollars ($500,000)
and the aggregate balance of Prime-based Advance(s) remaining outstanding shall
be at least Five Hundred Thousand Dollars ($500,000). The Company or the
applicable Permitted Borrower may prepay all or part of any Eurocurrency-based
Advance, subject to not less than three (3) Business Day's notice to
Administrative Agent, only on the last day of the Interest Period therefor
(unless such prepayment is made upon not less than five (5) Business Days prior
written notice to Administrative Agent and is accompanied by such additional
sums as reasonably estimated by Administrative Agent, in consultation with the
Banks, to be necessary to cover the amounts which will become due under this
Agreement in connection with such prepayment, including without limitation
Section 11.1 hereof), provided that the amount of any such partial prepayment
shall be at least One Million Dollars ($1,000,000), or the Alternative Currency
equivalent thereof, and the unpaid portion of such Advance which is refunded or
converted under Section 2.7A shall be at least Two Million Dollars ($2,000,000)
or the Alternative Currency equivalent thereof. Any prepayment made in
accordance with this Section shall be without premium, penalty or prejudice to
the right to reborrow under the terms of this Agreement. Any other prepayment
of all or any portion of the Revolving Credit, whether by acceleration,
required prepayment or otherwise, shall be subject to Section 11 hereof (in its
entirety), but otherwise without premium, penalty or prejudice.
2.10 Characterization of Advances in Absence of Election or Upon
Default. If, as to any outstanding Eurocurrency-based Advance carried in
Dollars, Administrative Agent has not received payment on the last day of the
Interest Period applicable thereto, or does not receive a timely Request for
Advance meeting
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the requirements of Section 2.7A hereof with respect to the
refunding or conversion of such Advance, or, subject to Section 2.6 hereof, if
on such day a Default or an Event of Default shall have occurred and be
continuing, the principal amount thereof which is not then prepaid shall be
converted automatically to a Prime-based Advance and the Administrative Agent
shall thereafter promptly notify the Company of said action. If the Company or
the relevant Permitted Borrower fails to deliver a timely request for Advance
meeting the requirements of Section 2.7A hereof with respect to the refunding
or conversion of any Advance denominated in an Alternative Currency at the end
of the applicable Interest Period (unless such Advance is repaid as of such
date), or, subject to Section 2.6 hereof, if on such last day of the applicable
Interest Period a Default or an Event of Default shall have occurred and be
continuing, such Advance, subject to the terms hereof, shall be refunded as an
Advance in the same Alternative Currency, in accordance with Section 2.7C(b)
hereof, with an Interest Period of one (1) month; provided that, if a Default
or an Event of Default has occurred and is continuing, such Advance may, upon
the election of the Majority Banks be redenominated into Dollars and carried as
a Prime-based Advance hereunder.
2.11 Revolving Credit Commitment Fee. From the date hereof to the
Revolving Credit Maturity Date, the Company shall pay to the Administrative
Agent, for distribution to the Banks (as set forth below), a Revolving Credit
Commitment Fee equal to an aggregate amount comprised (for all of the Banks) of
one-quarter of one percentage point (1/4%) per annum on the daily average
amount by which each Bank's Percentage of the Revolving Credit Maximum Amount
then applicable hereunder, exceeds the sum of (i) each Bank's Percentage of the
aggregate amount of Advances outstanding from time to time under the Revolving
Credit (using the Current Dollar Equivalent of any Advances outstanding in any
Alternative Currencies, determined as to each such Advance on the first day of
each applicable Interest Period thereof for such entire Interest Period); (ii)
each Bank's Percentage of the aggregate daily undrawn amount of any Letters of
Credit (calculated on the basis of the Dollar Amount of any Letters of Credit
denominated in Dollars, and the Current Dollar Equivalent of any Letters of
Credit denominated in any Alternative Currencies) which shall be outstanding
during such period and (iii) the aggregate daily principal amount of Term Loans
outstanding to each of the Banks during such period (using the Current Dollar
Equivalent of any Term Loans outstanding in any Alternative Currency determined
as of the first day of each calendar quarter), as applicable. The Revolving
Credit Commitment Fee shall be calculated quarterly commencing June 30, 1994
and shall be payable quarterly in arrears within five (5) Business Days of
receipt from Administrative Agent on or after the last day of each quarter
commencing June 30, 1994, and at the Revolving Credit Maturity Date, of an
invoice setting forth the amount of such fee (with reasonable detail supporting
the calculation thereof) and shall be computed on the basis of a year of three
hundred sixty (360) days and assessed for the actual number of days elapsed.
Whenever any payment of the Revolving Credit Commitment Fee shall be due on a
day which is not a Business Day, the date for payment thereof shall be extended
to the next Business Day. Upon receipt of payment of the Revolving Credit
Commitment Fee, Administrative Agent shall make prompt payment to each Bank of
its share of the Revolving Credit Commitment Fee determined with reference to
each of the Banks as aforesaid. The Revolving Credit Commitment Fee shall
(subject to verification of the accuracy thereof) not be refundable under any
circumstances.
2.12 Currency Appreciation; Sublimits; Mandatory Reduction of
Indebtedness. (a) If at any time and for any reason, the aggregate principal
amount (tested in the manner set forth below) of all Advances of the Revolving
Credit hereunder to the Company and to the Permitted Borrowers made in Dollars
and the aggregate Current Dollar Equivalent of all Advances hereunder to the
Company and to the Permitted Borrowers in any Alternative Currency as of such
time, plus the aggregate undrawn amount of any Letters of Credit which shall be
outstanding at such time (based on the Dollar Amount of any Letters of Credit
denominated in Dollars and the Current Dollar Equivalent of any Letters of
Credit denominated in any Alternative Currency) exceeds the Revolving Credit
Maximum Amount, the Company and the Permitted Borrowers shall:
(i) immediately repay that portion of the Indebtedness then
carried as a Prime-based Advance, if any, by the Dollar amount of such excess,
and/or reduce any pending request for an Advance in Dollars on such day by the
Dollar Amount of such excess, to the extent thereof; and
(ii) on the last day of each Interest Period of any
Eurocurrency-based Advance outstanding as of such time, until the necessary
reductions of Indebtedness under this Section 2.12(a) have been
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fully made, repay the Indebtedness carried in such Advances and/or reduce any
requests for refunding or conversion of such Advances submitted (or to be
submitted) by the Company or any of the Permitted Borrowers in respect of such
Advances, by the Amount in Dollars or the Applicable Alternative Currency,
as the case may be, of such excess, to the extent thereof.
The Company's compliance with this Section 2.12(a) shall be tested on a daily
or other basis satisfactory to Administrative Agent in its sole discretion,
provided that at any time while the aggregate Advances of the Revolving Credit
available to be borrowed hereunder equal or exceed Fifteen Million Dollars
($15,000,000), the Company's compliance with this Section 2.12(a) shall be
tested as of the last day of each calendar quarter.
(b) If at any time and for any reason the aggregate
principal amount (tested in the manner set forth below) of all Advances of the
Revolving Credit hereunder to a Permitted Borrower made in Dollars and the
aggregate Current Dollar Equivalent of all Advances hereunder to such
Permitted Borrower in any Alternative Currency as of such time, plus the
aggregate undrawn amount of any Letters of Credit which shall be outstanding at
such time (based on the Dollar Amount of any Letters of Credit denominated in
Dollars and the Current Dollar Equivalent of any Letters of Credit denominated
in any Alternative Currency) for the account of such Permitted Borrower, plus
the aggregate principal amount of Term Loans outstanding from such Permitted
Borrower (using the Current Dollar Equivalent of any Term Loan outstanding in
any Alternative Currency) exceeds the Sublimit applicable to such Permitted
Borrower, and such Permitted Borrower shall (i) immediately repay that portion
of the Indebtedness outstanding to such Permitted Borrower then carried as a
Prime-based Advance, if any, by the Dollar Amount of such excess, and/or reduce
on such day any pending request for an Advance in Dollars submitted by such
Permitted Borrower by the Dollar Amount of such excess, to the extent thereof;
and (ii) on the last day of each Interest Period of any Eurocurrency-based
Advance outstanding to such Permitted Borrower as of such time, until the
necessary reductions of Indebtedness under this Section 2.12(b) have been fully
made, repay such Indebtedness carried in such Advances and/or reduce any
requests for refunding or conversion of such Advances submitted (or to be
submitted) by such Permitted Borrower in respect of such Advances, by the
Amount in Dollars or the applicable Alternative Currency, as the case may be,
of such excess, to the extent thereof. Each Permitted Borrower's compliance
with this Section 2.12(b) shall be tested on a daily or other basis
satisfactory to Administrative Agent in its sole discretion, provided that at
any time while the unused portion of the applicable Sublimit then in effect
exceeds Five Million Dollars ($5,000,000), compliance with this Section 2.12(b)
shall be tested as of the last day of each calendar quarter.
2.13 Optional Reduction or Termination of Revolving Credit Maximum
Amount. The Company may upon at least five (5) Business Days' prior written
notice to the Administrative Agent, permanently reduce the Revolving Credit
Maximum Amount in whole at any time, or in part from time to time, without
premium or penalty, provided that: (i) each partial reduction of the Revolving
Credit Maximum Amount shall be in an aggregate amount equal to Five Million
Dollars ($5,000,000) or an integral multiple thereof; (ii) each reduction shall
be accompanied by the payment of the Revolving Credit Commitment Fee, if any,
accrued on the amount of such reduction to the date of such reduction; (iii)
the Company shall prepay in accordance with the terms hereof the amount, if
any, by which the aggregate unpaid principal amount of Revolving Credit Notes,
plus the aggregate amount of outstanding Letters of Credit, exceeds the amount
of the Revolving Credit Maximum Amount, taking into account the aforesaid
reductions of the Revolving Credit Maximum Amount, together with interest
thereon to the date of prepayment; (iv) if the termination or reduction of the
aggregate Revolving Credit Maximum Amount requires the prepayment of a
Eurocurrency-based Advance, the termination or reduction may be made only on
the last Business Day of the then current Interest Period applicable to such
Eurocurrency-based Advance Loan (unless such prepayment is made upon not less
than five (5) Business Days prior written notice to Administrative Agent and is
accompanied by such additional sums as reasonably estimated by Administrative
Agent, in consultation with the Banks, to be necessary to cover the amounts
which will become due under the terms of this Agreement in connection with such
prepayment, including without limitation Section 11.1 hereof) and (v) no
reduction shall reduce the amount of the Revolving Credit Maximum Amount to an
amount which is less than the sum of the aggregate undrawn amount of any
Letters of Credit outstanding at such time, plus the Reserved Availability.
Reductions of the Revolving Credit Maximum Amount and any accompanying
prepayments of the Revolving Credit Notes shall be distributed by
Administrative Agent to each Bank in
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accordance with such Bank's Percentage thereof, and will not be available for
reinstatement by or readvance to the Company. Any reductions of the aggregate
Revolving Credit Maximum Amount hereunder shall reduce each Bank's portion
thereof proportionately (based upon the applicable Percentages), and shall be
permanent and irrevocable.
2.14 Limited Election not to Gross-up. Notwithstanding the
provisions of Section 10.1(e) hereof (but only to the extent set forth
therein), each Bank may, from time to time with respect to any interest payment
received by it under a Revolving Credit Note, confirm by written certification
to Company and the Agents (delivered subsequent to receipt of such payment or
payments) that it has elected to receive such payment or payments from Company
or the applicable Permitted Borrower without gross-up for withholding taxes
under Section 10.1(e) hereof; provided, however, that (i) nothing contained in
this Section 2.14 shall reduce or otherwise affect the obligations of Company
and the Permitted Borrowers to pay all withholding taxes when due and promptly
to furnish tax receipts or other evidence of payment in accordance with
applicable law and (ii) in accepting any such payment or payments without the
required gross-up hereunder, the Agents and the Banks, as applicable, reserve
all rights hereunder to require compliance with Section 10.1(e) hereof (or any
other provision of this Agreement) with respect to any payment received by
Agents or such Banks subsequent to the date of any such certification.
2.15 Revolving Credit as Refinancing; Application of Advances
Thereafter. The Revolving Credit Notes issued by the Company and the Permitted
Borrowers shall constitute renewal and replacement evidence of all present
indebtedness of the Company and the Permitted Borrowers outstanding as of the
date hereof under the Prior Credit Agreement, and the notes issued pursuant
thereto. Advances of the Revolving Credit shall be available, subject to the
terms hereof, to fund working capital needs, capital expenditures, acquisitions
or other general corporate purposes of the Company and the Permitted Borrowers.
3. LETTERS OF CREDIT.
3.1 Letters of Credit. Subject to the terms and conditions of this
Agreement, Administrative Agent may through its Issuing Office, at any time and
from time to time from and after the date hereof until twenty (20) days prior
to the Revolving Credit Maturity Date, upon the written request of an Account
Party accompanied by a duly executed Letter of Credit Agreement and such other
documentation related to the requested Letter of Credit as the Administrative
Agent may require, issue standby or trade Letters of Credit denominated in
Dollars or in any Alternative Currency for the account of such Account Party,
in an aggregate amount for all Letters of Credit issued hereunder at any one
time outstanding not to exceed the Letter of Credit Maximum Amount. Each Letter
of Credit (other than any Special Purpose Letter of Credit) shall have an
initial expiration date not later than one (1) year from its date of issuance
(and may, in the sole discretion of the Administrative Agent, contain customary
evergreen provisions acceptable to Administrative Agent); and provided, however
that each Letter of Credit shall expire upon (notwithstanding any renewals
thereof or evergreen provisions contained therein) not later than ten (10)
Business Days prior to the Revolving Credit Maturity Date. The submission of
all applications and the issuance of each Letter of Credit hereunder shall be
subject in all respects to applicable provisions of U.S. law and regulations,
including without limitation, the Trading With the Enemy Act, Export
Administration Act, International Emergency Economic Powers Act, and the
Regulations of the Office of Foreign Assets Control of the U.S. Department of
the Treasury.
3.2A Conditions to Issuance. No Letter of Credit shall be issued at
the request and for the account of any Account Party unless, as of the date of
issuance of such Letter of Credit:
(a) the face amount of the Letter of Credit requested, plus
the undrawn portion of all other outstanding Letters of Credit (calculated in
each case on the basis of the sum of the Dollar Amount of any Letter of Credit
denominated in Dollars, plus the Current Dollar Equivalent of any Letters of
Credit denominated in Alternative Currencies) does not exceed the Letter of
Credit Maximum Amount;
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(b) (i) the face amount in Dollars of the Letter of Credit
requested (or the Current Dollar Equivalent thereof if denominated in an
Alternative Currency), plus the aggregate amount of all Advances outstanding
under the Revolving Credit Notes (using the Current Dollar Equivalent of any
Advances outstanding in any Alternative Currencies), plus the aggregate
undrawn portion of all other outstanding Letters of Credit (calculated on the
basis of the sum of the Dollar Amount of any Letters of Credit denominated in
Dollars, plus the Current Dollar Equivalent of any Letters of Credit
denominated in Alternative Currencies), plus the aggregate principal amount of
Term Loans outstanding hereunder (using the Current Dollar Equivalent of any
Term Loan outstanding in any alternative Currency), plus the Reserved
Availability, do not exceed the Revolving Credit Maximum Amount; and (ii)
whenever the Account Party is a Permitted Borrower, the face amount in Dollars
of the Letter of Credit requested by such Permitted Borrower, plus the undrawn
portion of all other Letters of Credit outstanding for the account of such
Permitted Borrower (determined as aforesaid), plus the aggregate amount of all
Advances under the Revolving Credit Notes (determined as aforesaid) outstanding
to such Permitted Borrower, plus the aggregate principal amount of all Term
Loans outstanding hereunder from such Permitted Borrower to a Bank or Banks,
as applicable (using the Current Dollar Equivalent of any Term Loan outstanding
in any Alternative Currency), plus the Current Dollar Equivalent of the maximum
aggregate Swing Line Amounts available to be borrowed by such Permitted
Borrower under the Swing Line Facilities (if any) established for it
(regardless of the amounts actually outstanding thereunder) do not exceed the
Sublimit applicable to such Permitted Borrower.
(c) the obligations of the Parent, the Company and the
Permitted Borrowers set forth in this Agreement and any of the Loan Documents
are valid, binding and enforceable obligations of such parties, as the case may
be (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles,
whether enforcement is sought by proceedings in equity or at law) and the valid,
binding and enforceable nature of this Agreement and the Loan Documents, as
aforesaid, has not been disputed by the Parent, the Company or any Permitted
Borrower;
(d) both (i) immediately before and (ii) immediately after
issuance of the Letter of Credit requested, no Default or Event of Default
exists;
(e) the representations and warranties contained in this
Agreement and the Loan Documents are true in all material respects as if made
on such date (except as to such matters which as of such time have been
previously reported to Administrative Agent and consented to or waived
pursuant to Section 13.11 hereof);
(f) the Account Party requesting the Letter of Credit shall
have delivered to Administrative Agent at its Issuing Office, not less than
five (5) Business Days prior to the requested date for issuance (or such
shorter time as the Administrative Agent, in its sole discretion, may permit),
the Letter of Credit Agreement related thereto, together with such other
documents and materials as may be reasonably required pursuant to the terms
thereof, and the terms of the proposed Letter of Credit shall be satisfactory
to Administrative Agent and its Issuing Office;
(g) no order, judgment or decree of any court, arbitrator
or governmental authority shall purport by its terms to enjoin or restrain
Administrative Agent from issuing the Letter of Credit, or any Bank from
taking an assignment of its Percentage thereof pursuant to 3.6 hereof, and
no law, rule, regulation, request or directive (whether or not having the force
of law) shall prohibit or request that Administrative Agent refrain from
issuing, or any Bank refrain from taking an assignment of its Percentage of,
the Letter of Credit requested or letters of credit generally;
(h) there shall have been (i) no introduction of or change
in the interpretation of any law or regulation that would make it unlawful or
impossible for the Administrative Agent to issue the requested Letter of
Credit, (ii) with respect to the jurisdictions in which the Account Party and
the beneficiary of the requested Letter of Credit are located (and the country
of the Alternative Currency in which any such Letter of Credit may be
denominated), no change of a type described in Section 11.3(ii) hereof, and
(iii) no declaration of
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a general banking moratorium by banking authorities in the United
States, Michigan or the jurisdictions in which the Account Party and the
beneficiary of the requested Letter of Credit are located (and the country of
the Alternative Currency in which any such Letter of Credit may be
denominated);
(i) Administrative Agent shall have received the issuance
fee required in connection with the issuance of such Letter of Credit pursuant
to Section 3.5 hereof.
Each Letter of Credit Agreement submitted to Administrative Agent pursuant
hereto shall constitute the certification by the Company and the Account Party
of the matters set forth in this Section 3.2A (a) through (e), provided that,
as to the matters covered by Section 3.2A(d)(ii) hereof, such certification is
given to the Company's belief. The Administrative Agent shall be entitled to
rely on any certification given by Company or any Account Party hereunder
without any duty of inquiry.
3.2B Special Purpose Letters of Credit. Notwithstanding anything
herein to the contrary, in connection with the requested issuance of any
Special Purpose Letter of Credit, the Administrative Agent shall be entitled to
impose such additional conditions to issuance as it may in its sole discretion
require.
3.3 Notice. Administrative Agent shall give notice, substantially
in the form attached as Exhibit "E", to each Bank of the issuance of each
Letter of Credit, not later than three (3) Business Days after issuance of each
Letter of Credit, specifying the amount thereof and the amount of such Bank's
Percentage thereof.
3.4 Letter of Credit Fees. The Company and the applicable Account
Party shall pay to Administrative Agent for distribution to the Banks in
accordance with the Percentages, Letter of Credit Fees as follows:
(a) For each Letter of Credit issued hereunder, a Letter of
Credit Fee with respect to the remaining balance of each such Letter of Credit
issued pursuant hereto (based on the Dollar Amount of any Letters of Credit
denominated in Dollars and the Current Dollar Equivalent of any Letters of
Credit denominated in any Alternative Currency) of the Applicable Fee
Percentage, inclusive of an issuance fee of one-eighth of one percentage point
(1/8%) per annum on the face amount of such Letters of Credit to be paid to and
retained by Administrative Agent hereunder.
(b) If any change in any law or regulation or in the
interpretation thereof by any court or administrative or governmental
authority charged with the administration thereof shall either (i) impose,
modify or cause to be deemed applicable any reserve, special deposit,
limitation or similar requirement against letters of credit issued by, or
assets held by, or deposits in or for the account of, Administrative Agent or
the Banks or (ii) impose on Administrative Agent or the Banks any other
condition regarding this Agreement or the Letters of Credit, and the result of
any event referred to in clause (i) or (ii) above shall be to increase the cost
or expense to Administrative Agent or the Banks of issuing or maintaining or
participating in any of the Letters of Credit (which increase in cost or
expense shall be determined by the Administrative Agent's or such Bank's
reasonable allocation of the aggregate of such cost increases and expense
resulting from such events), then, upon demand by the Administrative Agent or
such Bank, as the case may be, the Company and the applicable Account Party
shall, within ten days following demand for payment, pay to Administrative
Agent or such Bank, as the case may be, from time to time as specified by the
Administrative Agent or such Bank, additional amounts which shall be sufficient
to compensate the Administrative Agent or such Bank for such increased cost and
expense, together with interest on each such amount from ten days after the
date demanded until payment in full thereof at the Prime-based Rate. A
certificate as to such increased cost or expense incurred by the Administrative
Agent or such Bank, as the case may be, as a result of any event mentioned in
clause (i) or (ii) above, submitted to the Company and the applicable Account
Party, shall be conclusive, absent manifest error, as to the amount thereof.
(c) All payments by the Company or the applicable Account
Party to the Administrative Agent or the Banks under this Section 3.4 shall
be made in Dollars and in immediately available funds at the Agent's Issuing
Office or such other office of the Administrative Agent as may be designated
from time to time by written notice to the Company by the Administrative Agent.
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The aforesaid fees shall be nonrefundable under all circumstances, and, unless
(with respect to Existing Letters of Credit) otherwise noted on Schedule 1.53
hereto, shall be payable annually in advance (or such lesser period, if
applicable, for Letters of Credit issued with stated expiration dates of less
than one year) upon the issuance of each such Letter of Credit, and shall be
calculated on the basis of a 360 day year and assessed for the actual number of
days from the date of the issuance thereof to the stated expiration thereof.
3.5 Other Fees. In connection with the Letters of Credit, and in
addition to the Letter of Credit Fees (including the issuance fee payable to
Administrative Agent, as aforesaid), the Company and the applicable Account
Party shall pay, for the sole account of the Administrative Agent, standard
administration, payment and cancellation charges assessed by Administrative
Agent or its Issuing Office, at the times, in the amounts and on the terms set
forth in Administrative Agent's standard fee schedule (in effect from time to
time) or otherwise agreed to from time to time in writing between
Administrative Agent and the Company.
3.6 Draws and Demands for Payment Under Letters of Credit. (a) The
Company and each applicable Account Party agrees to pay to the Administrative
Agent, on the day on which the Administrative Agent shall honor a draft or
other demand for payment presented or made under any Letter of Credit, an
amount equal to the amount paid by the Administrative Agent in respect of such
draft or other demand under such Letter of Credit and all reasonable expenses
paid or incurred by the Administrative Agent relative thereto. Such payment by
the Company or the applicable Account Party to the Administrative Agent shall
be payable at the Issuing Office in the same Permitted Currency in which the
Administrative Agent honored the draft or other demand for payment. Unless the
Company or applicable Account Party shall have made such payment to the
Administrative Agent on such day, upon each such payment by the Administrative
Agent, the Administrative Agent shall be deemed to have disbursed to the
Company or the applicable Account Party, and the Company or the applicable
Account Party shall be deemed to have elected to substitute for its
reimbursement obligation, with respect to Letters of Credit denominated in
Dollars, a Prime-based Advance and, with respect to Letters of Credit
denominated in any Alternative Currency, a Eurocurrency-based Advance in the
applicable Alternative Currency with an Interest Period of one month, in each
case for the account of the Banks in an amount equal to the amount so paid by
the Administrative Agent in respect of such draft or other demand under such
Letter of Credit. Such Advance shall be disbursed notwithstanding any failure
to satisfy any conditions for disbursement of any Advance set forth in Section
2 hereof and, to the extent of the Advance so disbursed, the reimbursement
obligation of the Company or the applicable Account Party under this Section
3.6 shall be deemed satisfied.
(b) Nothing in this Agreement shall be construed to require or
authorize any Bank to issue any Letter of Credit, it being recognized that the
Administrative Agent shall be the issuer of Letters of Credit under this
Agreement. Upon each such issuance by the Administrative Agent, each Bank shall
automatically acquire a pro rata risk participation interest in such Letter of
Credit and related Letter of Credit Payment based on its respective Percentage.
