SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _________ to __________
Commission file number 0-22978
STIMSONITE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3718658
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization ) Identification Number)
7542 N. Natchez Avenue
Niles, Illinois 60714
(Address of principal executive offices) (Zip Code)
(847) 647-7717
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares of the registrant's common stock, $.01 par value,
outstanding as of July 26, 1996 was 8,839,150.
<PAGE>
<TABLE>
<CAPTION>
STIMSONITE CORPORATION
Index
Page
<S> <C> <C>
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Balance Sheets 4-5
Condensed Consolidated Statement of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-16
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 18
</TABLE>
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Information)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended Year Ended
---------------------------- ---------------------------- ----------------------------
June 30, 1996 July 2, 1995 June 30, 1996 July 2, 1995 June 30, 1996 July 2, 1995
------------- ------------ ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $24,240 $16,111 $37,665 $24,022 $81,762 $54,677
Cost of goods sold 15,099 8,744 24,129 13,622 52,132 28,391
------------- ------------ ------------- ------------ ------------- ------------
Gross profit 9,141 7,367 13,536 10,400 29,630 26,286
Operating expenses:
Selling and administrative 3,653 3,182 7,498 5,877 14,770 12,037
Research and development 618 792 1,410 1,542 2,957 2,735
Amortization of intangibles 710 702 1,419 1,399 2,835 2,776
------------- ------------ ------------- ------------ ------------- ------------
Total operating expenses 4,981 4,676 10,327 8,818 20,562 17,548
------------- ------------ ------------- ------------ ------------- ------------
Operating income 4,160 2,691 3,209 1,582 9,068 8,738
Joint venture partnership loss 89 89 22 220
Interest expense 740 610 1,414 1,132 2,888 1,996
Other income --- --- --- --- --- (206)
------------- ------------ ------------- ------------ ------------- ------------
Income before provision for income
taxes and extraordinary item 3,420 1,992 1,795 361 6,158 6,728
Provision for income taxes 1,356 798 723 148 2,689 2,661
------------- ------------ ------------- ------------ ------------- ------------
Net income $2,064 $1,194 $1,072 $213 $3,469 $4,067
============= ============ ============= ============ ============= ============
Net income (loss) per common and
common equivalent shares $0.23 $0.13 $0.12 $0.02 $0.38 $0.45
============= ============ ============= ============ ============= ============
Average number of common and
common equivalent shares outstanding 9,016,494 9,132,405 9,024,848 9,125,910 9,068,980 9,105,005
</TABLE>
See Accompanying Notes
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
6/30/96 12/31/95
------- --------
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $241 $251
Trade accounts receivable less allowance for doubtful
accounts of $1,061 and $895 22,566 18,144
Inventories 15,758 14,848
Prepaid expenses and other 1,081 901
Deferred tax assets 1,365 1,365
------------- ------------
Total current assets 41,011 35,509
Property, plant and equipment, net 16,153 11,890
Intangible assets, net 15,551 16,884
Deferred financing costs, net 687 892
Long term deferred tax assets and other 2,588 2,421
------------- ------------
Total Assets $75,990 $67,596
============= ============
</TABLE>
See Accompanying Notes
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
6/30/96 12/31/95
------- --------
(Unaudited) (Audited)
LIABILITIES
<S> <C> <C>
Current liabilities:
Accounts payable $8,250 $7,008
Current maturities of long-term debt 3,539 3,243
Accrued income taxes 2,165 1,527
Other accrued expenses 4,882 4,254
----------- ----------
Total current liabilities 18,836 16,032
Accrued postretirement benefits 631 631
Long-term debt 29,677 24,703
----------- ----------
Total liabilities 49,144 41,366
STOCKHOLDERS' EQUITY
Total stockholders' equity 26,846 26,230
----------- ----------
Total Liabilities and Stockholders' Equity $75,990 $67,596
=========== ==========
</TABLE>
See Accompanying Notes
<PAGE>
STIMSONITE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Thousand)
<TABLE>
<CAPTION>
Six Months Year Ended
----------------------------------------------------------
6/30/96 7/2/95 6/30/96 7/2/95
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $1,072 $213 $3,469 $4,067
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,580 1,054 3,092 2,028
Amortization of intangibles, deferred financing
costs and discount on long term debt 1,538 1,272 3,478 2,806
Provision for uncollectible accounts - - 303 259
Deferred income taxes - - (1,204) (145)
Joint venture partnership loss - 89 22 220
Changes in assets and liabilities:
Trade account receivables (4,422) (615) (2,488) (203)
Inventories (910) (4,088) (1,191) (4,444)
Prepaid expense and other (180) 68 (329) (39)
Accounts payable 724 (523) (318) (355)
Other accrued expenses 119 1,119 (1,212) 1,041
Accrued employee benefits 395 665 (1,145) 1,255
Accrued warranty 114 239 85 (148)
Accrued income taxes 1,156 (755) 1,569 (1,529)
------------ ------------ ------------ ------------
Net cash provided by(used in)
operating activities $1,186 ($1,262) $4,131 $4,813
============ ============ ============ ============
Cash flows from investing activities:
Purchase of property, plant and equipment ($5,843) ($2,921) ($6,674) ($4,165)
Acquisition of Pave-Mark - (6,670) (1,433) (6,670)
Investment in joint venture partnership - (64) (72) (195)
Other (167) (97) (6) (348)
------------ ------------ ------------ ------------
Net cash used in investing
activities ($6,010) ($9,752) ($8,185) ($11,378)
============ ============ ============ ============
Cash flows from financing activities:
Proceeds from the issuance of common stock, net of
offering expenses $56 $23 $148 $23
Payment to reacquire common stock (438) -- (932) --
