<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended February 28, 1995 or
-----------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________ to ____________
Commission file number: 2-45166
-------
A. Schulman, Inc. and its Consolidated Subsidiaries
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 34-0514850
- ------------------------------- -------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3550 West Market Street, Akron, Ohio 44333
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(216) 666-3751
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, including Area Code)
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---- ----
Number of common shares outstanding
as of March 31, 1995 - 37,550,780
<PAGE> 2
<TABLE>
A. SCHULMAN, INC.
STATEMENT OF CONSOLIDATED INCOME (Notes 1 and 2)
<CAPTION>
For the three months ended For the six months ended
-------------------------- ------------------------
February 28, February 28, February 28, February 28,
1995 1994 1995 1994
---- ---- ---- ----
Unaudited Unaudited
--------- ---------
<S> <C>
Net sales $249,637,000 $168,055,000 $500,878,000 $336,015,000
Interest and other income 1,624,000 1,852,000 3,288,000 3,962,000
------------ ------------ ------------ ------------
251,261,000 169,907,000 504,166,000 339,977,000
------------ ------------ ------------ ------------
Costs and expenses:
Cost of goods sold 208,339,000 138,867,000 417,916,000 276,359,000
Selling, general and
administrative expenses 19,446,000 16,365,000 40,483,000 33,563,000
Interest expense 931,000 169,000 1,512,000 341,000
Foreign currency transaction
losses 581,000 131,000 475,000 114,000
Minority interest 142,000 83,000 308,000 161,000
------------ ------------ ------------ ------------
229,439,000 155,615,000 460,694,000 310,538,000
------------ ------------ ------------ ------------
Income before taxes 21,822,000 14,292,000 43,472,000 29,439,000
Provision for income taxes:
U.S. 2,104,000 1,559,000 3,871,000 2,916,000
Foreign 6,621,000 3,777,000 13,269,000 7,780,000
------------ ------------ ------------ ------------
8,725,000 5,336,000 17,140,000 10,696,000
------------ ------------ ------------ ------------
Net income 13,097,000 8,956,000 26,332,000 18,743,000
Dividends on preferred stock (13,000) (13,000) (27,000) (27,000)
------------ ------------ ------------ ------------
Net income applicable to
common stock $ 13,084,000 $ 8,943,000 $ 26,305,000 $ 18,716,000
============ ============ ============ ============
Net income per share of
common stock $ .35 $ .24 $ .70 $ .50
===== ===== ===== =====
Cash dividends per share of
common stock $.085 $.072 $ .16 $.136
===== ===== ===== =====
Average number of shares outstanding
which were used in computing net
income per common share 37,541,593 37,436,690 37,517,276 37,418,904
</TABLE>
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<TABLE>
A. SCHULMAN, INC.
CONSOLIDATED BALANCE SHEET (Notes 1 and 2)
<CAPTION>
February 28, August 31,
Assets 1995 1994
------------ ------------
Unaudited
---------
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 3) $ 59,671,000 $ 60,062,000
Short-term investments, at cost 45,032,000 61,763,000
Accounts receivable, less allowance
for doubtful accounts of $5,534,000 at
February 28, 1995 and $4,111,000 at
August 31, 1994 163,579,000 129,010,000
Inventories, average cost or market,
whichever is lower 199,362,000 136,667,000
Prepaids, including tax effect of
temporary differences 13,781,000 11,870,000
------------ ------------
Total current assets 481,425,000 399,372,000
------------ ------------
Other assets:
Cash surrender value of life insurance 316,000 340,000
Deferred charges, etc., including tax effect
of temporary differences 14,289,000 12,604,000
------------ ------------
14,605,000 12,944,000
------------ ------------
Property, plant and equipment, at cost:
Land and improvements 8,712,000 5,813,000
Buildings and leasehold improvements 58,812,000 54,124,000
Machinery and equipment 163,096,000 141,365,000
Furniture and fixtures 17,256,000 15,227,000
Construction in progress 17,781,000 5,380,000
------------ ------------
265,657,000 221,909,000
Accumulated depreciation and investment grants
of $545,000 at February 28, 1995 and
$634,000 at August 31, 1994 137,326,000 123,806,000
------------ ------------
128,331,000 98,103,000
------------ ------------
$624,361,000 $510,419,000
============ ============
</TABLE>
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<TABLE>
A. SCHULMAN, INC.
CONSOLIDATED BALANCE SHEET (Notes 1 and 2)
<CAPTION>
February 28, August 31,
Liabilities and Stockholders' Equity 1995 1994
------------ ------------
Unaudited
---------
<S> <C> <C>
Current liabilities:
Notes payable $ 39,000,000 $ 12,300,000
Current portion of long-term debt 38,000 35,000
Accounts payable 79,956,000 54,286,000
U.S. and foreign income taxes payable 9,844,000 9,939,000
Accrued payrolls, taxes and related benefits 15,443,000 16,901,000
Other accrued liabilities 20,589,000 14,903,000
------------ ------------
Total current liabilites 164,870,000 108,364,000
------------ ------------
Long-term debt (Note 5) 40,114,000 23,126,000
Other long-term liabilities 30,399,000 27,547,000
Deferred income taxes 4,067,000 3,794,000
Minority interest 1,377,000 1,669,000
Stockholders' equity (Note 4):
Preferred stock, 5% cumulative, $100
par value, authorized, issued and
outstanding - 10,707 shares 1,071,000 1,071,000
Special stock, 1,000,000 shares authorized,
none outstanding - -
Common stock, $1 par value
Authorized - 75,000,000 shares
Issued - 37,986,611 shares at February 28, 1995
and 37,902,043 shares at August 31, 1994 37,987,000 37,902,000
Other capital 37,401,000 35,813,000
Cumulative foreign currency translation
adjustment 42,040,000 26,570,000
Retained earnings 277,118,000 256,826,000
Treasury stock, at cost, 442,674 shares (10,838,000) (10,838,000)
Unearned stock grant compensation (1,245,000) (1,425,000)
------------ ------------
Common stock equity 382,463,000 344,848,000
------------ ------------
Total stockholders' equity 383,534,000 345,919,000
------------ ------------
$624,361,000 $510,419,000
============ ============
</TABLE>
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<TABLE>
A. SCHULMAN, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (Notes 1 and 2)
<CAPTION>
Six months ended
----------------
February 28, February 28,
1995 1994
---- ----
Unaudited
---------
<S> <C> <C>
Provided (used in) operating activities:
Net income $26,332,000 $18,743,000
Items not requiring the current use of cash:
Depreciation 8,139,000 7,637,000
Non-current deferred taxes 19,000 947,000
Foreign pension and other compensation 1,385,000 1,077,000
Postretirement benefit obligation 480,000 600,000
Changes in working capital:
Accounts receivable (26,240,000) (18,814,000)
Inventories (56,466,000) (17,184,000)
Prepaids (1,645,000) 2,141,000
Accounts payable 20,666,000 20,531,000
Income taxes (468,000) (1,424,000)
Accrued payrolls and other accrued liabilities 2,568,000 (1,435,000)
Changes in other assets and other
long-term liabilities (1,382,000) (428,000)
----------- -----------
Net cash provided from (used in)
operating activities (26,612,000) 12,391,000
----------- -----------
Provided (used in) investing activities:
Expenditures for property, plant and equipment (36,163,000) (8,356,000)
Disposals of property, plant and equipment 410,000 251,000
Purchases of short-term investments (29,910,000) (20,873,000)
Proceeds from sales of short-term investments 50,233,000 25,796,000
----------- -----------
Net cash used in investing activities (15,430,000) (3,182,000)
----------- -----------
Provided from (used in) financing activities:
Cash dividends paid (6,001,000) (5,088,000)
Increase of notes payable 26,700,000 3,800,000
Increase of long-term debt 17,000,000 -
Reduction of long-term debt (18,000) (5,015,000)
Exercise of stock options 1,673,000 1,269,000
Decrease in minority interest (292,000) (259,000)
----------- -----------
Net cash provided (used) in financing activities 39,062,000 (5,293,000)
----------- -----------
Effect of exchange rate changes on cash 2,589,000 750,000
----------- -----------
Net increase (decrease) in cash and cash equivalents (391,000) 4,666,000
Cash and cash equivalents at beginning of year 60,062,000 69,690,000
----------- -----------
Cash and cash equivalents at end of period $59,671,000 $74,356,000
=========== ===========
</TABLE>
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A. SCHULMAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) The results of operations for the six months ended February 28, 1995 are
not necessarily indicative of the results expected for the year ended August
31, 1995.
(2) The interim financial statements furnished reflect all
adjustments which are, in the opinion of management, necessary to a fair
presentation of the results of the interim periods presented. All such
adjustments are of a normal recurring nature.
(3) All highly liquid investments purchased with a maturity of three months
or less are considered to be cash equivalents. Such investments amounted to
$56,058,000 at February 28, 1995 and $50,942,000 at August 31, 1994.
Investments with maturities between three and twelve months are considered to
be short-term investments.
(4) A summary of the stockholders' equity accounts for the six months ended
February 28, 1995 is as follows:
<TABLE>
<CAPTION>
Foreign Unearned
Currency Stock
Common Other Retained Translation Grant
Stock Capital Earnings Adjustment Compensation
----- ------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Balance-September 1, 1994 $37,902,000 $35,813,000 $256,826,000 $26,570,000 $(1,425,000)
Net income 26,332,000
Dividends paid or accrued:
Preferred (27,000)
Common, $.16 per share (6,013,000)
Stock options exercised 85,000 1,588,000
Foreign currency
translation adjustment 15,470,000
Amortization of
restricted stock 180,000
----------- ----------- ------------ ----------- -----------
Balance-February 28, 1995 $37,987,000 $37,401,000 $277,118,000 $42,040,000 $(1,245,000)
=========== =========== ============ =========== ===========
<FN>
(5) In March 1995, the Company entered into a new $75,000,000 credit agreement
with several banks which replaced an existing $40,000,000 agreement. The new
agreement provides for borrowings of up to $75,000,000 on a revolving credit
basis through February 28, 2000. Interest rates will be either the London
Interbank Offered Rate (LIBOR) plus 1/4%, certificate of deposit rate plus
3/8%, or the prime rate. A facility fee of 1/8% must also be paid to the
banks.
</TABLE>
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<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Material Changes in Results of Operations
- -----------------------------------------
A comparison of net sales by classification for both the three month and
six month periods ending February 28, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
(In Thousands)
Three Months Ended February 28, Six months ended February 28,
------------------------------- -----------------------------
1995 1994 Increase 1995 1994 Increase
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Manufacturing $141,894 $102,706 $39,188 $288,094 $205,198 $ 82,896
Merchant 58,116 32,141 25,975 111,408 65,045 46,363
Distribution 49,627 33,208 16,419 101,376 65,772 35,604
-------- -------- ------- -------- -------- --------
$249,637 $168,055 $81,582 $500,878 $336,015 $164,863
======== ======== ======= ======== ======== ========
</TABLE>
The translation effects from the weaker U.S. dollar increased sales by
$16.2 million in the quarter and $29.1 million for the six month period.
Volume or tonnage increased in all classifications during 1995. Total
tonnage increased approximately 16% for the quarter and 23% for the six month
period. The tonnage increases were generated by the favorable worldwide
economic conditions and higher production capacities provided by last year's
additions of a new manufacturing line in Belgium and the ComAlloy International
acquisition. In addition, higher selling prices contributed to greater net
sales.
Gross margins on sales for the quarter were 16.5% compared to 17.4% for
the same quarter of last year. Gross margins on sales for the six months ended
February 28, 1995 were 16.6% compared with 17.8% for the comparable six month
period last year. The decline in gross profit margins was primarily due to
higher resin prices for feedstocks and continuing worldwide competitive price
pressures. A comparison of gross profit by classification for both the three
month and six month periods ending February 28, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
(In Thousands)
Three Months Ended February 28, Six Months Ended February 28,
------------------------------- -----------------------------
1995 1994 Increase 1995 1994 Increase
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Manufacturing $26,849 $19,993 $ 6,856 $54,166 $40,892 $13,274
Merchant 8,264 4,724 3,540 16,501 9,948 6,553
Distribution 6,185 4,471 1,714 12,295 8,816 3,479
------- ------- ------- ------- ------- -------
$41,298 $29,188 $12,110 $82,962 $59,656 $23,306
======= ======= ======= ======= ======= =======
</TABLE>
Selling, general and administrative expenses increased in 1995 due to the
April 1994 acquisition of ComAlloy International, higher compensation levels
and additional costs to support the increase in sales volume. In addition, the
weakening of the U.S. dollar increased these expenses by $1,341,000 for the
quarter and $2,473,000 for the six month period.
Interest expense increased in 1995 due to greater levels of borrowing and
higher interest rates mainly in the United States. Losses on foreign currency
transactions were greater in 1995 due to the changes in the value of currencies
within and outside the European Monetary System.
The effective tax rates for the three months ended February 28 were 40.0%
in 1995 and 37.3% in 1994. For the six months ended February 28, the effective
tax rates were
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<PAGE> 8
39.4% in 1995 and 36.3% in 1994. In 1994, certain tax matters were settled in
Europe which lowered the tax rate. Also, the 1995 tax rate is higher because
of greater earnings in Germany which has a higher tax rate than the other
countries where the Company operates.
Other income in 1995 was lower due to a decrease in interest from European
temporary investments.
The weakening in the value of the U.S. dollar increased net income by
approximately $908,000 or $.03 per share for the second quarter and $1,838,000
or $.05 per share for the six month period.
Earnings in Europe increased approximately 65% in the 1995 second quarter
and 49% for the six month period. Over one-half of the profit increases were
generated by manufactured products whose tonnage grew by 20% for both the
quarter and six month period. Tonnage was up due to a strong level of orders
and the addition of a new manufacturing line in Belgium last year. Income from
European merchant sales was also up, primarily because of stronger prices.
North American income was up 20% in the 1995 second quarter and 26% for
the six month period. Manufactured products generated approximately 50% of the
improvement in profits based upon tonnage increases of 30%. The major reason
for the strong tonnage was the continuing strength of the economy and the
acquisition of ComAlloy International last year.
Recently, there has been some reduction in backlogs due to increases in
capacity and some forward buying by customers due to the significant rise in
resin prices over the last six months. However, it appears that most resin
pricing should remain firm in the months ahead. In addition, earnings will be
enhanced by the positive translation effect of the weaker U.S. dollar.
Although the North American economy is showing some signs of slower growth, it
is anticipated that earnings for 1995 will exceed last year's results.
Material Changes in Financial Condition
- ---------------------------------------
As of February 28, 1995, the current ratio was 2.9 to 1 and working
capital was $317 million.
On February 28, 1995, the Company acquired the assets of the Polymer
Service Division of J.M. Huber Corporation. This 143,000 square foot facility,
located in Orange, Texas, has an annual capacity of approximately 140 million
pounds. The primary function at this location is tolling services.
The Company also purchased the polypropylene compounding business of
Eastman Chemical Company on February 28, 1995. This transaction will broaden
the Company's line of polypropylene products, particularly for the automotive
industry. Manufacturing assets were not included.
In March 1995, the Company entered into a new $75,000,000 credit agreement
with several banks which replaced an existing $40,000,000 agreement. The new
agreement provides for borrowings on a revolving credit basis through February
28, 2000.
The ratio of long-term liabilities to capital was 15.5% at February 28,
1995 and 12.8% at August 31, 1994. This ratio is calculated by dividing the
sum of long-term debt and other long-term liabilities by the sum of total
stockholders' equity, long- term debt and other long-term liabilities. This
ratio increased during the six months ended February 28, 1995 because the
Company borrowed an additional $17 million under its revolving credit agreement.
In March 1995, the Company borrowed an additional $40 million under the
revolving credit agreement primarily to finance its greater working capital
requirements and the acquisition of assets from J.M. Huber Corporation.
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<PAGE> 9
Part II - Other Information
- ---------------------------
Items 1 through 5 are not applicable or the answer to such items is
negative; therefore, the items have been omitted and no reference is required
in this report.
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibit
Number Exhibit
------- -------
10 Credit Agreement dated as of March 13, 1995, among A.
Schulman, Inc., The Banks, and Society
National Bank, as Individuals and as Agent
27 Financial Data Schedule*
(b) No Reports on Form 8-K have been filed during the quarter for which this
report is filed.