If the Administrative Agent shall honor a draft or other demand for payment
presented or made under any Letter of Credit, the Administrative Agent shall
provide notice thereof to the Company and the applicable Account Party on the
date such draft or demand is honored, and to each Bank on such date unless the
Company or applicable Account Party shall have satisfied its reimbursement
obligation under Section 3.6(a) by payment to the Administrative Agent on such
date. The Administrative Agent shall further use reasonable efforts to provide
notice to the Company or applicable Account Party prior to honoring any such
draft or other demand for payment, but such notice, or the failure to provide
such notice, shall not affect the rights or obligations of the Administrative
Agent with respect to any Letter of Credit or the rights and obligations of the
parties hereto, including without limitation the obligations of the Company or
applicable Account Party under Section 3.6(a) hereof. Each Bank, on the date
such draft or demand is honored, shall make its Percentage share of the amount
paid by the Administrative Agent, and not reimbursed by the Company or
applicable Account Party on such day, available in the applicable Permitted
Currency and in immediately available funds for the account of the
Administrative Agent at the Administrative Agent's principal office for
Advances in Dollars, and at the relevant Agent's Correspondent for Advances in
any Alternative Currency. If and to the extent such Bank shall not have made
such Percentage share available to the Administrative Agent, such Bank, the
Company and the applicable Account Party severally agree to pay to the
Administrative Agent forthwith on demand such amount together with interest
thereon, for each day from the date such amount was paid by the Administrative
Agent until such
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amount is so made available to the Administrative Agent at a per annum rate
equal to the interest rate applicable during such period to the related Advance
disbursed under Section 3.6(a) in respect of the reimbursement obligation of
the Company and the applicable Account Party. If such Bank shall pay such
amount to the Administrative Agent together with such interest, such amount so
paid shall constitute an Advance by such Bank disbursed in respect of the
reimbursement obligation of the Company or applicable Account Party under
Section 3.6(a) for purposes of this Agreement, effective as of the date such
amount was paid by the Administrative Agent. The failure of any Bank to make
its Percentage share of any such amount paid by the Administrative Agent
available to the Administrative Agent shall not relieve any other Bank of its
obligation to make available its Percentage share of such amount, but no Bank
shall be responsible for failure of any other Bank to make such Percentage
share available to the Administrative Agent, except to the extent set forth in
the remainder of this Section 3.6.
(c) In the event any Bank ("Defaulting Bank") fails to fund
its risk participation in respect of any draft or other demand for payment
under a Letter of Credit hereunder, or fails to fund any Advance of the
Revolving Credit resulting therefrom pursuant to the provisions of Section
3.6(a), because it is prohibited from funding by any state, federal or foreign
regulatory authority (including without limitation any central bank or other
governmental body having jurisdiction over such Bank) due to the impaired
operating, capital or other financial condition of the Defaulting Bank, or
because of the insolvency of the Defaulting Bank (each a "Regulatory Event"),
each of the non-defaulting Banks (each, a "Non-defaulting Bank") promptly upon
demand by the Administrative Agent, shall purchase from the Administrative
Agent an additional participation interest in such Letter of Credit and the
related Letter of Credit Payment (or resulting Advance) in an amount sufficient
to place the Non-defaulting Banks in a position such that the relationship of
their relative participations in such Letter of Credit and the related Letter
of Credit Payment (or resulting Advance) is equal to the ratio ("Ratio") of the
Percentage of each Non-defaulting Bank to the aggregate Percentages of the
Non-defaulting Banks. To the extent any Non-defaulting Bank fails to purchase
such additional participation interest, as aforesaid, Administrative Agent may
withhold all sums payable to such Bank under this Agreement and apply the same
to such Bank's obligation to purchase said additional participation interest.
(d) In the event a Defaulting Bank fails to fund its risk
participation in respect of any draft or other demand for payment under a
Letter of Credit hereunder, or fails to fund any Advance of the Revolving
Credit resulting therefrom, otherwise than because of a Regulatory Event, each
of the Non-defaulting Banks shall be obligated to purchase from the
Administrative Agent an additional participation interest in such Letter of
Credit and the related Letter of Credit Payment (or resulting Advance) in an
amount sufficient to place the Non-defaulting Banks in a position such that the
relationship of their relative participations in such Letter of Credit and the
related Letter of Credit Payment (or resulting Advance) is equal to the Ratio,
but only as and to the extent each such Non-defaulting Bank receives or is
entitled to receive any payments under this Agreement. Administrative Agent
shall be entitled to withhold all sums payable to each Non-defaulting Bank from
time to time under this Agreement and to apply the same to such Bank's
obligation to purchase said additional participation interest, as and when such
sums become payable to such Bank hereunder.
(e) The obligation of each Non-defaulting Bank to purchase
such additional participation interest under Sections 3.6(c) and 3.6(d) hereof
shall be absolute, notwithstanding any inability of the Company or of any
Permitted Borrower at any time to satisfy any conditions for disbursement of
any Advance under Section 2 hereof. The purchase of such additional
participation interests by the Non-defaulting Banks under Sections 3.6(c) and
3.6(d) shall not relieve the Defaulting Bank of liability for or arising out of
its unfunded participation interest in any such Letter of Credit and the
related Letter of Credit Payment (or resulting Advance).
(f) The Administrative Agent shall withhold all sums
otherwise payable to a Defaulting Bank hereunder and apply such sums to the
Defaulting Bank's obligation to fund its risk participation under a Letter of
Credit and the related Letter of Credit Payment or any Advance of the
Revolving Credit resulting therefrom. To the extent funds are thereafter
received from the Defaulting Bank, whether by enforcement of this Section or
otherwise, such funds shall be applied by Administrative Agent to restore the
Non-defaulting Banks, to the extent possible, to their respective positions
hereunder existing prior to the failure by the Defaulting Bank
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to fund its risk participation in a Letter of Credit and the related
Letter of Credit Payment or any Advance resulting therefrom.
(g) From and after the date a Bank becomes a Defaulting
Bank by reason of a Regulatory Event, (i) the Revolving Credit Available
Commitment of such Bank shall be excluded in determining satisfaction of the
condition set forth in Section 3.2 A(b), and (ii) the risk participation in
any Letter of Credit issued on and after such date, otherwise allocable to such
Bank under Section 3.6(b), shall instead be acquired automatically by the
Non-defaulting Banks in such amounts that the relationship of their relative
participations in such Letter of Credit and the related Letter of Credit
Payment is equal to the Ratio.
(h) Nothing contained in Sections 3.6(c) through (g) hereof
shall create or be deemed to create any rights in favor of the Company, the
Permitted Borrowers or any other party, whether as third-party beneficiary or
otherwise.
3.7 Obligations Irrevocable. The obligations of Company and Account
Parties to make payments to Administrative Agent with respect to Letter of
Credit Obligations under Section 3.6 hereof, shall be unconditional and
irrevocable and not subject to any qualification or exception whatsoever,
including, without limitation:
(a) Any lack of validity or enforceability of any Letter of
Credit or any documentation relating to any Letter of Credit or to any
transaction related in any way to such Letter of Credit (the "Letter of Credit
Documents");
(b) Any amendment, modification, waiver, consent, or any
substitution, exchange or release of or failure to perfect any interest in
collateral or security, with respect to any of the Letter of Credit Documents;
(c) The existence of any claim, setoff, defense or other
right which the Company or any Account Party may have at any time against any
beneficiary or any transferee of any Letter of Credit (or any persons or
entities for whom any such beneficiary or any such transferee may be acting),
the Administrative Agent or any Bank or any other person or entity, whether in
connection with any of the Letter of Credit Documents, the transactions
contemplated herein or therein or any unrelated transactions;
(d) Any draft or other statement or document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(e) Payment by the Administrative Agent to the beneficiary
under any Letter of Credit against presentation of documents which do not
comply with the terms of the Letter of Credit, including failure of any
documents to bear any reference or adequate reference to such Letter of Credit,
although such an occurrence may be separately actionable following full
reimbursement as set forth in the last sentence of this Section 3.7 (without
limiting the Company's rights under such sentence following full
reimbursement);
(f) Any failure, omission, delay or lack on the part of the
Administrative Agent or any Bank or any party to any of the Letter of Credit
Documents to enforce, assert or exercise any right, power or remedy conferred
upon the Administrative Agent, any Bank or any such party under this Agreement,
any of the Loan Documents or any of the Letter of Credit Documents, or any
other acts or omissions on the part of the Administrative Agent, any Bank or
any such party; or
(g) Any other event or circumstance that would, in the
absence of this Section 3.7, result in the release or discharge by operation
of law or otherwise of the Company or any Account Party from the performance
or observance of any obligation, covenant or agreement contained in Section 3.6.
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No setoff, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature which the Company or any Account Party has or may
have against the beneficiary of any Letter of Credit shall be available
hereunder to the Company or any Account Party against the Administrative Agent
or any Bank. Nothing contained in this Section 3.7 shall be deemed to prevent
Company or any of the Account Parties, after satisfaction in full of the
absolute and unconditional obligations of Company and the Account Parties
hereunder, from asserting in a separate action any claim, defense, set off or
other right which they (or any of them) may have against Administrative Agent.
3.8 Risk Under Letters of Credit. (a) In assigning and the handling
of Letters of Credit and any security therefor, or any documents or instruments
given in connection therewith, Administrative Agent shall have the sole right
to take or refrain from taking any and all actions under or upon the Letters of
Credit.
(b) Subject to other terms and conditions of this
Agreement, Administrative Agent shall issue the Letters of Credit and shall
hold the documents related thereto in its own name and shall make all
collections thereunder and otherwise administer the Letters of Credit in
accordance with Administrative Agent's regularly established practices and
procedures and, except pursuant to Section 12.3 hereof, Administrative Agent
will have no further obligation with respect thereto. In the administration of
Letters of Credit, Administrative Agent shall not be liable for any action
taken or omitted on the advice of counsel, accountants, appraisers or other
experts selected by Administrative Agent and Administrative Agent may rely upon
any notice, communication, certificate or other statement from the Company, any
Account Party, beneficiaries of Letters of Credit, or any other Person which
Administrative Agent believes to be authentic. Administrative Agent will, upon
request, furnish the Banks with copies of Letter of Credit Agreements, Letters
of Credit and documents related thereto.
(c) In connection with the issuance and administration of
Letters of Credit and the assignments hereunder, Administrative Agent makes no
representation and shall have no responsibility with respect to (i) the
obligations of the Company or any of the Account Parties or the validity,
sufficiency or enforceability of any document or instrument given in connection
therewith, or the taking of any action with respect to same, (ii) the financial
condition of, any representations made by, or any act or omission of the
Company, any of the Account Parties or any other Person, or (iii) any failure
or delay in exercising any rights or powers possessed by Administrative Agent
in its capacity as issuer of Letters of Credit. Each of the Banks expressly
acknowledge that they have made and will continue to make their own evaluations
of the Company's and the Account Parties' creditworthiness without reliance on
any representation of Administrative Agent or Administrative Agent's officers,
agents and employees.
(d) If at any time Administrative Agent shall recover any
part of any unreimbursed amount for any draw or other demand for payment under
a Letter of Credit, or any interest thereon, Administrative Agent shall
receive same for the pro rata benefit of the Banks in accordance with their
respective Percentage interests therein and shall promptly deliver to each
Bank its share thereof, less such Bank's pro rata share of the costs of such
recovery, including court costs and attorney's fees. If at any time any Bank
shall receive from any source whatsoever any payment on any such unreimbursed
amount or interest thereon in excess of such Bank's Percentage share of such
payment, such Bank will promptly pay over such excess to Administrative Agent,
for redistribution in accordance with this Agreement.
3.9 Indemnification. (a) The Company hereby indemnifies and agrees
to hold harmless the Banks and the Administrative Agent, and their respective
officers, directors, employees and agents, from and against any and all claims,
damages, losses, liabilities, costs or expenses of any kind or nature
whatsoever which the Banks or the Administrative Agent or any such person may
incur or which may be claimed against any of them by reason of or in connection
with any Letter of Credit; and
(b) each Account Party other than the Company hereby
indemnifies and agrees to hold harmless the Banks and the Administrative Agent,
and their respective officers, directors, employees and agents, from and
against any and all claims, damages, losses, liabilities, costs or expenses of
any kind or nature whatsoever which the Banks or the Administrative Agent or
any such person may incur or which may be
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claimed against any of them by reason of or in connection with any Letter of
Credit issued for the account of any Permitted Borrower; and
(c) neither any Bank nor the Administrative Agent or any of
their respective officers, directors, employees or agents shall be liable or
responsible for: (i) the use which may be made of any Letter of Credit or for
any acts or omissions of any beneficiary in connection therewith; (ii) the
validity, sufficiency or genuineness of documents or of any endorsement
thereon, even if such documents should in fact prove to be in any or all
respects invalid, insufficient, fraudulent or forged; (iii) any error,
omission, interruption or delay in transmission, dispatch or delivery of any
message or advice, however transmitted, in connection with any Letter of
Credit; or (iv) any other event or circumstance whatsoever arising in
connection with any Letter of Credit; provided, however, that the Company and
Account Parties shall not be required to indemnify the Banks and the
Administrative Agent and such other persons, and the Banks shall be liable to
the Company and the Account Parties to the extent, but only to the extent, of
any direct, as opposed to consequential or incidental, damages suffered by the
Company and the Account Parties which were caused by the gross negligence or
wilful misconduct of the Administrative Agent, including without limitation
(A) the Administrative Agent's wrongful dishonor of any Letter of Credit after
the presentation to it by the beneficiary thereunder of a draft or other demand
for payment and other documentation strictly complying with the terms and
conditions of such Letter of Credit, or (B) the payment by the Administrative
Agent to the beneficiary under any Letter of Credit against presentation of
documents which do not substantially comply with the terms of the Letter of
Credit. It is understood that in making any payment under a Letter of Credit
the Administrative Agent will rely on documents presented to it under such
Letter of Credit as to any and all matters set forth therein without further
investigation and regardless of any notice or information to the contrary.
3.10 Right of Reimbursement. Each Bank agrees to reimburse the
Administrative Agent on demand, pro rata in accordance with their Percentages,
for (i) the reasonable out-of-pocket costs and expenses of the Administrative
Agent to be reimbursed by the Company or any Account Party pursuant to any
Letter of Credit Agreement or any Letter of Credit, to the extent not
reimbursed by the Company or Account Party and (ii) any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
fees, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against Administrative Agent (in its
capacity as issuer of any Letter of Credit) in any way relating to or arising
out of this Agreement, any Letter of Credit, any documentation or any
transaction relating thereto, or any Letter of Credit Agreement, except to the
extent that such liabilities, losses, costs or expenses were incurred by
Administrative Agent solely as a result of Administrative Agent's gross
negligence or willful misconduct.
4. TERM LOANS
4.1 Commitment. Subject to the terms and conditions of this
Agreement, each Bank, severally and for itself alone, agrees from and after the
date hereof to (but not including) the Revolving Credit Maturity Date to
advance to any Permitted Borrower, in a single Advance for each such loan in
Dollars or in any Alternative Currency (determined on the basis set forth in
Sections 2.7C(a) and 2.7C(d) hereof), sums not to exceed in the aggregate for
each such Bank an amount equal to such Bank's respective Term Loan Commitment.
From and after the occurrence of the Revolving Credit Maturity Date, the Banks'
respective Term Loan Commitments to make additional Term Loans shall expire and
be of no further force and effect. Advances of Term Loans shall be evidenced
by Term Notes to be executed and delivered by the applicable Permitted Borrower
to the applicable Bank, substantially in the form attached hereto as Exhibit
"C", with appropriate insertions acceptable to the applicable Bank in form and
substance, and in the face amount of the Term Loan to be funded by such Bank
hereunder.
4.2 Repayment of Principal. Until the applicable Term Loan
Maturity Date, when the entire unpaid principal balance of the applicable Term
Loan and all accrued interest and other sums outstanding thereon shall be paid
in full in the applicable Alternative Currency (subject to the terms hereof),
the principal Indebtedness evidenced by the applicable Term Note shall be
repaid on a quarterly, semi-annual or annual basis, if the applicable Permitted
Borrower elects in its request for Term Loan funding to provide for
amortization of the applicable Term Loan, but otherwise, subject to the terms
hereof, no scheduled principal payments shall be
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required under such Term Loan. The required amortization under a Term
Loan, or the lack of required amortization, shall be set forth in the Term Note
executed for such Term Loan. There shall be no readvance or reborrowing of any
principal reductions of the Term Loans, except to the extent, according to the
terms hereof, that availability under the Revolving Credit is restored by such
reductions.
4.3 Accrual of Interest. The Indebtedness evidenced by Term Notes
from time to time outstanding hereunder shall, from and after the date of
funding of the applicable Term Loan, bear interest at its Applicable Fixed Rate
set forth in the applicable Term Note. The amount and date of the funding of
each Term Loan, its Applicable Fixed Rate, and the amount and date of any
repayment shall be noted on each Bank's records, which records will be
conclusive evidence thereof, absent manifest error. Each Bank shall provide
written notice to Administrative Agent, from time to time promptly upon the
receipt of any principal payments thereon.
4.4 Interest on Default. In the event and so long as any Event of
Default shall exist under this Agreement or under an applicable Term Note,
interest shall be payable daily on the principal amount of all Advances from
time to time outstanding under such Term Note at a per annum rate equal to the
Applicable Fixed Rate in respect of such Term Loan, plus two percent (2%) per
annum.
4.5 Yield Maintenance Payments. The applicable Permitted Borrower
may prepay the principal outstanding under a Term Loan, in whole or in part (in
amounts of not less than $1,000,000, or the equivalent thereof in an
Alternative Currency), only upon payment to the applicable Bank of the Yield
Maintenance Payment required under the applicable Term Note. Upon any
involuntary prepayment of a Term Loan hereunder, whether by acceleration,
currency unavailability or otherwise, the applicable Permitted Borrower, as the
case may be, shall pay to the applicable Bank, the Yield Maintenance Payment in
an amount equal to the Yield Maintenance Payment which would have been due and
payable hereunder if the applicable Permitted Borrower had voluntarily elected
to prepay the applicable Term Loan (in an amount equal to such involuntary
prepayment) on such date of involuntary prepayment, as determined by the
applicable Bank in its sole discretion. Partial prepayment shall be applied to
payments due under the applicable Term Loan in the inverse order of their
maturities.
4.6 Requests for Funding Term Loans. The applicable Permitted
Borrower may request the funding of a Term Loan only upon delivery to a Bank of
a Request for Term Loan Funding executed by an authorized officer of Company or
the applicable Permitted Borrower, subject to the following:
(a) each such Request for Term Loan Funding shall set forth
the information required on the Request for Term Loan Funding form annexed
hereto as Exhibit "D", including without limitation:
(i) the proposed date that the Term Loan is to be
funded, which must be a Business Day;
(ii) whether such Term Loan is to be funded in Dollars
or in an Alternative Currency, and if in an Alternative Currency, the
applicable Alternative Currency;
(iii) the principal amount of the Term Loan requested
to be funded, which amount, absent the prior written approval of the funding
Bank, shall not be less than Five Million Dollars ($5,000,000), or the
equivalent thereof in an Alternative Currency; and
(iv) subject to the terms hereof, the proposed Term
Loan Maturity Date and amortization schedule (if any amortization is elected
by such Permitted Borrower);
(b) each such Request for Term Loan Funding shall be
delivered (i) to the Agents for review of Company's proposed allocation of
Term Loans under Section 4.9 hereof as contained in said proposed request for
Term Loan Funding, by the Agents' close of business not later than fifteen
(15) Business Days prior to the proposed date of funding and (ii) to the
applicable Bank by the close of business of such Bank not later
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than seven (7) Business Days prior to the proposed date of funding, with a
copy of such Request for Term Loan Funding to be delivered to each of the
Agents concurrently therewith;
(c) within three (3) Business Days of receipt from the
applicable Permitted Borrower of a Request for Term Loan Funding, the
applicable Bank shall furnish, or cause to be furnished, to the applicable
Permitted Borrower (with a copy to Documentation Agent) a proposed form of Term
Note which has been completed to evidence the applicable Term Loan, including,
without limitation, provisions governing the Applicable Fixed Rate, the
applicable Yield Maintenance Payment and the amortization schedule selected by
such Permitted Borrower, if any, provided that neither of the Agents nor any of
the Banks shall suffer any liability whatsoever in the event such Term Note is
not delivered to the applicable Permitted Borrower;
(d) not later than the close of business of the applicable
Bank five (5) days prior to the proposed date of funding of the Term Loan, the
applicable Permitted Borrower shall deliver to the applicable Bank (with a copy
thereof to each of the Agents) the aforesaid Term Note, executed and delivered
in compliance with this Agreement (dated as of the proposed date of funding of
such Term Loan), upon which delivery, the Request for Term Loan Funding shall
no longer be revocable by the applicable Permitted Borrower;
(e) each Request for Term Loan Funding shall constitute and
include certification by the Company or the applicable Permitted Borrower, as
the case may be, as of the date thereof that:
(i) both before and after the funding of the Term Loan, the
obligations of the Company, its Subsidiaries and the Permitted Borrowers set
forth in this Agreement and the Loan Documents to which such Persons are
parties are valid, binding and enforceable obligations of the Company, its
Subsidiaries and the Permitted Borrowers, as the case may be, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law);
(ii) all applicable conditions to the funding of the
applicable Term Loan have been satisfied and (to the belief of the applicable
Permitted Borrower), shall remain satisfied to the date of funding thereof;
(iii) there is no Default or Event of Default in existence,
and to the belief of the applicable Permitted Borrower, none will exist upon
the funding of such Term Loan; and
(iv) the representations and warranties contained in this
Agreement and the Loan Documents are true and correct in all material respects
and (to the belief of the applicable Permitted Borrower) shall be true and
correct in all material respects as to the funding of the applicable Term Loan.
4.7 Unavailability. If at any time the applicable Bank (after
consultation with the Administrative Agent) shall determine that by reason of
circumstances affecting the foreign exchange and inter-bank markets, generally,
or for any of the other reasons set forth in this Agreement, loans may not be
funded or carried in the applicable Alternative Currency or deposits in the
applicable Alternative Currency will not be available in the amounts necessary
to carry the outstanding principal of the applicable Term Loan to the
applicable Term Loan Maturity Date (or any shorter period), such Bank shall
notify Company and the applicable Permitted Borrower and the applicable Term
Loan shall be automatically converted to and carried in Dollars, in the Dollar
Amount of the principal balance then outstanding under the Term Loan, and
immediately upon receipt by Company or the applicable Permitted Borrower of
said notice, the applicable Permitted Borrower shall repay the entire principal
balance outstanding under such Term Loan in Dollars, together with all accrued
interest thereon and the applicable Yield Maintenance Payment resulting
therefrom, if any, and interest shall accrue on the outstanding principal
balance thereof until repaid in full, at the Prime-based Rate.
4.8 No Gross-up Election. Notwithstanding the provisions of Section
10.1(e) hereof (but only to the extent set forth therein), each Bank may, from
time to time by written notice to Company and the Agents, designate those
Alternative Currencies in which it is willing to fund Term Loans under Section
4.1 hereof
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without gross-up for withholding taxes under Section 10.1(e) hereof; provided,
however, that nothing contained in this Section 4.8 shall reduce or otherwise
affect the obligations of Company and the Permitted Borrowers to pay all
withholding taxes when due (and in all events no later than the date of payment
of the required interest payments hereunder) and promptly to furnish tax
receipts or other evidence of payment in accordance with applicable law.
4.9 Term Loan Allocation. Company and the Permitted Borrowers
will, during the life of this Agreement, exercise good faith diligent efforts
to allocate the funding of Term Loans among the Banks on an equal basis, s
ubject, however, to their respective needs for financing and subject to the
ability of the respective Banks to fund Term Loans without gross-up or
withholding.
4.10 Application of Term Loan Proceeds. Subject to the terms
hereof, the proceeds of Term Loans shall be applied by the applicable
Permitted Borrower to fund working capital needs, capital expenditures,
acquisitions or other general corporate purposes.
5. CONDITIONS. The obligations of Banks to make Advances or loans
pursuant to this Agreement are subject to the following conditions, provided
however that Section 5.1 through 5.10 below shall only apply to the initial
Advances or loans hereunder:
5.1 Execution of Notes and This Agreement. The Company and each of
the Permitted Borrowers shall have executed and delivered to Documentation
Agent for the account of each Bank, the Revolving Credit Notes and this
Agreement (including all schedules, exhibits, certificates, opinions, financial
statements and other documents to be delivered pursuant hereto), and, as
applicable, such Revolving Credit Notes, the Loan Documents and this Agreement
shall be in full force and effect.
5.2 Corporate Authority. Documentation Agent shall have received,
with a counterpart thereof for each Bank: (i) certified copies of resolutions
of the Board of Directors of the Company and each of the Permitted Borrowers
evidencing approval of the form of this Agreement and the Notes and authorizing
the execution and delivery thereof and the borrowing of Advances hereunder;
(ii) (A) certified copies of the Company's, the Parent's and the Permitted
Borrowers' articles of incorporation and bylaws or other constitutional
documents certified as true and complete as of a recent date by the appropriate
official of the jurisdiction of incorporation of each such entity (or, if
unavailable in such jurisdiction, by a responsible officer of such entity); and
(B) a certificate of good standing from the state or other jurisdictions of the
Company's and the Parent's incorporation, and from the applicable states of
incorporation or other jurisdictions of the Permitted Borrowers and from every
state or other jurisdiction in which either the Company, the Parent or any of
the Permitted Borrowers is qualified to do business, if issued by such
jurisdictions, subject to the limitations (as to qualification and
authorization to do business) contained in Section 6.1, hereof.
5.3 Company Guaranty. As security for all Indebtedness of the
Company and the Permitted Borrowers to the Banks hereunder, the Company agrees
to furnish, execute and deliver to Documentation Agent, or cause to be
furnished, executed and delivered to Documentation Agent, prior to or
concurrently with the initial borrowing hereunder, in form and substance
satisfactory to Documentation Agent and the Banks and supported by appropriate
resolutions in certified form authorizing same, the Company Guaranty.