Payments on notes receivable on common stock -- 30 31 30
Proceeds from long-term debt 6,300 12,000 7,100 12,500
Payments on long-term debt (1,030) (1,154) (2,971) (6,121)
Cash over draft -- -- 926 --
Financing fees paid in connection with debt refinancing -- -- (151) 69
Net cash provided by (used in) ------------ ------------ ------------ ------------
financing activities 4,888 10,899 4,151 6,501
Effect of exchange rate changes
on cash (74) 37 (141) 21
------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (10) (78) (44) (43)
Cash and cash equivalents, beginning of year 251 363 285 328
------------ ------------ ------------ ------------
Cash and cash equivalents, end of period $241 $285 $241 $285
============ ============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $1,204 $1,121 $2,311 $2,000
============ ============ ============ ============
Cash paid during the period for income taxes $158 $903 $2,987 $4,376
============ ============ ============ ============
</TABLE>
See Accompanying Notes
<PAGE>
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 1 - Financial Information
The consolidated financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to or as permitted by such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. In the opinion of management, the
financial information presented reflects all adjustments that are necessary to a
fair statement of results for the interim period presented. Such adjustments are
of a normal recurring nature. These financial statements should be read in
conjunction with the consolidated financial statements and footnotes thereto
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 (the "1995 Form 10-K").
The Company's business is highly seasonal and accordingly comparative full year
information is provided. The financial information included herein at June 30,
1996 and for the periods ended June 30, 1996 and July 2, 1995 is unaudited and
in the opinion of the Company, reflects all adjustments (which include normal
recurring adjustments) necessary for the fair presentation of financial position
as of those dates and the results of operations for those periods. The
information in the condensed consolidated balance sheet at December 31, 1995 was
derived from the Company's consolidated financial statements included in the
1995 Form 10-K.
Note 2 - Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
---------------- ----------------------
($000) (Unaudited) (Audited)
<S> <C> <C>
Raw materials $4,502 $4,735
Work in process 3,361 4,062
Finished goods 7,895 6,051
------- -------
$15,758 $14,848
======= =======
</TABLE>
<PAGE>
Note 3 - Income Taxes
The differences between the statutory federal income tax rate and the effective
tax rates for the quarters, six months and years ended June 30, 1996 and July 2,
1995 are as follows:
<TABLE>
<CAPTION>
Six Months Six Months
Qtr Ended Ended Year Ended Qtr Ended Ended Year Ended
---------- ---------- ------------ ---------- ---------- ------------
June 30, 1996 July 2, 1995
--------------------------------------------- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal statutory rate 34.0% 34.0% 34.0% 34.0% 34.0% 34.0%
State income taxes 4.8 4.8 4.8 5.0 5.0 5.0
Inability to utilize foreign
operating losses 1.0 6.8 1.2
Net operating loss utilized (1.0)
Provision for contingencies 5.8
Reversal of opening domestic
valuation allowance (6.8)
Other items 0.8 0.5 (0.9) 1.1 2.0 0.4
------ ------- ------- ------ ------ -------
39.6% 40.3% 43.7% 40.1% 41.0% 39.6%
======= ======= ======= ======= ====== =======
</TABLE>
See Accompanying Notes
<PAGE>
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
Note 4 - Subsequent Events
On July 23, 1996, the Company refinanced its long term debt under a new credit
agreement. The terms of the new credit agreement provide a credit facility
totaling $45.0 million of which $20.0 million is revolving credit due on June
30, 2000 bearing interest at prime or LIBOR at the Company's option plus a
margin of 75 to 150 basis points based on debt to cash flow quarterly
performance results. The balance of the credit facility is a $25.0 million term
loan due in quarterly installments of $0.625 million with a final payment of
$8.75 million due on June 30, 2003 bearing interest at prime plus 25 basis
points or LIBOR plus 180 basis points at the Company's option. The new credit
facility establishes certain minimum financial covenants. The Company's
performance with respect to these covenants will affect among other things the
level of funding available under the agreement. Under the new credit facility on
July 23, 1996, the Company borrowed $25.0 million under the term loan and $9.5
million under the revolving credit facility to repay $30.6 million in
outstanding debt and interest owed under its prior secured credit facility,
$2.8 million in construction related outstanding debt to LaSalle National Bank,
and $1.1 million to fund certain working capital requirements and closing costs
related to the new credit facility.
In May 1996, the Company broke ground on the construction of a new headquarters
and manufacturing facility in Waukegan, Illinois, a suburb of Chicago. The
Company previously purchased the 20 acre raw land site for $3.5 million. The
additional cost of completing the facility is expected to approximate $10.5
million and is expected to be completed by the middle of 1997. Construction
costs will be financed by advances under the new credit facility and cash flow
from operations.
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following is a discussion and analysis of the consolidated financial
condition and results of operations of the Company for the quarters, six months
and years ended June 30, 1996 and July 2, 1995. The following should be read in
conjunction with the condensed consolidated financial statements and related
notes appearing elsewhere herein and in conjunction with the consolidated
financial statements and footnotes thereto contained in the 1995 Form 10-K.