_____
* Filed only in electronic format pursuant to Item 601(b)(27) of Regulation
S-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date April 14, 1995 A. Schulman, Inc.
---------------- -------------------------------------
(Registrant)
/s/ R. A. Stefanko
-------------------------------------
R. A. Stefanko, Executive Vice President-
Finance & Administration
(Signing on behalf of Registrant as a duly
authorized officer of Registrant and
signing as the Principal Financial Officer
of Registrant)
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================================================================================
CREDIT AGREEMENT
DATED AS OF MARCH 13, 1995
AMONG
A. SCHULMAN, INC.,
THE BANKS
AND
SOCIETY NATIONAL BANK,
INDIVIDUALLY AND AS AGENT
================================================================================
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TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. AMOUNT AND TERMS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.1.A. AMOUNT AND NATURE OF SYNDICATED CREDIT . . . . . . . . . . . . . . . . . 8
SECTION 2.1.B. BID-OPTION LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 2.2. CONDITIONS TO LOANS; FUNDING OF LOANS . . . . . . . . . . . . . . . . . . 13
SECTION 2.3. PAYMENT ON NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.4. PREPAYMENT; FUNDING LOSSES . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 2.5. FACILITY FEES; TERMINATION OR REDUCTION . . . . . . . . . . . . . . . . . 15
SECTION 2.6. WITHHOLDING TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE III. ADDITIONAL PROVISIONS RELATING TO LIBOR RATE LOANS . . . . . . . . . . . . . 16
SECTION 3.1. RESERVES OR DEPOSIT REQUIREMENTS, ETC. . . . . . . . . . . . . . . . . . . 16
SECTION 3.2. TAX LAW, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.3. EURODOLLAR DEPOSITS UNAVAILABLE . . . . . . . . . . . . . . . . . . . . . 17
SECTION 3.4. CHANGES IN LAW - LIBOR RATE LOANS UNLAWFUL . . . . . . . . . . . . . . . . 17
SECTION 3.5. FUNDING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IV. ADDITIONAL PROVISIONS RELATING TO RACD RATE LOANS . . . . . . . . . . . . . . 18
SECTION 4.1. INCREASED COST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 4.2. QUOTED RATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 4.3. CHANGE OF LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE V. CONDITIONS TO EFFECTIVENESS . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 5.1. RESOLUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 5.2. LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 5.3. CERTIFICATE OF INCUMBENCY . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 5.4. NO DEFAULT CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 5.5. NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VI. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.1. FINANCIAL STATEMENTS AND REPORTS . . . . . . . . . . . . . . . . . . . . . 20
SECTION 6.2. PAYMENT OF TAXES, ASSESSMENTS, ETC. . . . . . . . . . . . . . . . . . . . 22
SECTION 6.3. MAINTENANCE OF CORPORATE EXISTENCE . . . . . . . . . . . . . . . . . . . . 22
SECTION 6.4. MAINTENANCE OF PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6.5. MAINTENANCE OF INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6.6. KEEPING OF BOOKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6.7. COMPLIANCE WITH GOVERNMENTAL LAW . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6.8. ENVIRONMENTAL COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 6.9. ACCESS TO PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 6.10. COMPLIANCE WITH ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 6.11. PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.12. USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.13. NOTICE OF PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VII. NEGATIVE COVENANTS OF THE BORROWER . . . . . . . . . . . . . . . . . . . . . 25
SECTION 7.1. CON. LONG-TERM INDEBTEDNESS TO CON. TANGIBLE NETWORTH RATIO . . . . . . . 25
SECTION 7.2. MINIMUM CONSOLIDATED TANGIBLE NET WORTH . . . . . . . . . . . . . . . . . 25
SECTION 7.3. LIMITATION ON LIENS . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 7.4. CONSOLIDATIONS, MERGERS AND SOLES OF ASSETS . . . . . . . . . . . . . . . 27
ARTICLE VIII. WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 8.1. ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 8.2. CORPORATE AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 8.3. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 8.4. MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 8.5. LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 8.6. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 8.7. GOVERNMENTAL AND OTHER APPROVALS . . . . . . . . . . . . . . . . . . . . . 28
SECTION 8.8. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 8.9. ENVIRONMENTAL COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 8.10. SOLVENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 8.11. DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE IX. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 9.1. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 9.2. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 9.3. WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 9.4. CROSS DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 9.5. JUDGMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 9.6. TERMINATION OF PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 9.7. CHANGE IN CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 9.8. CONSOLIDATED SUBSIDIARY'S SOLVENCY . . . . . . . . . . . . . . . . . . . . 31
SECTION 9.9. BORROWER'S SOLVENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE X. REMEDIES UPON DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 10.1. OPTIONAL DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 10.2. AUTOMATIC DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 10.3. OFFSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 10.4. EQUALIZATION PROVISION . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE XI. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 11.1. APPOINTMENT AND AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 11.2. NOTE HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 11.3. CONSULTATION WITH COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 11.4. DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 11.5. AGENT AND AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 11.6. KNOWLEDGE OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 11.7. ACTION BY AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 11.8. NOTICES, DEFAULT, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 11.9. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 11.10. SUCCESSOR AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
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<TABLE>
<S> <C>
ARTICLE XII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 12.1. BANKS' INDEPENDENT INVESTIGATION . . . . . . . . . . . . . . . . . . . . 35
SECTION 12.2. NO WAIVER; CUMULATIVE REMEDIES . . . . . . . . . . . . . . . . . . . . . 35
SECTION 12.3. AMENDMENTS, CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 12.4. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 12.5. COSTS, EXPENSES AND TAXES, INDEMNIFICATION . . . . . . . . . . . . . . . 36
SECTION 12.6. CAPITAL ADEQUACY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 12.7. OBLIGATIONS SEVERAL; NO FIDUCIARY OBLIGATIONS . . . . . . . . . . . . . . 37
SECTION 12.8. EXECUTION IN COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 12.9. BINDING EFFECT; ASSIGNMENT; PARTICIPATION . . . . . . . . . . . . . . . . 37
SECTION 12.10. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 12.11. SEVERABILITY OF PROVISIONS; CAPTIONS . . . . . . . . . . . . . . . . . . 39
SECTION 12.12. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 12.13. ENTIRETY AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 12.14. PRIOR AGREEMENT SUPERCEDED . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 12.15. JURY TRIAL WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ANNEX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
EXHIBIT A REVOLVING CREDIT NOTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
EXHIBIT B BID-OPTION NOTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
EXHIBIT C BID-OPTION QUOTE REQUEST . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
EXHIBIT D INVITATION FOR BID-OPTION QUOTES . . . . . . . . . . . . . . . . . . . . . . . 48
EXHIBIT E BID-OPTION QUOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
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<PAGE> 5
C R E D I T A G R E E M E N T
Credit agreement, effective as of March 13, 1995, between A. SCHULMAN,
INC., a Delaware corporation (hereinafter sometimes called the "Borrower"), the
Banking Institutions named in Annex A attached hereto and made a part hereof
(hereinafter sometimes collectively called the "Banks" and individually "Bank")
and SOCIETY NATIONAL BANK, Cleveland, Ohio, as Agent for the Banks under this
credit agreement (hereinafter sometimes called the "Agent"),
WITNESSETH:
WHEREAS, the Borrower and the Banks desire to contract for the
establishment of credits in the aggregate principal amounts hereinafter set
forth, to be made available to the Borrower upon the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE I. DEFINITIONS
As used in this credit agreement, the following terms shall have the
following meanings:
"ADVANTAGE" shall mean any payment (whether made voluntarily or
involuntarily, by offset of any deposit or other indebtedness or otherwise)
received by any Bank in respect of any Syndicated Loan if such payment results
in that Bank having a lesser share of the aggregate of all Syndicated Loans
than was the case immediately before such payment.
"ASSESSMENT RATE" shall mean, for any RACD Interest Period for any
RACD Rate Loan, the annual assessment rate on the first day of such Interest
Period for determining the then current annual assessment payable by the Agent
to the Federal Deposit Insurance Corporation (or any successor) for insuring
U.S. dollar deposits of the Agent in the United States.
"BID OPTION INTEREST PERIOD" shall mean the period commencing on the
date of each Bid-Option Loan and ending on the date requested by Borrower in
the applicable Bid-Option Quote Request, which date shall not be more than
ninety (90) days after the date of such Bid-Option Loan; and provided that
(i) any such Interest Period that would otherwise end on a day
that is not a Cleveland Banking Day shall be extended to the
next succeeding Cleveland Banking Day; and
(ii) no such Interest Period may end after the Termination Date .
"BID-OPTION LOANS" shall mean all Loans made pursuant to Section
2.1.B. hereof.
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<PAGE> 6
"BID-OPTION NOTE" or "BID-OPTION NOTES" shall mean a note or notes
executed and delivered pursuant to Section 2.1.B. hereof.
"BID-OPTION QUOTE" shall mean an offer by a Bank to make a Bid-Option
Loan in accordance with Section 2.1.B. hereof.
"BID-OPTION REQUEST" shall have the meaning ascribed thereto in
Subsection 2.1.B. hereof.
"CLEVELAND BANKING DAY" shall mean any day other than (i) a Saturday,
(ii) a Sunday, (iii) a day on which banking institutions in Cleveland, Ohio are
required or authorized by law or executive order to be closed, and if the
applicable day relates to a Libor Rate Loan, a day on which dealings in dollar
deposits are also carried on in the London interbank market and banks are open
for business in London.
"COMMITMENT" shall mean the obligation hereunder of each Bank to make
Loans up to the amount set opposite such Bank's name under the column headed
"Maximum Amount" as set forth in Annex A hereof during the Commitment Period
(or such lesser amount as shall be determined pursuant to Section 2.5 hereof).
"COMMITMENT PERIOD" shall mean the period from the Effective Date
hereof to the Termination Date.
"CONSOLIDATED LONG-TERM INDEBTEDNESS" shall mean all Indebtedness of
the Borrower and its Consolidated Subsidiaries maturing more than one year from
the date of determination in accordance with generally accepted accounting
principles, excluding, however, pension reserves under F.A.S.B. 87,
Indebtedness arising from deferred compensation agreements between the Borrower
and officers of the Borrower, and health care and life insurance reserves under
F.A.S.B. 106.
"CONSOLIDATED SUBSIDIARY" shall mean at any date any Subsidiary or
other entity the accounts of which would be consolidated with those of the
Borrower in its consolidated financial statements as of such date.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean the sum of the capital
stock, capital surplus and retained earnings of the Borrower and its
Consolidated Subsidiaries, after eliminating all intercompany items and
excluding from stockholders' equity the account "cumulative foreign currency
translation adjustments", but otherwise determined in accordance with generally
accepted accounting principles, minus the sum of the following (without
duplication of deductions in respect of items already deducted in arriving at
surplus and retained earnings): the book value of all assets which would be
treated as intangibles under generally accepted accounting principles as in
effect on the date hereof, including without limitation goodwill, trademarks,
tradenames, copyrights, patents and unamortized debt discount and expense; and
minority interests in subsidiaries.
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<PAGE> 7
"CONSOLIDATED TOTAL ASSETS" shall mean Total Assets of the Borrower
and its Consolidated Subsidiaries.
"CONTROLLED GROUP" shall mean a controlled group of corporations as
defined in Section 1563 of the Internal Revenue Code of 1986, as may be amended
from time to time, of which Borrower or any Subsidiary is a part.
"DEBT" shall mean, collectively, all indebtedness incurred by Borrower
to the Banks pursuant to this credit agreement and includes the principal of
and interest on all Notes and each extension, renewal or refinancing thereof in
whole or in part, the commitment fees and any prepayment premium payable
hereunder.
"EFFECTIVE DATE" shall mean March 13, 1995.
"ENVIRONMENTAL LAWS" shall mean all provisions of law, statutes,
ordinances, rules, regulations, permits, licenses, judgments, writs,
injunctions, decrees, orders, awards and standards promulgated by the
government of the United States of America or by any state or municipality
thereof or by any court, agency, instrumentality, regulatory authority or
commission of any of the foregoing concerning health, safety and protection of,
or regulation of the discharge of substances into, the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Indebtedness
or other obligation of any other Person and, without limiting the generality of
the foregoing, any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"INDEBTEDNESS" shall mean all items (other than capital stock, capital
surplus, retained earnings, deferred taxes and the account "cumulative foreign
current translation adjustments" included in stockholders' equity) which in
accordance with generally accepted accounting principles would be included in
determining total liabilities as shown on the liability side of a balance sheet
as at the date on which Indebtedness is to be determined, including, but not
limited
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<PAGE> 8
to, (i) indebtedness, obligations and liabilities secured by a Lien or capital
lease existing on property owned by the Borrower or its Consolidated
Subsidiaries whether or not the indebtedness, obligation or liability secured
thereby shall have been assumed and (ii) all Guarantees of the Borrower or its
Consolidated Subsidiaries.
"INTEREST ADJUSTMENT DATE" shall mean the last day of each Libor
Interest Period or RACD Interest Period, as the case may be.
"INTEREST PERIOD" shall mean a Bid-Option Interest Period, a Libor
Interest Period, or a RACD Interest Period, as the case may be.
"INVITATION FOR BID-OPTION QUOTES" shall mean an invitation for
Bid-Option Quotes in the form referred to in Subsection 2.1.B.
"LIBOR INTEREST PERIOD" shall mean a period of one, two, three or six
months (as selected by the Borrower) commencing on the applicable borrowing or
conversion date of each Libor Rate Loan and on each Interest Adjustment Date
with respect thereto; provided, however, that if any such period would be
affected by a reduction in Commitment as provided in Section 2.5 hereof,
prepayment or conversion rights as provided in Sections 3.1, 3.2 and 3.4 hereof
or maturity of Libor Rate Loans as provided in Section 2.1.A. hereof, such
period shall be shortened to end on such date. If the Borrower fails to select
a new Libor Interest Period with respect to an outstanding Libor Rate Loan at
least two (2) Cleveland Banking Days prior to any Interest Adjustment Date, the
Borrower shall be deemed to have elected to convert such LIBOR Rate Loan into a
Prime Rate Loan effective as of the day following the Interest Adjustment Date.
"LIBOR MARGIN" shall mean a rate per annum of one-quarter of one
percent (1/4 of 1%).
"LIBOR RATE" shall mean, for any Libor Interest Period for any Libor
Rate Loan, an interest rate per annum (rounded upwards to the next higher whole
multiple of 1/16% if such rate is not such a multiple) equal at all times
during such Interest Period to the quotient of (a) the rate per annum (rounded
upwards to the next higher whole multiple of 1/16% if such rate is not such a
multiple) at which deposits in United States dollars are offered at 11:00 a.m.
(London, England time) (or as soon thereafter as is reasonably practicable) by
prime banks in the London interbank eurodollar market to Agent two (2)
Cleveland Banking Days prior to the first day of such Interest Period in an
amount and maturity of the Libor Rate Loan, divided by (b) a number equal to
1.00 minus the aggregate (without duplication) of the rates (expressed as a
decimal fraction) of the Libor Reserve Requirements current on the date two (2)
Cleveland Banking Days prior to the first day of such Interest Period. The
Libor Rate shall be adjusted automatically on and as of the effective date of
any change in the Libor Reserve Requirements.
"LIBOR RATE LOAN" shall mean any Loan that bears interest with
reference to the Libor Rate.
"LIBOR RESERVE REQUIREMENTS" shall mean, for any Libor Interest Period
for any Libor Rate Loan, the maximum reserves (whether basic, supplemental,
marginal, emergency, or
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<PAGE> 9
otherwise) prescribed by the Board of Governors of the Federal Reserve System
(or any successor) with respect to liabilities or assets consisting of or
including "Eurocurrency liabilities" having a term equal to such Interest
Period.
"LIEN" shall have the meaning set forth in Section 7.5 hereof.
"LOAN" shall mean a Bid-Option Loan, a Libor Rate Loan, a Prime Rate
Loan or a RACD Rate Loan, as the case may be.
"NOTE" or "NOTES" shall mean the Bid-Option Notes and the Syndicated
Notes.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"PERSON" shall mean an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"PLAN" shall mean any employee pension benefit plan subject to Title
IV of the ERISA established or maintained by Borrower, any Subsidiary, or any
member of the Controlled Group, or any such Plan to which Borrower, any
Subsidiary, or any member of the Controlled Group is required to contribute on
behalf of any of its employees.