5.4 Permitted Borrowers Guaranty and Parent Guaranty. The Company
agrees to furnish, execute and deliver to Documentation Agent, or cause to be
furnished, executed and delivered to Documentation Agent, prior to or
concurrently with the initial borrowing hereunder, in form and substance
satisfactory to Documentation Agent and the Banks and supported by appropriate
resolutions in certified form authorizing same, the Parent Guaranty and, as
security for the Indebtedness of the Permitted Borrowers as set forth therein
(but not as security for the Indebtedness of the Company or Parent), the
Permitted Borrowers Guaranty.
5.5 Representations and Warranties -- All Parties. The
representations and warranties made by the Company, the Permitted Borrowers or
any other party to any of the Loan Documents under this Agreement
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or any of the Loan Documents (excluding the Banks), and the
representations and warranties of any of the foregoing which are contained in
any certificate, document or financial or other statement furnished at any time
hereunder or thereunder or in connection herewith or therewith shall have been
true and correct in all material respects when made and shall be true and
correct in all material respects on and as of the date of the making of the
initial Advance hereunder.
5.6 Compliance with Certain Documents and Agreements. The Company,
the Parent and each of the Permitted Borrowers (and any of their respective
Affiliates) shall have each performed and complied with all agreements and
conditions contained in this Agreement, the Loan Documents, or any agreement or
other document executed thereunder and required to be performed or complied
with by each of them (as of the applicable date) and none of such parties shall
be in default in the performance or compliance with any of the terms or
provisions hereof or thereof.
5.7 Opinion of Counsel. The Company shall furnish Documentation
Agent prior to the initial Advance under this Agreement, and with signed copies
for each Bank, opinions of counsel, dated the date hereof, and covering such
matters as required by and otherwise satisfactory in form and substance to the
Documentation Agent and each of the Banks.
5.8 Company's Certificate. The Documentation Agent shall have
received, with a signed counterpart for each Bank, a certificate of a
responsible senior officer of Company, dated the date of the making of the
initial Advances hereunder, stating that the conditions of paragraphs 5.1, 5.5,
5.6 and 5.11(a) through (b) hereof have been fully satisfied.
5.9 Payment of Agents' and Other Fees. Company shall have paid to
the Administrative Agent the Revolving Credit Closing Fee (for distribution to
the Banks hereunder), and to the Agents, the Agents' Fees and all costs and
expenses required hereunder.
5.10 Other Documents and Instruments. The Documentation Agent shall
have received, with a photocopy for each Bank, such other instruments and
documents as the Majority Banks may reasonably request in connection with the
making of the Loans hereunder, and all such instruments and documents shall be
satisfactory in form and substance to the Majority Banks.
5.11 Continuing Conditions. The obligations of the Banks to make any
of the Advances or loans under this Agreement, including but not limited to the
initial Advances of the Revolving Credit or Advances of Term Loans hereunder,
shall be subject to the following continuing conditions:
(a) No Default or Event of Default shall have occurred and
be continuing as of the making of the proposed Advance;
(b) There shall have been no material adverse change in the
condition (financial or otherwise), properties, business, results or operations
of the Company or its Subsidiaries (taken as a whole) from March 31, 1993 (or
any subsequent March 31st, if the Agents determine, with the concurrence of the
Majority Banks, based on the Company's financial statements for such subsequent
fiscal year that no material adverse change has occurred during such year, such
determination being made solely for purposes of determining the applicable date
under this paragraph) to the date of the proposed Advance hereunder;
(c) The representations and warranties contained in this
Agreement and the Loan Documents are true and correct in all material respects
as of the making of applicable Advance; and
(d) All documents executed or submitted pursuant hereto
shall be satisfactory in form and substance (consistent with the terms hereof)
to Documentation Agent and its counsel and to each of the Banks; Documentation
Agent and its counsel and each of the Banks and their respective counsel shall
have received all information, and such counterpart originals or such certified
or other copies of such materials, as Documentation Agent or its counsel and
each of the Banks and their respective counsel may reasonably request;
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and all other legal matters relating to the transactions contemplated
by this Agreement (including, without limitation, matters arising from time to
time as a result of changes occurring with respect to any statutory, regulatory
or decisional law applicable hereto) shall be satisfactory to counsel to
Documentation Agent and counsel to each of the Banks.
6. REPRESENTATIONS AND WARRANTIES
The Company and each of the Permitted Borrowers represents and warrants
to Agents and the Banks that:
6.1 Corporate Authority. The Company and each of the Subsidiaries
is a corporation duly organized and existing in good standing under the laws of
the applicable jurisdiction of organization, charter or incorporation; it, and
each of the Subsidiaries is duly qualified and authorized to do business as a
corporation or foreign corporation in each jurisdiction where the character of
its assets or the nature of its activities makes such qualification necessary,
except where such failure to qualify and be authorized to do business will not
have a material adverse impact on the Company and its Subsidiaries, taken as a
whole.
6.2 Due Authorization - Company. Execution, delivery and
performance of this Agreement, the Loan Documents and any other documents and
instruments required under this Agreement, and the issuance of the Revolving
Credit Notes by the Company are within its corporate powers, have been duly
authorized, are not in contravention of law or the terms of the Company's
Certificate of Incorporation or Bylaws, and, except as have been previously
obtained or as referred to in Section 6.15, below, do not require the consent
or approval, material to the transactions contemplated by this Agreement or the
Loan Documents, of any governmental body, agency or authority not previously
delivered under Section 5.5 hereof.
6.3 Due Authorization -- Parent and Subsidiaries. Execution,
delivery and performance of the Loan Documents and all other documents and
instruments executed and delivered under or in connection with this Agreement
or the Loan Documents by the Parent and each of the Permitted Borrowers are
within the corporate powers, have been duly authorized, are not in
contravention of law or the terms of articles of incorporation or bylaws or
other organic documents of the parties thereto, as applicable, and, except as
have been previously obtained (or as referred to in Section 6.15, below), do
not require the consent or approval, material to the transactions contemplated
by this Agreement, and the Loan Documents, of any governmental body, agency or
authority not previously obtained and delivered under Section 5.5 hereof.
6.4 Title to Material Property. Each of the Company, the Permitted
Borrowers and the Parent has good and valid title to the Material Property
owned by it.
6.5 Encumbrances. There are no security interests in, Liens,
mortgages or other encumbrances on and no financing statements on file with
respect to any property of Company, Parent or any of the Permitted Borrowers,
except for those Liens permitted under Section 8.5 hereof.
6.6 Subsidiaries. As of the date of this Agreement, there are no
directly or indirectly owned Subsidiaries of the Company, except for those
Subsidiaries identified in Schedule 6.6, attached hereto.
6.7 Taxes. The Company and its Subsidiaries each has filed on or
before their respective due dates, all federal, state and foreign tax returns
which are required to be filed or has obtained extensions for filing such tax
returns and is not delinquent in filing such returns in accordance with such
extensions and has paid all taxes which have become due pursuant to those
returns or pursuant to any assessments received by any such party, as the case
may be, to the extent such taxes have become due, except to the extent such tax
payments are being actively contested in good faith by appropriate proceedings
and with respect to which adequate provision has been made on the books of the
Company or its Subsidiaries, as applicable, as may be required by GAAP, and
except where the failure to comply with the foregoing would not have a material
adverse effect on the Company and its Subsidiaries taken as a whole.
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6.8 No Defaults. There exists no default under the provisions of
any instrument evidencing any permitted debt of the Company or its Subsidiaries
or any of the Permitted Borrowers or connected with any of the Permitted
Company Encumbrances, or the Permitted Encumbrances of the Subsidiaries, or of
any agreement relating thereto, except where such default would not have a
material adverse effect on Company and its Subsidiaries taken as a whole and
would not violate this Agreement or any of the Loan Documents according to the
terms thereof.
6.9 Enforceability of Agreement and Loan Documents -- Company. This
Agreement, each of the Loan Documents to which the Company is a party,
including without limitation the Company Guaranty, and all other certificates,
agreements and documents executed and delivered by Company under or in
connection herewith or therewith have each been duly executed and delivered by
their respective duly authorized officers and constitute the valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except as enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or similar laws affecting the
enforcement of creditor's rights, generally and by general principles of equity
(whether enforcement is sought in a proceeding in equity or at law).
6.10 Enforceability of Loan Documents -- Other Parties. The Loan
Documents, and all certificates, documents and agreements executed in
connection therewith by the Parent or by any of the Subsidiaries or any one of
them, including without limitation the Parent Guaranty or the Permitted
Borrowers Guaranty, as the case may be, have each been duly executed and
delivered by the respective duly authorized officers of such parties and
constitute the valid and binding obligations of such parties, enforceable in
accordance with their respective terms, except as enforcement thereof may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting the enforcement of creditor's rights, generally and by
general principles of equity (whether enforcement is sought in a proceeding in
equity or at law).
6.11 Non-contravention -- Company. The execution, delivery and
performance of this Agreement and the Loan Documents and any other documents
and instruments required under or in connection with this Agreement by the
Company are not in contravention of the terms of any indenture, material
agreement or material undertaking to which the Company is a party or by which
it or its properties are bound or affected, except where such contravention
would not have a material adverse effect on the Company and its Subsidiaries,
taken as a whole.
6.12 Non-contravention -- Other Parties. The execution, delivery and
performance of those Loan Documents signed by the Parent or by any of the
Subsidiaries, and any other documents and instruments required under or in
connection with this Agreement by the Parent or by any of the Subsidiaries are
not in contravention of the terms of any indenture, material agreement or
material undertaking to which any of such parties is a party or by which it or
its properties are bound or affected, except where such contravention would not
have a material adverse effect on the Company and its Subsidiaries, taken as a
whole.
6.13 No Litigation -- Company. There is no suit, action, proceeding,
including, without limitation, any bankruptcy proceeding, or governmental
investigation pending against or, to the best knowledge of the Company,
affecting the Company (other than any suit, action or proceeding in which the
Company is the plaintiff and in which no counterclaim or cross-claim against
Company has been filed), nor has the Company or any of its officers or
directors been subject to any suit, action, proceeding or governmental
investigation as a result of which any such officer or director is or may be
entitled to indemnification by Company, except as otherwise disclosed in
Schedule 6.13 attached hereto and except for miscellaneous suits, actions and
proceedings which have a reasonable likelihood of being adversely determined,
which suits, if resolved adversely to the Company would not in the aggregate
have a material adverse effect on the Company and its Subsidiaries, taken as a
whole. Except as so disclosed, there is not outstanding against the Company any
judgment, decree, injunction, rule, or order of any court, government,
department, commission, agency, instrumentality or arbitrator, nor, to the best
knowledge of the Company, is the Company in violation of any applicable law,
regulation, ordinance, order, injunction, decree or requirement of any
governmental body or court where such violation would have a material adverse
effect on the Company and its Subsidiaries, taken as a whole.
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6.14 No Litigation -- Other Parties. There is no suit, action,
proceeding (other than any suit, action or proceeding in which any such party
is the plaintiff and in which no counterclaim or cross-claim against any such
party has been filed), including, without limitation, any bankruptcy
proceeding, or governmental investigation pending against or, to the best
knowledge of the Company, affecting the Parent or any of the Subsidiaries, nor
has any such party or any of its officers or directors been subject to any
suit, action, proceeding or governmental investigation as a result of which any
such officer or director is or may be entitled to indemnification by such
party, except as otherwise disclosed in Schedule 6.14 attached hereto and
except for miscellaneous suits, actions and proceedings which have a reasonable
likelihood of being adversely determined, which suits, if resolved adversely to
such party, would not in the aggregate have a material adverse effect on the
Company and its Subsidiaries, taken as a whole. Except as so disclosed, there
is not outstanding against any such party any judgment, decree, injunction,
rule, or order of any court, government, department, commission, agency,
instrumentality or arbitrator nor, to the best knowledge of the Company, is any
such party in violation of any applicable law, regulation, ordinance, order,
injunction, decree or requirement of any governmental body or court where such
violation would have a material adverse effect on the Company and its
Subsidiaries, taken as a whole.
6.15 Consents, Approvals and Filings, Etc. Except as have been
previously obtained, no authorization, consent, approval, license,
qualification or formal exemption from, nor any filing, declaration or
registration with, any court, governmental agency or regulatory authority or
any securities exchange or any other person or party (whether or not
governmental) is required in connection with the execution, delivery and
performance: (i) by the Company of this Agreement, any of the Loan Documents to
which it is a party, or any other documents or instruments to be executed and
or delivered by the Company in connection therewith or herewith; and (ii) by
the Parent and each of the Permitted Borrowers of the Loan Documents to which
they are a party. All such authorizations, consents, approvals, licenses,
qualifications, exemptions, filings, declarations and registrations which have
previously been obtained or made, as the case may be, are in full force and
effect and are not the subject of any attack, or to the knowledge of the
Company, threatened attack (in any material respect) by appeal or direct
proceeding or otherwise.
6.16 Agreements Affecting Financial Condition. Neither the Company
nor any of its Subsidiaries is party to any agreement or instrument or subject
to any charter or other corporate restriction which materially adversely
affects the financial condition or operations of the Company and its
Subsidiaries, taken as a whole.
6.17 No Investment Company. Neither the Company nor any of its
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
6.18 No Margin Stock. Neither the Company nor any of its
Subsidiaries is engaged principally, or as one of its important activities,
directly or indirectly, in the business of extending credit for the purpose of
purchasing or carrying margin stock. None of the proceeds of any of the Loans
will be used by the Company or any of the Subsidiaries to purchase or carry
margin stock or will be made available by the Company or any of the
Subsidiaries in any manner to any other Person to enable or assist such Person
in, purchasing or carrying margin stock. After applying the proceeds of each
Advance, such margin stock will not constitute more than twenty five percent
(25%) of the value of the assets (either of the Company alone or of the Company
and its Subsidiaries on a Consolidated Basis) that are subject to any
provisions of this Agreement that may cause the Advances to be deemed secured,
directly or indirectly, by margin stock. Terms for which meanings are provided
in Regulation U of the Board of Governors of the Federal Reserve System or any
regulations substituted therefor, as from time to time in effect, are used in
this paragraph with such meanings.
6.19 ERISA. Neither a Reportable Event nor an Accumulated Funding
Deficiency has occurred during the five-year period prior to the date on which
this representation is made or deemed made with respect to any Pension Plan.
Each Pension Plan has complied in all material respects with the applicable
provisions of ERISA and the Code and any applicable regulations thereof, except
to the extent that any noncompliance, individually or in the aggregate, would
not have a material adverse effect upon the Company and its Subsidiaries, taken
as a whole. No termination of a Single Employer Plan has occurred, and no Lien
in favor of the PBGC or a Pension Plan has arisen, during such five-year
period. The present value of all accrued benefits
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under each Single Employer Plan maintained by the Company or any ERISA
Affiliate did not, as of the last annual valuation date prior to the date on
which this representation is made or deemed made, exceed the value of the
assets of such Pension Plan allocable to such accrued benefits. Neither the
Company nor any ERISA Affiliate has had a complete or partial withdrawal from
any Multiemployer Plan, nor does the Company or any ERISA Affiliate presently
intend to completely or partially withdraw from any Multiemployer Plan, and
neither the Company nor any ERISA Affiliate would become subject under ERISA if
the Company or any ERISA Affiliate were to withdraw completely from all
Multiemployer Plans as of the valuation date most closely preceding the date on
which this representation is made or deemed made. No such Multiemployer Plan
is in bankruptcy or reorganization or insolvent. There is no pending or, to
the best of our knowledge, threatened litigation or investigation questioning
the form or operation of any Pension Plan, nor is there any basis for any such
litigation or investigation which if adversely determined could have a material
adverse effect upon the Company and its Subsidiaries, taken as a whole.
6.20 Environmental Matters and Safety Matters. (a) The Company and
each Subsidiary is in substantial compliance with all federal, state,
provincial and local laws, ordinances and regulations relating to safety and
industrial hygiene or to the environmental condition, including without
limitation all applicable Hazardous Materials Laws in jurisdictions in which
the Company or any Subsidiary owns or operates, a facility or site, or arranges
for disposal or treatment of hazardous substances, solid waste, or other
wastes, accepts for transport any hazardous substances, solid wastes or other
wastes or holds any interest in real property or otherwise, except for matters
which, individually or in the aggregate, would not have a material adverse
effect upon the financial condition or business of the Company and its
Subsidiaries, taken as a whole.
(b) All federal, state, provincial, local and foreign
permits, licenses and authorizations required for present or (to the best of
the Company's knowledge) past use of the facilities and other properties or
activities of the Company and each Subsidiary have been obtained, are presently
in effect, and there is and has been full compliance with all such permits,
licenses or authorizations, except, in all cases, where the failure to comply
with the foregoing would not have a material adverse effect on the Company and
its Subsidiaries taken as a whole.
(c) No demand, claim, notice, suit (in law or equity),
action, administrative action, investigation or inquiry (including, without
limitation, the listing of any property by any domestic or foreign governmental
entity which identifies sites for remedial, clean-up or investigatory action)
whether brought by any governmental authority, private person or entity or
otherwise, arising under, relating to or in connection with any applicable
Hazardous Materials Laws is pending or, to the best of the Company's knowledge,
threatened against the Company or any of its Subsidiaries, any real property in
which the Company or any such Subsidiary holds or, to the best of the Company's
knowledge, has held an interest or any present or, to the best of the Company's
knowledge, past operation of the Company or any Subsidiary, except for such
matters which, individually or in the aggregate, would not have a material
adverse effect on the financial condition or business of the Company and its
Subsidiaries, taken as a whole.
(d) Neither the Company nor any of its Subsidiaries,
whether with respect to present or, to the best of the Company's knowledge,
past operations or properties, (i) is, to the best of the Company's knowledge,
the subject of any federal or state investigation evaluating whether any
remedial action is needed to respond to a release of any toxic substances,
radioactive materials, hazardous wastes or related materials into the
environment, (ii) has received any notice of any toxic substances, radioactive
materials, hazardous waste or related materials in, or upon any of its
properties in violation of any applicable Hazardous Materials Laws, or (iii)
knows of any basis for any such investigation or notice, or for the existence
of such a violation, except for such matters which, individually or in the
aggregate, would not have a material adverse effect on the financial condition
or business of the Company and its Subsidiaries, taken as a whole.
(e) No release, threatened release or disposal of hazardous
waste, solid waste or other wastes is occurring or has occurred on, under or to
any real property in which the Company or any of its Subsidiaries holds any
interest or performs any of its operations, in violation of any applicable
Hazardous
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Materials Laws, except for any such matters which, individually or in
the aggregate, would not have a material adverse effect on the financial
condition or business of the Company and its Subsidiaries, taken as a whole.
6.21 Accuracy of Information. Each of the Company's audited or
unaudited financial statements previously furnished to Agents and the Banks by
the Company prior to the date of this Agreement, is complete and correct in all
material respects and fairly presents the financial condition of the Company
and its Subsidiaries, taken as a whole, and the results of their operations for
the periods covered thereby; any projections of operations for future years
previously furnished by Company to Agents or the Banks have been prepared as
the Company's good faith estimate of such future operations, taking into
account all relevant facts and matters known to Company; since March 31, 1993
there has been no material adverse change in the financial condition of the
Company or its Subsidiaries, taken as a whole; to the knowledge of the Company,
neither the Company, nor any of its Subsidiaries has any contingent obligations
(including any liability for taxes) not disclosed by or reserved against in the
March 31, 1993 balance sheet which is likely to have a material adverse effect
on the Company and its Subsidiaries, taken as a whole, except as set forth on
Schedule 6.21 hereof.
7. AFFIRMATIVE COVENANTS
Each of the Company and the Permitted Borrowers covenants and agrees
that, until the Revolving Credit Maturity Date and thereafter until final
payment in full of the Indebtedness and the performance by the Company and the
Permitted Borrowers of all other obligations under this Agreement, unless the
Majority Banks shall otherwise consent in writing, it will, and, it will cause
the Subsidiaries to:
7.1 Preservation of Existence, Etc. Except as otherwise
specifically permitted hereunder, preserve and maintain its corporate existence
and such of its rights, licenses, and privileges as are material to the
business and operations conducted by it; and qualify and remain qualified to do
business in each jurisdiction in which such qualification is material to the
business and operations or ownership of properties, in each case of the Company
and its Subsidiaries, taken as a whole.
7.2 Keeping of Books. Keep proper books of record and account in
which full and correct entries shall be made of all of its financial
transactions and its assets and businesses so as to permit the presentation of
financial statements prepared in accordance with GAAP.
7.3 Reporting Requirements. Furnish Administrative Agent with
copies for each Bank:
(a) as soon as possible, and in any event within three
Business Days after becoming aware of the occurrence of each Default or Event
of Default, a written statement of the chief financial officer of the Company
(or in such officer's absence, a responsible senior officer) setting forth
details of such Default or Event of Default and the action which the Company
has taken or has caused to be taken or proposes to take or cause to be taken
with respect thereto;
(b) as soon as available, and in any event within
ninety-five (95) days after and as of the end of each of the Company's fiscal
years, (i) a detailed Consolidated audit report of the Company having the
balance sheet and related statements of income, retained earnings and cash
flows certified to by independent certified public accountants of recognized
international standing, together with an unaudited Consolidating report of the
Company and its Subsidiaries certified by an authorized officer of the Company
as to consistency (with prior financial reports and accounting periods),
accuracy and fairness of presentation except, subject to the terms hereof, as
disclosed therein, and (ii) a Covenant Compliance and Interest Rate Adjustment
Report;
(c) as soon as available, and in any event within fifty
(50) days after and as of the end of the first three fiscal quarters of each
year, (i) a Consolidated balance sheet and related statements of income,
retained earnings and cash flows of the Company and its Subsidiaries and
Consolidating balance sheets and statements of income of the Company and its
Subsidiaries, each certified by an authorized officer of the Company as to
consistency (with prior financial reports and accounting periods, as
aforesaid), accuracy and fairness of presentation, and (ii) a Covenant
Compliance and Interest Rate Adjustment Report;
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(d) as soon as possible, and in any event within three
Business Days after becoming aware of any material adverse change in the
financial condition of the Company and its Subsidiaries, taken as a whole, a
certificate of the chief financial officer of Company (or in such officer's
absence, a responsible senior officer) setting forth the details of such
change;
(e) (i) as soon as available, copies of the Company's
reports on Form 8-K, 10-Q and 10-K filed with the federal Securities and
Exchange Commission, and (ii), as soon as available, copies of all filings,
reports or other documents filed by the Company or any of its Subsidiaries with
the federal Securities and Exchange Commission or comparable reports to or
filings with comparable agencies or authorities in England, Canada, France,
Germany, Scotland or Australia, or any stock exchanges in such jurisdictions;
and
(f) promptly, and in form and substance reasonably
satisfactory to Agents such other information as Agents may reasonably request
from time to time.
7.4 Consolidated Tangible Net Worth. Maintain as of the end of each
fiscal quarter a Consolidated Tangible Net Worth of not less than the "base
Consolidated Tangible Net Worth." For purposes of this Agreement,
(i) base Consolidated Tangible Net Worth shall be $30,000,000 as of
the date of execution of this Agreement; and
(ii) on the last day of each fiscal year, beginning March 31, 1995,
the base Consolidated Tangible Net Worth then in effect shall be adjusted
upward by an amount equal to (a) 50% of the sum of Consolidated Net Income for
the fiscal year then ended, if a positive number, and (b) 90% of (x) the net
cash proceeds of the issuance of Capital Stock of the Company received during
such fiscal year, (y) the amount of contributions by the Parent to the capital
account of the Company received by the Company during such fiscal year and (z)
the amount of all other new capital (according to GAAP) received by the Company
during such fiscal year.
7.5 Consolidated Leverage Ratio. Maintain as of the end of each
fiscal quarter a Consolidated Leverage Ratio of not more than .55 to 1.0.
7.6 Consolidated Fixed Charge Ratio. Maintain as of the end of
each fiscal quarter, a Consolidated Fixed Charge Ratio of not less than 1.35 to
1.0.
7.7 Consolidated Cash Flow Coverage Ratio. Maintain as of the end
of each fiscal quarter, a Consolidated Cash Flow Coverage Ratio of not less
than .2 to 1.0.
7.8 Taxes. Pay and discharge all taxes and other governmental
charges, and all material contractual obligations calling for the payment of
money, before the same shall become overdue, unless and to the extent only that
such payment is being contested in good faith by appropriate proceedings and is
reserved for, as required by GAAP on its balance sheet, or where the failure to
pay any such matter could not have a material adverse effect on the Company and
its Subsidiaries, taken as a whole.
7.9 Inspections. Permit Agents and each Bank, through their
authorized attorneys, accountants and representatives to examine the Company's
and each of the Subsidiaries' books, accounts, records, ledgers and assets and
properties of every kind and description wherever located at all reasonable
times during normal business hours and at reasonable intervals, upon oral or
written request of Agents; and permit Agents and each Bank or their authorized
representatives, at reasonable times and intervals, to visit all of their
respective offices, discuss their respective financial matters with their
respective officers and independent certified public accountants, and by this
provision the Company and each Subsidiary authorizes such accountants to
discuss the finances and affairs of the Company and its Subsidiaries (provided
that the Company is given an opportunity to participate in such discussions)
and examine any of its or their books and other corporate records.
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7.10 Further Assurances. Execute and deliver or cause to be executed
and delivered within a reasonable time following Documentation Agent's request,
and at the Company's expense, such other documents or instruments as
Documentation Agent may reasonably require to effectuate more fully the
purposes of this Agreement.