The Company manufactures and markets highway safety products used in a variety
of applications where motorist guidance is important.
Seasonality and Quarterly Results
The Company's sales are highly seasonal. The domestic highway maintenance and
construction season tends to reach its peak in the second and third quarters of
the year, and domestic sales of the Company's products are generally highest in
these quarters. While international sales are also seasonal, international
maintenance and construction seasons vary from the domestic season and tend to
offset somewhat the seasonality of domestic sales. International sales
constituted 13.9% and 18.7% of net sales in the first six months of 1996 and
1995, respectively, and 14.2% of net sales in the year ended December 31, 1995.
Sales in any given quarter generally result from orders booked and shipped in
that quarter. Accordingly, net sales and operating income are particularly
sensitive to the timing of domestic market demand and tend to be highest in the
second and third quarters, whereas net sales and operating income tend to be
reduced during the first and fourth quarters, resulting in either operating
losses or reduced earnings for those periods. In addition, the Company's
performance in any given quarter is further affected by weather anomalies.
Results of Operations
The following table sets forth, for the periods indicated, the percentage of net
sales of certain items in the Company's condensed consolidated statements of
operations and the percentage change in each item from the prior period.
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<TABLE>
<CAPTION>
Table
Percentage of Percentage of Percentage of
Net Sales Percentage Net Sales Percentage Net Sales Percentage
Quarter Ended Change from Six Months Ended Change from Year Ended Change from
6/30/96 7/2/95 Prior Period 6/30/96 7/2/95 Prior Period 6/30/96 7/2/95 Prior Period
------- ------- ------------ ------- ------ ------------ ------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 50.5% 100.0% 100.0% 56.7% 100.0% 100.0% 49.5%
Cost of goods sold 62.3 54.3 72.7 64.1 56.7 77.1 63.8 51.9 83.6
Gross profit 37.7 45.7 24.1 35.9 43.3 30.2 36.2 48.1 12.7
Selling and administrative 15.1 19.8 14.8 19.9 24.5 27.6 18.1 22.0 22.7
Research and development 2.5 4.9 (22.0) 3.7 6.4 (8.6) 3.6 5.0 8.1
Amortization of intangibles 2.9 4.4 1.1 3.8 5.8 1.4 3.5 5.1 2.1
Operating income 17.2 16.7 54.6 8.5 6.6 102.8 11.1 16.0 3.8
Interest expense 3.1 3.8 21.3 3.7 4.7 24.9 3.5 3.7 44.7
Joint venture partnership loss -- 0.5 (100.0) -- 0.4 (100.0) -- 0.4 (90.0)
Income before provision
for income taxes 14.1 12.4 71.7 4.8 1.5 397.2 7.5 12.3 (8.5)
Net income 8.5 7.4 72.9 2.8 0.9 403.3 4.2 7.4 (14.7)
</TABLE>
See Accompanying Notes
<PAGE>
Quarter Ended June 30, 1996
Compared to
Quarter Ended July 2, 1995
Net sales of $24.2 million for the quarter ended June 30, 1996 increased $8.1
million or 50.5 % over the comparable fiscal 1995 quarter. Domestic highway
delineation sales increased 19% compared with the second quarter of 1995.
Thermoplastic domestic revenues were $8.3 million in the quarter ended June
30,1996 compared to $1.9 million in the second quarter of 1995. The difference
in thermoplastic revenues was largely due to the inclusion of three months
revenue in 1996 compared with one months revenue in 1995, because the operation
was acquired on May 31, 1995. Optical film domestic revenues decreased 25%
compared with the second quarter of 1995. International sales increased 18%
primarily due to the inclusion of sales from the acquired thermoplastic
business. Excluding the sales of the acquired thermoplastic business,
international sales increased by 2% in the quarter. The continuation of soft
market demand in certain European and Asian markets adversely impacted
international sales growth during the quarter.
Cost of goods sold for the second quarter of 1996 totaled $15.1 million compared
to $8.7 million in 1995. As a percentage of net sales, cost of goods sold
increased from 54.3% in the first quarter of 1995 to 62.3% in 1996. Excluding
the effects of the acquired thermoplastic business, cost of goods sold as a
percentage of net sales was 50.6% in the 1996 period compared to 50.5% in 1995.
The acquired thermoplastic business has historically generated a substantially
lower gross margin than Stimsonite's other operations.
Gross margin of 37.7% in the second quarter of 1996 compares to a 45.7% gross
margin in the same period of 1995. Excluding the effect of the acquired
business, gross margin increased slightly compared to 1995.
Selling and administrative expenses for the second quarter 1996 were $3.7
million, an increase of $0.5 million. The increase was principally attributable
to the acquired thermoplastic operations offset by $0.3 million of income
arising from the sale of a product line which generated 1% of the Company's
revenues.
Research and development expenses for the second quarter of 1996 were $0.6
million compared to $0.8 million in the second quarter of 1995. The decrease was
largely due to realization of revenue from sales of insert tools which is an
offset to research and development expenses. As a percentage of net sales,
research and development expenses were 2.5 % in the 1996 period compared to 4.9
% in 1995.
Interest expense was $0.7 million in the second quarter 1996, an increase of
$0.1 million compared to 1995. The increase is primarily related to increased
debt resulting from the acquisition of the thermoplastic business.