"POSSIBLE DEFAULT" shall mean an event, condition or thing which
constitutes, or which with the lapse of any applicable grace period or the
giving of notice or both would constitute, any event of default referred to in
Article IX hereof and which has not been appropriately waived by the Banks in
writing.
"PRIME RATE" shall mean that interest rate established from time to
time by Agent as Agent's Prime Rate, whether or not such rate is publicly
announced; the Prime Rate may not be the lowest interest rate charged by Agent
for commercial or other extensions of credit.
"PRIME RATE LOANS" shall mean any Loan that bears interest with
reference to the Prime Rate.
"RACD FIXED RATE" shall mean a rate per annum equal to the sum of the
RACD Margin plus the RACD Rate.
"RACD INTEREST PERIOD" shall mean a period of 30, 60, 90 or 180 days
(as selected by the Borrower) commencing on the applicable borrowing date of
each RACD Rate Loan and on each Interest Adjustment Date with respect thereto;
provided, however, that if any such period would be affected by a reduction in
Commitment as provided in Section 2.5 hereof, prepayment or conversion rights
as provided in Sections 4.1 and 4.3 hereof, or maturity of RACD Rate Loans as
provided in Section 2.1 hereof, such period shall be shortened to end on such
date. If the
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<PAGE> 10
Borrower fails to select a new RACD Interest Period with respect to an
outstanding RACD Rate Loan at least one Cleveland Banking Day prior to any
Interest Adjustment Date, the Borrower shall be deemed to have elected to
convert such RACD Rate Loan into a Prime Rate Loan effective as of the day
following the Interest Adjustment Date.
"RACD MARGIN" shall mean three-eighths per cent (3/8 of 1%) for all
RACD Rate Loans obtained by Borrower pursuant to Section 2.1.A.
"RACD RATE" means, for any RACD Interest Period for any RACD Rate
Loan, an interest rate per annum (rounded upwards to the next higher whole
multiple of 1/100 of 1% if such rate is not such a multiple) equal at all time
during such Interest Period equal to the sum of (a) the Assessment Rate plus
(b) the quotient of (i) the rate per annum determined by the Agent to be the
average (rounded upwards to the next higher whole multiple of 1/100 of 1% if
such rate is not such a multiple) of the bid rates per annum, at 9:00 a.m.
(Cleveland, Ohio time) (or as soon thereafter as is practicable) on the first
day of such Interest Period, of at least two New York certificate of deposit
dealers of recognized standing selected by the Agent for the purchase at face
value of certificates of deposit of the Agent in an amount substantially equal
to the principal amount of the RACD Rate Loan of Agent to which such Interest
Period is to apply and with a maturity equal to such Interest Period, divided
by (ii) a number equal to 1.00 minus the aggregate (without duplication) of the
rates (expressed as a decimal fraction) of the RACD Reserve Requirements
current on the first day of such Interest Period. The RACD Rate shall be
automatically adjusted on and as of the effective date of any change in the
Assessment Rate or RACD Reserve Requirements.
"RACD RATE LOAN" means any Loan that bears interest with reference to
the RACD Fixed Rate.
"RACD RESERVE REQUIREMENTS" shall mean for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, without limitation, all
basic, supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements)
for a member bank of the Federal Reserve System in Cleveland, Ohio, in respect
of new nonpersonal time deposits in dollars in the United States, having a
maturity comparable to the related RACD Interest Period and in an amount of One
Hundred Thousand Dollars ($100,000.00) or more.
"REFUNDING BORROWING" shall mean a Loan which, after application of
the proceeds thereof, results in no net increase in the outstanding principal
amount of Syndicated Loans made by any Bank.
"REGULATION U" shall mean Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"REGULATORY CHANGE" shall mean, as to any Bank, any change in United
States federal, state or foreign laws or regulations or the adoption or making
of any interpretations, directives or
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<PAGE> 11
requests of or under any United States federal, state or foreign laws or
regulations (whether or not having the force of law) by any court or
governmental authority charged with the interpretation or administration
thereof, excluding, however, any such change which results in an adjustment of
the Assessment Rate or the RACD Reserve Requirement and the effect of which is
reflected in a change in the RACD Rate.
"RELATED WRITING" shall mean any Note, assignment, mortgage, security
agreement, guaranty agreement, subordination agreement, financial statement,
audit report or other writing furnished by Borrower or any of its officers to
the Banks pursuant to or otherwise in connection with this credit agreement.
"REPORTABLE EVENT" shall mean a reportable event as that term is
defined in Title IV of ERISA, except actions of general applicability by the
Secretary of Labor under Section 110 of such Act.
"REQUIRED BANKS" shall mean Banks having at least fifty-one percent
(51%) of the Commitments, or if the Commitments have expired or terminated,
holding Notes evidencing at least fifty-one percent (51%) of the aggregate
unpaid principal amounts of the Loan.
"SUBSIDIARY" shall mean any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by the Borrower.
"SYNDICATED LOANS" shall mean all Loans made pursuant to Section
2.1.A. hereof.
"SYNDICATED NOTE" or "SYNDICATED NOTES" shall mean a note or notes
executed and delivered pursuant to Section 2.1.A. hereof.
"TERMINATION DATE" shall mean February 28, 2000.
"TOTAL ASSETS" shall mean total assets of the Person determined in
accordance with generally accepted accounting principles.
"UNFUNDED VESTED LIABILITIES" shall mean, with respect to any Plan at
any time, the amount (if any) by which (i) the present value of all vested
nonforfeitable benefits under such Plan exceeds (ii) the fair market value of
all Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan, but only to the extent that such excess
represents a potential liability of a member of the Controlled Group to the
PBGC or the Plan under Title IV of ERISA.
"WHOLLY-OWNED CONSOLIDATED SUBSIDIARY" shall mean any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests of
which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Borrower.
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Any accounting term not specifically defined in this Article I
shall have the meaning ascribed thereto by generally accepted accounting
principles not inconsistent with Borrower's present accounting procedures.
The foregoing definitions shall be applicable to the singulars
and plurals of the foregoing defined terms.
ARTICLE II. AMOUNT AND TERMS OF CREDIT
SECTION 2.1.A. AMOUNT AND NATURE OF SYNDICATED CREDIT. Subject to
the terms and provisions of this credit agreement each Bank will participate to
the extent hereinafter provided in making Syndicated Loans to the Borrower in
such aggregate amount as the Borrower shall request; provided, however, that in
no event shall the aggregate principal amount of all Loans outstanding under
this credit agreement be in excess of Seventy-Five Million Dollars
($75,000,000).
Each Bank, for itself and not one for any other, agrees to participate
in Syndicated Loans made hereunder on such basis that (a) immediately after the
completion of any Syndicated Loan by the Borrower hereunder the aggregate
principal amount then outstanding on Syndicated Notes issued to such Bank shall
not be in excess of the amount shown opposite the name of such Bank under the
column headed "Maximum Amount" as set forth in Annex A hereto for the
Commitment Period and (b) such aggregate principal amount outstanding on
Syndicated Notes issued to such Bank shall represent that percentage of the
aggregate principal amount then outstanding on all Syndicated Notes (including
the Syndicated Notes held by such Bank) which is shown opposite the name of
such Bank under the column headed "Percentage" in Annex A hereto.
Each borrowing from, and reduction of Commitments of, the Banks
hereunder shall be made pro rata according to their respective Commitments.
The aforementioned Syndicated Loans may be made as follows:
Subject to the terms and conditions of this credit agreement,
from the Effective Date to, but excluding the Termination Date, each Bank will
make a Syndicated Loan or Syndicated Loans to the Borrower in such amount or
amounts as the Borrower may from time to time request but not exceeding in
aggregate principal amount at any one time outstanding hereunder the Commitment
of such Bank. The Borrower shall have the option, subject to the terms and
conditions set forth herein, to borrow hereunder up to the Commitment by means
of any combination of (i) Prime Rate Loans , bearing interest at a rate per
annum which shall be the Prime Rate from time to time in effect and drawn down
in aggregate amounts of not less than One Million Dollars ($1,000,000) or any
higher multiple of $100,000 (except that any such borrowing in excess of
$1,000,000 may be in the aggregate amount of the unused Commitments), (ii)
Libor Rate Loans maturing at the end of the applicable Libor Interest Period,
but in no event later than February 28, 2000, drawn down in aggregate amounts
of not less than One Million Dollars ($1,000,000) or any higher multiple of
$100,000 (except that any such borrowing in excess of $1,000,000 may be in the
aggregate amount of the unused Commitments), bearing interest at a
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rate per annum which shall be the Libor Rate plus the LIBOR Margin, or (iii)
RACD Rate Loans maturing at the end of the applicable RACD Interest Period, but
in no event later than the Termination Date, drawn down in aggregate amounts of
not less than One Million Dollars ($1,000,000) or any higher multiple of
$100,000 (except that any such borrowing in excess of $1,000,000 may be in the
aggregate amount of the unused Commitments), bearing interest at a rate per
annum equal to the applicable RACD Fixed Rate.
The Borrower shall pay interest (based on a year having 365 or 366
days, as the case may be, and calculated for the actual number of days elapsed)
on the unpaid principal amount of Prime Rate Loans outstanding from time to
time from the date thereof until paid, payable on each March 31, June 30,
September 30, and December 31 of each year and on the Termination Date , at a
rate per annum which shall be the Prime Rate from time to time in effect. The
Borrower shall pay interest (based on a year having 360 days and calculated for
the actual number of days elapsed) at a fixed rate for each Libor Interest
Period on the unpaid principal amount of Libor Rate Loans outstanding from time
to time from the date thereof until paid, payable on each Interest Adjustment
Date with respect to a Libor Interest Period; provided that if a Libor Interest
Period exceeds three (3) months, the interest must be paid every three (3)
months from the beginning of such Interest Period, at the rate per annum which
shall be the Libor Rate plus the LIBOR Margin, fixed in advance of each Libor
Interest Period as herein provided for each such Libor Interest Period. The
Borrower shall pay interest (based on a year having 360 days and calculated for
the actual number of days elapsed) at a fixed rate for each RACD Interest
Period on the unpaid principal amount of RACD Rate Loans outstanding from time
to time from the date thereof until paid, payable on each Interest Adjustment
Date with respect to a RACD Interest Period, at a rate per annum equal to the
applicable RACD Fixed Rate, fixed in advance of each RACD Interest Period as
herein provided for each such RACD Interest Period; provided that if any
portion of any RACD Rate Loan shall have a RACD Interest Period of less than
thirty (30) days, such portion shall bear interest during such RACD Interest
Period at the rate per annum which would apply if such portion were a Prime
Rate Loan, and further provided that if a RACD Interest Period exceeds ninety
(90) days, the interest must be paid every ninety (90) days from the beginning
of such RACD Interest Period.
At the request of the Borrower, and provided no event of default exists
hereunder, the Banks shall convert Prime Rate Loans to Libor Rate Loans or RACD
Rate Loans at any time, and shall convert Libor Rate Loans or RACD Rate Loans to
any other type of Loans permitted by this Section 2.1.A. on any Interest
Adjustment Date applicable to the Libor Rate Loan or RACD Rate Loan, as the case
may be, but each request for Loans under this Section 2.1.A must either be for
Prime Rate Loans or RACD Rate Loans or Libor Rate Loans. The obligation of the
Borrower to repay the Prime Rate Loans, RACD Rate Loans and Libor Rate Loans
made by each Bank pursuant to this Section 2.1.A. and to pay interest thereon
shall be evidenced by a Syndicated Note of the Borrower substantially in the
form of Exhibit A hereto, with appropriate insertions, dated the date of this
credit agreement and payable to the order of such Bank on the Termination Date
in the principal amount of its Commitment, or if less, the aggregate unpaid
principal amount of Syndicated Loans made hereunder by such Bank. The principal
amount of the Prime Rate Loans, RACD Rate Loans and Libor Rate Loans made by
each Bank and prepayments thereof and the applicable dates with respect thereto
shall be recorded by such Bank from time to time on
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any ledger or other record of such Bank or such Bank shall record such
information by such other method as such Bank may generally employ; provided,
however, that failure to make any such record shall in no way detract from
Borrower's obligations under such Syndicated Note. The aggregate unpaid amount
of the Loans shown on the aforesaid records of such Bank shall be rebuttably
presumptive evidence of the principal amount owing and unpaid on such Syndicated
Note. If any Syndicated Note shall not be paid at maturity, whether such
maturity occurs by reason of lapse of time or by operation of any provision of
acceleration of maturity therein contained, the principal thereof and the unpaid
interest thereon shall bear interest, until paid, for Prime Rate Loans and RACD
Rate Loans at a rate per annum which shall be two and five-eighths per cent
(2-5/8%) in excess of the Prime Rate from time to time in effect and for Libor
Rate Loans at a rate per annum two and one-half per cent (2-1/2%) in excess of
the Libor Rate for the relevant Libor Interest Period. Subject to the
provisions of this credit agreement the Borrower shall be entitled under this
Section 2.1.A. to borrow funds, repay the same in whole or in part and reborrow
hereunder at any time and from time to time.
SECTION 2.1.B. BID-OPTION LOANS.
(a) The Bid-Option. From the Effective Date to but excluding the
Termination Date, of the Commitment Period, the Borrower may, as set forth in
this Section 2.1.B., request the Banks to make offers to make Bid-Option Loans
to Borrower. Each Bank may, but shall have no obligation to, make such offers
and Borrower may, but shall have no obligation to, accept any such offers, in
the manner set forth in this Section 2.1.B.; furthermore, each Bank may limit
the aggregate amount of Bid-Option Loans when quoting rates for more than one
Bid-Option Interest Period in any Bid-Option Quote, provided that such
limitation shall not be less than the minimum amounts required hereunder for
Bid-Option Loans and the Borrower may choose among the Bid-Option Loans if such
limitation is imposed; provided, that the aggregate outstanding principal
amount of Bid-Option Loans shall not at any time exceed the excess of (i) the
aggregate amount of the Commitments over (ii) the sum of the aggregate
outstanding principal amount of Syndicated Loans; and, provided further, that
no Bank may make Bid-Option Loans in an aggregate principal amount that exceeds
the amount of its Commitment to make Syndicated Loans under Section 2.1.A.
hereof.
(b) Bid-Option Quote Request. When the Borrower wishes to request
offers to make Bid-Option Loans under this Section 2.1.B., it shall transmit to
the Agent by telex or telecopy a Bid-Option Quote Request substantially in the
form of Exhibit C hereto so as to be received no later than 11:00 a.m.
Cleveland time on the Cleveland Banking Day next preceding the date of the Loan
proposed therein specifying:
(i) the proposed date of the Bid-Option Loan, which shall be a
Cleveland Banking Day;
(ii) the aggregate amount of such Bid-Option Loan, which shall be a
minimum of $1,000,000 or a larger multiple thereof; and
(iii) the duration of the Bid-Option Interest Period applicable
thereto.
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(c) Invitation for Bid-Option Quotes. Promptly upon receipt of a
Bid-Option Quote Request, the Agent shall send to the Banks by telecopy an
Invitation for Bid-Option Quotes substantially in the form of Exhibit D hereto,
which shall constitute an invitation by the Borrower to each Bank to submit
Bid-Option Quotes offering to make the Bid-Option Loans to which such
Bid-Option Quote Request relates in accordance with this Section 2.1.B.
(d) Submission and Contents of Bid-Option Quotes.
(i) Each Bank may submit a Bid-Option Quote containing an offer or
offers to make Bid-Option Loans in response to any Invitation
for Bid-Option Quotes. Each Bid-Option Quote must comply with
the requirements of this subsection (d) and must be submitted
to the Agent by telecopy not later than 10:00 a.m. Cleveland
time on the proposed date of the Loan. Agent may submit a Bid
Option Quote provided that Agent notify Borrower of the terms
of such Bid-Option Quote no later than 9:45 a.m. Cleveland
time on the proposed date of the Loan. Subject to Article IX,
any Bid- Option Quote so made shall be irrevocable except with
the written consent of the Agent given on the instructions of
the Borrower.