7.11 Insurance. Maintain insurance coverage on its physical assets
and against other business risks in such amounts and of such types as are
customarily carried by companies similar in size and nature, consistent with
prudent business judgment and then current practice.
7.12 Indemnification. With respect to the Company, indemnify and
save each Agent and the Banks harmless from all reasonable loss, cost, damage,
liability or expenses, including reasonable attorneys' fees and disbursements,
incurred by each of the Agents and the Banks by reason of an Event of Default
or enforcing the obligations of the Company or the Permitted Borrowers under
this Agreement or in the prosecution or defense of any action or proceeding
concerning any matter growing out of or connected with this Agreement or any of
the Loan Documents or any mortgage or security agreement released by Agents or
the Banks from time to time hereunder or under the Prior Credit Agreement; and,
with respect to each of the Permitted Borrowers, indemnify and save each Agent
and the Banks harmless from all reasonable loss, cost, damage, liability or
expenses, including reasonable attorneys' fees and disbursements, incurred by
each of the Agents and the Banks with respect to a Permitted Borrower by reason
of an Event of Default or enforcing the obligations of the Permitted Borrowers
under this Agreement, the Prior Credit Agreement or the Loan Documents or in
the prosecution or defense of any action or proceeding concerning any matter
growing out of or connected with this Agreement, the Prior Credit Agreement or
any of the Loan Documents or any mortgage or security agreement released by
Agents or the Banks from time to time hereunder or under the Prior Credit
Agreement.
7.13 Governmental and Other Approvals. Apply for, obtain and/or
maintain in effect, as applicable, all material authorizations, consents,
approvals, licenses, qualifications, exemptions, filings, declarations and
registrations (whether with any court, governmental agency, regulatory
authority, securities exchange or otherwise) which are necessary in connection
with the execution, delivery and performance: (i) by the Company, of this
Agreement, the Loan Documents, or any other documents or instruments to be
executed and/or delivered by the Company in connection therewith or herewith;
and (ii) by each of the Permitted Borrowers, of this Agreement and the Loan
Documents.
7.14 Compliance with Laws. Comply in all material respects with all
applicable laws, rules, regulations and orders of any governmental authority,
whether federal, state, local or foreign (including without limitation
Hazardous Materials Laws), in effect from time to time.
7.15 ERISA. Comply in all material respects with all requirements
imposed by ERISA as presently in effect or hereafter promulgated or the
Internal Revenue Code (or comparable laws in applicable jurisdictions outside
the United States of America relating to Foreign Plans) and promptly notify
Banks upon the occurrence of any of the following events:
(a) the termination of any Pension Plan pursuant to
Subtitle C of Title IV of ERISA or otherwise (other than any Defined
Contribution Plan not subject to Section 412 of the Code and any Multiemployer
Plan);
(b) the appointment of a trustee by a United States
District Court to administer any Pension Plan pursuant to ERISA;
(c) the commencement by the PBGC, or any successor thereto,
of any proceeding to terminate any Pension Plan;
(d) the failure of the Company or any ERISA Affiliate to
make any payment in respect of any Pension Plan required under Section 412 of
the Internal Revenue Code;
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(e) the withdrawal of the Company or any ERISA Affiliate
from any Multiemployer Plan;
(f) the occurrence of an Accumulated Funding Deficiency or
a Reportable Event; or
(g) the occurrence of a "prohibited transaction" (as
defined in Section 9.1(i) hereof) which could have a material adverse effect
upon the Company and its Subsidiaries, taken as a whole.
8. NEGATIVE COVENANTS
Each of the Company and the Permitted Borrowers covenants and agrees
that until the Revolving Credit Maturity Date and thereafter until final
payment in full of the Indebtedness and the performance by the Company and the
Permitted Borrowers of all other obligations under this Agreement, it will not,
and it will not allow the Subsidiaries, without the prior written consent of
the Majority Banks, to:
8.1 Capital Structure, Business Objects or Purpose. Except as
otherwise specifically permitted under this Agreement,
(a) purchase, acquire or redeem any of its Capital Stock,
other than (i) cash redemptions of the Capital Stock of any 100% Subsidiary,
(ii) redemptions for cash of the Capital Stock of any of its other Subsidiaries
or (iii) purchases, acquisitions or redemptions by the Company of its Capital
Stock in an aggregate amount during the life of this Agreement not to exceed
ten percent (10%) of the total Capital Stock of the Company then issued and
outstanding (determined as of the date of any such purchase, acquisition or
redemption, taking into account all prior such purchases, acquisitions and
redemptions); provided that any redemptions under subparagraphs (ii) or (iii)
of this Section shall be conducted (X) only while no Default or Event of
Default, hereunder has occurred and is continuing and (Y) with respect to
redemptions under subparagraph (ii) hereof, only on a pro rata basis with any
third-party shareholder or joint venture partner in such Subsidiary; or
(b) make any material change in its capital structure or
general business objects or purpose.
8.2 Limitations on Fundamental Changes. Enter into any transaction
of acquisition, merger, consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, assign, transfer or otherwise dispose of, all or substantially all of
its property, business or assets, or make any material change in its present
method of conducting business, except:
(a) any Subsidiary may be merged or consolidated with or
into the Company (so long as Company shall be the continuing or surviving
corporation) or with or into any one or more of the Permitted Borrowers (so
long as a Permitted Borrower shall be the continuing or surviving corporation);
(b) any Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or otherwise)
to the Company or any of the Permitted Borrowers;
(c) any Person other than a Subsidiary may merge or
consolidate with and into the Company or any Permitted Borrower so long as (i)
the Company or such Permitted Borrower shall be the surviving corporation and
(ii) immediately before and immediately after giving effect to such merger or
consolidation, no Default or Event of Default shall have occurred and be
continuing; and
(d) the Company may merge or consolidate with or into the
Parent and not survive so long as (i) the Parent expressly assumes, by written
agreement (including amendments to, or amendment and restatement of this
Agreement) satisfactory to Agents and the Banks in form and substance, all of
Company's
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obligations under this Agreement and the other Loan Documents and
(ii) immediately before and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing.
8.3 Guaranties. Guarantee, endorse, or otherwise become liable for
or upon the obligations of others, except by endorsement of cash items for
deposit in the ordinary course of business and except for (i) the Company
Guaranty, (ii) the Permitted Borrowers Guaranty, and (iii) guaranties of
indebtedness permitted under Section 8.4 hereof, provided that, with respect to
any indebtedness incurred by a Joint Venture or any unconsolidated Subsidiary,
the aggregate amount of such indebtedness at any time covered by a guaranty of
the Company or any Subsidiary shall at no time exceed, together with the loans,
advances, investments or other matters covered thereby, the limitation imposed
under Section 8.8(d) hereof.
8.4 Indebtedness. Become or remain obligated for any indebtedness
for borrowed money, or for any indebtedness incurred in connection with the
acquisition of any property, real or personal, tangible or intangible, except:
(a) Indebtedness to Banks (or their affiliates) hereunder
and under a Swing Line Facility;
(b) Other indebtedness issued and at all times maintained
on a pari passu basis with the Indebtedness (or on a basis subordinate
thereto), provided that such indebtedness be issued pursuant to documentation
containing covenants not more restrictive in the aggregate than the covenants
contained in this Agreement (as determined by the Company in its reasonable
discretion) and provided further, however, that immediately before and
immediately after such indebtedness is incurred (giving effect thereto), no
Default or Event of Default has occurred and is continuing. For purposes of
this Section 8.4, the granting of Liens which are permitted under Section 8.5
hereof, shall not be deemed to constitute the entry into more restrictive
covenants; and
(c) Intercompany Loans, subject to the other applicable
terms and limitations of this Agreement, including but not limited to Section
8.8 hereof.
8.5 Liens. Permit or suffer any Lien to exist on any of its
properties, real, personal or mixed, tangible or intangible, whether now owned
or hereafter acquired, except:
(a) any Lien subsequently granted by Company or any
Subsidiary in favor of Documentation Agent on behalf of Banks;
(b) Liens securing any other indebtedness permitted under
Section 8.4 hereof, provided that the aggregate amount of such indebtedness
secured by a Lien shall not exceed, at any time outstanding, fifteen percent
(15%) of Consolidated Net Tangible Assets and provided further that,
immediately before and immediately after the granting of such Lien (giving
effect thereto), no Default or Event of Default has occurred and is continuing;
and
(c) Permitted Company Encumbrances and Permitted
Encumbrances of the Subsidiaries.
8.6 Limitation on Sales of Assets. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, notes, trade acceptances or accounts receivable
and leasehold interests), whether now owned or hereafter acquired, except:
(a) any disposition of inventory or worn-out or obsolete
machinery, equipment or other such personal property in the ordinary course of
business;
(b) any disposition of contract rights or general
intangibles (other than notes, trade acceptances or accounts receivable),
customer lists, proprietary rights or other similar intangible personal
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property in the ordinary course of business conducted while no Default or Event
of Default has occurred and is continuing; and
(c) dispositions of real estate or tangible personal
property having a net book value at the time of disposition thereof
aggregating, during the period commencing on the date of this Agreement and
ending on the Revolving Credit Maturity Date, an amount not to exceed fifteen
percent (15%) of the Consolidated Net Tangible Assets determined as of the end
of each fiscal quarter, provided that, immediately before and immediately after
each such disposition (giving effect thereto), no Default or Event of Default
has occurred and is continuing.
8.7 Dividends. Declare or pay any dividends on or make any other
distribution with respect to (whether by reduction of stockholder's equity or
otherwise) any shares of its Capital Stock, except for:
(a) cash dividends by any Subsidiary paid to Company or to
any Permitted Borrower (other than Scherer France or Scherer Italy) or 100%
Subsidiary;
(b) cash dividends by a Subsidiary which is not a 100%
Subsidiary to its shareholders (including any third party shareholders),
provided however that such dividends are declared and paid on substantially the
same terms and conditions and on a corresponding basis for all shareholders
(except that the dates of payment of such dividends by any such party may be
adjusted for the respective accounting fiscal years of its shareholders), and
payment of all such dividends to all shareholders is made within a period of
four months from the payment of the first such dividend to any shareholder; and
(c) cash dividends by the Company paid in respect of any
fiscal year after April 1, 1994 in an aggregate amount in respect of such
fiscal year (on a non-cumulative basis) not to exceed twenty-five percent (25%)
of Consolidated Net Income for such fiscal year if paid prior to the end of the
next succeeding fiscal year;
provided that, with respect to any dividends paid pursuant to subparagraph (c),
above, no such dividends shall be paid unless, both before and after giving
effect thereto, no Default or Event of Default, shall have occurred and be
continuing.
8.8 Investments. Make or allow to remain outstanding any investment
(whether such investment shall be of the character of investment in shares of
stock, evidences of indebtedness or other securities or otherwise) in, or any
loans or advances to, any Person, firm, corporation or other entity or
association, other than:
(a) Company's current stock ownership interests in the
Subsidiaries;
(b) The investments, loans and/or advances in or to
Subsidiaries set forth on Schedule 8.8 hereto (in addition to any other matters
set forth in this Section 8.8);
(c) Intercompany Loans, Advances, or Investments without
regard to any repayment of such loans, advances, or investments (other than the
repayment or recovery of capital or principal), in an aggregate amount at any
time outstanding not to exceed (absent the consent of the Majority Banks),
exclusive of the other matters permitted under subsections (a) and (b) of this
Section 8.8, but including any such investments or other matters permitted
under any other provision of this Agreement, fifteen percent (15%) of
Consolidated Net Tangible Assets;
(d) loans, advances or investments (without regard to any
repayment of such loans, advances or investments, other than the repayment of
capital or principal) to any Joint Venture or unconsolidated Subsidiary,
including without limitation (i) investments or other matters permitted under
any provision of this Agreement other than subsections (a) and (b) of this
Section 8.8 and (ii) guaranties by the Company or any Subsidiary (valued on the
basis of the aggregate amount of such indebtedness covered by a guaranty) of
third-
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party indebtedness of any Joint Venture or unconsolidated Subsidiary, in
an aggregate amount from the date of this Agreement to the Revolving Credit
Maturity Date not to exceed, absent the consent of the Majority Banks, five
percent (5%) of Consolidated Net Tangible Assets;
(e) commercial paper, full faith and credit direct
obligations of the United States of America or, with respect to the Foreign
Subsidiaries, of the central government of the applicable jurisdiction, or any
agency thereof, certificates of deposit, and other short term investments (each
of a duration of one year or less), including without limitation interest rate
swaps, foreign currency investments and other hedging instruments in the
ordinary course of business, maintained by the Company or any of its
Subsidiaries consistent with the present investment practices of such parties
(as classified in the current financial statements of such parties);
(f) other short term investments (excluding investments in
Subsidiaries or Affiliates) made or maintained by any Foreign Subsidiary
outside of the United States of America in the ordinary course of its business,
consistent with the present investment practices of the Company and its
Subsidiaries as of the date hereof (generally, and as to the individual and
aggregate amounts and other terms thereof);
(g) 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 and under any Employee Benefit Plan;
(h) investments in or under the Company's existing rabbi
trust made in conformity with the terms thereof;
(i) receivables arising from the sale of goods and services
in the ordinary course of business of the Company and its Subsidiaries; and
(j) investments, whether by acquisition of shares of
Capital Stock, indebtedness or other obligations or security of, any Person
(other than a Subsidiary or an Affiliate) which is a customer of the Company or
any Subsidiary, which investment was made in exchange for amounts owed by such
customer to the Company or any Subsidiary (and incurred in the ordinary course
of business) or as an advance on the provision of goods and services in the
ordinary course of business;
In valuing any investments, loans and advances for the purpose of applying the
limitations set forth in this Section 8.8 (except as otherwise expressly
provided herein), 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.
8.9 Transactions with Affiliates. Enter into any transaction with
any of its or their stockholders or officers or its or their affiliates, except
in the ordinary course of business and on terms not less favorable than would
be usual and customary in similar transactions between Persons dealing at arm's
length.
8.10 Prohibition Against Certain Restrictions. Enter into or
otherwise become subject to any agreement or arrangement (excluding this
Agreement) with any lender or other third party (i) which prohibits, restricts
or otherwise limits the ability of Company to make loans, advances or
investments to its Subsidiaries or which prohibits, restricts or otherwise
limits the ability of any Permitted Borrower to make loans, advances or
investments in any other Permitted Borrower or (ii) which prohibits, restricts
or otherwise limits the execution, delivery or performance by Company or any
Permitted Borrower of any guaranty, indemnity or similar undertaking in favor
of Agents or the Banks.
9. DEFAULTS
9.1 Events of Default. Any of the following events is an "Event of
Default":
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(a) non-payment when due of any principal under any of the
Notes, or any reimbursement obligation under Section 3.6 hereof or nonpayment
within three (3) Business Days after becoming due of any interest under any of
the Notes or of any Fees in accordance with the terms hereof;
(b) default in the payment of any money by Company or any
of the Permitted Borrowers under this Agreement or any of the Loan Documents,
other than as set forth in subsection (a), above within three (3) Business Days
of the date the same is due and payable;
(c) default in the observance or performance of or failure
to comply with any of the other conditions, covenants or agreements set forth
in this Agreement or any of the Loan Documents by any party thereto and (i)
with respect to the covenants set forth in Sections 7.1, 7.3 through 7.7 and
8.1 through 8.10 hereof, such default has continued unremedied for a period of
five (5) consecutive days; and (ii) with respect to the remaining covenants
conditions or agreements set forth in this Agreement or the Loan Documents,
such default has continued unremedied for a period of thirty (30) consecutive
days;
(d) any representation or warranty made by Parent, Company
or any of the Permitted Borrowers herein or in any instrument submitted
pursuant hereto or by any other party to the Loan Documents proves untrue in
any material adverse respect when made;
(e) any material provision of the Company Guaranty, the
Parent Guaranty or the Permitted Borrowers Guaranty shall at any time for any
reason (other than in accordance with its terms) cease to be valid and binding
and enforceable against the Company, the Parent or any Permitted Borrower, as
applicable, or the validity, binding effect or enforceability thereof shall be
contested by any Person or the Company, the Parent or any Permitted Borrower
shall deny that it has any or further liability or obligation under the Company
Guaranty, the Parent Guaranty or the Permitted Borrower Guaranty, as
applicable, or the Company Guaranty, the Parent Guaranty or Permitted Borrower
Guaranty shall be terminated, invalidated or set aside or in any way cease to
give or provide to the Banks and the Agents the benefits purported to be
created thereby;
(f) (i) default in the payment of any other obligation
of Company, its Subsidiaries or the Permitted Borrowers for borrowed money in
an aggregate amount in excess of Ten Million Dollars ($10,000,000) (or the
Alternative Currency equivalent thereof), or (ii) default of or failure to
comply with any obligation of Company, its Subsidiaries or the Permitted
Borrowers for borrowed money in an aggregate amount in excess of Ten Million
Dollars ($10,000,000) (or the Alternative Currency equivalent thereof)
resulting in the acceleration thereof prior to its expressed maturity;
(g) the Parent shall cease to own directly or indirectly
free and clear of all Liens, one hundred percent (100%) of the issued and
outstanding Capital Stock of Company, or the Parent shall cease to possess,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the Company, whether through the ownership of voting
securities or by contract or otherwise;
(h) the rendering of any judgment for the payment of money
in excess of the sum of Ten Million Dollars ($10,000,000) (or the Alternative
Currency equivalent thereof) in the aggregate against Company, any of its
Subsidiaries or any of the Permitted Borrowers, and such judgments shall remain
unpaid, unvacated, unbonded or unstayed by appeal or otherwise for a period of
thirty (30) consecutive days, except as covered by adequate insurance with a
reputable carrier and an action is pending in which an active defense is being
made with respect thereto;
(i) any Person shall engage in any "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Pension Plan, (ii) any Accumulated Funding Deficiency, whether or not waived,
shall exist with respect to any Pension Plan or any Lien in favor of the PBGC
or a Pension Plan shall arise on the assets of the Company or any ERISA
Affiliate, (iii) a Reportable Event shall occur with respect to, or proceedings
shall commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan, (iv) any Single Employer
Plan shall terminate for purposes of Title IV of ERISA, (v) the Company or any
ERISA Affiliate shall, or in the reasonable opinion of
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the Majority Banks is likely to, incur any liability in connection with
a withdrawal from, or the insolvency, bankruptcy or reorganization of, a
Multiemployer Plan or (vi) any other event or condition shall occur or exist,
with respect to a Pension Plan; and in each case in clauses (i) through (vi)
above, (x) a period of thirty (30) days has elapsed from the occurrence of such
event or condition and (y) such event or condition, together with all other
such events or conditions, if any, could subject the Company or any of its
Subsidiaries to any tax, penalty or other liabilities in the aggregate material
in relation to the business, operations, property or financial or other
condition of the Company and its Subsidiaries taken as a whole;
(j) the Company, any of the Permitted Borrowers or the
Parent shall be dissolved or liquidated (or any judgment, order or decree
therefor shall be entered) or; if a creditors' committee shall have been
appointed for the business of the Company or any of its Subsidiaries or the
Parent; or if the Company or any of its Subsidiaries or the Parent shall have
made a general assignment for the benefit of creditors or shall have been
adjudicated bankrupt, or shall have filed a voluntary petition in bankruptcy or
for reorganization or to effect a plan or arrangement with creditors or shall
fail to pay its debts generally as such debts become due in the ordinary course
of business (except as contested in good faith and for which adequate reserves
are made in such party's financial statements); or shall file an answer to a
creditor's petition or other petition filed against it, admitting the material
allegations thereof for an adjudication in bankruptcy or for reorganization; or
shall have applied for or permitted the appointment of a receiver or trustee or
custodian for any of its property or assets; or such receiver, trustee or
custodian shall have been appointed for any of its property or assets
(otherwise than upon application or consent of the Company, or any of its
Subsidiaries or the Parent) or if an order shall be entered approving any
petition for reorganization of the Company or any of its Subsidiaries or the
Parent; or the Company, the Parent or any Subsidiary shall take any action
(corporate or other) authorizing or in furtherance of any of the actions
described in this subsection; or
(k) any Person or group of Persons acting in concert shall
acquire or control, directly or indirectly, whether by ownership, proxy, voting
trust or otherwise, more than fifty percent (50%) of the issued and outstanding
securities of the Parent having ordinary voting power for the election of
directors.
9.2 Exercise of Remedies. If an Event of Default has occurred and
is continuing hereunder: (v) the Agents may, and upon being directed to do so
by the Majority Banks, shall, declare the Banks' commitment hereunder to make
Advances of the Revolving Credit or to fund Term Loans terminated; (w) the
Agents may and, upon being directed to do so by the Majority Banks, shall
declare the entire unpaid Indebtedness, including the Notes, immediately due
and payable, without presentment, notice or demand, all of which are hereby
expressly waived by the Company and the Permitted Borrowers; (x) upon the
occurrence of any Event of Default specified in subsection 9.1(j), above, and
notwithstanding the lack of any declaration by Agents under preceding clause
(w), the entire unpaid Indebtedness, including the Notes, shall become
automatically and immediately due and payable and the Banks' commitment
hereunder to make Advances of the Revolving Credit or to fund Term Loans shall
be automatically and immediately terminated (subject only to the continued
availability of Advances of the Reserved Availability pursuant to, and as
limited by, Section 2.7B(a) through (e) hereof); (y) the Agents may, and upon
being directed to do so by the Majority Banks, shall demand immediate delivery
of cash collateral, and the Company and each Account Party agrees to deliver
such cash collateral upon demand, in an amount equal to the maximum amount that
may be available to be drawn at any time prior to the stated expiry of all
outstanding Letters of Credit; and (z) the Agents shall, if directed to do so
by the Majority Banks or the Banks, as applicable (subject to the terms
hereof), exercise any remedy permitted by this Agreement, the Loan Documents or
law.
9.3 Rights Cumulative. No delay or failure of Agents and/or Banks
in exercising any right, power or privilege hereunder shall affect such right,
power or privilege, nor shall any single or partial exercise thereof preclude
any further exercise thereof, or the exercise of any other power, right or
privilege. The rights of Banks under this Agreement are cumulative and not
exclusive of any right or remedies which Banks would otherwise have.
9.4 Waiver by the Company of Certain Laws. To the extent permitted
by applicable law, the Company and each of the Permitted Borrowers hereby agree
to waive, and do hereby absolutely and irrevocably
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waive and relinquish the benefit and advantage of any valuation, stay,
appraisement, extension or redemption laws now existing or which may hereafter
exist, which, but for this provision, might be applicable to any sale made
under the judgment, order or decree of any court, on any claim for interest on
the Notes. These waivers have been voluntarily given, with full knowledge of
the consequences thereof.
9.5 Waiver of Defaults. No Event of Default shall be waived by the
Banks except in a writing signed by an officer of the Administrative Agent in
accordance with Section 12.11 hereof. No single or partial exercise of any
right, power or privilege hereunder, nor any delay in the exercise thereof,
shall preclude other or further exercise of their rights by Agents or the
Banks. No waiver of any event of default shall extend to any other or further
event of default. No forbearance on the part of the Agents or the Banks in
enforcing any of their rights shall constitute a waiver of any of their rights.
The Company and each of the Permitted Borrowers expressly agrees that this
Section may not be waived or modified by the Banks or Agents by course of
performance, estoppel or otherwise.
9.6 Deposits and Accounts. Upon the occurrence and during the
continuance of any Event of Default under Section 9.1(a), 9.1(b) or 9.1(j)
hereof, each Bank may at any time and from time to time, without prior notice
to the Company or any Permitted Borrower (any requirement for such notice being
expressly waived by the Company and the Permitted Borrowers) set off and apply
against any and all of:
(a) the obligations of the Company now or hereafter
existing under this Agreement, whether owing to such Bank or any other Bank or
either of the Agents, 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 such Bank to or for the credit or the account of the Company and any
property of the Company from time to time in possession of such Bank, and
(b) of the obligations of the Permitted Borrowers (or any
of them) now or hereafter existing under this Agreement, whether owing to such
Bank or any other Bank or either of the Agents, 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 such Bank to or for the credit or the account
of the Company or any Permitted Borrower and any property of the Company or any
Permitted Borrower from time to time in possession of such Bank,
irrespective of whether or not such deposits (or other rights or property) held
or indebtedness owing by such Bank to Company or any Permitted Borrower may be
contingent and unmatured. Promptly following any such setoff, such Bank shall
give written notice to Administrative Agent and to the Company of the
occurrence thereof. The rights of each Bank under this Section 9.6 are in
addition to the other rights and remedies (including, without limitation, other
rights of setoff) which such Bank may have.
10. PAYMENTS, RECOVERIES AND COLLECTIONS; SPECIAL LIMITATIONS.
10.1 Payment Procedure. (a) All payments by the Company and/or by
any of the Permitted Borrowers of principal of, or interest on, the Revolving
Credit Notes, or of Fees, shall be made without setoff or counterclaim on the
date specified for payment under this Agreement not later than 11:00 a.m.
(Detroit time) in Dollars in immediately available funds to Administrative
Agent, for the ratable account of the Banks, at Administrative Agent's office
located at 611 Woodward, Detroit, Michigan 48226, in respect of Domestic
Advances and Fees. Payments made in respect of any Advance in any Alternative
Currency shall be made on the date when due under this Agreement in such
Alternative Currency in same day funds for the account of Administrative
Agent's Eurocurrency Lending Office, at the Agent's Correspondent for such
Alternative Currency, for the ratable account of the Banks, not later than
11:00 a.m. (the time of Agent's Correspondent). Upon receipt by the
Administrative Agent of each such payment in Dollars, the Administrative Agent
shall make prompt payment in like funds received to each Bank, or, in respect
of Eurocurrency-based Advances, upon receipt by Agent's Correspondent,
Administrative Agent shall direct the transfer in accordance with customary
banking procedures, to such Bank's Eurocurrency Lending Office, in like funds
and currencies, of all amounts received by Agent's Correspondent for the
account of such Bank.