Six Months Ended June 30, 1996
Compared to
Six Months Ended July 2, 1995
Net sales for the six months ended June 30, 1996 were $37.7 million, an increase
of $13.6 million or 56.8 % compared to the fiscal 1995 period. Excluding the
effects of the thermoplastic acquisition, net sales increased $2.8 million or
14.3 %. Increases of $3.0 million in highway reflector revenues and $10.8
million in thermoplastic revenues were partially offset by reductions of $0.1
million each in international and optical film revenues.
Cost of goods sold for the six months ended June 30, 1996 totaled $24.1 million
compared to $13.6 million in 1995. Excluding the effect of the thermoplastic
acquisition, the cost of goods sold was $14.8 million. The increase $9.3 million
in costs associated with the thermoplastic operations and $1.2 million in higher
costs associated with higher sales of other products.
Selling and administrative expenses for the six months ended June 30, 1996
totaled $7.5 million, an increase of $1.6 million or 27.6 % compared to a year
earlier. Excluding the effects of the thermoplastic acquisition, selling and
administrative expenses were increased $0.2 million. The increase is largely
related to the acquired business and an increase in commissions related to
product mix. A favorable offset was income of $0.3 million arising from the
sale of a product line which generated approximately 1% of the Company's
revenues.
Research and development expenses for the six months ended June 30, 1996 were
$1.4 million down 8.6 % compared to 1995. As a percentage of net sales, research
and development expenses were 3.7 % in the 1996 period compared to 6.4 % in
1995. The net decrease in spending is relates to lower tooling expenses offset
by increased spending related to new product development and improvements in
existing product quality in a product line.
Interest expense was $1.4 million for the six months ended June 30, 1996, an
increase of $0.3 million or 24.9 % compared to 1995. The increase is primarily
related to increased debt resulting from the acquisition of the thermoplastic
business.
Year Ended June 30, 1996
Compared to
Year Ended July 2, 1995
Net sales for the year ended June 30, 1996 were $81.8 million, an increase of
$27.0 million or 49.5 % compared to the year ended July 3, 1995. Excluding the
effect of the thermoplastic acquisition, net sales decreased $0.9 million or 1.6
%. The Company's highway domestic operations experienced sales growth while
optical film and international sales declined slightly due to aggressive
competitive pricing and soft market demand in certain foreign markets.
Cost of goods sold for the year ended June 30, 1996 totaled $52.1 million
compared to $28.3 million in 1995. Excluding the effect of the thermoplastic
acquisition, cost of goods sold was $28.1 million. The 83.6 % increase is due to
higher sales of lower margin products particularly thermoplastic.
Selling and administrative expenses for the year ended June 30, 1996 totaled
$14.8 million, an increase of $2.8 million or 22.7 % compared to a year earlier.
The increase was largely the result of the thermoplastic acquisition offset by
$0.3 million income arising from the sale of a minor product line.
Research and development expenses for the year ended June 30, 1996 were $3.0
million compared to $2.7 million a year earlier. As a percentage of net sales,
research and development expenses were 3.6 % for the year ended June 30, 1996
compared to 5.0 % for the previous year.
Interest expense for the year ended the June 30, 1996 was $2.9 million, an
increase of $0.8 million or 44.7 % compared to a year earlier. The increase is
largely related to increased indebtedness used to fund the acquisition of the
thermoplastic operations and the acquisition of raw land in Waukegan, Illinois
for the location of a new headquarters and manufacturing facility.
Liquidity and Capital Resources
The Company finances working capital expenditures through internally generated
funds, revolving credit and working capital borrowings. During the six months
ended June 30, 1996, the Company's long term debt increased $5.3 million as a
result of borrowings in connection with the purchase 20 acres of raw land in
Waukegan, Illinois for use as the future headquarters and manufacturing facility
of the Company and to fund current working capital requirements.
The Company's sales are highly seasonal, with domestic revenues tending to be
highest in the second and third quarter of the year consistent with the domestic
highway maintenance and construction season. The Company builds working capital,
principally accounts receivable and inventory, during the second and third
quarters to support sales. Positive cash flow from operations is generally
realized in the third and fourth quarters as cash collections are higher than
production levels and in the fourth quarter of the year as production and
related expenditures seasonally decline and accounts receivable are collected.
Conversely, the Company generally experiences negative cash flow in the first
quarter, when sales are lower, and in the second quarter, when the Company is
building working capital but has not yet collected revenues from second quarter
sales. The Company has historically borrowed funds available under its revolving
credit facilities to fund working capital during these quarters. As a result of
the seasonal fluctuations and lower than expected working capital needs, the
Company realized $1.2 million from operating activities in the first six months
of 1996 compared to expending $1.3 million in the first six months of 1995. The
Company realized $4.1 million from operating activities in the year ended June
30, 1996, compared to $4.8 million from operating activities in the year ended
the second quarter ended July 2, 1995.