(ii) Each Bid-Option Quote shall be in substantially the form of
Exhibit E hereto and shall in any case specify:
(A) the proposed date of the Loan;
(B) the principal amount of the Bid-Option Loan for which
each such offer is being made, which principal amount
(x) must be in a minimum of $1,000,000 or a larger
multiple of $1,000,000, and (y) may not exceed the
principal amount of the Bid-Option Loans for which
offers were requested;
(C) the Interest Period(s) for which each such Bid-Option
Rate is offered;
(D) the rate of interest per annum (rounded to the
nearest 1/100 of 1%) (the "Bid-Option Rate") offered
for each such Bid-Option Loan; and
(E) the identity of the quoting Bank.
(iii) Any Bid-Option Quote shall be disregarded if it:
(A) is not substantially in the form of Exhibit E hereto
or does not specify all of the information required
by clause (ii) of this subsection (d);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set
forth in the applicable Invitation for Bid-Option
Quotes;
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<PAGE> 16
(D) arrives after the time set forth in subsection (d)
above; or
(E) would cause the submitting Bank to exceed its limit
on Bid-Option Loans set forth herein;
provided that a Bid-Option Quote shall not be disregarded
pursuant to clause (iii)(B) or (C) above solely because it
contains an indication that an allocation that might otherwise
be made to it pursuant to Section 2.1.B.(g) would be
unacceptable.
(e) Notice to Borrower. The Agent shall promptly notify the
Borrower of the terms of any Bid-Option Quote submitted by a Bank that is in
accordance with Subsection 2.1.B.(d)(ii). Any Bid-Option Quote not made in
accordance with Subsection 2.1.B.(d)(ii) shall be disregarded by the Agent.
The Agent's notice to the Borrower shall specify
(i) the aggregate principal amount of Bid-Option Loans for which
offers have been received for each Bid-Option Interest Period
specified in the related Bid-Option Quote Request, and
(ii) the respective principal amounts and respective Bid-Option
Rates so offered.
(f) Acceptance and Notice by Borrower. Not later than 11:00 a.m.
Cleveland time on the proposed date of a Loan, the Borrower shall notify the
Agent of the Borrower's acceptance or non-acceptance of the offers so notified
to it pursuant to subsection 2.1.B.(e) and the Agent shall, promptly upon
receiving such notice from the Borrower, notify each Bank that a Bid-Option
Quote has been accepted. In the case of acceptance, such notice (a "Notice of
Bid-Option Loan") shall specify the aggregate principal amount of offers for
the applicable Interest Period(s) that have been accepted. The Borrower may
accept any Bid-Option Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Bid-Option Loan may not
exceed the applicable amount set forth in the related
Bid-Option Quote Request for the applicable Bid-Option
Interest Period;
(ii) the principal amount of each Bid-Option Loan must be a minimum
of $1,000,000 or a larger multiple thereof.
(iii) acceptance of offers may only be made on the basis of
ascending Bid-Option Rates; and
(iv) the Borrower may not accept any offer that is described in
subsection 2.1.B.(d)(iii) or that otherwise fails to comply
with the requirements of this credit agreement.
(g) Allocation by Agent. If offers are made by two or more Banks
with the same Bid-Option Rates for a greater aggregate principal amount than
the amount in respect of which offers
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<PAGE> 17
are accepted for the related Interest Period, the principal amount of Bid-Option
Loans in respect of which such offers are accepted shall be allocated by the
Agent among such Banks as nearly as possible (in such multiples, not greater
than $100,000, as the Agent may deem appropriate) in proportion to the aggregate
principal amount of such offers. Determinations by the Agent of the amounts of
Bid-Option Loans shall be conclusive in the absence of manifest error.
(h) Effect on Facility Fees. Notwithstanding anything in this
credit agreement to the contrary, the sum of the aggregate outstanding principal
amount of all Syndicated Loans plus all Bid-Option Loans shall not at any time
exceed the aggregate amount of the Commitments of all Banks. Each Bank's
obligation to make its pro rata portion of any subsequently requested Syndicated
Loan shall not be affected by the making by such Bank of a Bid-Option Loan, and
the Bank which has outstanding Bid-Option Loans may be obligated to exceed its
Commitment, provided, that, Bid-Option Loans made by any Bank shall not affect
such Bank's ratable share of the facility fees paid by Borrower pursuant to
Section 2.5 hereof nor reduce Borrower's obligation to pay such fees .
SECTION 2.2. CONDITIONS TO LOANS;. FUNDING OF LOANS (a) The
obligation of each Bank to make the Loans hereunder is conditioned, in the case
of each borrowing hereunder, upon (i) in the case of Syndicated Loans, receipt
by the Agent of same Cleveland Banking Day's notice from the Borrower by 11:00
a.m. Cleveland time of the proposed date and aggregate amount of the borrowing
of any Prime Rate Loans, two (2) Cleveland Banking Day's notice from the
Borrower by 11:00 a.m. Cleveland time of the proposed date, aggregate amount
and initial RACD Interest Period for any RACD Rate Loans and three (3)
Cleveland Banking Days' notice from the Borrower by 11:00 a.m. Cleveland time
of the proposed date, aggregate amount and initial Libor Interest Period for
any Libor Rate Loans, of which date, amount and initial Libor Interest Period
or initial RACD Interest Period (if applicable) the Agent shall notify each
Bank promptly upon the receipt of such notice; and on which date each Bank
shall provide the Agent not later than 12:00 Noon Cleveland time, with the
amount in federal or other immediately available funds, required of it; (ii)
the fact that no Possible Default shall then exist or immediately after the
loan would exist; and (iii) the fact that the representations and warranties
contained in Article VIII hereof shall be true and correct in all material
respects with the same force and effect as if made on and as of the date of
such borrowing (except to the extent that any thereof expressly relate to an
earlier date, and, except in the case of a Refunding Borrowing, the
representation and warranty set forth in Section 8.4 as to any material adverse
change which has theretofore been disclosed in writing by the Borrower to the
Banks). Each borrowing by the Borrower hereunder shall be deemed to be a
representation and warranty by the Borrower as of the date of such borrowing as
to the facts specified in (ii) and (iii) above. The Agent shall promptly
notify the Borrower in writing (with a copy to each of the Banks) of the
applicable interest rate pertaining to each Syndicated Loan obtained hereunder
(other than Prime Rate Loans).
(b) Not later than 12:00 Noon, Cleveland time on the date of each
Loan, each Bank that is to participate therein shall (except as provided in
subsection (c) of this Section) make available its share (if any) of such Loan,
in federal or other funds immediately available in Cleveland, to the Agent at
its address specified pursuant to Section 12.4. Unless the Agent determines
that any applicable condition specified in Section 2.2(a) has not been
satisfied, the Agent, subject to the
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<PAGE> 18
provisions of this Agreement, will make the funds so received from the Banks
available to the Borrower at the Agent's aforesaid address. Unless the Agent
shall have received notice from any Bank that is to participate in a Loan prior
to the date such Loan is to be made under this Section that such Bank will not
make available to the Agent such Bank's share (if any) of such Loan, the Agent
may assume that such Bank has made such Bank's share available to the Agent on
the date such Loan is to be made. If and to the extent such Bank shall not have
so made its share available to the Agent, the Agent may (but shall not be
obligated to) make such amount available to the Borrower, and such Bank and the
Borrower severally agree to pay to the Agent forthwith on demand such amount
together with interest thereon, for each day from the date such amount together
with interest thereon, for each day from the date such amount is made available
to the Borrower by the Agent until the date such amount is repaid to the Agent,
at a rate per annum equal to the interest rate applicable to such Loan during
such period. If such Bank shall pay such amount to the Agent together with
interest, such amount so paid shall constitute a Loan by such Bank as a part of
the related borrowing for purposes of this Agreement. The failure of any Bank
to make its share of any such Loan available to the Agent shall not relieve any
other Bank of its obligations to make available its share of such Borrowing on
the date such Loan is requested to be made, but no Bank shall be responsible for
failure of any other Bank to make such share available to the Agent on the date
of any such Loan.
(c) If any Bank makes a new Loan hereunder on a day on which the
Borrower is to repay all or any part of an outstanding Loan from such Bank,
such Bank shall apply the proceeds of its new Loan to make such repayment and
only an amount equal to the difference (if any) between the amount being
borrowed and the amount being repaid shall be made available by such Bank to
the Agent as provided in subsection (b) of this Section, or remitted by the
Borrower to the Agent as provided in Section 2.3, as the case may be.
SECTION 2.3. PAYMENT ON NOTES, ETC. All payments of principal,
interest and commitment fees with respect to the Loans shall be made to the
Agent in immediately available funds for the account of the Banks, and the
Agent forthwith shall distribute to each Bank its ratable share of the amount
of principal, interest and fees received by it for the account of such Bank.
Each Bank shall endorse on a ledger or other record of such Bank pertaining to
each Note held by it, appropriate notations evidencing each payment of
principal made thereon or shall record such principal payment by such other
method as such Bank may generally employ; provided, however, that failure to
make any such entry shall in no way detract from or add to Borrower's
obligations under each such Note. Whenever any payment to be made hereunder,
including without limitation any payment to be made on any Note, shall be
stated to be due on a day which is not a Cleveland Banking Day, such payment
shall be made on the next succeeding Cleveland Banking Day and such extension
of time shall in each case be included in the computation of the interest
payable on such Note; provided, however, that with respect to any Libor Rate
Loan, if the next succeeding Cleveland Banking Day falls in the succeeding
calendar month, such payment shall be made on the preceding Cleveland Banking
Day and the relevant Interest Period shall be adjusted accordingly.
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<PAGE> 19
SECTION 2.4. PREPAYMENT; FUNDING LOSSES. The Borrower shall have the
right at any time or from time to time, upon one (1) Cleveland Banking Day's
prior written notice to the Agent, to prepay the Prime Rate Loans in whole at
any time, or from time to time in part in amounts aggregating One Million
Dollars ($1,000,000) or any larger multiple of $100,000, by paying the
principal amount to be prepaid together with accrued interest thereon to the
date of prepayment. Each such optional prepayment shall be applied to prepay
the Prime Rate Loans of the Banks in proportion to their respective
Commitments. Except as provided in Article III hereof, the Borrower may not
prepay all or any portion of the principal amount of any Libor Rate Loans or
RACD Rate Loans prior to the maturity thereof. The Borrower may not prepay all
or any portion of any Bid-Option Loans prior to the maturity thereof. Upon
receipt of any notice of prepayment pursuant to this Section, the Agent shall
promptly notify each Bank of the contents thereof and of such Bank's ratable
share of such prepayment and such notice shall not thereafter be revocable by
the Borrower.
If the Borrower makes any payment of principal with respect to any
Libor Rate Loan or RACD Rate Loan (pursuant to Article X or otherwise) on any
day other than the last day of an Interest Period applicable thereto (such
Interest Period being a period of 30, 60, 90 or 180 days, as selected by the
Borrower, for each RACD Rate Loan, and a period of 1, 2, 3 or 6 months, as
selected by the Borrower, for each LIBOR Rate Loan), or if the Borrower fails
to borrow any Libor Rate Loan or RACD Rate Loan after notice has been given to
any Bank in accordance with Section 2.2 hereof, the Borrower shall reimburse
each Bank on demand for any resulting loss or expense incurred by it, including
(without limitation) any loss incurred in obtaining, liquidating or employing
deposits from third parties; PROVIDED, that such Bank shall have delivered to
the Borrower a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error. The Borrower
hereby agrees to indemnify each Bank against any such loss or expense.
SECTION 2.5. FACILITY FEES; TERMINATION OR REDUCTION OF COMMITMENTS.
Borrower agrees to pay to Agent, for the ratable account of each Bank, as a
consideration for its Commitment hereunder, an annual facility fee calculated
at the rate of one-eighth per cent (1/8 of 1%) per annum (based on a year
having 365 or 366 days, as the case may be, and calculated for the actual
number of days elapsed) from the date hereof to and including the Termination
Date, on the total amount of such Bank's Commitment hereunder, payable on March
31, June 30, September 30 and December 31 of each year and on the Termination
Date, commencing March 31, 1995. Borrower may at any time or from time to time
terminate in whole or ratably in part the Commitments of the Banks hereunder to
an amount not less than the aggregate principal amount of the Loans then
outstanding, by giving Agent not less than three (3) Cleveland Banking Days'
notice, provided that any such partial termination shall be in an aggregate
amount for all the Banks of Five Million Dollars ($5,000,000) or any integral
multiple thereof. The Agent shall promptly notify each Bank of its
proportionate amount and the date of each such termination. After each such
termination, the facility fees payable hereunder shall be calculated upon the
Commitments of the Banks as so reduced. If the Borrower terminates in whole
the Commitments of the Banks, on the effective date of such termination (the
Borrower having prepaid in full the unpaid principal balance, if any, of the
Syndicated Notes outstanding together with all interest (if any) and facility
fees accrued and unpaid) all of the Syndicated Notes
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<PAGE> 20
outstanding shall be delivered to the Agent marked "Canceled" and redelivered to
the Borrower. Any partial reduction in the Commitments of the Banks shall be
effective during the remainder of the Commitment Period.
SECTION 2.6 WITHHOLDING TAXES. All payments shall be made free and
clear of and without reduction or withholding for or on account of any present
or future income, excise or other taxes, levies, imposts, fees, duties or
charges imposed by any governmental or other taxing authority unless the
withholding or other payment of such taxes, imposts, fees, duties or charges is
required by applicable law. If the Borrower is required by applicable law to
make any such withholding or other payment in respect of payments hereunder to
any Bank, the Borrower shall pay to such Bank such additional amounts as may be
necessary in order that the net amount received by such Bank after the required
withholding or other payment (including any required withholding or other
payment on such additional amounts) equals the amount such Bank would have
received had no such withholding or other payment been made; provided, however,
that no such additional amounts shall be paid with respect to any United States
federal withholding tax imposed by reason of the failure of a Bank which is not
incorporated in the United States to provide the Borrower with appropriately
completed Forms 4224 or such other tax forms as the Borrower shall reasonably
request to establish any applicable exemption from such withholding
requirements. A Bank's certification of amounts payable under this Section
shall be conclusive absent manifest error.
ARTICLE III. ADDITIONAL PROVISIONS RELATING TO LIBOR RATE LOANS
SECTION 3.1. RESERVES OR DEPOSIT REQUIREMENTS, ETC. If at any time
any law, treaty or regulation (including, without limitation, Regulation D of
the Board of Governors of the Federal Reserve System) or the interpretation
thereof by any governmental authority charged with the administration thereof
or any central bank or other fiscal, monetary or other authority shall impose
(whether or not having the force of law), modify or deem applicable any reserve
and/or special deposit requirement (other than reserves included in the Libor
Reserve Requirement, the effect of which is reflected in the interest rate(s)
of the Libor Rate Loan(s) in question) against assets held by, or deposits in
or for the amount of any loans by, any Bank, and the result of the foregoing is
to increase the cost (whether by incurring a cost or adding to a cost) to such
Bank of making or maintaining hereunder Libor Rate Loans or to reduce the
amount of principal or interest received by such Bank with respect to such
Libor Rate Loans, then upon demand by such Bank the Borrower shall pay to such
Bank from time to time on Interest Adjustment Dates with respect to such Loans,
as additional consideration hereunder, additional amounts sufficient to fully
compensate and indemnify such Bank for such increased cost or reduced amount,
assuming (which assumption such Bank need not corroborate) such additional cost
or reduced amount were allocable to such Libor Rate Loans. A statement as to
the increased cost or reduced amount as a result of any event mentioned in this
Section 3.1, setting forth the calculations therefor, shall be promptly
submitted by such Bank to the Borrower and shall, in the absence of manifest
error, be conclusive and binding as to the amount thereof. Notwithstanding any
other provision of this credit agreement, after any such demand for
compensation by any Bank, Borrower, upon at least three (3) Cleveland Banking
Days' prior written notice to such Bank through the Agent, may prepay all Libor
Rate Loans in full or convert all Libor Rate Loans
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to any other type of Loans permitted under this credit agreement regardless of
the Libor Interest Period of any thereof. Any such prepayment or conversion
shall be subject to the prepayment penalties set forth in Section 2.4 hereof.
Each Bank will notify Borrower as promptly as practicable (with a copy thereof
delivered to the Agent) of the existence of any event which will likely require
the payment by Borrower of any such additional amount under this Section.