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(b) Unless the Administrative Agent shall have been
notified by the Company prior to the date on which any payment to be made by
the Company or the applicable Permitted Borrower is due that the Company or the
applicable Permitted Borrower does not intend to remit such payment, the
Administrative Agent may, in its sole discretion and without obligation to do
so, assume that the Company has remitted such payment when so due and the
Administrative Agent may, in reliance upon such assumption, make available, or
direct Agent's Correspondent to transfer, to each Bank on such payment date an
amount equal to such Bank's share of such assumed payment. If the Company or
the applicable Permitted Borrower has not in fact remitted such payment to the
Administrative Agent (or the Administrative Agent's Correspondent for the
account of the Administrative Agent's Eurocurrency Lending Office in the case
of Eurocurrency-based Advance), each Bank shall forthwith on demand repay to
the Administrative Agent in the applicable currency the amount of such assumed
payment made available or transferred to such Bank, together with the interest
thereon, in respect of each day from and including the date such amount was
made available by the Administrative Agent to (or directed to be transferred
to) such Bank to the date such amount is repaid to the Administrative Agent at
a rate per annum equal to (i) for Prime-based Advances, the Federal Funds
Effective Rate (daily average), as the same may vary from time to time, and
(ii) with respect to Eurocurrency-based Advances, Administrative Agent's
aggregate marginal cost (including the cost of maintaining any required
reserves or deposit insurance and of any fees, penalties, overdraft charges or
other costs or expenses incurred by Administrative Agent) of carrying such
amount.
(c) Subject to the definition of Eurocurrency-Interest
Period, whenever any payment to be made hereunder shall otherwise be due on a
day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in
computing interest, if any, in connection with such payment.
(d) Except as otherwise provided in this Agreement or the
other Loan Documents (and subject to the terms and conditions thereof), all
payments by the Permitted Borrowers of principal of, or interest on, the Term
Notes shall be made to the applicable Bank in Dollars or the applicable
Alternative Currency without setoff or counterclaim on the dates and other
terms provided in such Notes.
(e) All payments to be made by the Company or any of the
Permitted Borrowers under this Agreement, the Revolving Credit Notes, the Term
Notes or any of the other Loan Documents shall be made without set-off or
counterclaim, as aforesaid, and without deduction for or on account of any
present or future withholding or other taxes of any nature imposed by any
governmental authority or of any political subdivision thereof or any
federation or organization of which such governmental authority may at the time
of payment be a member, unless the Company or any of the Permitted Borrowers,
as the case may be, is compelled by law to make payment subject to such tax. In
such event the Company or the applicable Permitted Borrower, as the case may
be, shall:
(i) with respect to the Revolving Credit Notes (subject
to any certification issued by a Bank under Section 2.14 hereof) or any of the
other Loan Documents, pay to the Administrative Agent (or cause the applicable
Permitted Borrowers to pay to Administrative Agent) for Administrative Agent's
own account and/or (as the case may be) for the account of the Banks and, with
respect to the Term Loans, unless otherwise agreed by any Bank pursuant to
Section 4.8 hereof, pay to the applicable funding Bank such additional amounts
as may be necessary to ensure that the Administrative Agent and/or such Banks
receive a net amount in the applicable Alternative Currency equal to the full
amount which would have been receivable had payment not been made subject to
such tax (except to the extent such tax would not have been imposed but for the
failure of such Bank to comply with Section 13.14 hereof); and
(ii) remit such tax to the relevant taxing
authority(ies) according to the requirements then in effect under applicable
law, and as soon as available and in any event within 30 days of the date on
which filing of the applicable return or other filing in respect of such tax is
required under applicable law, send to each of the Banks, as applicable, such
certificates or certified copies of such receipts as any Bank shall reasonably
require as proof of the payment by the Company or the applicable Permitted
Borrower, of any such taxes payable by the Company or any Permitted Borrower.
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As used herein, the terms "tax", "taxes" and "taxation" include all
present and future taxes, levies, imposts, duties, charges, fees, deductions
and withholdings and any restrictions or conditions resulting in a charge
together with interest thereon and fines and penalties with respect thereto
which may be imposed by reason of any violation or default with respect to the
law regarding such tax, assessed as a result of or in connection with the
transactions in any Alternative Currency hereunder, or the payment and or
receipt of funds in any Alternative Currency hereunder, or the payment or
delivery of funds into or out of any jurisdiction other than the United States
of America (whether assessed against the Company, any of the Permitted
Borrowers, either of the Agents or any of the Banks, or the respective
correspondents of Agents or any Bank) and shall also include without limitation
any duty or other tax now or hereafter imposed by the applicable taxing
authorities in Australia on the Company, any Permitted Borrower, either of the
Agents (or their respective correspondents) or any Bank or its correspondent
with respect to or in connection with the creation or maintenance of deposits
or deposit accounts with any Australian bank or other depository institution,
or any deposits to or withdrawals from any such accounts.
10.2 Application of Proceeds. Notwithstanding anything to the
contrary in this Agreement, upon and during the continuance of any Default or
Event of Default, any offsets, any voluntary payments by the Company, any of
the Permitted Borrowers or others and any other sums received or collected in
respect of the Indebtedness (whether evidenced by the Revolving Credit Notes,
the Term Notes or otherwise), shall be applied, first, to the Notes in such
order and manner as determined by the Majority Banks, next, to any other
Indebtedness hereunder on a pro rata basis (subject to the terms hereof), and
then, if there is any excess, to the Company or the Permitted Borrowers, as the
case may be. Subject to the foregoing, the pro rata application of such
proceeds and other sums to the Notes shall be based on each Bank's portion of
the aggregate of the Indebtedness then outstanding, including both the
Revolving Credit Notes and the Term Notes.
10.3 Pro-rata Recovery. If, following the occurrence and during the
continuance of any Default or Event of Default, any Bank shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
offset or otherwise) on account of principal of, or interest on, any of the
Notes in excess of its pro rata share (based on such Bank's portion of the
aggregate of the Indebtedness, including both the Revolving Credit Notes and
the Term Notes) of payments then or thereafter obtained by all Banks upon
principal of and interest on all such Notes, such Bank shall purchase from the
other Banks such participations in such Notes held by them as shall be
necessary to cause such purchasing Bank to share the excess payment or other
recovery ratably in accordance with the foregoing; provided, however, that if
all or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing holder, the purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without interest.
11. CHANGES IN LAW OR CIRCUMSTANCES; INCREASED COSTS.
11.1 Reimbursement of Prepayment Costs. As to any Eurocurrency-based
Advance, if any prepayment thereof shall occur, whether by the Company or any
of the Permitted Borrowers, on any day other than the last day of an Interest
Period (whether pursuant to this Agreement or by acceleration, or otherwise),
or if the rate applicable to such Advance shall be changed during any Interest
Period pursuant to this Agreement, the Company and the applicable Permitted
Borrower having made such prepayment, in addition to any of their other
obligations hereunder, shall reimburse Banks on demand for any costs incurred
by Banks as a result of the timing thereof, including but not limited to any
net costs incurred in liquidating or employing deposits from third parties,
such reimbursement to be made to each Bank which shall have delivered to the
Company a certificate setting forth the basis for determining such costs, which
certificate shall be conclusively presumed correct save for manifest error.
11.2 Agent's Eurocurrency Lending Office. For any Advance to which
the Eurocurrency-based Rate is applicable, if Administrative Agent shall
designate a Eurocurrency Lending Office which maintains books separate from
those of the rest of Administrative Agent, Administrative Agent shall have the
option of maintaining and carrying the relevant Advance on the books of such
Eurocurrency Lending Office.
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11.3 Availability of Alternative Currency. The Administrative Agent
and the Banks shall not be required to make any Advance requested to be made in
an Alternative Currency or issue any Letter of Credit denominated in an
Alternative Currency if, at any time prior to making such Advance or issuing
such Letter of Credit, the Administrative Agent or any Bank (after consultation
with Administrative Agent) shall determine, in its sole discretion, that (i)
deposits in the applicable Alternative Currency in the amounts and maturities
required to fund such Advance will not be available to the Administrative Agent
or such Banks; (ii) a fundamental change has occurred in the foreign exchange
or interbank markets with respect to the applicable Alternative Currency
(including, without limitation, changes in national or international financial,
political or economic conditions or currency exchange rates or exchange
controls); or (iii) it has become otherwise materially impractical for the
Administrative Agent (or in the case of the Term Loans, the applicable funding
Bank) to make such Advance or to issue such Letter of Credit in the applicable
Alternative Currency. The Administrative Agent shall promptly notify the
Company and Banks of any such determination; and, with respect to the Term
Loans, the applicable funding Bank shall promptly notify the Administrative
Agent and the Company of any such determination.
11.4 Circumstances Affecting Eurocurrency-based Rate Availability.
If with respect to any Interest Period, Administrative Agent or the Banks
(after consultation with Administrative Agent) shall reasonably determine (a)
that, by reason of circumstances affecting the foreign exchange and interbank
markets generally, deposits in Eurodollars or in any applicable Alternative
Currency, as the case may be, in the applicable amounts are not being offered
to the Administrative Agent for such Interest Period, then Administrative Agent
shall forthwith give notice thereof to the Company. Thereafter, until
Administrative Agent notifies the Company that such circumstances no longer
exist, (b) the obligation of Banks to make Eurocurrency-based Advances or
Advances in Alternative Currencies (other than in any applicable Alternative
Currency with respect to which deposits are available, as required hereunder),
and the right of the Company to convert an Advance to or refund an Advance as a
Eurocurrency-based Advance or as an Advance in an Alternative Currency (other
than in any applicable Alternative Currency with respect to which deposits are
available, as required hereunder), shall be suspended, and (c) the Company
shall repay in full (or cause to be repaid in full) the then outstanding
principal amount of each such Eurocurrency-based or Alternative Currency
Advance covered hereby in the applicable Alternative Currency, together with
accrued interest thereon, any amounts payable under Section 11.7, hereof, and
all other amounts payable hereunder on the last day of the then current
Interest Period applicable to such Advance. Upon the date for repayment as
aforesaid and unless Company notifies Administrative Agent to the contrary
within two (2) Business Days after receiving a notice from Administrative Agent
pursuant to this Section, such outstanding principal amount shall be converted
to a Prime-based Advance as of the last day of such Interest Period.
11.5 Laws Affecting Eurocurrency-based or Alternative Currency
Advance Availability. In the event that any change in or the adoption of any
applicable law, rule or regulation (whether domestic or foreign) now or
hereafter in effect and whether or not currently applicable to any Bank or the
Agents or any change in or the adoption of any interpretation or administration
thereof by any governmental authority charged with the interpretation or
administration thereof, or compliance by the Agents or any of the Banks (or any
of their respective Eurocurrency Lending Offices) with any request or directive
(whether or not having the force of law) of any such authority, shall make it
unlawful or impossible for any of the Banks (or any of their respective
Eurocurrency Lending Offices) to honor its obligations hereunder to make or
maintain any Advance with interest at the Eurocurrency-based Rate, or in an
Alternative Currency, such Bank shall forthwith give notice thereof to Company
and to Administrative Agent. Thereafter, (a) the obligations of Banks to make
or carry Eurocurrency-based Advances or Advances in any such Alternative
Currency and the right of Company to convert an Advance or refund an Advance as
a Eurocurrency-based Advance or as an Advance in any such Alternative Currency
shall be suspended and thereafter Company or the applicable Permitted Borrower
may select as Applicable Interest Rates or as Alternative Currencies only those
which remain available and which are permitted to be selected hereunder, and
(b) if any of the Banks may not lawfully continue to maintain an Advance to the
end of the then current Interest Period applicable thereto (or, in the case of
any Term Loan, to maturity) as a Eurocurrency-based Advance or in such
Alternative Currency, the Company or the applicable Permitted Borrower shall
immediately prepay such Advance in the Alternative Currency in which it is
denominated, together with interest to the date of payment, and any amounts
payable under Sections 11.1 and
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11.7 with respect to such prepayment and the applicable Advance shall
immediately be converted to a Prime-based Advance (in the Dollar Amount
thereof) and the Prime-based Rate shall be applicable thereto.
11.6 Increased Cost of Eurocurrency-based or Alternative Currency
Advances. In the event that any change in or the adoption of any applicable
law, rule or regulation (whether domestic or foreign) now or hereafter in
effect and whether or not currently applicable to any Bank or the Agents or any
change in or the adoption of any interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Administrative Agent
or any of the Banks with any request or directive (whether or not having the
force of law) made by any such authority, central bank or comparable agency
after the date hereof:
(a) shall subject the Agents or any of the Banks to any
tax, duty or other charge with respect to any Advance or any Note or shall
change the basis of taxation of payments to the Agents or any of the Banks of
the principal of or interest on any Advance or any Note or any other amounts
due under this Agreement in respect thereof (except for (i) the imposition of
or increase in the rate of any withholding tax (which shall be subject to
Section 10.1(d) hereof) and (ii) changes in the rate of tax on the overall net
income of the Agents or of any of the Banks imposed by a jurisdiction in which
such Bank's principal executive office or Eurocurrency Lending Office is
located); or
(b) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors of the
Federal Reserve System), special deposit or similar requirement against assets
of, deposits with or for the account of, or credit extended by the Agents or
any of the Banks or shall impose on the Agents or any of the Banks or the
foreign exchange and interbank markets any other condition affecting any
Advance or any of the Notes;
and the result of any of the foregoing is to increase the costs to the Agents
or any of the Banks of making, funding or maintaining any part of the
Indebtedness hereunder as a Eurocurrency-based Advance or as an Advance in any
Alternative Currency or to reduce the amount of any sum received or receivable
by the Agents or any of the Banks under this Agreement or under the Notes in
respect of a Eurocurrency-based Advance or any Advance in an Alternative
Currency, whether with respect to Advances to Company or to any of the
Permitted Borrowers, then such Agent or Bank shall promptly notify the
Administrative Agent, the Company and the Permitted Borrowers of such fact and
demand compensation therefor and, within fifteen (15) days after such notice,
the Company and the applicable Permitted Borrowers agrees to pay to such Agent
or such Bank such additional amount or amounts as will compensate such Agent or
such Bank or Banks for such increased cost or reduction. A certificate of such
Agent or Bank setting forth the basis for determining such additional amount or
amounts necessary to compensate such Agent or Bank or Banks shall be
conclusively presumed to be correct save for manifest error.
11.7 Indemnity. The Company will indemnify Administrative Agent and
each of the Banks against any loss or expense which may arise or be
attributable to the Administrative Agent's and each Bank's obtaining,
liquidating or employing deposits or other funds acquired to effect, fund or
maintain the Advances (i) as a consequence of any failure by the Company or any
of the Permitted Borrowers, as applicable, to make any payment when due of any
amount due hereunder in connection with a Eurocurrency-based Advance or any
Advance in an Alternative Currency, (ii) due to any failure of the Company or
any of the Permitted Borrowers, as applicable, to borrow on a date specified
therefor in a Request for Advance or Request for Term Loan Funding, or (iii)
due to any payment or prepayment of any Eurocurrency-based Advance or any
Advance in an Alternative Currency on a date other than the last day of the
Interest Period for such Advance, whether required by another provision of this
Agreement or otherwise. Each of the Permitted Borrowers will indemnify
Administrative Agent and each of the Banks against any loss or expense which
may arise or be attributable to the Administrative Agent's and each Bank's
obtaining, liquidating or employing deposits or other funds acquired to effect,
fund or maintain the Advances (x) as a consequence of any failure by any of the
Permitted Borrowers, as applicable, to make any payment when due of any amount
due hereunder in connection with a Eurocurrency-based Advance or an Advance in
an Alternative Currency, (y) due to any failure of the Permitted Borrowers, as
applicable, to borrow on a date specified therefor in a Request for Advance or
Request for Term Loan Funding or
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(z) due to any payment or prepayment by any Permitted Borrower of any
Eurocurrency-based Advance or any Advance in an Alternative Currency on a date
other than the last day of the Interest Period for such Advance, whether
required by another provision of this Agreement or otherwise. The
Administrative Agent's and each Bank's (as applicable) calculations of any such
loss or expense shall be furnished to the Company and shall be conclusive,
absent manifest error.
11.8 Judgment Currency. (a) If for the purposes of obtaining
judgment in any court it is necessary to convert a sum due hereunder in any
currency (the "Original Currency") into another currency (the "Other Currency")
the parties hereto agree, to the fullest extent that they may effectively do
so, that the rate of exchange used shall be that at which in accordance with
normal banking procedures the Administrative Agent could purchase the Original
Currency with the Other Currency at the main office of the Administrative Agent
in Detroit two (2) Business Days after the date on which final judgment is
given.
(b) The obligation of the Company and each Permitted
Borrower in respect of any sum due in the Original Currency from it to any Bank
or the Agents hereunder shall, notwithstanding any judgment in any Other
Currency, be discharged only to the extent that on the Business Day following
receipt by such Bank or the Agents (as the case may be) of any sum adjudged to
be so due in such Other Currency such Bank or the Agents (as the case may be)
may in accordance with normal banking procedures purchase the Original Currency
with such Other Currency; if the amount of the Original Currency so purchased
is less than the sum originally due to such Bank or the Agents (as the case may
be) in the original Currency, the Company and each Permitted Borrower agrees,
as a separate obligation and notwithstanding any such judgment, to indemnify
such Bank or the Agents (as the case may be) against such loss, and if the
amount of the Original Currency so purchased exceeds the sum originally due to
any Bank or the Agents (as the case may be), such Bank or the Agents (as the
case may be) agrees to remit to the Company or the applicable Permitted
Borrower such excess.
11.9 Other Increased Costs. In the event that after the date hereof
the adoption of or any change in any applicable law, treaty, rule or regulation
(whether domestic or foreign) now or hereafter in effect and whether or not
presently applicable to any Bank or the Agents, or any interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by any Bank or such
Agents with any guideline, request or directive of any such authority (whether
or not having the force of law), including any risk based capital guidelines,
affects or would affect the amount of capital required or expected to be
maintained by such Bank or such Agents (or any corporation controlling such
Bank or either of such Agents) and such Bank or such Agent, as the case may be,
determines that the amount of such capital is increased by or based upon the
existence of such Bank's or such Agent's obligations or Advances hereunder and
such increase has the effect of reducing the rate of return on such Bank's or
such Agent's (or such controlling corporation's) capital as a consequence of
such obligations or Advances hereunder to a level below that which such Bank or
such Agent (or such controlling corporation) could have achieved but for such
circumstances (taking into consideration its policies with respect to capital
adequacy) by an amount deemed by such Bank or such Agent to be material, then
the Company shall pay to such Bank or such Agent, as the case may be, from time
to time, upon request by such Bank or by such Agent, additional amounts
sufficient to compensate such Bank or such Agent (or such controlling
corporation) for any increase in the amount of capital and reduced rate of
return which such Bank or such Agent reasonably determines to be allocable to
the existence of such Bank's or such Agent's obligations or Advances hereunder.
A statement as to the amount of such compensation, prepared in good faith and
in reasonable detail by such Bank or such Agent, as the case may be, shall be
submitted by such Bank or by such Agent to the Company, reasonably promptly
after becoming aware of any event described in this Section 11.9 and shall be
conclusive, absent manifest error in computation.
11.10 Substitute Banks. The Company may at any time after discussion
with, and at least 3 Business Days prior written notice to Agents, and to any
Bank which shall have requested compensation pursuant to Sections 3.4(c), 11.6
or 11.9 hereof, or which shall have failed, despite being obligated hereunder
to do so, to fund its percentage share of any Advance pursuant to Section
2.8(a) hereof or any draft or any other demand for payment under a Letter of
Credit pursuant to Section 3.6(b) hereof, or which is unable to fund or
maintain any Eurocurrency-based or Alternative Currency Advance on the basis of
Section 11.4 or 11.5 hereof, designate another financial institution (a
"Substitute Bank") who is approved by the Agents (which approval shall not be
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unreasonably withheld) to replace and substitute for such Bank. The Substitute
Bank shall execute a counterpart of this Agreement (including reasonable
conforming changes to the signature pages hereof) and such additional
amendments, agreements, instruments, and other documents as may be reasonably
requested by the Agents. The Company and each Permitted Borrower shall execute
and deliver to the Agents for transmittal to the Substitute Bank a Revolving
Credit Note and the Company and each Permitted Borrower shall prepay in full
all outstanding Advances of such Bank together with all accrued interest and
fees (including amounts payable under Sections 11.1 and 11.7 hereof) payable to
such Bank, and the Substitute Bank shall assume and acquire all of the
outstanding risk participations in outstanding Letters of Credit then held by
such Bank pursuant to Section 3.6(b), whereupon such Bank shall have no further
obligations under this Agreement or any of the Loan Documents except for
liabilities under Section 12.9 based on acts or omissions occurring prior to
such prepayment. Simultaneously with such prepayment, the Substitute Bank shall
make Advances (which may be Eurocurrency-based Advances and Prime-based
Advances (at the then current rate and in the applicable Alternative Currency),
or a combination thereof) in principal amounts equal to the Advances being
prepaid and, with respect to Eurocurrency-based Advances, comparable remaining
portions of the relevant Interest Periods.
12. AGENTS
12.1 Appointment of Agents. Each Bank and the holder of each Note
irrevocably appoints and authorizes the Agents to act on behalf of such Bank or
holder under this Agreement and the Loan Documents and to exercise such powers
hereunder and thereunder as are specifically delegated to Agents by the terms
hereof and thereof, together with such powers as may be reasonably incidental
thereto. The provisions of this Section 12 are solely for the benefit of the
Agents and the Banks, and the Company and the Permitted Borrowers shall not
have any rights as a third party beneficiary of any of the provisions hereof.
In performing their functions and duties under this Agreement, the Agents shall
act solely as agent of the Banks and do not assume and shall not be deemed to
have assumed any obligation towards or relationship of agency or trust with or
for the Company or any Permitted Borrower. Each Bank agrees (which agreement
shall survive any termination of this Agreement) to reimburse Agents for all
reasonable out-of-pocket expenses (including outside attorneys' fees and
disbursements) incurred by Agents hereunder or in connection herewith or with
an Event of Default or in enforcing the obligations of the Company or the
Permitted Borrowers under this Agreement or the Loan Documents or any other
instrument executed pursuant hereto, and for which Agents are not reimbursed by
the Company, the Permitted Borrowers, or any other Person, pro rata according
to such Bank's Percentage. Agents shall not be required to take any action
under the Loan Documents, or to prosecute or defend any suit in respect of the
Loan Documents, unless indemnified to their satisfaction by the Banks against
loss, costs, liability and expense. If any indemnity furnished to Agents shall
become impaired, they may call for additional indemnity and cease to do the
acts indemnified against until such additional indemnity is given.
12.2 Deposit Account with Agents. The Company and each of the
Permitted Borrowers hereby authorize Agents, in the sole discretion of each
Agent, to charge (a) the Company's general deposit account(s), if any,
maintained with Agents for the amount of any principal, interest, or other
amounts or costs due under this Agreement upon any Event of Default under
Sections 9.1(a), 9.1(b) or 9.1(j) hereof, and (b) each of the Permitted
Borrowers' general deposit account(s), if any, maintained with the Agents for
the amount of any principal, interest, or other amounts or costs due under this
Agreement upon any Event of Default with respect to an obligation of any
Permitted Borrower under Sections 9.1(a), 9.1(b) or 9.1(j) hereof.
12.3 Scope of Agents' Duties. The Agents shall have no duties or
responsibilities except those expressly set forth herein, and shall not, by
reason of this Agreement, have a fiduciary relationship with any Bank (and no
implied covenants or other obligations shall be read into this Agreement
against the Agents). Neither of the Agents nor any of their respective
directors, officers, employees or agents shall be liable to any Bank for any
action taken or omitted to be taken by them under this Agreement or any
document executed pursuant hereto, or in connection herewith or therewith with
the consent or at the request of the Majority Banks or in the absence of their
own gross negligence or willful misconduct, nor be responsible for or have any
duties to ascertain, inquire into or verify (a) any recitals or warranties
herein or therein, (b) the effectiveness, enforceability, validity or due
execution of this Agreement or any document executed pursuant hereto or any
security thereunder, (c) the performance by the Company, any of its
Subsidiaries or any of the Permitted
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Borrowers of its obligations hereunder or thereunder, or (d) the
satisfaction of any condition hereunder or thereunder, including without
limitation, to the making of any Advance or the issuance of any Letter of
Credit. Agents shall be entitled to rely upon any certificate, notice,
document or other communication (including any cable, telegraph, telex,
facsimile transmission or oral communication) believed by them to be genuine
and correct and to have been sent or given by or on behalf of a proper person.
Neither of the Agents or any of their respective directors, officers, employees
or agents shall be liable to any Bank or any Swing Line Bank in the event it
fails to inform a Swing Line Bank of the occurrence of a Default or an Event of
Default hereunder or of the termination of the Revolving Credit Maximum Amount,
provided however, that as set forth above, Advances of the Reserved
Availability shall be available to the Banks pursuant to Section 2.7B(a)
hereof, to the extent set forth therein, until the furnishing of written notice
by Administrative Agent under said Section 2.7B(a)(i) or (ii), as applicable.