On July 23, 1996, the Company refinanced its long term debt under a new credit
agreement. The terms of the new credit agreement provide a credit facility
totaling $45.0 million of which $20.0 million is revolving credit due on June
30, 2000 bearing interest at prime or LIBOR at the Company's option plus a
margin of 75 to 150 basis points based on debt to cash flow quarterly
performance results. The balance of the credit facility is a $25.0 million term
loan due in quarterly installments of $0.625 million with a final payment of
$8.75 million due on June 30, 2003 bearing interest at prime plus 25 basis
points or LIBOR plus 180 basis points at the Company's option. The new credit
facility establishes certain minimum financial covenants. The Company's
performance with respect to these covenants will affect amount other things the
level of funding available under the agreement. Under the new credit facility on
July 23, 1996, the Company borrowed $25.0 million under the term loan and $9.5
million under the revolving credit facility to repay $30.6 million in
outstanding construction related debt and interest owed under its prior secured
credit facility, $2.8 million in outstanding debt to LaSalle National Bank, and
$1.1 million to fund certain working capital requirements and closing costs
related to the new credit facility.
In May 1996, the Company broke ground on the construction of a new headquarters
and manufacturing facility in Waukegan, Illinois, a suburb of Chicago. The
Company previously purchased the 20 acre raw land site for $3.5 million. The
additional cost of completing the facility is expected to approximate $10.5
million and is expected to be completed by the middle of 1997. Construction
costs will be financed by advances under the new credit facility and cash flow
from operations.
Excluding amounts expended for the Company's new facility in Waukegan, Illinois,
the Company expects capital expenditure spending for additions and replacements
to approximate $4.0 million in 1996 and $4.3 million in 1997 with funding to be
principally provided from internally generated funds.
In October 1995, the board of directors authorized the repurchase of up to
500,000 shares of the Company's common stock. As of June 30, 1996, the Company
had purchased 110,000 shares of its common stock at an average price of $8.47
per share.
At June 30, 1996, the Company's outstanding borrowings under the old credit
facility consisted of $14.1 million of term loans and $16.3 million of revolving
loans. In addition, the Company has borrowed $2.8 million under a separate loan
agreement covering the purchase of land in Waukegan, Illinois. At June 30, 1996,
the additional amount available under the revolving loan portion of the old
credit agreement after consideration of all borrowing base limitations and
outstanding loans was $0.7 million. As discussed earlier, this debt facility was
paid in full on July 23, 1996.
The Company expects that cash flow from operations and borrowings under the new
credit facility will be sufficient to fund working capital needs and capital
expenditures and make mandatory principal payments under the new credit facility
through 1997.
From time to time, the Company considers possible acquisitions of businesses
complimentary to the Company's business. It is likely that any significant
acquisition would be funded with additional long term debt.
This Form 10-Q contains "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, including (without limitation)
statements as to expectations, beliefs and future financial performance and
assumptions underlying the foregoing relating to product demand, international
prospects, ability to meet short and long term debt requirements, expected cash
flow from operations, and projected capital spending levels. The actual results
of outcomes could differ materially from those discussed in the particular
forward looking statements based on a number of factors, including (i) changes
in economic conditions and (ii) pricing and other actions taken by competitors.
<PAGE>
Part II - Other Information
Item 4 - Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of the Company took place on May 30,
1996. The following matters took place at the meeting:
The following directors were elected to serve during the year or until
their successors have been elected. A summary of voting results is as
follows:
<TABLE>
<CAPTION>
T a b u l a t i o n of V o t e s
----------------------------------
Name of Director For Against Withheld
- -------------------- --- -------- ----------
<S> <C> <C> <C>
Terrence D. Daniels 7,072,844 0 64,500
Lawrence S. Eagleburger 7,072,844 0 64,500
Donald H. Haider 7,072,844 0 64,500
Edward T. Harvey, Jr. 7,072,844 0 64,500
Anthony R. Ignaczak 7,071,844 0 65,500
Lawrence Z.Y. Moh 7,071,814 0 65,530
Richard J.M. Poulson 7,071,844 0 65,500
Jay R. Taylor 7,069,329 0 68,015
</TABLE>
The appointment of Coopers & Lybrand as the Company's independent accountants
for the 1996 fiscal year was ratified. A summary of voting results is as
follows:
<TABLE>
<CAPTION>
Number of Votes
-------------------
<S> <C>
For 7,108,569
Against 23,800
Abstain 4,975
</TABLE>
A resolution was adopted that "resolved," that the 1994 stock option plan for
non-employee directors by amended and restated as described in the proxy
statement mailed to the stockholders of the Company in connection with this
annual meeting. A summary of voting results is as follows:
<TABLE>
<CAPTION>
Number of Votes
-------------------
<S> <C>
For 7,108,564
Against 23,800
Abstain 4,975
</TABLE>
<PAGE>
Item 6 - Exhibits and Reports Form 8-K
(A) Exhibits
10.1 Loan agreement dated July 23, 1996 between LaSalle National Bank
and Harris Trust and Savings Bank as co-lenders and Stimsonite
Corporation.
10.2 *Employment agreement dated May 30, 1996 between Stimsonite
Corporation and Jay R. Taylor, CEO and President of Stimsonite
Corporation.
11.1 Statement regarding computation of per share earnings.
(B) Reports on Form 8-K
There were no reports of Form 8-K filed during the quarter ended June
30, 1996.