SECTION 3.2. TAX LAW, ETC. In the event that by reason of any law,
regulation or requirement or in the interpretation thereof by an official
authority, or the imposition of any requirement of any central bank whether or
not having the force of law, any Bank shall, with respect to this credit
agreement or any transaction under this credit agreement, be subjected to any
tax, levy, impost, charge, fee, duty, deduction or withholding of any kind
whatsoever (other than any tax imposed upon the total net income of such Bank)
and if any such measures or any other similar measure shall result in an
increase in the cost to such Bank of making or maintaining any Libor Rate Loan
or in a reduction in the amount of principal, interest or commitment fee
receivable by such Bank in respect thereof, then such Bank shall promptly
notify the Borrower stating the reasons therefor. The Borrower shall
thereafter pay to such Bank upon demand from time to time on Interest
Adjustment Dates with respect to such Libor Rate Loans, as additional
consideration hereunder, such additional amounts as will fully compensate such
Bank for such increased cost or reduced amount. A statement as to any such
increased cost or reduced amount, setting forth the calculations therefor,
shall be submitted by such Bank to the Borrower and shall, in the absence of
manifest error, be conclusive and binding as to the amount thereof.
Notwithstanding any other provision of this credit agreement, after
any such demand for compensation by any Bank, Borrower, upon at least three (3)
Cleveland Banking Days' prior written notice to such Bank through the Agent,
may prepay all Libor Rate Loans in full or convert all Libor Rate Loans to any
other type of Loans permitted under this credit agreement regardless of the
Interest Period of any thereof. Any such prepayment or conversion shall be
subject to the prepayment penalties set forth in Section 2.4 hereof.
SECTION 3.3. EURODOLLAR DEPOSITS UNAVAILABLE OR INTEREST RATE
UNASCERTAINABLE. In respect of any Libor Rate Loans, in the event that the
Agent shall have determined that dollar deposits of the relevant amount for the
relevant Interest Period for such Libor Rate Loans are not available to the
Agent in the applicable Eurodollar market or that, by reason of circumstances
affecting such market, adequate and reasonable means do not exist for
ascertaining the Libor Rate applicable to such Libor Interest Period, as the
case may be, the Agent shall promptly give notice of such determination to the
Borrower and (i) any notice of new Libor Rate Loans (or conversion of existing
loans to Libor Rate Loans) previously given by the Borrower and not yet
borrowed (or converted, as the case may be) shall be deemed a notice to make
Prime Rate Loans, and (ii) the Borrower shall be obligated either to prepay or
to convert any outstanding Libor Rate Loans on the last day of the then current
Libor Interest Period or Periods with respect thereto.
SECTION 3.4. CHANGES IN LAW RENDERING LIBOR RATE LOANS UNLAWFUL. If
at any time any new law, treaty or regulation, or any change in any existing
law, treaty or regulation, or any interpretation thereof by any governmental or
other regulatory
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authority charged with the administration thereof, shall make it unlawful for
any Bank to fund any Libor Rate Loans which it is committed to make hereunder
with moneys obtained in the Eurodollar market, the Commitment of such Bank to
fund Libor Rate Loans shall, upon the happening of such event forthwith be
suspended for the duration of such illegality, and such Bank shall by written
notice to the Borrower and the Agent declare that its Commitment with respect to
such Loans has been so suspended and, if and when such illegality ceases to
exist, such suspension shall cease and such Bank shall similarly notify the
Borrower and the Agent. If any such change shall make it unlawful for any Bank
to continue in effect the funding in the applicable Eurodollar market of any
Libor Rate Loan previously made by it hereunder, such Bank shall, upon the
happening of such event, notify the Borrower, the Agent and the other Banks
thereof in writing stating the reasons therefor, and the Borrower shall, on the
earlier of (i) the last day of the then current Libor Interest Period or (ii) if
required by such law, regulation or interpretation, on such date as shall be
specified in such notice, either convert all Libor Rate Loans to any other type
of Loans permitted under this credit agreement or prepay all Libor Rate Loans to
the Banks in full. Any such prepayment or conversion shall be subject to the
prepayment penalties prescribed in Section 2.4 hereof.
SECTION 3.5. FUNDING. Each Bank may, but shall not be required to,
make Libor Rate Loans hereunder with funds obtained outside the United States.
ARTICLE IV. ADDITIONAL PROVISIONS RELATING TO RACD RATE LOANS
SECTION 4.1. INCREASED COST. If, as a result of any Regulatory
Change:
(a) the basis of taxation of payments to any Bank of the principal of
or interest on any RACD Rate Loan or any other amounts payable under this
credit agreement in respect thereof (other than taxes imposed on the overall
net income of such Bank by the jurisdiction in which such Bank has its main
office) is changed; or
(b) any reserve, special deposit or similar requirements relating to
any extensions of credit or other assets of, or any deposits with or
liabilities of, any Bank are imposed, modified or deemed applicable; or
(c) any other condition affecting this credit agreement or any of the
RACD Rate Loans is imposed on any Bank;
and such Bank determines that, by reason thereof, the cost to such Bank of
making or maintaining any of the RACD Rate Loans is increased, or any amount
received by such Bank hereunder in respect of any such loans is reduced (such
increase in cost and reductions in amounts receivable being herein called
"Increased Costs"), then the Borrower shall pay to such Bank upon demand such
additional amount or amounts as will compensate such Bank for such Increased
Costs (such demand to be accompanied by a statement setting forth the basis for
the calculation thereof). Determinations by such Bank for purposes of this
Section of the effect of any Regulatory Change on its costs of making or
maintaining RACD Rate Loans or on amounts receivable by it in respect of such
RACD Rate Loans, and of the additional amounts required to compensate such Bank
in
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respect of any Increased Cost shall be conclusive in the absence of manifest
error. Notwithstanding any other provision of this credit agreement, after any
such demand for compensation by any Bank, Borrower, upon at least two (2)
Cleveland Banking Days' prior written notice to such Bank through the Agent, may
prepay all RACD Rate Loans in full or convert all RACD Rate Loans to any other
type of loans permitted under this credit agreement regardless of the RACD
Interest Period of any thereof. Any such prepayment or conversion shall be
subject to the prepayment penalty set forth in Section 2.4 hereof. Each Bank
will notify Borrower as promptly as practicable (with a copy thereof delivered
to the Agent) of the existence of any event which will likely require the
payment by Borrower of any such additional amounts under this Section.
SECTION 4.2. QUOTED RATES. Anything herein to the contrary
notwithstanding, if on or before the first day of the applicable RACD Interest
Period for any RACD Rate Loan (i) the Agent shall determine that for any reason
whatsoever, dealers of recognized standing are not providing quotes for
certificates of deposit (in the applicable amounts) for a period of time
comparable to the applicable RACD Interest Period or (ii) the Agent shall
determine that the rates quoted by such dealers for purposes of computing the
rate of interest on RACD Rate Loans for the applicable RACD Interest Period do
not accurately reflect the cost to the Banks of making or maintaining such RACD
Rate Loans for such period, then the Agent shall give the Borrower prompt
notice thereof, and so long as such failure to quote such rates continues
and/or rates fail to accurately reflect costs to the Banks as aforesaid, the
Banks shall be under no obligation to make RACD Rate Loans or to convert any
other type of Loans made pursuant to this credit agreement into RACD Rate Loans
and the Borrower shall not be entitled to obtain any RACD Rate Loans hereunder
until the Agent has notified the Borrower that the conditions giving rise to
the operation of this Section no longer exist.
SECTION 4.3. CHANGE OF LAW. Notwithstanding any other provision in
this credit agreement, in the event that any Regulatory Change shall make it
unlawful for any Bank to fund any RACD Rate Loans, the Commitment of such Bank
to fund RACD Rate Loans shall, upon the happening of such event forthwith be
suspended for the duration of such illegality, and such Bank shall by written
notice to the Borrower and the Agent declare that its Commitment with respect
to such Loans has been so suspended and, if and when such illegality ceases to
exist, such suspensions shall cease and such Bank shall similarly notify the
Borrower and the Agent. If any such change shall make it unlawful for any Bank
to continue in effect the funding of RACD Rate Loans, such Bank shall, upon the
happening of such event, notify the Borrower, the Agent and the other Banks
thereof in writing stating the reasons therefor, and the Borrower shall, on the
earlier of (i) the last day of the then current RACD Interest Period or (ii) if
required by such Regulatory Change, on such date as shall be specified on such
notice, either convert all RACD Rate Loans to any other type of Loans permitted
under this credit agreement or prepay all RACD Rate Loans to the Banks in full.
Any such prepayment or conversion shall be subject to the prepayment penalties
prescribed in Section 2.4 hereof.
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<PAGE> 24
ARTICLE V. CONDITIONS TO EFFECTIVENESS
Prior to or concurrently with the execution and delivery of this credit
agreement and as a condition to the first Loan hereunder, Borrower shall furnish
to each Bank (in form and substance satisfactory to the Banks) the following:
SECTION 5.1. RESOLUTIONS AND ORGANIZATIONAL DOCUMENTS. Certified copies
of the resolutions of the board of directors of Borrower evidencing approval of
the execution of this credit agreement and the execution and delivery of the
Notes as provided for herein and certified, by the Secretary of Borrower, copies
of the Certificate of Incorporation and By-Laws of the Borrower.
SECTION 5.2. LEGAL OPINION. A favorable opinion of counsel for Borrower
as to the matters referred to in Sections 8.1 (for the Borrower only), 8.2 (for
the Borrower only), 8.5 and 8.7 of this credit agreement and such other matters
as Agent and the Banks may reasonably request.
SECTION 5.3. CERTIFICATE OF INCUMBENCY. A certificate of the secretary
or assistant secretary of Borrower certifying the names of the officers of
Borrower authorized to sign this credit agreement, and the Notes, together with
the true signatures of such officers.
SECTION 5.4. NO DEFAULT CERTIFICATE. A certificate of the secretary or
assistant secretary of Borrower certifying that as of the date of this credit
agreement no Possible Default exists hereunder.
SECTION 5.5. NOTES. A Syndicated Note for each Bank, in the form of
Exhibit A hereto, and a Bid-Option Note for each Bank, in the form of
Exhibit B hereto, each duly completed and executed by the Borrower.
ARTICLE VI. AFFIRMATIVE COVENANTS
Borrower agrees that so long as the Commitments remain in effect and
thereafter until the principal of and interest on all Notes and all other
payments due hereunder shall have been paid in full, Borrower will perform and
observe all of the following provisions, namely:
SECTION 6.1. FINANCIAL STATEMENTS AND REPORTS. The Borrower shall
deliver to each of the Banks:
(a) Quarterly Statements. As soon as reasonably
possible, and in any event within sixty (60) days after the close of
each of the first three (3) fiscal quarters of the Borrower: (i) the
consolidated balance sheet of the Borrower as at the end of each
quarter, setting forth in comparative form the corresponding figures
for the preceding fiscal year end; and (ii) the consolidated statement
of income of the Borrower for such quarter and for the portion of the
fiscal year ended with such quarter, setting forth in comparative form
the corresponding figures for the corresponding period of the preceding
fiscal year, and all in
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reasonable detail and certified by a principal officer of the Borrower,
subject to year-end audit adjustments.
(b) Annual Statements. As soon as reasonably possible,
and in any event within ninety (90) days after the close of each fiscal
year of the Borrower: (i) the consolidated balance sheet of the
Borrower for such fiscal year; (ii) the related consolidated income
statement of the Borrower for such fiscal year; and (iii) the
consolidated statement of cash flows of the Borrower for such fiscal
year; all setting forth in comparative form the corresponding figures
for the previous fiscal year. Such consolidated balance sheets and
statements shall be prepared in reasonable detail, in accordance with
generally accepted accounting principles, and accompanied by an opinion
of Price Waterhouse, or other independent certified public accountants
of recognized standing reasonably acceptable to the Banks, as to said
consolidated balance sheets and statements.
(c) Accountants' Statements. As soon as reasonably
possible, and in any event within one hundred twenty (120) days after
the close of each fiscal year of the Borrower, the written statement of
the certified public accountants reporting on such statements that in
making the examination necessary for their report, they have obtained
no knowledge of any Possible Default under this credit agreement or the
Notes by the Borrower or if such accountants shall have obtained
knowledge of any Possible Default, they shall specify all such Possible
Defaults and their nature and status.
(d) Notice of Default. As soon as reasonably possible
and in any event within five (5) days after any financial officer of
the Borrower has knowledge of the occurrence of a Possible Default, a
statement of the Chief Financial Officer of the Borrower describing
such Possible Default and the action which the Borrower proposes to
take with respect thereto.
(e) Compliance Certificate. As soon as reasonably
possible, and in any event within ninety (90) days after the close of
each period referred to in Section 6.1(a) and within one hundred twenty
(120) days after the close of each period referred to in Section 6.1(b)
hereof, a certificate signed by the Chairman of the Board, President or
Chief Financial Officer of the Borrower stating that a review of the
activities of the Borrower during such fiscal year has been made under
his supervision with a view to determining whether during such fiscal
year the Borrower had performed and observed all its respective
obligations under this credit agreement and the Notes, and under any
indenture, credit agreement or loan agreement or other instrument in
respect of borrowed money or the deferred purchase price of property,
and either: (i) stating that to the best of his knowledge the Borrower
had during such fiscal year performed and observed each covenant and
condition of this credit agreement and the Notes applicable to it and
that he had during the course of such review obtained no knowledge of
any Possible Default under this credit agreement or the
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Notes; or (ii) if in his opinion the Borrower has not performed and
observed all covenants and conditions contained in this credit
agreement and the Notes, or if any Possible Default shall exist under
this credit agreement or the Notes, specifying all such events, and
their nature and status and stating the action, if any, being taken by
the Borrower to cure or avoid any such Possible Default.
(f) Regulation U. If at any time the value of all
"margin stock" (as defined in Regulation U) owned by the Borrower and
its Consolidated Subsidiaries exceeds (or would, following application
of the proceeds of an intended Loan hereunder, exceed) 25% of the value
of the total assets of the Borrower and its Consolidated Subsidiaries,
in each case as reasonably determined by the Borrower, prompt notice of
such fact and, promptly upon the request of any Bank, a duly completed
statement of purpose on Form U-1 for such Bank together with such other
information or documents as the Banks may be required to obtain under
said Regulation U in connection with this credit agreement.
(g) Other Reports and Statements. Promptly upon the
mailing to its stockholders of each annual report or proxy statement, a
copy of each such report or proxy statement; promptly upon any filing
by the Borrower with the Securities and Exchange Commission or any
governmental agency or agencies substituted for such commission, or
with any national securities exchange, of any annual or periodic or
report on form 8-K or registration statement, a copy of such report or
statement.
(h) Additional Information. From time to time such
additional information regarding the financial position or business of
the Borrower as the Agent, at the request of any Bank, may reasonably
request.
SECTION 6.2. PAYMENT OF TAXES, ASSESSMENTS, ETC. The Borrower will duly
and promptly pay and discharge, and will cause each of its Subsidiaries to duly
and promptly pay and discharge, as the same become due and payable, all taxes,
assessments and governmental and other charges and claims (except for those
taxes, assessments, charges or claims which if unpaid would not, in the
aggregate, have a material adverse effect on the financial condition of the
Borrower), lawfully levied or imposed upon the franchises, properties, earnings
and business of the Borrower or its Subsidiaries, as the case may be , as well
as all lawful claims for labor, materials and supplies which, if unpaid, might
become a lien or charge upon such properties or any part thereof; provided,
however, that nothing contained in this Section 6.2 shall require the Borrower
or any such Subsidiary to pay any such tax, assessment, charge or claim so long
as the Borrower or any such Subsidiary in good faith and by proper proceedings
shall contest the validity thereof and shall set aside on its books adequate
reserves with respect thereto.
SECTION 6.3. MAINTENANCE OF CORPORATE EXISTENCE. Except as permitted by
Section 7.6, the Borrower will at all times do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence,
rights, patents and franchises, and the corporate existence, rights, patents and
franchises of its Subsidiaries, and comply with, and cause each of its
Subsidiaries to comply with, all related laws applicable to the Borrower or such
Subsidiary in such manner as counsel shall advise; provided that nothing in this
Section 6.3 shall (i) require the Borrower or such Subsidiary to maintain,
preserve or renew any right, patent, or franchise not, in the opinion of the
Board of Directors or the President of the Borrower, necessary or desirable in
the conduct of the business of the Borrower or such Subsidiary, as the
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case may be, or (ii) require the Borrower to comply with any law so long as the
validity or applicability thereof shall be contested in good faith and by proper
proceedings, or (iii) require the Borrower to maintain, preserve or keep in full
force and effect the corporate existence of any Subsidiaries, the Total Assets
of which in the aggregate equal 15% or less of Consolidated Total Assets during
any twelve-month period.