Agents may treat the payee of any Note as the holder thereof. Agents may employ
agents and may consult with legal counsel (who may be counsel for the Company
or a Permitted Borrower), independent public accountants and other experts
selected by them and shall not be liable to the Banks (except as to money or
property received by them or their authorized agents), for the negligence or
misconduct of any such agent selected by them with reasonable care or for any
action taken or omitted to be taken by them in good faith in accordance with
the advice of such counsel, accounts or experts.
12.4 Successor Agents. Agents may resign as such at any time upon at
least 30 days prior notice to the Company and all Banks. If Agents at any time
shall resign or if the office of Administrative Agent or Documentation Agent
shall become vacant for any other reason, Majority Banks shall, by written
instrument, appoint successor agent(s) (satisfactory to such Majority Banks
and, unless a Default or an Event of Default has occurred and is continuing, to
the Company, whose approval shall not be unreasonably withheld or delayed)
which shall thereupon become the Agents hereunder, as applicable, and shall be
entitled to receive from the prior Agents such documents of transfer and
assignment as such successor Agents may reasonably request. Any such successor
Agent shall be a commercial bank having a combined capital and surplus of at
least $500,000,000. If a successor is not so appointed or does not accept such
appointment before the resigning Agent's resignation becomes effective, the
resigning Agent may appoint a temporary successor to act until such appointment
by the Majority Banks is made and accepted or if no such temporary successor is
appointed as provided above by the resigning Agent, the Majority Banks shall
thereafter perform all of the duties of the resigning Agent hereunder until
such appointment by the Majority Banks is made and accepted. Such successor
Agent shall succeed to all of the rights and obligations of the resigning Agent
as if originally named. The resigning Agent shall duly assign, transfer and
deliver to such successor Agent all moneys at the time held by the resigning
Agent hereunder after deducting therefrom its expenses for which it is entitled
to be reimbursed. Upon such succession of any such successor Agent, the
provisions of this Section 11 shall continue in effect for the benefit of the
resigning Agent in respect of any actions taken or omitted to be taken by it
while it was acting as Agent.
12.5 Loans by Agents. NBD Bank, N.A. and Comerica Bank (and each of
their successors and assigns), in their capacity as Banks hereunder shall have
the same rights and powers hereunder as any other Bank and may exercise or
refrain from exercising the same as though they were not the Agents. NBD Bank,
N.A. and its Affiliates and Comerica Bank and its Affiliates may (without
having to account therefor to any Bank) accept deposits from, lend money to,
and generally engage in any kind of banking, trust, financial advisory or other
business with the Company or any Subsidiary of the Company as if they were not
acting as Agents hereunder, and may accept fees and other consideration
therefor without having to account for the same to the Banks.
12.6 Credit Decisions. Each Bank acknowledges that it has,
independently of Agents and each other Bank and based on the financial
statements of the Company and its Subsidiaries and such other documents,
information and investigations as it has deemed appropriate, made its own
credit decision to extend credit hereunder from time to time. Each Bank also
acknowledges that it will, independently of Agents and each other Bank and
based on such other documents, information and investigations as it shall deem
appropriate at any time, continue to make its own credit decisions as to
exercising or not exercising from time to time any rights and privileges
available to it under this Agreement or any document executed pursuant hereto.
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12.7 Agents' Fees. On the date of execution of this Agreement, and
on March 31 of each year until the Indebtedness has been repaid and no
commitment to fund thereafter any loan hereunder is outstanding, the Company
shall pay to Agents an annual agency fee and such other reasonable fees and
charges as set forth (or to be set forth from time to time) in a letter
agreement between Company and Agents. The Agents' Fees described in this
Section 12.7 shall not be refundable under any circumstances.
12.8 Authority of Agents to Enforce Notes and This Agreement. Each
Bank, subject to the terms and conditions of this Agreement, authorizes the
Agents with full power and authority as attorney-in-fact to institute and
maintain actions, suits or proceedings for the collection and enforcement of
the Notes and to file such proofs of debt or other documents as may be
necessary to have the claims of the Banks allowed in any proceeding relative to
the Company, any of its Subsidiaries, any of the Permitted Borrowers or its
creditors or affecting its properties, and to take such other actions which
Agents consider to be necessary or desirable for the protection, collection and
enforcement of the Notes, this Agreement or the Loan Documents.
12.9 Indemnification. The Banks agree to indemnify the Agents (to
the extent not reimbursed by the Company, the Permitted Borrowers or any other
Person, but without limiting any obligation of the Company, the Permitted
Borrowers or any other Person to make such reimbursement), ratably according to
their respective Percentages, from and against any and all claims, damages,
losses, liabilities, and reasonable costs or expenses of any kind or nature
whatsoever (including, without limitation, reasonable fees and disbursements of
counsel) which may be imposed on, incurred by, or asserted against the Agents
in any way relating to or arising out of this Agreement, any of the Loan
Documents or the transactions contemplated hereby or any action taken or
omitted by the Agents under this Agreement or any of the Loan Documents,
provided, however, that no Bank shall be liable for any portion of such claims,
damages, losses, liabilities, costs or expenses resulting from the Agents'
gross negligence or willful misconduct. Without limitation of the foregoing,
each Bank agrees to reimburse the Agents promptly upon demand for its ratable
share of any out-of-pocket expenses (including, without limitation, reasonable
fees and expenses of counsel) incurred by the Agents in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
or any of the Loan Documents, to the extent that the Agents are not reimbursed
for such expenses by the Company and the Permitted Borrowers, but without
limiting the obligation of the Company or Permitted Borrowers to make such
reimbursement. Each Bank agrees to reimburse the Agents promptly upon demand
for its ratable share of any amounts owing to the Agents by the Banks pursuant
to this Section. If the indemnity furnished to the Agents under this Section
shall, in the judgment of the Agents, be insufficient or become impaired, the
Agents may call for additional indemnity from the Banks and cease, or not
commence, to take any action until such additional indemnity if furnished.
12.10 Knowledge of Default. It is expressly understood and agreed
that the Agents shall be entitled to assume that no Event of Default has
occurred and is continuing, unless the respective officers of the Agents
immediately responsible for matters concerning this Agreement shall have been
notified in a writing specifying such Event of Default and stating that such
notice is a "notice of default" by a Bank or the Company. Upon receiving such a
notice, the Agents shall promptly notify each Bank of such Event of Default.
12.11 Agents' Authorization; Action by Banks. Except as otherwise
expressly provided herein, whenever the Agents are authorized and empowered
hereunder on behalf of the Banks to give any approval or consent, or to make
any request, or to take any other action on behalf of the Banks (including
without limitation the exercise of any right or remedy hereunder or under the
other Loan Documents), the Agents shall be required to give such approval or
consent, or to make such request or to take such other action only when so
requested in writing by the Majority Banks or the Banks, as applicable
hereunder. Action that may be taken by Majority Banks or all of the Banks, as
the case may be (as provided for hereunder) may be taken (i) pursuant to a vote
at a meeting (which may be held by telephone conference call) as to which all
of the Banks have been given reasonable advance notice, or (ii) pursuant to the
written consent of the requisite Percentages of the Banks as required
hereunder, provided that all of the Banks are given reasonable advance notice
of the requests for such consent.
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12.12 Enforcement Actions by the Agents. Except as otherwise
expressly provided under this Agreement or in any of the other Loan Documents
and subject to the terms hereof, Agents will take such action, assert such
rights and pursue such remedies under this Agreement and the other Loan
Documents as the Majority Banks or all of the Banks, as the case may be (as
provided for hereunder), shall direct, provided, however, that the Agents shall
not be required to act or omit to act if, in the judgment of the Agents, such
action or omission may expose the Agents to personal liability or is contrary
to this Agreement, any of the Loan Documents or applicable law. Except as
expressly provided above or elsewhere in this Agreement or the other Loan
Documents, no Bank (other than the Agents, acting in their respective capacity
as agents) shall be entitled to take any enforcement action of any kind under
any of the Loan Documents.
13. MISCELLANEOUS
13.1 Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for
the purposes of this Agreement, it shall be done in accordance with GAAP.
13.2 Consent to Jurisdiction. The Company and each Permitted
Borrower hereby irrevocably submits to the non-exclusive jurisdiction of any
United States Federal or Michigan state court sitting in Detroit in any action
or proceeding arising out of or relating to this Agreement or any of the Loan
Documents and the Company and each Permitted Borrower hereby irrevocably agrees
that all claims in respect of such action or proceeding may be heard and
determined in any such United States Federal or Michigan state court. Each of
the Permitted Borrowers irrevocably appoints the Company as its agent for
service of process. The Company and each Permitted Borrower irrevocably
consents to the service of any and all process in any such action or proceeding
brought in any court in or of the State of Michigan by the delivery of copies
of such process to the Company at its address specified on the signature page
hereto or by certified mail directed to such address. Nothing in this Section
shall affect the right of the Banks and the Agents to serve process in any
other manner permitted by law or limit the right of the Banks or the Agents (or
any of them) to bring any such action or proceeding against the Company or any
Permitted Borrowers or any of its or their property in the courts of any other
jurisdiction. The Company and each Permitted Borrower hereby irrevocably waives
any objection to the laying of venue of any such suit or proceeding in the
above described courts.
13.3 Law of Michigan. This Agreement and the Notes have been
delivered at Detroit, Michigan, and shall be governed by and construed and
enforced in accordance with the laws of the State of Michigan, except as and to
the extent expressed to the contrary in any of the Loan Documents. Whenever
possible each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining
provisions of this Agreement.
13.4 Interest. In the event the obligation of the Company or any of
the Permitted Borrowers to pay interest on the principal balance of the Notes
is or becomes in excess of the maximum interest rate which the Company is
permitted by law to contract or agree to pay, giving due consideration to the
execution date of this Agreement, then, in that event, the rate of interest
applicable with respect to such Bank's Percentage shall be deemed to be
immediately reduced to such maximum rate and all previous payments in excess of
the maximum rate shall be deemed to have been payments in reduction of
principal and not of interest.
13.5 Closing Costs and Other Costs. The Company and the Permitted
Borrowers agree to pay, or reimburse the Agents for payment of, on demand (a)
all reasonable closing costs and expenses, including, by way of description and
not limitation, attorney fees and advances, appraisal and accounting fees,
title and lien search fees, and required travel costs, incurred by Agents in
connection with the commitment, consummation and closing of the loans
contemplated hereby or in connection with any refinancing or restructuring of
the credit arrangements provided under this Agreement; (b) all stamp and other
taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing or recording of this Agreement and the Loan
Documents and the consummation of the transactions contemplated hereby, and any
and all liabilities with
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respect to or resulting from any delay in paying or omitting to pay
such taxes or fees, and (c) all reasonable costs and expenses of the Agents or
any of the Banks (including reasonable fees and expenses of counsel and whether
incurred through negotiations, legal proceedings or otherwise) in connection
with any Event of Default or the enforcement of, or the exercise or
preservation of any rights under, this Agreement, or the Loan Documents and (d)
all reasonable costs and expenses of the Agents or any of the Banks (including
reasonable fees and expenses of counsel) in connection with any action or
proceeding relating to a court order, injunction or other process or decree
restraining or seeking to restrain the Agents or any of the Banks from paying
any amount under, or otherwise relating in any way to, any Letter of Credit and
any and all reasonable costs and expenses which any of them may incur relative
to any payment under any Letter of Credit. All of said amounts required to be
paid by Company or any Permitted Borrower and not paid forthwith upon demand,
as aforesaid, may, at Agents' option after not less than ten (10) days prior
written notice to Company, be charged by Agents as Prime-based Advances of the
Revolving Credit.
13.6 Notices. Except as otherwise provided herein, all notices or
demand hereunder to the parties hereto shall be sufficient if made in writing
and delivered by messenger, sent by facsimile or deposited in the mail, postage
prepaid, certified mail, and addressed to the parties as set forth on the
signature pages of this Agreement and to Permitted Borrowers at the Company's
address. Any notice or demand given to the Company hereunder shall be deemed
given to the Permitted Borrowers, whether or not said notice or demand is
addressed to or received by the Permitted Borrowers.
13.7 Further Action. The Company and the Permitted Borrowers, from
time to time, upon written request of Agents will make, execute, acknowledge
and deliver or cause to be made, executed, acknowledged and delivered, all such
further and additional instruments, and take all such further action as may be
required to carry out the intent and purpose of this Agreement or the Loan
Documents, and to provide for Advances under and payment of the Notes,
according to the intent and purpose herein and therein expressed.
13.8 Successors and Assigns; Participations.
(a) This Agreement shall be binding upon and shall inure to
the benefit of the Company and the Permitted Borrowers, the Agents and the
Banks, and their respective successors and assigns.
(b) The foregoing shall not authorize any assignment by the
Company, or any of the Permitted Borrowers, of its rights or duties hereunder,
and no such assignment shall be made (or effective) without the prior written
approval of the Banks.
(c) Except with the prior written approval of the Company
(which shall not unreasonably be withheld or delayed) and the prior written
approval of Agents (which may be given or withheld in their reasonable
discretion) no Bank may sell, assign, transfer, grant participations in, or
otherwise dispose of (except to affiliates within its holding company group, if
any, provided that Agents and the Company shall be notified prior to any such
dispositions) all or any portion of any of its Notes or of its right, title and
interest therein or thereto or in or to this Agreement or the Loan Documents;
provided however, that (i) in connection with the funding of Advances in any
Alternative Currency, any Bank may grant participations to Administrative Agent
and (ii) Agents, as lenders, may grant a participation in their respective
Notes to each other or to one or more of the other Banks. In the event of any
permitted grant by a Bank of a participating interest to a participant (each a
"Participant"), such Bank shall remain responsible for the performance of its
obligations hereunder, and the Company and the Permitted Borrowers and the
Agents shall continue to deal solely and directly with such Bank in connection
with such Bank's rights and obligations under the Loan Documents. Any agreement
pursuant to which any Bank may grant such a participating interest shall
provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Company and the Permitted Borrowers under the
Loan Documents including, without limitation, the right to approve any
amendment, modification or waiver of any provision of the Loan Documents;
provided that such participation agreement may provide that such Bank will not
agree to any modification, amendment or waiver of this Agreement described in
clause (b) or (c) of Section 13.11 without the consent of the Participant.
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13.9 Indulgence. No delay or failure of Agents and the Banks in
exercising any right, power or privilege hereunder shall affect such right,
power or privilege nor shall any single or partial exercise thereof preclude
any further exercise thereof, nor the exercise of any other right, power or
privilege. The rights of Agents and the Banks hereunder are cumulative and are
not exclusive of any rights or remedies which Agents and the Banks would
otherwise have.
13.10 Counterparts. This Agreement may be executed in several
counterparts, and each executed copy shall constitute an original instrument,
but such counterparts shall together constitute but one and the same
instrument.
13.11 Amendment and Waiver. No amendment or waiver of any provision of
this Agreement or any Loan Document, nor consent to any departure by the
Company or any of the Permitted Borrowers therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Majority Banks
(and, with respect to any amendments to this Agreement or the Loan Documents,
by the Company and the applicable Permitted Borrowers which are signatories
thereto), and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent shall, unless in writing and
signed by all the Banks, do any of the following: (a) subject the Banks to any
additional commitments or obligations, (b) reduce the principal of, or interest
on, the Notes or any fees or other amounts payable hereunder, (c) postpone any
date fixed for any payment of principal of, or interest on, the Notes or any
fees or other amounts payable hereunder, (d) waive any Event of Default
specified in Sections 9.1(a) or (b) hereof (provided that if, at the relevant
time, only Term Loans are outstanding hereunder, the prior written approval of
all of the Banks shall be required to waive, whether by consent, waiver or
amendment, any Event of Default under this Agreement), (e) release any of the
Guaranties or release or defer the granting or perfecting of a lien or security
interest in any collateral except as shall be otherwise expressly provided in
this Agreement or any Loan Document, (f) take any action which requires the
signing of all Banks pursuant to the terms of this Agreement or any Loan
Document, (g) change the aggregate unpaid principal amount of the Notes which
shall be required for the Banks or any of them to take any action under this
Agreement or any Loan Document, or (h) change the definition of "Majority
Banks" or this Section 13.11, and provided further, however, that no amendment,
waiver, or consent shall, unless in writing and signed by the Agents in
addition to all the Banks, affect the rights or duties of the Agents under this
Agreement or any Loan Document. Notwithstanding the foregoing, (i) any
amendments to Schedule 1.122 hereof shall require only the consent of
Administrative Agent and Company (subject to the terms hereof), provided that
copies of such amendments shall be delivered to the Banks promptly upon the
effective date thereof. All references in this Agreement to "Banks" or "the
Banks" shall refer to all Banks, unless expressly stated to refer to Majority
Banks.
13.12 Taxes and Fees. Should any documentary, stamp or similar tax or
recording or filing fee become payable in respect of the execution, filing
and/or recording of this Agreement or any of the Loan Documents or any
amendment, modification or supplement hereof or thereof, the Company and each
of the Permitted Borrowers agrees to pay the same together with any interest or
penalties thereon and agrees to hold the Agents and the Banks harmless with
respect thereto.
13.13 Confidentiality. Each Bank agrees that it will not disclose
without the prior consent of the Company, (other than to its employees, to
another Bank or to its auditors or counsel) any information with respect to the
Company or any of its Subsidiaries which is made available by the Company or
the Permitted Borrowers to the Banks (and received or reviewed by such Banks)
pursuant to this Agreement or any of the Loan Documents or is designated (in
writing) by the Company or any of the Permitted Borrowers as confidential
information; provided that any Bank may disclose any such information (a) as
has become generally available to the public or has been lawfully obtained by
such Bank from any third party under no duty of confidentiality to the Company,
(b) as may be required or appropriate in any report, statement or testimony
submitted to, or in respect to any inquiry, by, any municipal, state or federal
regulatory body having or claiming to have jurisdiction over such Bank,
including the Board of Governors of the Federal Reserve System of the United
States, the Office of the Comptroller of the Currency or the Federal Deposit
Insurance Corporation or similar organizations (whether in the United States or
elsewhere) or their successors, (c) as may be required or appropriate in
respect to any summons or subpoena or in connection with any litigation, (d) in
order to comply with any law, order, regulation
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or ruling applicable to such Bank, and (e) to any permitted transferee
or assignee or to any approved participant of, or with respect to, the Notes,
as aforesaid. Each Bank agrees that it will exercise good faith, diligent
efforts to cause its officers, employees, auditors, counsel and other agents to
comply with the provisions of this Section 13.13.
13.14 Withholding Taxes. If any Bank is not incorporated under the
laws of the United States or a state thereof, such Bank shall promptly deliver
to the Administrative Agent two executed copies of (i) Internal Revenue Service
Form 1001 specifying the applicable tax treaty between the United States and
the jurisdiction of such Bank's domicile which provides for the exemption from
withholding on interest payments to such Bank, (ii) Internal Revenue Service
Form 4224 evidencing that the income to be received by such Bank hereunder is
effectively connected with the conduct of a trade or business in the United
States or (iii) other evidence satisfactory to the Administrative Agent that
such Bank is exempt from United States income tax withholding with respect to
such income. Such Bank shall amend or supplement any such form or evidence as
required to insure that it is accurate, complete and non-misleading at all
times. Promptly upon notice from the Administrative Agent of any determination
by the Internal Revenue Service that any payments previously made to such Bank
hereunder were subject to United States income tax withholding when made, such
Bank shall pay to the Administrative Agent the excess of the aggregate amount
required to be withheld from such payments over the aggregate amount actually
withheld by the Administrative Agent. In addition, from time to time upon the
reasonable request and at the sole expense of the Company or any Permitted
Borrower, each Bank and the Administrative Agent shall (to the extent it is
able to do so based upon applicable facts and circumstances), complete and
provide the Company or any Permitted Borrower with such forms, certificates or
other documents as may be reasonably necessary to allow the Company or any
Permitted Borrower, as applicable, to make any payment under this Agreement or
the other Loan Documents without any withholding for or on the account of any
tax under Section 10.1(d) hereof (or with such withholding at a reduced rate),
provided that the execution and delivery of such forms, certificates or other
documents does not adversely affect or otherwise restrict the right and
benefits (including without limitation economic benefits) available to such
Bank or the Administrative Agent, as the case may be, under this Agreement or
any of the other Loan Documents, or under or in connection with any
transactions not related to the transactions contemplated hereby.
13.15 Effective Upon Execution. This Agreement shall become effective
upon the execution hereof by Banks, Agent and the Company and the issuance by
the Company and the Permitted Borrowers, as applicable, of the Revolving Credit
Notes hereunder, and shall remain effective until the Indebtedness has been
repaid and discharged in full and no commitment to extend any credit hereunder
or under any of the Loan Documents, whether optional or obligatory, remains
outstanding.
13.16 Waiver of Jury Trial. The Banks, the Agents and the Company and
each of the Permitted Borrowers, after consulting or having had the opportunity
to consult with counsel, knowingly, voluntarily and intentionally waive any
right any of them may have to a trial by jury in any litigation based upon or
arising out of this Agreement or any related instrument or agreement or any of
the transactions contemplated by this Agreement or any course of conduct,
dealing, statements (whether oral or written) or action of any of them. Neither
the Banks, the Agents, the Permitted Borrowers nor the Company shall seek to
consolidate, by counterclaim or otherwise, any such action in which a jury
trial has been waived with any other action in which a jury trial cannot be or
has not been waived except where the failure to assert any such claim
(otherwise raised by the Company or the Permitted Borrowers on a timely basis)
would lead to its dismissal with prejudice. These provisions shall not be
deemed to have been modified in any respect or relinquished by the Banks and
the Agents or the Company or any Permitted Borrowers except by a written
instrument executed by all of them.
13.17 Complete Agreement; Severability. This Agreement, the Notes,
any Requests for Advance hereunder, and the Loan Documents contain the entire
agreement of the parties hereto, superseding all prior agreements, discussions
and understandings relating to the subject matter hereof, and none of the
parties shall be bound by anything not expressed in writing. In the event of
any conflict between the terms of this Agreement and the other Loan Documents,
this Agreement shall govern. In case any one or more of the obligations of the
Company or any of the Permitted Borrowers under this Agreement, the Notes or
any of the other Loan Documents shall be invalid, illegal or unenforceable in
any jurisdiction, the validity, legality and enforceability of
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the remaining obligations of the Company or any of the Permitted
Borrowers shall not in any way be affected or impaired thereby, and such
invalidity, illegality or unenforceability in one jurisdiction shall not affect
the validity, legality or enforceability of the obligations of the Company or
any of the Permitted Borrowers under this Agreement, the Notes or any of the
other Loan Documents in any other jurisdiction.
13.18 Table of Contents and Headings. The table of contents and the
headings of the various subdivisions hereof are for convenience of reference
only and shall in no way modify or affect any of the terms or provisions
hereof.
13.19 Construction of Certain Provisions. If any provision of this
Agreement or any of the Loan Documents refers to any action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person,
whether or not expressly specified in such provision.
13.20 Independence of Covenants. Each covenant hereunder shall be
given independent effect (subject to any exceptions stated in such covenant) so
that if a particular action or condition is not permitted by any such covenant
(taking into account any such stated exception), the fact that it would be
permitted by an exception to, or would be otherwise within the limitations of,
another covenant shall not avoid the occurrence of a Default or an Event of
Default if such action is taken or such condition exists.
13.21 Reliance on and Survival of Various Provisions. All terms,
covenants, agreements, representations and warranties of the Company or any
party to any of the Loan Documents made herein or in any of the Loan Documents
or in any certificate, report, financial statement or other document furnished
by or on behalf of the Company, any such party in connection with this
Agreement or any of the Loan Documents shall be deemed to have been relied upon
by the Banks, notwithstanding any investigation heretofore or hereafter made by
any Bank or on such Bank's behalf, and those covenants and agreements of the
Company and the Permitted Borrowers set forth in Sections 7.12, 11.1, 11.6,
11.7, 11.9 and 13.5 hereof (together with any other indemnities of the Company
or the Permitted Borrowers contained elsewhere in this Agreement or in any of
the Loan Documents) and of Banks set forth in Section 13.13 hereof shall
survive the repayment in full of the Indebtedness and the termination of the
Revolving Credit Maximum Amount and the Term Loan Commitments.
WITNESS the due execution hereof as of the day and year first above
written.
COMERICA BANK, R.P. SCHERER INTERNATIONAL
as Documentation Agent CORPORATION
By:/s/ Phyllis D. McCann By:/s/ Nicole S. Williams
Its:Assistant Vice Presidnet Its:Chief Financial Officer
One Detroit Center 2075 West Big Beaver Road
500 Woodward Avenue Troy, Michigan 48084
Detroit, Michigan 48226 Attn: Nicole S. Williams
Attention: Phyllis D. McCann
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NBD BANK, N.A., as F&F HOLDING GMBH
Administrative Agent
By: /s/ Nicole S. Williams
By: /s/ Kelly J. Cotton Its: /s/ Attorney
Its: Vice President c/o R.P. Scherer International
611 Woodward Avenue Corporation
Detroit, Michigan 48226 2075 West Big Beaver Road
Attention: Kelly Cotton Troy, Michigan 48084
Attention: Nicole S. Williams
R.P. SCHERER CANADA INC.