* Management contract or compensation plan or arrangement.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated August 15, 1996 STIMSONITE CORPORATION
/s/THOMAS C. RATCHFORD
----------------------
Thomas C. Ratchford
Vice President-Finance, Treasurer,
Secretary and Chief Financial Officer
(Its Duly Authorized Officer and
Principal Financial and Accounting Officer)
<PAGE>
<TABLE>
Exhibit Index
<CAPTION>
Sequential
Exhibit Page
Number Description Number
<S> <C> <C>
10.1 Loan agreement dated July 23, 1996 between
LaSalle National Bank and Harris Trust and
Savings Bank as co-lenders and Stimsonite
Corporation
10.2 Employment agreement dated May 30, 1996
between Stimsonite Corporation and
Jay R. Taylor, CEO and President of
Stimsonite Corporation
11.1 Statement regarding computation of per
share earnings
</TABLE>
Stimsonite Corporation Exhibit 11.1
Computation of Per Share Earnings
For the Periods Indicated
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended Year Ended
------------------------- ------------------------- ------------------------
Description 6/30/96 7/2/95 6/30/96 7/2/95 6/30/96 7/2/95
- ----------- ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Average Shares Outstanding 8,852,900 8,919,650 8,854,650 8,911,775 8,882,442 8,907,088
Net additional shares assuming
dilutive stock options exercised
and proceeds used to purchase
treasury shares at fair market
value 149,914 183,070 155,229 185,757 168,227 169,939
Options issued within one year prior
to the initial filing date of
registration statement for an
initial public offering in
accordance with Staff Accounting
Bulletin No. 83 13,680 29,685 14,969 28,378 18,311 27,978
------------ -------------- ------------- -------------- ------------ --------------
Average number of common
shares and common equivalent
shares outstanding 9,016,494 9,132,405 9,024,848 9,125,910 9,068,980 9,105,005
============ ============== ============= ============== ============ ==============
Net Income $2,064,000 $1,194,000 $1,072,000 $213,000 $3,469,000 $4,067,000
Per share data:
Net Income $0.23 $0.13 $0.12 $0.02 $0.38 $0.45
</TABLE>
See Accompanying Notes
Exhibit 10.1
LOAN AGREEMENT
Dated as of July 23, 1996
among
STIMSONITE CORPORATION
as Borrower,
and
LASALLE NATIONAL BANK
as Co-Lender
and
HARRIS TRUST AND SAVINGS BANK
as Co-Lender
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached but
is inserted for convenience only.
1. DEFINITIONS AND TERMS.................................................... 1
1.1 Certain Definitions........................................ 1
-------------------
1.2 Certain UCC and Accounting Terms........................... 16
--------------------------------
2. LOANS: BANKS' COMMITMENTS AND BORROWING PROCEDURES...................... 16
2.1 Revolving Credit Commitment................................ 16
---------------------------
2.2 Term Loan Commitment....................................... 16
--------------------
2.3 Borrowing Procedures under the Commitment.................. 16
-----------------------------------------
2.4 Letters of Credit.......................................... 17
-----------------
2.5 All Loans to Constitute One Obligation..................... 18
--------------------------------------
3. LOANS: NOTES EVIDENCING LOANS........................................... 18
3.1 Revolving Notes............................................ 18
---------------
3.2 Term Note.................................................. 18
---------
3.3 Recordation................................................ 18
-----------
4. LOANS: AMOUNTS; INTEREST; BALANCES...................................... 19
4.1 Applicable Borrowing Amounts; Interest Rates; Default Rate. 19
-------------------------------------------------
4.2 Computation of Interest.................................... 20
-----------------------
4.3 Conversion and Reborrowing of Loans........................ 20
-----------------------------------
4.4 Change of Law.............................................. 20
-------------
4.5 Unavailability of Deposits or Inability to Ascertain
the LIBOR Rate or Adjusted
----------------------------------------------------------
LIBOR Rate................................................. 21
----------
4.6 Yield Protection, Etc...................................... 21
---------------------
4.7 Funding Indemnity.......................................... 22
-----------------
4.8 Discretion of Agent as to Manner of Funding................ 23
-------------------------------------------
4.9 Interest Laws.............................................. 23
-------------
4.10 Letter of Credit Fees...................................... 24
---------------------
5. LOANS: GENERAL TERMS.................................................... 24
5.1 Payments to Agent.......................................... 24
-----------------
5.2 Automatic Debit............................................ 24
---------------
5.3 Application of Payment..................................... 24
----------------------
5.4 Payment to the Banks....................................... 25
--------------------
5.5 Pro Rata Treatment......................................... 25
------------------
5.6 Non-Receipt of Funds by the Agent.......................... 25
---------------------------------
5.7 Conditions Precedent Events................................ 25
---------------------------
5.8 Offset..................................................... 26
-------
5.9 Discretionary Disbursements................................ 26
---------------------------
5.10 Credit Termination Date; Continuance of Obligations, Etc... 26
---------------------------------------------------------
5.11 Loan Evidence.............................................. 26
-------------
5.12 Over-Advances.............................................. 26
-------------
5.13 Lending Offices............................................ 27
---------------
5.14 Several Obligations; Remedies Independent.................. 27
-----------------------------------------
5.15 Lock-Box................................................... 27
--------
5.16 Unused Portion Fee......................................... 27
------------------
5.17 Transaction Fee............................................ 28
---------------
6. LOANS: CONDITIONS TO LENDING............................................ 28
6.1 Initial Loan Conditions Precedent.......................... 28
---------------------------------
6.2 Accountant's Letter........................................ 29
-------------------
7. ACCOUNTS RECEIVABLE...................................................... 29
7.1 Account Representations and Warranties..................... 29
--------------------------------------
7.2 Verification of Accounts................................... 30
------------------------
8. INVENTORY................................................................ 30
8.1 Inventory Representations and Warranties.............. 30
9. REPRESENTATIONS AND WARRANTIES; COVENANTS;
INDEMNIFICATION; CONTINUING OBLIGATION............... 30