SECTION 6.4. MAINTENANCE OF PROPERTIES. Except as provided in Section
6.3 hereof, the Borrower will at all times maintain, preserve, protect and keep
or cause to be maintained, preserved, protected and kept its material property,
and the material properties of its Subsidiaries, in good repair, working order
and condition and, from time to time, will make or cause to be made all repairs,
renewals, replacements, extensions, additions, betterments and improvements to
its property as are necessary and proper, so that the business carried on in
connection therewith may be conducted properly and efficiently at all times.
SECTION 6.5. MAINTENANCE OF INSURANCE. The Borrower will, and will
cause each of its Subsidiaries to, keep adequately insured by financially sound
and reputable insurers, all property of a character usually insured by
corporations engaged in the same or a similar business similarly situated
against loss or damage of the kinds customarily insured against by such
corporations and carry such other insurance as is generally carried by
corporations engaged in the same or a similar business similarly situated.
SECTION 6.6. KEEPING OF BOOKS. The Borrower will, and will cause each
of its Subsidiaries to, keep at all times proper books of record and account in
which full, true and correct entries will be made of its transactions in
accordance with generally accepted accounting principles; and set aside on its
books from its earnings, for each fiscal year, reserves for depreciation,
obsolescence and/or amortization of its properties during such years and all
other proper reserves, which, in accordance with good accounting practice and
generally accepted accounting principles, should be set aside from such earnings
in connection with its business.
SECTION 6.7. COMPLIANCE WITH GOVERNMENTAL LAW. The Borrower will, and
will cause each of its Subsidiaries to, comply in all material respects with all
applicable statutes, regulations and orders of, and all restrictions imposed by,
the United States of America and all foreign countries having jurisdiction, and
any state, municipality or any other political subdivision or any agency of any
thereof, in respect of the conduct of their respective businesses and the
ownership of their respective properties; provided, however, that nothing
contained in this Section 6.7 shall require the Borrower to comply with any law
so long as the validity or applicability thereof shall be contested in good
faith and by proper proceedings.
SECTION 6.8. ENVIRONMENTAL COMPLIANCE. Notwithstanding the generality
of Section 6.7 hereof, Borrower and each Subsidiary will comply in all material
respects with any and all Environmental Laws including, without limitation, all
Environmental Laws in jurisdictions in which Borrower or any Subsidiary owns or
operates a facility or site, arranges for disposal or treatment of hazardous
substances, solid waste or other wastes, accepts for transport any hazardous
substances, solid waste or other wastes or holds any interest in real property
or otherwise. Borrower will furnish to the Banks promptly after receipt thereof
a copy of any notice
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Borrower or any Subsidiary may receive from any governmental authority, private
person or entity or otherwise that any litigation or proceeding pertaining to
any environmental, health or safety matter has been filed or is threatened
against Borrower or such Subsidiary, any real property in which Borrower or such
Subsidiary holds any interest or any past or present operation of Borrower or
such Subsidiary, which litigation or proceeding if concluded in a manner adverse
to Borrower or such Subsidiary reasonably is expected by Borrower to have a
material adverse effect on the business, assets, operations or condition,
financial or otherwise, of Borrower and its Consolidated Subsidiaries. Neither
Borrower nor any Subsidiary will allow the release or disposal of hazardous
waste, solid waste or other wastes on, under or to any real property in which
Borrower or such Subsidiary holds any interest or performs any of its
operations, in violation of any Environmental Law in any material respect. As
used in this subsection "litigation or proceeding" means any demand, claim,
notice, suit, suit in equity, action, administrative action, investigation or
inquiry whether brought by any governmental authority, private person or entity
or otherwise. Borrower shall defend, indemnify and hold the Banks harmless
against all costs, expenses, claims, damages, penalties and liabilities of every
kind or nature whatsoever (including attorneys fees) arising out of or resulting
from the noncompliance of Borrower or any Subsidiary with any Environmental Law.
SECTION 6.9. ACCESS TO PROPERTIES. The Borrower will permit, and will
cause each of its Subsidiaries to permit, each of the Banks or any agent or
representative thereof at such Bank's expense, upon reasonable prior notice, to
examine and make copies of and abstracts from the records and books of account
of, and visit the properties of the Borrower and any of its Subsidiaries, during
normal business hours; provided that (i) such Bank will not unduly interfere
with the operations of the Borrower or any such Subsidiary during any such
examination or visit and (ii) such Bank agrees to treat confidentially all
information obtained by such Bank from such records and books of account.
SECTION 6.10. COMPLIANCE WITH ERISA. The Borrower will comply in all
material respects with the provisions of ERISA and will cause each member of the
Controlled Group to so comply. The Borrower will furnish to each of the Banks:
(i) as soon as reasonably possible, and in any event within thirty (30) days
after any executive officer of the Borrower knows that any materially adverse
Reportable Event with respect to any Plan has occurred, a statement of the Chief
Financial Officer of the Borrower setting forth details as to such Reportable
Event and, if known, the action which the Borrower proposes to take with respect
thereto, together with a copy, if available, of the notice of such Reportable
Event given to the PBGC; (ii) promptly after receipt thereof, a copy of any
notice the Borrower or any member of the Controlled Group may receive from the
PBGC relating to the PBGC's intention to terminate any Plan or to appoint a
trustee to administer any Plan; (iii) promptly after receipt thereof, a copy of
any notice of complete or partial withdrawal liability under Title IV of ERISA;
and (iv) promptly after such request, such documents and information relating to
any Plan as any Bank may reasonably request from time to time. In all events,
the Borrower shall only be required to furnish to the Banks such information as
is or may be available to the Borrower and shall not be deemed to have failed in
its reporting responsibility if such information is either unavailable or
delayed by action of or inaction of the PBGC or any other governmental entity
charged with responsibility for the administration of reports required by ERISA.
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SECTION 6.11. PLAN. Neither Borrower nor any Subsidiary will suffer or
permit any Plan to be amended if, as a result of such amendment, the current
liability under the Plan is increased to such an extent that security is
required pursuant to section 307 of the ERISA. As used herein, "current
liability" means current liability as defined in section 307 of ERISA.
SECTION 6.12. USE OF PROCEEDS. The Borrower will use the proceeds of
the Loans for general corporate purposes. No part of the proceeds of any Loan
hereunder will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any margin stock. If
requested by any Bank, the Borrower will furnish to such Bank in connection with
any Loan hereunder a statement in conformity with the requirements of Federal
Reserve Form U-1 referred to in Regulation U.
SECTION 6.13. NOTICE OF PROCEEDINGS. The Borrower will promptly give
notice in writing to each Bank of all litigation, arbitral proceedings and
regulatory proceedings affecting the Borrower or any Subsidiary or the property
of the Borrower or any Subsidiary, except litigation or proceedings which, if
adversely determined, could not materially and adversely affect the consolidated
financial condition or the business taken as a whole of the Borrower and its
Subsidiaries.
ARTICLE VII.
NEGATIVE COVENANTS OF THE BORROWER
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid.
SECTION 7.1. CONSOLIDATED LONG-TERM INDEBTEDNESS TO CONSOLIDATED
TANGIBLE NET WORTH RATIO. The Borrower will not permit Consolidated Long-term
Indebtedness to exceed forty-five percent (45%) of Consolidated Tangible Net
Worth at any time.
SECTION 7.2. MINIMUM CONSOLIDATED TANGIBLE NET WORTH. The Borrower will
not permit Consolidated Tangible Net Worth to be less than $225,000,000 plus
twenty-five percent (25%) of Borrower's positive net income, on a cumulative
basis, from September 1, 1994 as of each fiscal year-end thereafter.
SECTION 7.3. LIMITATION ON LIENS. Neither the Borrower nor any
Subsidiary will create, assume or incur or suffer to be created, assumed or
incurred or to exist any mortgage, lien, charge, security interest or
encumbrance of any kind upon, or pledge of, or subject to the prior payment of
any Indebtedness any of its property or assets, whether now owned or hereafter
acquired, or acquire or agree to acquire any property or assets subject to any
conditional sale agreement, including a lease on terms tantamount thereto, or
other title retention agreement (the foregoing mortgages, liens, charges,
security interests, encumbrances, pledges, prior rights of payments and the
rights of others under conditional sale agreements, leases and other title
retention agreements being hereinafter sometimes collectively called "Liens");
PROVIDED,
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HOWEVER, that the foregoing restrictions shall not apply to the following items
so long as they do not in the aggregate materially adversely affect the conduct
of the business of the Borrower and its Subsidiaries:
(a) Liens existing on the date hereof;
(b) Liens or deposits made to secure the release thereof,
securing taxes, assessments or governmental charges or levies or the
claims of materialmen, mechanics, carriers, warehousemen, landlords and
other similar persons;
(c) Liens incurred or deposits made in the ordinary course of
business (i) in connection with workmen's compensation, unemployment
insurance, social security and other similar laws, or (ii) to secure
the performance of letters of credit, bids, tenders, contracts, leases,
public or statutory obligations, surety, customs, appeal and
performance bonds and other similar obligations not incurred in
connection with the borrowing of money, the obtaining of advances or
the payment of the deferred purchase price of property;
(d) attachment Liens the execution or other enforcement of
which is effectively stayed and the claims secured thereby are being
contested in good faith by appropriate proceedings;
(e) judgment or similar Liens, PROVIDED, the amount
which they secure does not in the aggregate exceed by more than Two
Million Dollars ($2,000,000) the amount of insurance available to
satisfy the same, OR PROVIDED, the execution or other
enforcement of such Liens is effectively stayed and the claims secured
thereby are currently being contested in good faith by appropriate
proceedings;
(f) easements, rights of way, restrictions, leases, licenses,
minor irregularities in title and other similar encumbrances affecting
real properties, which do not in the aggregate materially impair their
use in the operation of the business of the Borrower or any Subsidiary
or detract from the value of such property for the purpose of business;
(g) purchase money Liens upon property acquired or constructed
by the Borrower or any Subsidiary for use in its business, or
extensions, renewals or refundings thereof, PROVIDED, that no such
Lien shall extend to any property other than the respective property
so acquired or constructed (or the land underlying the same) or shall
secure any Indebtedness in an amount greater than 100% of the lesser
of (i) the purchase price or construction cost of the property or (ii)
the fair market value of the property at the date of acquisition or
construction;
(h) Liens, charges, security interests and encumbrances not
exceeding Five Million Dollars ($5,000,000) in the aggregate which (i)
are incidental to the conduct of the business of the Borrower or any
Subsidiary and the ownership of its or their properties and assets,
(ii) were not incurred in connection with the borrowing of money or the
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obtaining of advances or credit and (iii) do not in the aggregate
materially detract from the value of the property of the Borrower or
any Subsidiary or materially impair the use thereof in the operation of
its or their business; and
(i) Liens incurred by the Borrower or a Subsidiary in
connection with the issuance of Indebtedness by any governmental
instrumentality for the purpose of constructing or acquiring a facility
designed for use by the Borrower or a Subsidiary in the conduct of its
business, PROVIDED that if such Liens were purchase money Liens they
would be permitted under subparagraph (g) above.
SECTION 7.4. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The Borrower
will not (i) consolidate or merge with or into any other Person unless the
Borrower shall be the surviving entity and, after giving effect thereto, no
Possible Default shall exist hereunder, or (ii) sell, lease or otherwise
transfer all or any substantial part of its assets to any Person, it being
agreed that nothing in this Section shall in any way restrict purchases by the
Borrower of its own stock. The Borrower will not permit any Subsidiary to
consolidate with, merge into or transfer all or any substantial part of its
assets to any Person other than the Borrower or a Wholly-Owned Consolidated
Subsidiary unless, after giving effect thereto, (i) the nature of Borrower's
business, viewed on a consolidated basis, shall not be materially different from
that at the date of this credit agreement, and (ii) no Possible Default shall
exist hereunder.
ARTICLE VIII. WARRANTIES
Subject only to such exceptions, if any, as may be fully disclosed in
an officer's certificate or written opinion of counsel furnished by Borrower to
each Bank prior to the execution and delivery hereof, Borrower represents and
warrants as follows:
SECTION 8.1. ORGANIZATION. The Borrower is a corporation duly organized
and validly existing in good standing under the laws of the State of Delaware,
and Borrower and each Subsidiary are duly qualified to do business and in good
standing as a foreign corporation in all other jurisdictions in which failure to
so qualify would have a material adverse affect on the Borrower's and the
Subsidiaries' ability to conduct, on a consolidated basis, their operations or
own their properties. The Borrower has all requisite corporate power and
authority to conduct its business as now being conducted and to own its
properties and to execute and deliver and to perform all of its obligations
under this credit agreement.
SECTION 8.2. CORPORATE AUTHORIZATION. The execution and delivery of
this credit agreement and of the Notes are within the authority of the Borrower,
have been duly authorized by all necessary corporate action and do not and will
not contravene any provision of applicable law or of the certificate of
incorporation or by-laws of the Borrower or any Subsidiary, or any judgment,
order, decree, agreement or instrument binding on the Borrower or any Subsidiary
or result in the creation of any Lien, charge or encumbrance upon any of the
property or assets of the Borrower or any Subsidiary pursuant to any other
agreement or instrument to which the Borrower or any Subsidiary is a party or
which is binding upon the Borrower or any Subsidiary or result in the breach of
or constitute a default under any indenture or other
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<PAGE> 32
agreement or instrument to which the Borrower or any Subsidiary is a party
or by which its properties may be bound or affected. This credit agreement
constitutes, and the Notes when duly executed on behalf of the Borrower and
delivered in accordance with this credit agreement will constitute, legal, valid
and binding obligations of the Borrower enforceable in accordance with their
respective terms.
SECTION 8.3. FINANCIAL STATEMENTS. The consolidated balance sheet and
the related consolidated statements of income, of stockholders' equity and cash
flows, covered by an opinion of Price Waterhouse, present fairly the financial
position of the Borrower and its Subsidiaries at August 31, 1994 and 1993, and
the results of their operations and the changes in their cash flows for each of
the three years in the period ended August 31, 1994. Copies of these financial
statements, which include the report of Price Waterhouse, have been delivered to
each of the Banks. The unaudited consolidated balance sheet and the related
consolidated statements of income, of stockholders' equity and cash flows
present fairly the financial position of the Borrower and its Subsidiaries at
November 30, 1994 and the results of their operations and the changes in their
cash flows for the three months ended November 30, 1994 in conformity with
generally accepted accounting principles applied on a basis consistent with the
August 31, 1994 statements referred to above. These financial statements are
subject to year-end adjustments.
SECTION 8.4. MATERIAL ADVERSE CHANGE. No material adverse change has
occurred in the business, assets, operations or condition, financial or
otherwise, of the Borrower and its Subsidiaries since August 31, 1994.
SECTION 8.5. LITIGATION. There are no actions, suits or proceedings
pending or, to the best of the Borrower's knowledge, threatened against or
affecting the Borrower or the properties of the Borrower in any court or before
or by any governmental department, agency or instrumentality, which, if
adversely determined, could, individually or in the aggregate, have a material
adverse effect on the consolidated financial condition or the business taken as
a whole of the Borrower and its Subsidiaries or which in any manner draw into
question the validity of this credit agreement or the Notes.
SECTION 8.6. TAXES. The Borrower has filed (or has obtained extensions
of the time by which it is required to file) all tax returns which are required
to be filed, and has paid all taxes shown due pursuant to such returns or
pursuant to any assessment received by the Borrower, except such taxes, if any,
as are being contested in good faith and by proper proceedings and as to which
adequate reserves have been provided. The Borrower does not know of any proposed
significant tax assessment against it nor of any basis for one, except to the
extent any such assessment has been adequately provided for in the consolidated
tax reserves of the Borrower.