By: /s/ Nicole S. Williams
Its: /s/ Attorney
c/o R.P. Scherer International
Corporation
2075 West Big Beaver Road
Troy, Michigan 48084
Attention: Nicole S. Williams
R.P. SCHERER LIMITED
By: /s/ Nicole S. Williams
Its: /s/ Attorney
c/o R.P. Scherer International
Corporation
2075 West Big Beaver Road
Troy, Michigan 48084
Attention: Nicole S. Williams
SCHERER DDS LIMITED
By: /s/ Nicole S. Williams
Its: /s/ Attorney
c/o R.P. Scherer International
Corporation
2075 West Big Beaver Road
Troy, Michigan 48084
Attention: Nicole S. Williams
R.P. SCHERER HOLDINGS LTD.
By: /s/ Nicole S. Williams
Its: /s/ Attorney
c/o R.P. Scherer International
Corporation
2075 West Big Beaver Road
Troy, Michigan 48084
Attention: Nicole S. Williams
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130
<PAGE> 76
R.P. SCHERER HOLDINGS PTY. LTD.
By: /s/ Nicole S. Williams
Its: /s/ Attorney
c/o R.P. Scherer International
Corporation
2075 West Big Beaver Road
Troy, Michigan 48084
Attention: Nicole S. Williams
R.P. SCHERER PTY. LTD.
By: /s/ Nicole S. Williams
Its: /s/ Attorney
c/o R.P. Scherer International
Corporation
2075 West Big Beaver Road
Troy, Michigan 48084
Attention: Nicole S. Williams
R.P. SCHERER S.A.
By: /s/ Nicole S. Williams
Its: /s/ Attorney
c/o R.P. Scherer International
Corporation
2075 West Big Beaver Road
Troy, Michigan 48084
Attention: Nicole S. Williams
R.P. SCHERER S.p.A.
By: /s/ Nicole S. Williams
Its: /s/ Attorney
c/o R.P. Scherer International
Corporation
2075 West Big Beaver Road
Troy, Michigan 48084
Attention: Nicole S. Williams
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BANKS: COMERICA BANK
By: /s/ Phyllis D. McCann
Eurocurrency Lending Office: Its: Assistant Vice President
Comerica Bank Grand Caymans One Detroit Center
One Detroit Center 500 Woodward Avenue
500 Woodward Avenue Detroit, Michigan 48226
Detroit, Michigan 48226 Attention: Phyllis D. McCann
Attention: Michigan Corporate II Telex No. 235808
Telex: 23596 or 235808 Facsimile No. (313) 222-9514
Facsimile No. (313) 567-3727
NBD BANK, N.A.
Eurocurrency Lending Office:
By: /s/ Kelly J. Cotton
Its: Vice President
Attention: Michigan Banking Division
Telex: 2nd Floor
Facsimile No. 611 Woodward Avenue
Detroit, Michigan 48226
Attention: Kelly Cotton
Telex:
Facsimile No. 313-225-1671
SOCIETE GENERALE
Eurocurrency Lending Office:
34th Floor
181 West Madison By: /s/ Terry L. Terens
Chicago, Illinois 60602 Its: Vice President
Attention: Terry L. Terens 34th Floor
Telex: 190130 SECHIUT 181 West Madison
Facsimile No. 312-578-5099 Chicago, Illinois 60602
Attention: Terry L. Terens
Telex: 190130 SECHIUT
Facsimile No. 312-578-5099
THE BANK OF NOVA SCOTIA
Eurocurrency Lending Office:
600 Peachtree Street, N.E.
Atlanta, Georgia 30308 By: /s/ F.C.H. Ashby
Attention: F.C.H. Ashby
Telex: 00542319 Its:Senior Manager Loan Operations
Facsimile No. 404-888-8998 600 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attention: F.C.H. Ashby
Telex: 00542319
Facsimile No. 404-888-8998
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ABN AMRO BANK N.V.
Eurocurrency Lending Office:
ABN AMRO Bank N.V. By: /s/ Robert J. Graff
135 S. LaSalle Street, Room 560
Chicago, Illinois 60603 Its: Vice President
Attention: Robert J. Graff
Telex: 6732700
Facsimile No. (312) 606-8435 And By: /s/ Bernard J. McGuigan
Its: Group Vice President
135 S. LaSalle Street
Suite 525
Chicago, Illinois 60603
Attention: Robert J. Graff
Telex: 6732700
Facsimile No. (312) 606-8435
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EXHIBIT 10.7
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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June 1, 1994, between JOHN P. CASHMAN (the
"Employee") and R.P. SCHERER CORPORATION, a Delaware corporation (the
"Company").
WHEREAS, the Company desires to assure itself of the benefit of the Employee's
services and experience for a period of time and the Employee is willing to
enter into an agreement to that end upon the terms and conditions herein set
forth.
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. Term of Agreement. Subject to the terms and conditions hereof,
the term of employment of the Employee under this Agreement shall be for the
period of one year commencing from the date set forth above. Thereafter, so
long as Employee is capable of performing his duties hereunder and provided
this Agreement is not terminated pursuant to Section 4, this Agreement shall
be automatically renewed for successive periods of one year, unless, prior to
30 days before the termination date of any one-year period, either party
notifies the other of an intention to terminate this Agreement on such
termination date in which event the Agreement shall be terminated on such date.
Such term of employment, as renewed, is hereinafter referred to as the
"Employment Period."
2. Services to be Rendered.
(a) During the term of employment of the Employee under
this Agreement (and any renewals thereof) the Employee shall serve the Company
as its Chairman and Co-Chief Executive Officer.
(b) The Employee agrees that he will, during the term of
employment under this Agreement (and any renewals thereof) devote his time,
attention and ability to the business of the Company and its subsidiaries as
the Company's Chairman and Co-Chief Executive Officer and shall well and
faithfully serve the Company and its subsidiaries and shall exercise the powers
and authorities and fulfill the responsibilities hereby conferred upon him
honestly, diligently, in good faith and in the best interest of the Company and
its subsidiaries and use his best efforts to promote their interests. The
Employee may, however, serve as an outside director of any other corporation
provided Employee obtains the consent of the Company, which shall not be
unreasonably withheld.
3. Compensation.
(a) In full payment for services rendered to the Company
under this Agreement, the Company shall pay the Employee a salary of Six
Hundred Thirty-Two Thousand Two Hundred Eighty Six and 00/100 Dollars
($632,286) per year during the first year of the Employment Period ("Base
Salary"). The Compensation Committee of the Board of Directors of the Company
shall determine the salary to be paid to the Employee during subsequent years
of the Employment Period.
(b) In addition to the compensation otherwise provided
for in this Section 3, during the term of his employment hereunder, the
Employee also shall be entitled to: (i) participate in the Company's stock
option plans, in accordance with the terms thereof, as from time to time may be
in effect; (ii) by resolution of the Compensation Committee, participate in the
Company's incentive compensation plans, in accordance with the terms
thereof, as from time to time may be in effect; (iii) participate in the
Company's retirement plans, in accordance with the terms thereof, as from time
to time may be in effect; and (iv) participate in such group life, disability,
accident, hospital and medical insurance plans ("Welfare Plans") in accordance
with the terms thereof, as from time to time may be in effect; provided, that
any such participation is generally appropriate to Employee's responsibilities
hereunder; and provided, further, that benefits and terms of participation
under the Welfare Plans may be changed by the Company from time to time in its
sole discretion. To the extent stock options are to be granted in accordance
with a Company stock option plan for the Company fiscal year ending within the
year Employee's employment agreement terminates, Employee is entitled to such
options in accordance with the plan's terms.
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(c) The Employee shall be entitled, during the Employment
Period, to vacations and fringe benefits consistent with the practices of the
Company.
(d) The Company shall provide the Employee, during the
Employment Period, with the use of a Company-owned or leased automobile, and
will pay all taxes and insurance on said vehicle.
4. Disability, Death and Termination.
(a) In the event of the Employee's inability to perform
the principal duties of his job at the Company due to physical or mental
condition, as determined by a physician ("Permanent Incapacitating Disability")
for any consecutive period of at least one year with or without accommodation,
the Company may, at its election, terminate the Employee's employment
hereunder. The date of Permanent Incapacitating Disability shall be on the
last day of such period. In the event of any such termination, the Company
shall be obligated (i) for compensation earned by the Employee hereunder, but
not yet paid, prior to such termination, and (ii) to pay the Employee each
month, for twenty-four consecutive months, an amount equal to the monthly
Termination Benefit (the "Disability Benefit"); provided, however, that the
amount of the Disability Benefit shall be reduced by any amounts received by
the Employee in respect of the Employee's disability from any employee benefit
or disability plans maintained by the Company.
(b) The obligations of the Company under this Agreement
shall terminate upon the death of the Employee.
(c) If any of the following events should occur:
(1) the Employee voluntarily terminates
employment with the Company without Good Reason before retirement (which for
purposes of this Agreement shall be determined at or over the age of 55 or at
any earlier date approved by the Company), or
(2) the Company terminates the Employee's
employment for Cause, the Company's obligations hereunder shall terminate and
no further payments of any kind (other than in respect of compensation earned
by the Employee as determined hereunder prior to such termination) shall
thereafter be made by the Company to the Employee hereunder.
For purposes of the foregoing, "Cause" means:
(i) any act or acts of the Employee constituting
a felony (or its equivalent) under the laws of the United States, any state
thereof or any foreign jurisdiction;
(ii) any material breach by the Employee of any
employment agreement with the Company or the policies of the Company or any of
its subsidiaries or the willful and persistent (after written notice to the
Employee) failure or refusal of the Employee to perform his duties of
employment or comply with any lawful directives of the Board of Directors of
the Company;
(iii) a course of conduct amounting to gross
neglect, willful misconduct or dishonesty; or
(iv) any misappropriation of material property of
the Company by the Employee or any misappropriation of a corporate or business
opportunity of the Company by the Employee.
For purposes of the foregoing, "Good Reason" means:
(i) any material reduction by the Company of such
Employee's duties, responsibilities or titles;
(ii) any involuntary removal of such Employee from
any position previously held (except in connection with a promotion or a
termination for Cause, death or disability, or the voluntary termination by the
Employee other than for Good Reason);
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(iii) within six months after a Change in Control;
or
(iv) such other reasons (including
nonemployment-related reasons) as may be approved by the Company, in its sole
discretion, from time to time.
(d) If the Company terminates the Employee's employment
without Cause, if the Employee voluntarily terminates employment with the
Company for Good Reason, or if the Company notifies the Employee of its
intention to terminate this Employment Agreement pursuant to Section 1 hereof,
the Company shall:
(1) pay the Employee a monthly amount, for
twenty-four consecutive months after termination, equal to one twelfth of the
Employee's annual average salary as computed by the Company for the prior
twenty-four consecutive months, or if the Employee has not been employed for
twenty-four consecutive months, for the number of consecutive months employed,
preceding the date of termination (the "Termination Benefit") until the
Termination Benefit is paid in full; and
(2) provide Employee with benefits in accordance
with Section 3(b)(iv) and Section 3(d) for a period of twenty-four consecutive
months after termination.
5. Confidentiality. For purposes of this Agreement, "proprietary
information" shall mean any information relating to the business of the Company
or any of its subsidiaries that has not previously been publicly released by
duly authorized representatives of the Company and shall include (but shall not
be limited to) Company information encompassed in all research, product
development, designs, plans, formulations and formulating techniques,
proposals, marketing and sales plans, financial information, costs, pricing
information, strategic business plans, customer information, and all methods,
concepts, or ideas in or reasonably related to the business of the Company.
The Employee agrees to regard and preserve as confidential all
proprietary information pertaining to the Company's business that has been or
may be obtained by the Employee in the course of his employment with the
Company, whether he has such information in his memory or in writing or other
physical form. The Employee will not, without prior written authority from the
Company to do so, use for his benefit or purposes, or disclose to any other
person, firm, partnership, corporation or other entity, either during the term
of his employment hereunder or thereafter, any proprietary information
connected with the business or developments of the Company, except as required
in connection with the performance by the Employee of his duties and
responsibilities as an employee of the Company. This provision shall not apply
after the proprietary information has been voluntarily disclosed to the public,
independently developed and disclosed by others, or otherwise enters the public
domain through lawful means.
6. Removal of Documents or Objects. The Employee agrees not to
remove from the premises of the Company, except as an employee of the Company
in pursuit of the business of the Company or any of its subsidiaries, or except
as specifically permitted in writing by the Company, any document (regardless
of the medium on which it is recorded), object, computer program, computer
source code, object code or data (the "Documents") containing or reflecting any
proprietary information of the Company. The Employee recognizes that all such
Documents, whether developed by him or by someone else, are the exclusive
property of the Company.
7. Non-Competition. The Employee agrees that during the term of
his employment hereunder and for a period of two years after such term of
employment terminates or is terminated, he will not in any way, directly or
indirectly, manage, operate, control, solicit officers or employees of the
Company, accept employment, a directorship or a consulting position with or
otherwise advise or assist or be connected with or own or have any other
interest in or right with respect to (other than through ownership of not more
than one percent of the outstanding shares of a corporation's stock which is
listed on a national securities exchange) any enterprise which competes or
shall compete with the Company, by engaging in or otherwise carrying on the
research, development, manufacture or sale of any product of any type
developed, manufactured or sold by the Company or any subsidiary thereof,
whether now or hereafter (to the extent that any such product is under
consideration by the Board of Directors of the Company at the time the
Employee's employment terminates or is terminated).
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8. Corporate Opportunities. The Employee agrees that during the
Employment Period he will not take any action which might divert from the
Company or any subsidiary of the Company any opportunity which would be within
the scope of any of the present or future businesses of the Company or any of
its subsidiaries (which future businesses are then under consideration by the
Board of Directors of the Company), the loss of which has or would have had, in
the reasonable judgment of the Board of Directors of the Company, an adverse
effect upon the Company, unless the Board of Directors of the Company has given
prior written approval.
9. Relief. It is understood and agreed by and between the
parties hereto that the service to be rendered by the Employee hereunder, and
the rights and privileges granted to the Company by the Employee hereunder, are
of a special, unique, extraordinary and intellectual character, which gives
them a peculiar value, the loss of which cannot be reasonably or adequately
compensated in damages in any action at law, and that a breach by the Employee
of any of the provisions contained in this Agreement will cause the Company
great irreparable injury and damage.
The Employee hereby expressly agrees that the Company shall be
entitled to the remedies of injunction, specific performance and other
equitable relief to prevent a breach of this Agreement by the Employee. The
Employee further expressly agrees that in the event the Employee breaches the
non-competition provisions of Section 7 of this Agreement or the
confidentiality provisions of Section 5 of this Agreement, the balance of any
payments due under this Agreement shall be forfeited by the Employee.
The provisions of this Section 9 shall not, however, be
construed as a waiver of any of the rights which the Company may have for
damages or otherwise.
10. Warranty. The Employee hereby warrants that he is free to
enter into this Agreement and to render his services pursuant hereto.
11. Non-Assignability. Except as otherwise provided herein, this
Agreement may not be assigned by either the Company or the Employee.
12. Merger or Consolidation. In the event (a) the Company merges
with or into, or consolidates with, another entity; (b) the Company sells,
exchanges or otherwise disposes of all or substantially all of the assets of
the Company; (c) 50% or more of the Company's then outstanding shares of voting
stock is acquired by another corporation, person or entity; (d) the Company
liquidates or dissolves; or (e) the Company recapitalizes or enters into any
similar transaction, and as a result of which the Common Stock either (i) is no
longer a voting equity security of the Company or (ii) is no longer listed on a
national securities exchange or authorized for quotation on an inter-dealer
quotation system of a national securities association (referred to collectively
as a "Change in Control"), this Agreement may be assigned and transferred to
such successor in interest as an asset of the Company upon such assignee
assuming the Company's obligations hereunder, in which event the Employee
agrees to continue to perform his duties and obligations according to the terms
and conditions hereof for such assignee or transferee of this Agreement subject
to Employee's right to terminate for Good Reason in accordance with Section
4(c)(iii).
13. Withholding. The Company shall have the right to withhold the
amount of taxes, which in the determination of the Company, are required to be
withheld under law with respect to any amount due or paid under this Agreement.
14. Notices. All notices and other communications which are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by registered or
certified mail, return receipt requested, postage prepaid:
(a) If to the Company, to it at:
R.P. Scherer International Corporation
2075 West Big Beaver Road
Troy, Michigan 48084
Attention: Secretary
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With a copy to:
R.P. Scherer Corporation
2075 West Big Beaver Road
Troy, Michigan 48084
Attention: Secretary
(b) If to the Employee, to him at such address as set
forth in the signature page hereof or as he shall otherwise have specified by
notice in writing to the Company.
15. Governmental Regulation. Nothing contained in this Agreement
shall be construed so as to require the commission of any act contrary to law
and wherever there is any conflict between any provision of this Agreement and
any statute, law, ordinance, order or regulation, the latter shall prevail, but
in such event any such provision of this Agreement shall be curtailed and
limited only to the extent necessary to bring it within the legal requirements.
16. Governing Law; Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of Michigan. Any
suit, action or proceeding against the Employee with respect to this Agreement,
or any judgment entered by any court in respect of any thereof, may be brought
in any court of competent jurisdiction in the State of Michigan and the
Employee hereby submits to the exclusive jurisdiction of such courts for the
purpose of any such suit, action, proceeding or judgment. The Employee hereby
irrevocably waives any objections which he may now or hereafter have to the
laying of the venue of any suit, action or proceeding arising out of or
relating to this Agreement brought in any court of competent jurisdiction in
the State of Michigan, and hereby further irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in
any inconvenient forum. No suit, action or proceeding against the Company with
respect to this Agreement may be brought in any court, domestic or foreign, or
before any similar domestic or foreign authority other than in a court of
competent jurisdiction in the State of Michigan, and the Employee hereby
irrevocably waives any right which he may otherwise have had to bring such an
action in any other court, domestic or foreign, or before any similar domestic
or foreign authority. The Company hereby submits to the jurisdiction of such
courts for the purpose of any such suit, action or proceeding. The Employee
irrevocably waives his right to trial by jury with regard to any suit, action,
or proceeding with respect to this Agreement; provided, however, that if such
waiver of the right to jury trial shall be held unenforceable, the invalidity
or unenforceability of this provision shall not impair the validity or
enforceability of any other provision of this Agreement.
17. Entire Agreement; Amendment. This Agreement sets forth the
entire understanding of the parties in respect of the subject matter contained
herein and supersedes all prior agreement, arrangements and understandings
relating to the subject matter and may only be amended by a written agreement
signed by both parties hereto or their duly authorized representatives.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
R.P. SCHERER CORPORATION
By: /s/ Nicole S. Williams
------------------------
Title:Executive Vice President
------------------------
/s/ John P. Cashman
-------------------
John P. Cashman
139
<PAGE> 1
EXHIBIT 10.8
140
<PAGE> 2
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June 1, 1994, between ALEKSANDAR ERDELJAN
(the "Employee") and R.P. SCHERER CORPORATION, a Delaware corporation (the
"Company").
WHEREAS, the Company desires to assure itself of the benefit of the Employee's
services and experience for a period of time and the Employee is willing to
enter into an agreement to that end upon the terms and conditions herein set
forth.
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. Term of Agreement. Subject to the terms and conditions
hereof, the term of employment of the Employee under this Agreement shall be
for the period of one year commencing from the date set forth above.
Thereafter, so long as Employee is capable of performing his duties hereunder
and provided this Agreement is not terminated pursuant to Section 4, this
Agreement shall be automatically renewed for successive periods of one year,
unless, prior to 30 days before the termination date of any one-year period,
either party notifies the other of an intention to terminate this Agreement on
such termination date in which event the Agreement shall be terminated on such
date. Such term of employment, as renewed, is hereinafter referred to as the
"Employment Period."
2. Services to be Rendered.
(a) During the term of employment of the Employee under
this Agreement (and any renewals thereof) the Employee shall serve the Company
as its President and Co-Chief Executive Officer.
(b) The Employee agrees that he will, during the term of
employment under this Agreement (and any renewals thereof) devote his time,
attention and ability to the business of the Company and its subsidiaries as
the Company's President and Co-Chief Executive Officer and shall well and
faithfully serve the Company and its subsidiaries and shall exercise the powers
and authorities and fulfill the responsibilities hereby conferred upon him
honestly, diligently, in good faith and in the best interest of the Company and
its subsidiaries and use his best efforts to promote their interests. The
Employee may, however, serve as an outside director of any other corporation
provided Employee obtains the consent of the Company, which shall not be
unreasonably withheld.
3. Compensation.
(a) In full payment for services rendered to the Company
under this Agreement, the Company shall pay the Employee a salary of Six
Hundred Thirty-Two Thousand Two Hundred Eighty Six and 00/100 Dollars
($632,286) per year during the first year of the Employment Period ("Base
Salary"). The Compensation Committee of the Board of Directors of the Company
shall determine the salary to be paid to the Employee during subsequent years
of the Employment Period.
(b) In addition to the compensation otherwise provided
for in this Section 3, during the term of his employment hereunder, the
Employee also shall be entitled to: (i) participate in the Company's stock
option plans, in accordance with the terms thereof, as from time to time may be
in effect; (ii) by resolution of the Compensation Committee, participate in the
Company's incentive compensation plans, in accordance with the terms
thereof, as from time to time may be in effect; (iii) participate in the
Company's retirement plans, in accordance with the terms thereof, as from time
to time may be in effect; and (iv) participate in such group life, disability,
accident, hospital and medical insurance plans ("Welfare Plans") in accordance
with the terms thereof, as from time to time may be in effect; provided, that
any such participation is generally appropriate to Employee's responsibilities
hereunder; and provided, further, that benefits and terms of participation
under the Welfare Plans may be changed by the Company from time to time in its
sole discretion. To the extent stock options are to be granted in accordance
with a Company stock option plan for the Company fiscal year ending within the
year Employee's employment agreement terminates, Employee is entitled to such
options in accordance with the plan's terms. (c) The Employee shall be
entitled, during the Employment Period, to vacations and fringe benefits
consistent with the practices of the Company.
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<PAGE> 3
(d) The Company shall provide the Employee, during the
Employment Period, with the use of a Company-owned or leased automobile, and
will pay all taxes and insurance on said vehicle.
4. Disability, Death and Termination.
(a) In the event of the Employee's inability to perform
the principal duties of his job at the Company due to physical or mental
condition, as determined by a physician ("Permanent Incapacitating Disability")
for any consecutive period of at least one year with or without accommodation,
the Company may, at its election, terminate the Employee's employment
hereunder. The date of Permanent Incapacitating Disability shall be on the
last day of such period. In the event of any such termination, the Company
shall be obligated (i) for compensation earned by the Employee hereunder, but
not yet paid, prior to such termination, and (ii) to pay the Employee each
month, for twenty-four consecutive months, an amount equal to the monthly
Termination Benefit (the "Disability Benefit"); provided, however, that the
amount of the Disability Benefit shall be reduced by any amounts received by
the Employee in respect of the Employee's disability from any employee benefit
or disability plans maintained by the Company.
(b) The obligations of the Company under this Agreement
shall terminate upon the death of the Employee.
(c) If any of the following events should occur:
(1) the Employee voluntarily terminates
employment with the Company without Good Reason before retirement (which for
purposes of this Agreement shall be determined at or over the age of 55 or at
any earlier date approved by the Company), or
(2) the Company terminates the Employee's
employment for Cause, the Company's obligations hereunder shall terminate and
no further payments of any kind (other than in respect of compensation earned
by the Employee as determined hereunder prior to such termination) shall
thereafter be made by the Company to the Employee hereunder.
For purposes of the foregoing, "Cause" means:
(i) any act or acts of the Employee constituting
a felony (or its equivalent) under the laws of the United States, any state
thereof or any foreign jurisdiction;
(ii) any material breach by the Employee of any
employment agreement with the Company or the policies of the Company or any of
its subsidiaries or the willful and persistent (after written notice to the
Employee) failure or refusal of the Employee to perform his duties of
employment or comply with any lawful directives of the Board of Directors of
the Company;
(iii) a course of conduct amounting to gross neglect,
willful misconduct or dishonesty; or
(iv) any misappropriation of material property of
the Company by the Employee or any misappropriation of a corporate or business
opportunity of the Company by the Employee.
For purposes of the foregoing, "Good Reason" means:
(i) any material reduction by the Company of such
Employee's duties, responsibilities or titles;
(ii) any involuntary removal of such Employee from
any position previously held (except in connection with a promotion or a
termination for Cause, death or disability, or the voluntary termination by the
Employee other than for Good Reason);
(iii) within six months after a Change in Control; or
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<PAGE> 4
(iv) such other reasons (including
nonemployment-related reasons) as may be approved by the Company, in its sole
discretion, from time to time.
(d) If the Company terminates the Employee's employment
without Cause, if the Employee voluntarily terminates employment with the
Company for Good Reason, or if the Company notifies the Employee of its
intention to terminate this Employment Agreement pursuant to Section 1 hereof,
the Company shall:
(1) pay the Employee a monthly amount, for
twenty-four consecutive months after termination, equal to one twelfth of the
Employee's annual average salary as computed by the Company for the prior
twenty-four consecutive months, or if the Employee has not been employed for
twenty-four consecutive months, for the number of consecutive months employed,
preceding the date of termination (the "Termination Benefit") until the
Termination Benefit is paid in full; and
(2) provide Employee with benefits in accordance
with Section 3(b)(iv) and Section 3(d) for a period of twenty- four consecutive
months after termination.
5. Confidentiality. For purposes of this Agreement, "proprietary
information" shall mean any information relating to the business of the Company
or any of its subsidiaries that has not previously been publicly released by
duly authorized representatives of the Company and shall include (but shall not
be limited to) Company information encompassed in all research, product
development, designs, plans, formulations and formulating techniques,
proposals, marketing and sales plans, financial information, costs, pricing
information, strategic business plans, customer information, and all methods,
concepts, or ideas in or reasonably related to the business of the Company.