9.1 Representations and Warranties of Borrower................. 30
------------------------------------------
9.2 Affirmative Covenants...................................... 36
---------------------
9.3 Negative Covenants......................................... 43
------------------
9.4 Maintenance of Accounts.................................... 44
-----------------------
10. DEFAULT................................................................. 45
10.1 Events of Default.......................................... 45
-----------------
10.2 Cumulative Remedies........................................ 46
-------------------
10.3 Acceleration and Termination of Loans...................... 46
-------------------------------------
10.4 Rights of Creditor......................................... 46
------------------
10.5 Injunctive Relief.......................................... 46
-----------------
11. THE AGENT............................................................... 46
11.1 Appointment, Powers and Immunities......................... 46
----------------------------------
11.2 Reliance by Agent.......................................... 47
-----------------
11.3 Defaults................................................... 47
--------
11.4 Rights as a Bank........................................... 48
----------------
11.5 Indemnification............................................ 48
---------------
11.6 Non-Reliance on Agent and other Banks...................... 48
-------------------------------------
11.7 Failure to Act............................................. 49
--------------
11.8 Resignation or Removal of Agent............................ 49
-------------------------------
11.9 Consents under this Agreement and the Other Agreements..... 49
------------------------------------------------------
11.10 Distribution of Notices.................................... 49
-----------------------
11.11 Collateral Sub-Agents...................................... 49
---------------------
12. GENERAL................................................................. 50
12.1 Payment Application Date................................... 50
------------------------
12.2 Statement of Account....................................... 50
--------------------
12.3 Manner of Application; Waiver of Setoff Prohibition........ 50
---------------------------------------------------
12.4 Survival of Representations and Warranties................. 50
------------------------------------------
12.5 Integration; Amendment; Assignment; Participation.......... 51
-------------------------------------------------
12.6 No Waiver.................................................. 52
---------
12.7 Severability............................................... 52
------------
12.8 Successors and Assigns..................................... 52
----------------------
12.9 Conflict with Other Agreements............................. 53
------------------------------
12.10 No Impairment by Termination............................... 53
----------------------------
12.11 Waivers 53
12.12 Costs, Fees and Expenses Related to Agreement and
Other Agreements........................................ 53
12.13 Environmental Indemnity.................................... 53
12.14 Release 54
12.15 Governing Law.............................................. 54
12.16 Notices.................................................... 54
12.17 FORUM; AGENT; VENUE; JURY TRIAL WAIVER..................... 54
12.18 Other Costs, Fees and Expenses............................. 55
12.19 Revival.................................................... 55
12.20 Acknowledgments............................................ 55
12.21 Section Headings........................................... 55
12.22 Counterparts............................................... 56
12.23 Effectiveness.............................................. 56
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is made as of the 23rd day of
July, 1996, by and among STIMSONITE CORPORATION, a Delaware corporation
("Borrower"); LASALLE NATIONAL BANK, a national banking association ("LaSalle"),
and HARRIS TRUST AND SAVINGS BANK, an Illinois banking corporation ("Harris")
(LaSalle and Harris are sometimes referred to herein individually as a "Bank"
and/or collectively as the "Banks"). LASALLE NATIONAL BANK, a national banking
association, as agent for the Banks for certain limited purposes hereunder (in
such capacity, together with its successors in such capacity, "Agent"), shall
also be deemed a party hereto for the purpose of acting as agent.
W I T N E S E T H:
WHEREAS, Borrower desires to borrow funds and obtain other financial
accommodations from Banks; and
WHEREAS, pursuant to Borrower's request, Banks are willing to lend monies
to Borrower pursuant hereto;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements set forth herein, Borrower agrees to borrow from the Banks, and
the Banks agree to lend to Borrower, subject to and upon the following terms and
conditions:
1. DEFINITIONS AND TERMS
1.1 Certain Definitions. The following words, terms and/or phrases
shall have the meanings set forth thereafter and such meanings shall be
applicable to the singular and plural form thereof, giving effect to the
numerical difference.
"Account Debtor" means a Person obligated on or under an Account
Receivable.
"Adjusted LIBOR Rate" shall mean a rate per annum determined pursuant to
the following ------------------- formula:
Adjusted LIBOR Rate = LIBOR
100% - Reserve Percentage
"Accounts Receivable" means all of Borrower's now
existing or hereafter arising or acquired Accounts, accounts receivable
and other rights to payment, however created, including without
limitation any right to payment for goods sold or leased or for
services rendered, whether arising out of the sale of Inventory or
otherwise and whether or not it has been earned by performance, and any
and all notes, drafts, acceptances, chattel paper, General Intangibles
and other obligations arising out of or representing a right to
payment, however created, including without limitation a right to
payment for goods sold or leased or for services rendered.
"Affiliate" means any Person (a) that directly or
indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with Borrower or one or more
Affiliates, (b) that directly or beneficially owns or holds 10% or more
of any equity interest in Borrower or one or more Affiliates or (c) 10%
or more of whose voting stock (or in the case of a Person which is not
a corporation, 10% or more of any equity interest) is owned directly or
beneficially or held by Borrower or one or more Affiliates. For
purposes of this definition and this Agreement, the term "control"
shall mean, directly or indirectly, the power to direct or cause the
direction of the management or policies of a Person, whether through
ownership interest or otherwise, including without limitation the power
to elect or appoint, directly or indirectly, a majority of the members
of its governing board or body.