SECTION 8.7. GOVERNMENTAL AND OTHER APPROVALS. No approval, consent or
authorization of, or filing or registration with, any governmental authority or
body is necessary for the execution or delivery by the Borrower of this credit
agreement or the Notes or for the performance by the Borrower of any of the
terms or conditions hereof or thereof, except for such approvals, consents or
authorizations (copies of which have been delivered to each of the Banks) as
have been obtained and are in full force and effect.
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SECTION 8.8. ERISA. The Borrower and each member of the Controlled
Group have fulfilled their obligations under the minimum funding standards of
ERISA and the Internal Revenue Code of 1986, as may have been amended (the
"Code") with respect to each Plan and are in compliance in all material respects
with the presently applicable provisions of ERISA and the Code, and have not
incurred any liability to the PBGC or a Plan under Title IV of ERISA.
SECTION 8.9. ENVIRONMENTAL COMPLIANCE. It is Borrower's belief that
Borrower and each Subsidiary are in substantial compliance with any and all
Environmental Laws including, without limitation, all Environmental Laws in all
jurisdictions in which Borrower or any Subsidiary owns or operates, or has owned
or operated, a facility or site, arranges or has arranged for disposal or
treatment of hazardous substances, solid waste or other wastes, accepts or has
accepted for transport any hazardous substances, solid waste or other wastes or
holds or has held any interest in real property or otherwise. No litigation or
proceeding arising under, relating to or in connection with any Environmental
Law is pending or, to the best of Borrower's knowledge, threatened against
Borrower or any Subsidiary, any real property in which Borrower or any
Subsidiary holds or has held an interest or any past or present operation of
Borrower or any Subsidiary, which litigation or proceeding if concluded in a
manner adverse to Borrower or such Subsidiary reasonably is expected by Borrower
to have a material adverse effect on the business, assets, operations or
condition, financial or otherwise, of Borrower and its Consolidated
Subsidiaries. To the best of Borrower's knowledge, except for a matter involving
the Borrower's Akron, Ohio plant which is the subject of a proceeding between
the Ohio EPA and Borrower, 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 Borrower or any Subsidiary holds any
interest or performs any of its operations, in violation of any Environmental
Law. As used in this subsection, "litigation or proceeding" means any demand,
claim, notice, suit, suit in equity, action, administrative action,
investigation or inquiry whether brought by any governmental authority, private
person or entity or otherwise.
SECTION 8.10. SOLVENCY. Borrower has received consideration which is
the reasonable equivalent value of the obligations and liabilities that Borrower
has incurred to the Banks. Borrower is not insolvent as defined in any
applicable state or federal statute, nor will Borrower be rendered insolvent by
the execution and delivery of this credit agreement or any Note to the Banks.
Borrower is not engaged or about to engage in any business or transaction for
which the assets retained by it shall be an unreasonably small capital, taking
into consideration the obligations to the Banks incurred hereunder. Borrower
does not intend to, nor does it believe that it will, incur debts beyond its
ability to pay them as they mature.
SECTION 8.11. DEFAULTS. No Possible Default exists hereunder, nor will
any begin to exist immediately after the execution and delivery hereof.
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ARTICLE IX. EVENTS OF DEFAULT
Each of the following shall constitute an event of default hereunder:
SECTION 9.1. PAYMENTS. If Borrower shall fail to pay when due any
principal of any Note, or shall fail to pay within three (3) consecutive days of
the due date thereof any interest, fees or any other amount payable hereunder.
SECTION 9.2. COVENANTS. If Borrower shall fail to perform or observe
the covenants contained in Article VI(excluding Section 6.1(d)), and, if such
default occurs under Sections 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9, 6.10
or 6.11, such default shall continue unremedied for a period of thirty (30)
consecutive days after the giving of written notice thereof by Agent or any Bank
to Borrower that the specified default is to be remedied; or if Borrower shall
fail to perform or observe any of the other covenants, conditions or agreements
contained herein or in any Related Writing.
SECTION 9.3. WARRANTIES. If any representation, warranty or statement
made in or pursuant to this credit agreement or any Related Writing or any other
material information furnished by Borrower to the Banks or any thereof or any
other holder of any Note, shall be false or erroneous in any material respect.
SECTION 9.4. CROSS DEFAULT. If Borrower or any Consolidated Subsidiary
defaults in any payment of principal or interest due and owing upon any other
obligation for borrowed money in excess of Ten Million Dollars ($10,000,000)
beyond any period of grace provided with respect thereto or in the performance
of any other agreement, term or condition contained in any agreement under which
such obligation is created, if the effect of such default is to accelerate the
maturity of such indebtedness or to permit the holder thereof to cause such
indebtedness to become due prior to its stated maturity.
SECTION 9.5. JUDGMENTS. If a judgment or judgments or order or orders
for payment of money in excess of $5,000,000 not covered by insurance shall be
rendered against Borrower and such judgment or judgments or order or orders
shall continue unsatisfied and unstayed for a period of thirty (30) consecutive
days.
SECTION 9.6. TERMINATION OF PLAN. If (a) any member of the Controlled
Group shall fail to pay when due an amount or amounts aggregating in excess of
$5,000,000 which it shall have become liable to pay to the PBGC or to a Plan
under Title IV of ERISA, or (b) notice of intent to terminate a Plan or Plans
having aggregate Unfunded Vested Liabilities in Excess of $15,000,000
(collectively, a "Material Plan") shall be filed under Title IV of ERISA by any
member of the Controlled Group, any plan administrator or any combination of the
foregoing, or (c) the PBGC shall institute proceedings under Title IV of ERISA
to terminate or to cause a trustee to be appointed to administer any Material
Plan or a proceeding shall be instituted by a fiduciary of any Material Plan
against any member of the Controlled Group to enforce Section 515 of ERISA and
such proceeding shall not have been dismissed within thirty (30) consecutive
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days thereafter, or (d) a condition shall exist by reason of which the PBGC
would be entitled to obtain a decree adjudicating that any Material Plan must be
terminated.
SECTION 9.7. CHANGE IN CONTROL. If at any time (i) less than 75% of the
members of the board of directors of the Borrower shall be (A) individuals who
are members of such board on the date hereof plus (B) individuals whose
election, or nomination for election by the Borrower's stockholders, was
approved by a vote of at least 75% of the members of the board then still in
office who are members of the board on the date hereof or (ii) any person, or
any two or more persons acting as a partnership, limited partnership, syndicate,
or other group for the purpose of acquiring, holding or disposing of securities
of the Borrower, shall become, according to public announcement or filing, the
"beneficial owner" (as defined in Rule 13d-3 issued under the Securities
Exchange Act of l934, as amended), directly or indirectly, of securities of the
Borrower representing 30% or more (calculated in accordance with such Rule
13d-3) of the combined voting power of the Borrower's then outstanding voting
securities.
SECTION 9.8. CONSOLIDATED SUBSIDIARY'S SOLVENCY. If any Consolidated
Subsidiary shall (a) generally not pay its debts as such debts become due, or
(b) make a general assignment for the benefit of creditors, or (c) apply for or
consent to the appointment of a receiver, a custodian, a trustee, an interim
trustee or liquidator of itself or all or a substantial part of its assets, or
(d) be adjudicated a debtor or have entered against it an order for relief under
Title 11 of the United States Code, as the same may be amended from time to
time, or (e) file a voluntary petition in bankruptcy or file a petition or an
answer seeking reorganization or an arrangement with creditors or seeking to
take advantage of any other law (whether federal or state) relating to relief of
debtors, or admit (by answer, by default or otherwise) the material allegations
of a petition filed against it in any bankruptcy, reorganization, insolvency or
other proceeding (whether federal or state) relating to relief of debtors, or
(f) suffer or permit to continue unstayed and in effect for thirty (30)
consecutive days any judgment, decree or order, entered by a court of competent
jurisdiction, which approves a petition seeking its reorganization or appoints a
receiver, custodian, trustee, interim trustee or liquidator of itself or of all
or a substantial part of its assets, or (g) take or omit to take any other
action in order thereby to effect any of the foregoing.
SECTION 9.9. BORROWER'S SOLVENCY. If Borrower shall (a) discontinue
business, or (b) generally not pay its debts as such debts become due, or (c)
make a general assignment for the benefit of creditors, or (d) apply for or
consent to the appointment of a receiver, a custodian, a trustee, an interim
trustee or liquidator of all or a substantial part of its assets, or (e) be
adjudicated a debtor or have entered against it an order for relief under Title
11 of the United States Code, as the same may be amended from time to time, or
(f) file a voluntary petition in bankruptcy or file a petition or an answer
seeking reorganization or an arrangement with creditors or seeking to take
advantage of any other law (whether federal or state) relating to relief of
debtors, or admit (by answer, by default or otherwise) the material allegations
of a petition filed against it in any bankruptcy, reorganization, insolvency or
other proceeding (whether federal or state) relating to relief of debtors, or
(g) suffer or permit to continue unstayed and in effect for thirty (30)
consecutive days any judgment, decree or order entered by a court or
governmental commission of competent jurisdiction, which assumes custody or
control of
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Borrower, approves a petition seeking reorganization of Borrower or any other
judicial modification of the rights of its creditors, or appoints a receiver,
custodian, trustee, interim trustee or liquidator for Borrower or of all or a
substantial part of its assets, or (h) take or omit to take any action in order
thereby to effect any of the foregoing.
ARTICLE X. REMEDIES UPON DEFAULT
Notwithstanding any contrary provision or inference herein or
elsewhere,
SECTION 10.1. OPTIONAL DEFAULTS. If any event of default referred to in
section 9.1, 9.2, 9.3, 9.4, 9.5, 9.6, 9.7 or 9.8 hereof shall occur, the
Required Banks, or in the case of subsection 10.1.(b), the holders of at least
fifty-one percent (51%) (by amount) of the outstanding Loans, shall have the
right in their discretion, by directing the Agent, on behalf of the Banks, to
give written notice to Borrower, to
(a) terminate the Commitments and the credits hereby established, if
not theretofore terminated, and forthwith upon such election the obligations of
Banks, and each thereof, to make any further Loan or Loans hereunder immediately
shall be terminated, and/or
(b) accelerate the maturity of all of Borrower's Debt to the Banks (if
it be not already due and payable), whereupon all of Borrower's Debt to the
Banks shall become and thereafter be immediately due and payable in full without
any presentment or demand and without any further or other notice of any kind,
all of which are hereby waived by Borrower.
SECTION 10.2. AUTOMATIC DEFAULTS. If any event of default referred to
in Section 9.9 hereof shall occur,
(a) all of the Commitments and the credits hereby established shall
automatically and forthwith terminate, if not theretofore terminated, and no
Bank thereafter shall be under any obligation to grant any further loan or loans
hereunder, and
(b) the principal of and interest on any Notes, then outstanding, and
all of Borrower's Debt to the Banks shall thereupon become and thereafter be
immediately due and payable in full (if it be not already due and payable), all
without any presentment, demand or notice of any kind, which are hereby waived
by Borrower.
SECTION 10.3. OFFSETS. If there shall occur or exist any Possible
Default referred to in Section 9.9 hereof or if the maturity of the Notes is
accelerated pursuant to Section 10.1 or 10.2 hereof, each Bank shall have the
right at any time to set off against, and to appropriate and apply toward the
payment of, any and all debt then owing by Borrower to that Bank (including,
without limitation, any participation purchased or to be purchased pursuant to
Section 10.4 hereof), whether or not the same shall then have matured, any and
all deposit balances and all other indebtedness then held or owing by that Bank
to or for the credit or account of Borrower, all without notice to or demand
upon Borrower or any other person, all such notices and demands being hereby
expressly waived by Borrower.
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SECTION 10.4. EQUALIZATION PROVISION. Each Bank agrees with the other
Banks that if it at any time shall obtain any Advantage over the other Banks or
any thereof in respect of Syndicated Loans (except under Article III or Article
IV hereof), it will purchase from the other Banks, for cash and at par, such
additional participation in the Syndicated Loans as shall be necessary to
nullify the Advantage. If any said Advantage resulting in the purchase of an
additional participation as aforesaid shall be recovered in whole or in part
from the Bank receiving the Advantage each such purchase shall be rescinded, and
the purchase price restored (but without interest unless the Bank receiving the
Advantage is required to pay interest on the Advantage to the person recovering
the Advantage from such Bank) ratably to the extent of the recovery. Each Bank
further agrees with the other Banks that if it at any time shall receive any
payment for or on behalf of Borrower on any Indebtedness owing by Borrower to
that Bank by reason of offset of any deposit or other indebtedness, it will
apply such payment first to any and all Indebtedness owing by Borrower to that
Bank pursuant to this credit agreement (including, without limitation, any
participation purchased or to be purchased pursuant to this Section 10.4) until
Borrower's Debt has been paid in full. Borrower agrees that any Bank so
purchasing a participation from the other Banks or any thereof pursuant to this
Section may exercise all its rights of payment (including the right of set-off)
with respect to such participation as fully as if such Bank were a direct
creditor of Borrower in the amount of such participation.
ARTICLE XI. THE AGENT
The Banks authorize Society National Bank and Society National Bank
hereby agrees to act as Agent for the Banks in respect of this credit agreement
upon the terms and conditions set forth elsewhere in this credit agreement, and
upon the following terms and conditions:
SECTION 11.1. APPOINTMENT AND AUTHORIZATION. Each Bank hereby
irrevocably appoints and authorizes the Agent to take such action as Agent on
its behalf and to exercise such powers hereunder as are delegated to the Agent
by the terms hereof, together with such powers as are reasonably incidental
thereto. Neither the Agent nor any of its directors, officers, attorneys or
employees shall be liable for any action taken or omitted to be taken by it or
them hereunder or in connection herewith, except for its or their own gross
negligence or willful misconduct.
SECTION 11.2. NOTE HOLDERS. The Agent may treat the payee of any Note
as the holder thereof until written notice of transfer shall have been filed
with it signed by such payee and in form satisfactory to the Agent.
SECTION 11.3. CONSULTATION WITH COUNSEL. The Agent may consult with
legal counsel selected by it and shall not be liable for any action taken or
suffered in good faith by it in accordance with the opinion of such counsel.
SECTION 11.4. DOCUMENTS. The Agent shall not be under a duty to examine
into or pass upon the validity, effectiveness, genuineness or value of this
credit agreement, the Notes, any other Related Writing furnished pursuant hereto
or in connection herewith or the value of any
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collateral obtained hereunder, and the Agent shall be entitled to assume that
the same are valid, effective and genuine and what they purport to be.
SECTION 11.5. AGENT AND AFFILIATES. With respect to the loans made
hereunder, the Agent shall have the same rights and powers hereunder as any
other Bank and may exercise the same as though it were not the Agent, and the
Agent and its affiliates may accept deposits from, lend money to and generally
engage in any kind of business with the Borrower or any Subsidiary or affiliate
of the Borrower.
SECTION 11.6. KNOWLEDGE OF DEFAULT. It is expressly understood and
agreed that the Agent shall be entitled to assume that no Possible Default has
occurred and is continuing, unless the Agent has been notified by a Bank in
writing that such Bank considers that a Possible Default has occurred and is
continuing and specifying the nature thereof.
SECTION 11.7. ACTION BY AGENT. So long as the Agent shall be entitled,
pursuant to Section 11.6 hereof, to assume that no Possible Default shall have
occurred and be continuing, the Agent shall be entitled to use its discretion
with respect to exercising or refraining from exercising any rights which may be
vested in it by, or with respect to taking or refraining from taking any action
or actions which it may be able to take under or in respect of, this credit
agreement. The Agent shall incur no liability under or in respect of this credit
agreement by acting upon any notice, certificate, warranty or other paper or
instrument believed by it to be genuine or authentic or to be signed by the
proper party or parties, or with respect to anything which it may do or refrain
from doing in the reasonable exercise of its judgment, or which may seem to it
to be necessary or desirable in the premises.
SECTION 11.8. NOTICES, DEFAULT, ETC. In the event that the Agent shall
have acquired actual knowledge of any Possible Default, the Agent shall promptly
notify the Banks and will take such action and assert such rights under this
credit agreement as the Required Banks shall direct and the Agent shall inform
the other Banks in writing of the action taken. The Agent may take such action
and assert such rights as it deems to be advisable, in its discretion, for the
protection of the interests of the holders of the Notes.