The Employee agrees to regard and preserve as confidential all
proprietary information pertaining to the Company's business that has been or
may be obtained by the Employee in the course of his employment with the
Company, whether he has such information in his memory or in writing or other
physical form. The Employee will not, without prior written authority from the
Company to do so, use for his benefit or purposes, or disclose to any other
person, firm, partnership, corporation or other entity, either during the term
of his employment hereunder or thereafter, any proprietary information
connected with the business or developments of the Company, except as required
in connection with the performance by the Employee of his duties and
responsibilities as an employee of the Company. This provision shall not apply
after the proprietary information has been voluntarily disclosed to the public,
independently developed and disclosed by others, or otherwise enters the public
domain through lawful means.
6. Removal of Documents or Objects. The Employee agrees not to
remove from the premises of the Company, except as an employee of the Company
in pursuit of the business of the Company or any of its subsidiaries, or except
as specifically permitted in writing by the Company, any document (regardless
of the medium on which it is recorded), object, computer program, computer
source code, object code or data (the "Documents") containing or reflecting any
proprietary information of the Company. The Employee recognizes that all such
Documents, whether developed by him or by someone else, are the exclusive
property of the Company.
7. Non-Competition. The Employee agrees that during the term of
his employment hereunder and for a period of two years after such term of
employment terminates or is terminated, he will not in any way, directly or
indirectly, manage, operate, control, solicit officers or employees of the
Company, accept employment, a directorship or a consulting position with or
otherwise advise or assist or be connected with or own or have any other
interest in or right with respect to (other than through ownership of not more
than one percent of the outstanding shares of a corporation's stock which is
listed on a national securities exchange) any enterprise which competes or
shall compete with the Company, by engaging in or otherwise carrying on the
research, development, manufacture or sale of any product of any type
developed, manufactured or sold by the Company or any subsidiary thereof,
whether now or hereafter (to the extent that any such product is under
consideration by the Board of Directors of the Company at the time the
Employee's employment terminates or is terminated).
8. Corporate Opportunities. The Employee agrees that during the
Employment Period he will not take any action which might divert from the
Company or any subsidiary of the Company any opportunity which would be within
the scope of any of the present or future businesses of the Company or any of
its subsidiaries (which future businesses are then under consideration by the
Board of Directors of
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<PAGE> 5
the Company), the loss of which has or would have had, in
the reasonable judgment of the Board of Directors of the Company, an adverse
effect upon the Company, unless the Board of Directors of the Company has given
prior written approval.
9. Relief. It is understood and agreed by and between the
parties hereto that the service to be rendered by the Employee hereunder, and
the rights and privileges granted to the Company by the Employee hereunder, are
of a special, unique, extraordinary and intellectual character, which gives
them a peculiar value, the loss of which cannot be reasonably or adequately
compensated in damages in any action at law, and that a breach by the Employee
of any of the provisions contained in this Agreement will cause the Company
great irreparable injury and damage.
The Employee hereby expressly agrees that the Company shall be
entitled to the remedies of injunction, specific performance and other
equitable relief to prevent a breach of this Agreement by the Employee. The
Employee further expressly agrees that in the event the Employee breaches the
non-competition provisions of Section 7 of this Agreement or the
confidentiality provisions of Section 5 of this Agreement, the balance of any
payments due under this Agreement shall be forfeited by the Employee.
The provisions of this Section 9 shall not, however, be
construed as a waiver of any of the rights which the Company may have for
damages or otherwise.
10. Warranty. The Employee hereby warrants that he is free to
enter into this Agreement and to render his services pursuant hereto.
11. Non-Assignability. Except as otherwise provided herein, this
Agreement may not be assigned by either the Company or the Employee.
12. Merger or Consolidation. In the event (a) the Company merges
with or into, or consolidates with, another entity; (b) the Company sells,
exchanges or otherwise disposes of all or substantially all of the assets of
the Company; (c) 50% or more of the Company's then outstanding shares of voting
stock is acquired by another corporation, person or entity; (d) the Company
liquidates or dissolves; or (e) the Company recapitalizes or enters into any
similar transaction, and as a result of which the Common Stock either (i) is no
longer a voting equity security of the Company or (ii) is no longer listed on a
national securities exchange or authorized for quotation on an inter-dealer
quotation system of a national securities association (referred to collectively
as a "Change in Control"), this Agreement may be assigned and transferred to
such successor in interest as an asset of the Company upon such assignee
assuming the Company's obligations hereunder, in which event the Employee
agrees to continue to perform his duties and obligations according to the terms
and conditions hereof for such assignee or transferee of this Agreement subject
to Employee's right to terminate for Good Reason in accordance with Section
4(c)(iii).
13. Withholding. The Company shall have the right to withhold the
amount of taxes, which in the determination of the Company, are required to be
withheld under law with respect to any amount due or paid under this Agreement.
14. Notices. All notices and other communications which are
required or may be given under this Agreement shall be in writing and shall be
deemed to have been given if delivered personally or sent by registered or
certified mail, return receipt requested, postage prepaid:
(a) If to the Company, to it at:
R.P. Scherer International Corporation
2075 West Big Beaver Road
Troy, Michigan 48084
Attention: Secretary
With a copy to:
R.P. Scherer Corporation
2075 West Big Beaver Road
Troy, Michigan 48084
Attention: Secretary
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<PAGE> 6
(b) If to the Employee, to him at such address as set
forth in the signature page hereof or as he shall otherwise have specified by
notice in writing to the Company.
15. Governmental Regulation. Nothing contained in this Agreement
shall be construed so as to require the commission of any act contrary to law
and wherever there is any conflict between any provision of this Agreement and
any statute, law, ordinance, order or regulation, the latter shall prevail, but
in such event any such provision of this Agreement shall be curtailed and
limited only to the extent necessary to bring it within the legal requirements.
16. Governing Law; Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of Michigan. Any
suit, action or proceeding against the Employee with respect to this Agreement,
or any judgment entered by any court in respect of any thereof, may be brought
in any court of competent jurisdiction in the State of Michigan and the
Employee hereby submits to the exclusive jurisdiction of such courts for the
purpose of any such suit, action, proceeding or judgment. The Employee hereby
irrevocably waives any objections which he may now or hereafter have to the
laying of the venue of any suit, action or proceeding arising out of or
relating to this Agreement brought in any court of competent jurisdiction in
the State of Michigan, and hereby further irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in
any inconvenient forum. No suit, action or proceeding against the Company with
respect to this Agreement may be brought in any court, domestic or foreign, or
before any similar domestic or foreign authority other than in a court of
competent jurisdiction in the State of Michigan, and the Employee hereby
irrevocably waives any right which he may otherwise have had to bring such an
action in any other court, domestic or foreign, or before any similar domestic
or foreign authority. The Company hereby submits to the jurisdiction of such
courts for the purpose of any such suit, action or proceeding. The Employee
irrevocably waives his right to trial by jury with regard to any suit, action,
or proceeding with respect to this Agreement; provided, however, that if such
waiver of the right to jury trial shall be held unenforceable, the invalidity
or unenforceability of this provision shall not impair the validity or
enforceability of any other provision of this Agreement.
17. Entire Agreement; Amendment. This Agreement sets forth the
entire understanding of the parties in respect of the subject matter contained
herein and supersedes all prior agreement, arrangements and understandings
relating to the subject matter and may only be amended by a written agreement
signed by both parties hereto or their duly authorized representatives.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
R.P. SCHERER CORPORATION
By: /s/ Nicole S. Williams
Title:Executive Vice President
/s/ Aleksandar Erdeljan
Aleksandar Erdeljan
145
<PAGE> 1
EXHIBIT 10.9
146
<PAGE> 2
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June 1, 1994, between NICOLE S. WILLIAMS the
"Employee") and R.P. SCHERER CORPORATION, a Delaware corporation (the
"Company").
WHEREAS, the Company desires to assure itself of the benefit of the Employee's
services and experience for a period of time and the Employee is willing to
enter into an agreement to that end upon the terms and conditions herein set
forth.
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, the parties hereto agree as follows:
1. Term of Agreement. Subject to the terms and conditions hereof, the term of
employment of the Employee under this Agreement shall be for the
period of one year commencing from the date set forth above.
Thereafter, so long as Employee is capable of performing her duties
hereunder and provided this Agreement is not terminated pursuant to
Section 4, this Agreement shall be automatically renewed for
successive periods of one year, unless, prior to 30 days before the
termination date of any one-year period, either party notifies the
other of an intention to terminate this Agreement on such termination
date in which event the Agreement shall be terminated on such date.
Such term of employment, as renewed, is hereinafter referred to as the
"Employment Period."
2. Services to be Rendered.
(a) During the term of employment of the Employee under this
Agreement (and any renewals thereof) the Employee shall serve
the Company as its Executive Vice President, Finance and Chief
Financial Officer.
(b) The Employee agrees that she will, during the term of
employment under this Agreement (and any renewals thereof)
devote her time, attention and ability to the business of the
Company and its subsidiaries as the Company's Executive Vice
President, Finance and Chief Financial Officer and shall well
and faithfully serve the Company and its subsidiaries and
shall exercise the powers and authorities and fulfill the
responsibilities hereby conferred upon her honestly,
diligently, in good faith and in the best interest of the
Company and its subsidiaries and use her best efforts to
promote their interests. The Employee may, however, serve as
an outside director of any other corporation provided Employee
obtains the consent of the Company, which shall not be
unreasonably withheld.
3. Compensation.
(a) In full payment for services rendered to the Company under
this Agreement, the Company shall pay the Employee a salary of
Two Hundred Thirteen Thousand Six Hundred Twenty-Five and
00/100 Dollars ($213,625) per year during the first year of
the Employment Period ("Base Salary"). The Compensation
Committee of the Board of Directors of the Company shall
determine the salary to be paid to the Employee during
subsequent years of the Employment Period; provided, however,
that the Compensation Committee shall not reduce the
Employee's salary to be paid in any succeeding year to an
amount less than the Employee's Base Salary.
(b) In addition to the compensation otherwise provided for in this
Section 3, during the term of her employment hereunder, the
Employee also shall be entitled to: (i) participate in the
Company's stock option plans, in accordance with the terms
thereof, as from time to time may be in effect; (ii)
participate in the Company's incentive compensation plans, in
accordance with the terms thereof, as from time to time may be
in effect; (iii) participate in the Company's retirement
plans, in
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accordance with the terms thereof, as from time to time may
be in effect; and (iv) participate in such group life,
disability, accident, hospital and medical insurance plans
("Welfare Plans") in accordance with the terms thereof, as
from time to time may be in effect; provided, that any such
participation is generally appropriate to Employee's
responsibilities hereunder; and provided, further, that
benefits and terms of participation under the Welfare Plans
may be changed by the Company from time to time in its sole
discretion. To the extent stock options are to be granted in
accordance with a Company stock option plan for the Company
fiscal year ending within the year Employee's employment
agreement terminates, Employee is entitled to such options in
accordance with the plan's terms.
(c) The Employee shall be entitled, during the Employment Period,
to vacations and fringe benefits consistent with the practices
of the Company.
(d) The Company shall provide the Employee, during the Employment
Period, with the use of a Company-owned or leased automobile,
and will pay all taxes and insurance on said vehicle.
4. Disability, Death and Termination.
(a) In the event of the Employee's inability to perform the
principal duties of her job at the Company due to physical or
mental condition, as determined by a physician ("Permanent
Incapacitating Disability") for any consecutive period of at
least one year with or without accommodation, the Company may,
at its election, terminate the Employee's employment
hereunder. The date of Permanent Incapacitating Disability
shall be on the last day of such period. In the event of any
such termination, the Company shall be obligated (i) for
compensation earned by the Employee hereunder, but not yet
paid, prior to such termination, and (ii) to pay the Employee
each month, for twenty-four consecutive months, an amount
equal to the monthly Termination Benefit (the "Disability
Benefit"); provided, however, that the amount of the
Disability Benefit shall be reduced by any amounts received by
the Employee in respect of the Employee's disability from any
employee benefit or disability plans maintained by the
Company.
(b) The obligations of the Company under this Agreement shall
terminate upon the death of the Employee.
(c) If any of the following events should occur:
(1) the Employee voluntarily terminates employment with the
Company without Good Reason before retirement (which
for purposes of this Agreement shall be determined at
or over the age of 55 or at any earlier date approved
by the Company), or
(2) the Company terminates the Employee's employment for
Cause, the Company's obligations hereunder shall
terminate and no further payments of any kind (other
than in respect of compensation earned by the
Employee as determined hereunder prior to such
termination) shall thereafter be made by the Company
to the Employee hereunder.
For purposes of the foregoing, "Cause" means:
(i) any act or acts of the Employee constituting a felony (or
its equivalent) under the laws of the United States, any
state thereof or any foreign jurisdiction;
(ii)any material breach by the Employee of any employment
agreement with the Company or the policies of the Company
or any of its subsidiaries or the willful and persistent
(after written notice to the Employee) failure or refusal
of the
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Employee to perform her duties of employment or comply
with any lawful directives of the Board of Directors of
the Company;
(iii) a course of conduct amounting to gross neglect, willful
misconduct or dishonesty; or
(iv) any misappropriation of material property of the
Company by the Employee or any misappropriation of a
corporate or business opportunity of the Company by the
Employee.
For purposes of the foregoing, "Good Reason" means:
(i) any material reduction by the Company of such Employee's
duties, responsibilities or titles;
(ii) any involuntary removal of such Employee from any
position previously held (except in connection with a
promotion or a termination for Cause, death or
disability, or the voluntary termination by the
Employee other than for Good Reason);
(iii) within six months after a Change in Control; or
(iv) such other reasons (including nonemployment-related
reasons) as may be approved by the Company, in its sole
discretion, from time to time.
(d) If the Company terminates the Employee's employment without
Cause, if the Employee voluntarily terminates employment with
the Company for Good Reason, or if the Company notifies the
Employee of its intention to terminate this Employment
Agreement pursuant to Section 1 hereof, the Company shall:
(1) pay the Employee a monthly amount, for twenty-four
consecutive months after termination, equal to one
twelfth of the Employee's annual average salary as
computed by the Company for the prior twenty-four
consecutive months, or if the Employee has not been
employed for twenty-four consecutive months, for the
number of consecutive months employed, preceding the
date of termination (the "Termination Benefit") until
the Termination Benefit is paid in full; and
(2) provide Employee with benefits in accordance with
Section 3(b)(iv) and Section 3(d) for a period of
twenty-four consecutive months after termination.
5. Confidentiality. For purposes of this Agreement, "proprietary information"
shall mean any information relating to the business of the Company or any
of its subsidiaries that has not previously been publicly released by duly
authorized representatives of the Company and shall include (but shall not
be limited to) Company information encompassed in all research, product
development, designs, plans, formulations and formulating techniques,
proposals, marketing and sales plans, financial information, costs, pricing
information, strategic business plans, customer information, and all
methods, concepts, or ideas in or reasonably related to the business of the
Company.
The Employee agrees to regard and preserve as confidential all proprietary
information pertaining to the Company's business that has been or may be
obtained by the Employee in the course of her employment with the Company,
whether she has such information in her memory or in writing or other
physical form. The Employee will not, without prior written
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authority from the Company to do so, use for her benefit or purposes,
or disclose to any other person, firm, partnership, corporation or other
entity, either during the term of her employment hereunder or thereafter,
any proprietary information connected with the business or developments of
the Company, except as required in connection with the performance by the
Employee of her duties and responsibilities as an employee of the Company.
This provision shall not apply after the proprietary information has been
voluntarily disclosed to the public, independently developed and disclosed
by others, or otherwise enters the public domain through lawful means.
6. Removal of Documents or Objects. The Employee agrees not to remove from
the premises of the Company, except as an employee of the Company in
pursuit of the business of the Company or any of its subsidiaries, or
except as specifically permitted in writing by the Company, any document
(regardless of the medium on which it is recorded), object, computer
program, computer source code, object code or data (the "Documents")
containing or reflecting any proprietary information of the Company. The
Employee recognizes that all such Documents, whether developed by her or
by someone else, are the exclusive property of the Company.
7. Non-Competition. The Employee agrees that during the term of her
employment hereunder and for a period of two years after such term of
employment terminates or is terminated, she will not in any way, directly
or indirectly, manage, operate, control, solicit officers or employees of
the Company, accept employment, a directorship or a consulting position
with or otherwise advise or assist or be connected with or own or have any
other interest in or right with respect to (other than through ownership of
not more than one percent of the outstanding shares of a corporation's
stock which is listed on a national securities exchange) any enterprise
which competes or shall compete with the Company, by engaging in or
otherwise carrying on the research, development, manufacture or sale of any
product of any type developed, manufactured or sold by the Company or any
subsidiary thereof, whether now or hereafter (to the extent that any such
product is under consideration by the Board of Directors of the Company at
the time the Employee's employment terminates or is terminated).
8. Corporate Opportunities. The Employee agrees that during the Employment
Period she will not take any action which might divert from the Company
or any subsidiary of the Company any opportunity which would be within the
scope of any of the present or future businesses of the Company or any of
its subsidiaries (which future businesses are then under consideration by
the Board of Directors of the Company), the loss of which has or would have
had, in the reasonable judgment of the Board of Directors of the Company,
an adverse effect upon the Company, unless the Board of Directors of the
Company has given prior written approval.
9. Relief. It is understood and agreed by and between the parties hereto that
the service to be rendered by the Employee hereunder, and the rights and
privileges granted to the Company by the Employee hereunder, are of a
special, unique, extraordinary and intellectual character, which gives them
a peculiar value, the loss of which cannot be reasonably or adequately
compensated in damages in any action at law, and that a breach by the
Employee of any of the provisions contained in this Agreement will cause
the Company great irreparable injury and damage.
The Employee hereby expressly agrees that the Company shall be entitled to
the remedies of injunction, specific performance and other equitable relief
to prevent a breach of this Agreement by the Employee. The Employee
further expressly agrees that in the event the Employee breaches the
non-competition provisions of Section 7 of this Agreement or the
confidentiality provisions of Section 5 of this Agreement, the balance of
any payments due under this Agreement shall be forfeited by the Employee.
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The provisions of this Section 9 shall not, however, be construed as a
waiver of any of the rights which the Company may have for damages or
otherwise.
10. Warranty. The Employee hereby warrants that she is free to enter into this
Agreement and to render her services pursuant hereto.
11. Non-Assignability. Except as otherwise provided herein, this Agreement may
not be assigned by either the Company or the Employee.
12. Merger or Consolidation. In the event (a) the Company merges with or into,
or consolidates with, another entity; (b) the Company sells, exchanges or
otherwise disposes of all or substantially all of the assets of the
Company; (c) 50% or more of the Company's then outstanding shares of voting
stock is acquired by another corporation, person or entity; (d) the Company
liquidates or dissolves; or (e) the Company recapitalizes or enters into
any similar transaction, and as a result of which the Common Stock either
(i) is no longer a voting equity security of the Company or (ii) is no
longer listed on a national securities exchange or authorized for quotation
on an inter-dealer quotation system of a national securities association
(referred to collectively as a "Change in Control"), this Agreement may be
assigned and transferred to such successor in interest as an asset of the
Company upon such assignee assuming the Company's obligations hereunder, in
which event the Employee agrees to continue to perform her duties and
obligations according to the terms and conditions hereof for such assignee
or transferee of this Agreement subject to Employee's right to terminate
for Good Reason in accordance with Section 4(c)(iii).
13. Withholding. The Company shall have the right to withhold the amount of
taxes, which in the determination of the Company, are required to be
withheld under law with respect to any amount due or paid under this
Agreement.
14. Notices. All notices and other communications which are required or may be
given under this Agreement shall be in writing and shall be deemed to have
been given if delivered personally or sent by registered or certified mail,
return receipt requested, postage prepaid:
(a) If to the Company, to it at:
R.P. Scherer International Corporation
2075 West Big Beaver Road
Troy, Michigan 48084
Attention: Secretary
With a copy to:
R.P. Scherer Corporation
2075 West Big Beaver Road
Troy, Michigan 48084
Attention: Secretary
(b) If to the Employee, to her at such address as set forth in the
signature page hereof or as
she shall otherwise have specified by notice in writing to the
Company.
15. Governmental Regulation. Nothing contained in this Agreement shall be
construed so as to require the commission of any act contrary to law and
wherever there is any conflict between any provision of this Agreement and
any statute, law, ordinance, order or regulation, the
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latter shall prevail, but in such event any such provision of this Agreement
shall be curtailed and limited only to the extent necessary to bring it
within the legal requirements.
16. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan. Any suit,
action or proceeding against the Employee with respect to this Agreement,
or any judgment entered by any court in respect of any thereof, may be
brought in any court of competent jurisdiction in the State of Michigan and
the Employee hereby submits to the exclusive jurisdiction of such courts
for the purpose of any such suit, action, proceeding or judgment. The
Employee hereby irrevocably waives any objections which she may now or
hereafter have to the laying of the venue of any suit, action or proceeding
arising out of or relating to this Agreement brought in any court of
competent jurisdiction in the State of Michigan, and hereby further
irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in any inconvenient forum. No
suit, action or proceeding against the Company with respect to this
Agreement may be brought in any court, domestic or foreign, or before any
similar domestic or foreign authority other than in a court of competent
jurisdiction in the State of Michigan, and the Employee hereby irrevocably
waives any right which she may otherwise have had to bring such an action
in any other court, domestic or foreign, or before any similar domestic or
foreign authority. The Company hereby submits to the jurisdiction of such
courts for the purpose of any such suit, action or proceeding. The
Employee irrevocably waives her right to trial by jury with regard to any
suit, action, or proceeding with respect to this Agreement; provided,
however, that if such waiver of the right to jury trial shall be held
unenforceable, the invalidity or unenforceability of this provision shall
not impair the validity or enforceability of any other provision of this
Agreement.
17. Entire Agreement; Amendment. This Agreement sets forth the entire
understanding of the parties in respect of the subject matter contained
herein and supersedes all prior agreement, arrangements and understandings
relating to the subject matter and may only be amended by a written
agreement signed by both parties hereto or their duly authorized
representatives.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
R.P. SCHERER CORPORATION
By: /s/ A. Erdeljan
Title: President
/s/ Nicole S. Williams
Nicole S. Williams
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EXHIBIT 21
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EXHIBIT 21
R. P. SCHERER INTERNATIONAL CORPORATION AND SUBSIDIARIES
The following is a list of all of the subsidiaries of R.P. Scherer
International Corporation, their jurisdiction of incorporation and the
percentage of their outstanding capital stock owned by R.P. Scherer
International Corporation or another subsidiary of R.P. Scherer International
Corporation.
<TABLE>
<CAPTION>
EFFECTIVE PERCENTAGE
JURISDICTION OF OWNERSHIP BY
NAME OF SUBSIDIARY INCORPORATION R. P. SCHERER CORPORATION
<S> <C> <C>
R. P. Scherer Hardcapsule, Inc.* New Jersey 100%
R. P. Scherer Hardcapsule (West)* Utah 100%
Gelatin Products International Delaware 100%
Science Labs Inc.* Delaware 100%
The LVC Corporation* Missouri 100%
R. P. Scherer Argentina S.A.I.C. Argentina 99%
Vivax Interamericana S.A. Argentina 99% (1)
R. P. Scherer do Brasil Encapsulacoes, Ltda. Brazil 100%
R. P. Scherer Canada Inc. Ontario, Canada 100%
F&F Holding GmbH Germany 100%
R. P. Scherer GmbH Germany 51% (2)
Allcaps Weichgelatinekapseln GmbH Germany 51% (3)
R. P. Scherer S.A. France 70% (4)
Pharmagel France S.A. France 95% (5)
R. P. Scherer S.p.A. Italy 95% (6)
R. P. Scherer Holdings Pty. Ltd. Australia 100%
R. P. Scherer Pty. Limited Australia 100% (7)
R. P. Scherer Holdings Ltd. England 100%
R. P. Scherer Limited England 100% (8)
Scherer DDS Limited England 100% (8)
R. P. Scherer (Hong Kong) Limited Hong Kong 100%
R. P. Scherer K.K. Japan 60%
R. P. Scherer Korea Limited Korea 50%
R. P. Scherer Egypt Egypt 10%
</TABLE>
(1) The Company owns 1.875% directly and R. P. Scherer Argentina S.A.I.C.
(of which the Company owns 99%) owns an additional 98.125%.
(2) The 51% interest in R. P. Scherer GmbH is owned directly by F&F
Holding GmbH.
(3) This corporation is 100% owned directly by R. P. Scherer GmbH (of
which F&F Holding GmbH owns 51%).
(4) The Company owns 50.01% directly and R. P. Scherer GmbH (of which F&F
Holding GmbH owns 51%) owns an additional 39.975%.
(5) This Corporation is 100% owned by R. P. Scherer S.p.A.
(6) The Company owns 90% directly and R. P. Scherer GmbH (of which F&F
Holding GmbH owns 51%) owns an additional 10%.
(7) This Corporation is 100% owned by R. P. Scherer Holdings Pty. Ltd.
(8) This Corporation is 100% owned by R. P. Scherer Holdings Ltd.
*Inactive
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EXHIBIT 23
155
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EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K into the Company's previously filed
Registration Statement, File Number 33-51231.
ARTHUR ANDERSEN & CO.
Detroit, Michigan,
June 24, 1994.
156