SECTION 11.9. INDEMNIFICATION. The Banks agree to indemnify the Agent
(to the extent not reimbursed by the Borrower), ratably according to the
respective principal amounts of their Commitments from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in its capacity as agent
in any way relating to or arising out of this credit agreement or any action
taken or omitted by the Agent with respect to this credit agreement, provided
that no Bank shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross negligence, willful misconduct or
from any action taken or omitted by the Agent in any capacity other than as
agent under this credit agreement.
SECTION 11.10. SUCCESSOR AGENT. The Agent may resign at any time upon
10 days' notice to the Borrower and the Banks and may be removed at any time
with or without
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cause by any two Banks. If the Agent shall resign or be removed, the Required
Banks shall appoint in writing from among the Banks a different Bank as
successor Agent, which successor Agent shall be approved in writing by the
Company. Upon its appointment and approval, the successor Agent shall succeed to
all the rights, powers and duties as Agent without any further action. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Section shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent.
ARTICLE XII. MISCELLANEOUS
SECTION 12.1. BANKS' INDEPENDENT INVESTIGATION. Each Bank by its
signature to this credit agreement acknowledges and agrees that the Agent has
made no representation or warranty, express or implied, with respect to the
creditworthiness, financial condition, or any other condition of Borrower or any
Subsidiary or with respect to the statements contained in any information
memorandum furnished in connection herewith or in any other oral or written
communication between the Agent and such Bank. Each Bank represents that it has
made and shall continue to make its own independent investigation of the
creditworthiness, financial condition and affairs of Borrower and any Subsidiary
in connection with the extension of credit hereunder, and agrees that the Agent
has no duty or responsibility, either initially or on a continuing basis, to
provide any Bank with any credit or other information with respect thereto
(other than such notices as may be expressly required to be given by Agent to
the Banks hereunder), whether coming into its possession before the granting of
the first Loans or at any time or times thereafter.
SECTION 12.2. NO WAIVER; CUMULATIVE REMEDIES. No omission or course of
dealing on the part of Agent, any Bank or the holder of any Note in exercising
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, power or remedy preclude
any other or further exercise thereof or the exercise of any other right, power
or remedy hereunder. The remedies herein provided are cumulative and in addition
to any other rights, powers or privileges held by operation of law, by contract
or otherwise.
SECTION 12.3. AMENDMENTS, CONSENTS. No amendment, modification,
termination, or waiver of any provision of this credit agreement or of the Notes
nor consent to any variance therefrom, shall be effective unless the same shall
be in writing and signed by the Required Banks (and to the extent any rights or
duties of the Agent may be affected thereby, the Agent) and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. Unanimous consent of the Banks shall be required with
respect to (i) the extension of maturity of the Notes, or the payment date of
interest thereunder, (ii) any reduction in the rate of interest on the Notes, or
in any amount of principal or interest due on any Syndicated Note, or any change
in the manner of pro rata application of any payments made by Borrower to the
Banks hereunder, or any change in amortization schedules, or in the manner of
calculating fees or prepayment penalties, (iii) any change in any percentage
voting requirement in this credit agreement, (iv) any extension of the
Commitment Period, (v) any change in the facility fees hereunder, or (vi) any
increase in the amount of the Commitments. Notice of amendments or
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consents ratified by the Banks hereunder shall immediately be forwarded by
Borrower to all Banks. Each Bank or other holder of a Note shall be bound by any
amendment, waiver or consent obtained as authorized by this section, regardless
of its failure to agree hereto.
SECTION 12.4. NOTICES. All notices, statements, requests, demands and
other communications provided for hereunder shall be in writing and, if to
Borrower, mailed or delivered to it, addressed to it at the address specified on
the signature pages of this credit agreement, if to a Bank, mailed or delivered
to it, addressed to the address of such Bank specified on the signature pages of
this credit agreement. All notices, statements, requests, demands and other
communications provided for hereunder shall be deemed to be given or made when
delivered or forty-eight (48) hours after being deposited in the mails with
postage prepaid by registered or certified mail or delivered to a telegraph
company, addressed as aforesaid, except that notices from Borrower to Agent or
the Banks pursuant to any of the provisions hereof shall not be effective until
received by Agent or the Banks. If any notice, statement, request, demand or
other communication is sent to the applicable party by facsimile transmission it
shall be deemed delivered when sent to such party at its telecopy number set
forth opposite its signature below and appropriate confirmation of such notice,
statement, request, demand or other communication is received from such party.
SECTION 12.5. COSTS, EXPENSES AND TAXES, INDEMNIFICATION. Borrower
agrees to pay on demand the following costs and expenses: (i) any expenses
incurred by Agent in connection with the preparation of this credit agreement
and any Related Writings, (ii) administration and out-of-pocket expenses of
Agent in connection with the administration of this credit agreement, the Notes,
the collection and disbursement of all funds hereunder and the other instruments
and documents to be delivered hereunder, (iii) extraordinary expenses of Agent
in connection with the administration of this credit agreement, the Notes and
the other instruments and documents to be delivered hereunder, (iv) the
reasonable fees and out-of-pocket expenses of special counsel for the Agent and
for the Banks, with respect thereto and of local counsel, if any, who may be
retained by said special counsel with respect thereto, and (v) all costs and
expenses, including reasonable attorney's fees of the Agent and the Banks, in
connection with the restructuring or enforcement of this credit agreement or any
Related Writing. In addition, Borrower shall pay any and all stamp and other
taxes and fees payable or determined to be payable in connection with the
execution and delivery of this credit agreement or the Notes, and the other
instruments and documents to be delivered hereunder, and agrees to save Agent
and each Bank harmless from and against any and all liabilities with respect to
or resulting from any delay in paying or omission to pay such taxes or fees. The
Borrower further agrees to indemnify and hold harmless the Agent and each Bank
from and against any and all liabilities, loss, damage, costs and expenses of
any kind (including reasonable fees and disbursements of special counsel for the
Banks) which may be incurred relating to or arising out of this credit
agreement, any Note or the use of the proceeds of any Loan, except to the extent
caused by the gross negligence or willful misconduct of the party seeking
indemnity.
SECTION 12.6. CAPITAL ADEQUACY. If any Bank shall have determined,
after the date hereof, that the adoption of any applicable law, rule, regulation
or guideline regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by
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any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
lending office) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on such Bank's capital (or the capital of its holding company) as a consequence
of its obligations hereunder to a level below that which such Bank (or its
holding company) could have achieved but for such adoption, change or compliance
(taking into consideration such Bank's policies or the policies of its holding
company with respect to capital adequacy) by an amount deemed by such Bank to be
material, then from time to time, within 15 days after demand by such Bank (with
a copy to the Agent), the Borrower shall pay to such Bank such additional amount
or amounts as will compensate such Bank (or its holding company) for such
reduction. Each Bank will designate a different lending office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Bank, be otherwise disadvantageous to such
Bank. A certificate of any Bank claiming compensation under this section and
setting forth the additional amount or amounts to be paid to it hereunder shall
be conclusive in the absence of manifest error. In determining such amount, such
Bank may use any reasonable averaging and attribution methods. Failure on the
part of any Bank to demand compensation for any reduction in return on capital
with respect to any period shall not constitute a waiver of such Bank's rights
to demand compensation for any reduction in return on capital in such period or
in any other period. The protection of this section shall be available to each
Bank regardless of any possible contention of the invalidity or inapplicability
of the law, regulation or other condition which shall have been imposed.
SECTION 12.7. OBLIGATIONS SEVERAL; NO FIDUCIARY OBLIGATIONS. The
obligations of the Banks hereunder are several and not joint. Nothing contained
in this credit agreement and no action taken by Agent or the Banks pursuant
hereto shall be deemed to constitute the Banks a partnership, association, joint
venture or other entity. No default by any Bank hereunder shall excuse the other
Banks from any obligation under this credit agreement; but no Bank shall have or
acquire any additional obligation of any kind by reason of such default. The
relationship among Borrower and the Banks with respect to this credit agreement,
any Note and any Related Writing is and shall be solely that of debtor and
creditor, respectively, and no Bank has any fiduciary obligation toward Borrower
with respect to any such documents or the transactions contemplated thereby.
SECTION 12.8. EXECUTION IN COUNTERPARTS. This credit agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
SECTION 12.9. BINDING EFFECT; ASSIGNMENT; PARTICIPATION. This credit
agreement shall become effective when it shall have been executed by Borrower,
Agent and by each Bank and thereafter shall be binding upon and inure to the
benefit of Borrower and each of the Banks and their respective successors and
assigns, except that Borrower shall not have the right to assign its rights
hereunder or any interest herein without the prior written consent of all of
-37-
<PAGE> 42
the Banks. No Person, other than the Banks, shall have or acquire any obligation
to grant Borrower any loans hereunder.
Each Bank may assign all or a portion of such Bank's rights and
obligations under this credit agreement to one or more banks or financial
institutions, provided, that (i) the prior written consent of Borrower
and Agent shall be required prior to any such assignment (other than to an
affiliate of any Bank), which consent shall not be unreasonably withheld, (ii)
such assignment is in an amount equal to at least $5,000,000 and does not exceed
fifty percent (50%) of such Bank's Commitment, and (iii) the assigning Bank
shall pay to Agent an assignment fee of $3,000. Upon the acceptance of such
assignment by Borrower and Agent, the assignee thereunder shall be a party
hereto and have the rights and obligations of a Bank hereunder, and the
assigning Bank shall, to the extent that rights and obligations hereunder have
been assigned by it, relinquish its rights and be released from its obligations
under this credit agreement.
Each Bank may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
credit agreement (including, without limitation, all or a portion of its
Commitment, the Loans owing to it and the Note or Notes held by it);
PROVIDED, however, that (i) such Bank's obligations under this credit
agreement (including, without limitation, its Commitment to Borrower hereunder)
shall remain unchanged, (ii) such Bank shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) such Bank
shall remain the holder of any such Note for all purposes of this credit
agreement, (iv) Borrower, Agent, and the other Banks shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under this credit agreement, and (v) with respect to changes in this
credit agreement, the Notes or any other Related Writing, the written consent of
any participant under the applicable participation agreement shall be limited
solely to (x) the extension of maturity of any Note or the payment date of
interest thereunder, (y) any reduction in the rate of interest on any Note, or
in any amount of principal or interest due on any Note, and (z) any change in
the manner of calculating any fees under the credit agreement.
Agent and Borrower may, for all purposes of this credit agreement,
treat any Bank as the holder of any Note drawn to its order (and owner of the
Loans evidenced thereby) until written notice of assignment or transfer shall
have been received and approved by them.
Notwithstanding any other provision in this credit agreement, any Bank
may assign and pledge all or any portion of its Loans and its Notes to any
Federal Reserve Bank as collateral to secure any obligation of the Bank to such
Federal Reserve Bank. Such assignment may be made at any time without notice or
other obligation with respect to the assignment. No such assignment shall
release the assigning Bank from its obligations hereunder.
SECTION 12.10. GOVERNING LAW. This credit agreement, each of the Notes
and any Related Writing shall be governed by and construed in accordance with
the laws of the State of Ohio, without regard to the principles of conflict of
laws and the respective rights and obligations of Borrower and the Banks shall
be governed by Ohio law.
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<PAGE> 43
SECTION 12.11. SEVERABILITY OF PROVISIONS; CAPTIONS. Any provision of
this credit agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. The several captions to sections and subsections herein are
inserted for convenience only and shall be ignored in interpreting the
provisions of this credit agreement.
SECTION 12.12. PURPOSE. Each of the Banks represents and warrants to
Borrower that it is entering into this credit agreement with the present
intention of acquiring any Note issued pursuant hereto solely in connection with
such Bank's commercial lending activities and not for the purpose of
distribution or resale, it being understood, however, that each Bank shall at
all times retain full control over the disposition of its assets.
SECTION 12.13. ENTIRE AGREEMENT. This credit agreement, any Note and
any other agreement, document or instrument attached hereto or referred to
herein or executed on or as of the date hereof integrate all the terms and
conditions mentioned herein or incidental hereto and supersede all oral
representations and negotiations and prior writings with respect to the subject
matter hereof.
SECTION 12.14. PRIOR AGREEMENT SUPERSEDED. Borrower and each Bank
acknowledge and agree that this credit agreement shall supersede and replace the
Credit Agreement by and between Borrower and Society National Bank, First
National Bank of Ohio and Union Bank of Switzerland dated as of June 30, 1993,
as amended (the "Prior Agreement"), and that Borrower shall have no further
rights to borrow and the foregoing Banks shall have no further obligations to
lend under the Prior Agreement. On the Effective Date, Borrower shall repay the
outstanding principal balance of each Note (as defined in the Prior Agreement),
and all unpaid interest accrued thereon, executed and delivered by Borrower
pursuant to the Prior Agreement and shall pay all costs and expenses due the
Banks under the terms of the Prior Agreement.
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<PAGE> 44
SECTION 12.15. JURY TRIAL WAIVER. BORROWER AND EACH OF THE BANKS WAIVE
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER AND THE BANKS, OR ANY THEREOF,
ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS CREDIT AGREEMENT OR
ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT
IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY ANY BANK'S ABILITY TO PURSUE
REMEDIES PURSUANT TO ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED
IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT AMONG BORROWER AND THE
BANKS, OR ANY THEREOF.
Address: 3550 West Market Street A. SCHULMAN, INC.
Akron, Ohio 44333
By: R. A. Stefanko
------------------------
Telecopy No. (216) 668-7204 Title: Exec. Vice Pres.
---------------------
Address: 127 Public Square SOCIETY NATIONAL BANK,
Cleveland, Ohio 44114 individually and as Agent
By: Lamar C. Ratcliffe, Jr.
-----------------------
Telecopy No. (216) 689-4981 Title: Vice President
--------------------
Address: 106 South Main Street FIRST NATIONAL BANK OF OHIO
Akron, Ohio 44308
By: Dale R. Dubaskas
Telecopy No. (216) 996-8130 Title: Vice President
-40-
<PAGE> 45
Address: 30 South Wacker Drive UNION BANK OF SWITZERLAND
Chicago, Illinois 60606 By: Steven M. Dadmun
------------------------
Telecopy No. (312) 993-5530 Title: Vice President
---------------------
By: Eric P. Weinheimer
------------------------
Title: Lending Officer
---------------------
Address: One First National Plaza THE FIRST NATIONAL BANK OF
Suite 0634, 1-10 CHICAGO
Chicago, Illinois 60670 By: Marguerite Canestraro
Attention: Ernest M. Misora ------------------------
Telecopy No. (312) 732-4840 Title: Attorney In fact
---------------------
-41-
<PAGE> 46
<TABLE>
ANNEX A
<CAPTION>
Name Maximum Amount Percentage
- ---- -------------- ----------
<S> <C> <C>
SOCIETY NATIONAL BANK $35,000,000 46.7%
FIRST NATIONAL BANK OF
OHIO $15,000,000 20%
UNION BANK OF
SWITZERLAND $15,000,000 20%
THE FIRST NATIONAL
BANK OF CHICAGO $10,000,000 13.3%
</TABLE>
-42-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF FEB. 28, 1995 AND AUG. 31, 1994 AND THE
STATEMENT OF CONSOLIDATED INCOME FOR THE THREE MONTHS ENDED FEB. 28, 1995 AND
FEB. 28, 1994 AND FOR THE SIX MONTHS ENDED FEB. 28, 1995 AND FEB. 28, 1994 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000087565
<NAME> A. Schulman, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1994
<PERIOD-START> SEP-01-1994
<PERIOD-END> FEB-28-1995
<CASH> 59,671
<SECURITIES> 45,032
<RECEIVABLES> 163,579
<ALLOWANCES> 5,534
<INVENTORY> 199,362
<CURRENT-ASSETS> 481,425
<PP&E> 265,657
<DEPRECIATION> 137,326
<TOTAL-ASSETS> 624,361
<CURRENT-LIABILITIES> 164,870
<BONDS> 40,114
<COMMON> 37,987
0
1,071
<OTHER-SE> 344,476
<TOTAL-LIABILITY-AND-EQUITY> 624,361
<SALES> 500,878
<TOTAL-REVENUES> 504,166
<CGS> 417,916
<TOTAL-COSTS> 460,694
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,512
<INCOME-PRETAX> 43,472
<INCOME-TAX> 17,140
<INCOME-CONTINUING> 26,332
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,332
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
</TABLE>