"Applicable Lending Office" means, for each Bank, the
"Lending Office" of such Bank (or an Affiliate thereof) designated on
the signature pages hereof or such other office of such Bank (or an
Affiliate thereof) as such Bank may from time to time specify to
Borrower as the office by which its Loans are to be made and
maintained.
"Authorized Officer" means the President, the Vice
President-Finance or the Treasurer of Borrower.
"Base Rate" means the rate of interest (expressed as
a percentage per annum) most recently announced or published publicly
from time to time by Harris as its prime lending rate of interest,
which is not necessarily the lowest or most favorable rate of interest
charged by Harris on commercial loans at any one time. The rate of
interest shall change automatically and immediately as and when the
Base Rate shall change, without notice to Borrower, and any notice to
which it may be entitled is hereby waived, and any such change in the
Harris' Base Rate shall not affect any of the terms and conditions of
this Agreement, all of which shall remain in full force and effect.
"Base Rate Loan" shall mean a Loan bearing interest
as specified in Paragraph 4.1(a).
"Borrower's Liabilities" means all obligations and
liabilities of Borrower in the aggregate to Banks (including, without
limitation, all debts, claims and indebtedness) whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now
and/or from time to time hereafter owing, due or payable, however
evidenced, created, incurred, acquired or owing and however arising,
whether under this Agreement or the Other Agreements, or by oral
agreement or operation of law or otherwise.
"Business Day" means (i) for all purposes other than
as covered by clause (ii) below, any day on which commercial banking
institutions are open for the transaction of commercial banking
business in Chicago, Illinois other than a Saturday or Sunday, and (ii)
with respect to all notices and determinations in connection with, and
payments of principal and interest on, a LIBOR Loan, any day which is a
Business Day described in clause (i) and which is also a day for
trading by and between banks in U.S. dollar deposits in the interbank
eurodollar market.
"Capital Expenditures" means the cost of acquiring
any fixed assets, or any improvements, replacements, substitutions,
accessions or additions thereto or therefor which have a useful life of
more than one year, including without limitation, the cost of direct or
indirect acquisitions of such assets by way of purchase, capital lease
or otherwise; provided, however, that (i) the purchase price of assets
acquired after the date hereof pursuant to a bulk sale of assets or an
acquisition of all or substantially all of the assets of a Person and
(ii) costs associated with the construction and improvement of the
Waukegan Facility up to $15.5 million in the aggregate prior to
December 31, 1997, as detailed on the projections for the Waukegan
Facility Capital Expenditures attached hereto as Exhibit 1.1 (which
shall be updated from time-to-time at the request of and to the
reasonable satisfaction of the Banks), shall be excluded from the
determination of Capital Expenditures.
"Cash Flow" means EBITDA less Capital Expenditures,
plus lease amounts and rental payments.
"Cash Flow Coverage Ratio" means, as of any
date, Cash Flow divided by Fixed Charges.
"Charges" means all national, federal, state, county,
city, municipal and/or other governmental (or any instrumentality,
division, agency, body or department thereof, including, without
limitation, the PBGC) taxes, levies, assessments, charges, liens,
claims or encumbrances upon and/or relating to Borrower's Liabilities,
Borrower's business, Borrower's ownership and/or use of Borrower's
assets, income and/or gross receipts.
"Closing Date" means July 23, 1996.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time and the regulations promulgated and the
rulings issued thereunder.
"Commitment" means as to each Bank, the obligations
of such Bank to make Loans in an aggregate amount at any one time
outstanding up to but not exceeding the amount set opposite such Bank's
name on the respective signature pages hereof under the caption
"Commitment".
"Conversion Date" means the Business Day on which a
Base Rate Loan is converted to a LIBOR Loan.
"Debt" means all of a Person's liabilities,
obligations and indebtedness to any Person of any and every kind and
nature, whether primary, secondary, direct, indirect, absolute,
contingent, fixed or otherwise, heretofore, now and/or from time to
time hereafter owing, due or payable, however evidenced, created,
incurred, acquired or owing and however arising, whether under written
or oral agreement, by operation of law or otherwise. Without in any way
limiting the generality of the foregoing, Debt specifically includes
(i) Funded Debt and (ii) liabilities in respect of unfunded vested
benefits under Plans and Multiemployer Plans covered by Title IV of
ERISA.
"Default Rate" shall have the meaning assigned to
such term in Paragraph 4.1(c) hereof.
"Early Termination Date" means the date, pursuant to
Paragraph 10.3, upon which, whether by notice or by right hereunder,
the Banks' obligation to extend credit hereunder is terminated.
"EBITDA" means, with respect to any fiscal period of
Borrower, Borrower's (a) net income (determined in accordance with
GAAP) for such period, plus (b) the aggregate amounts deducted in
determining such net income in respect of (i) Interest Expense, (ii)
income taxes, (iii) depreciation, (iv) amortization and (v)
extraordinary losses up to $500,000 in the aggregate in any fiscal
year, minus (c) extraordinary gains, each determined in accordance with
GAAP consistently applied.
"Eligible Accounts Receivable" means an Account
Receivable arising in the ordinary course of the Borrower's business
from the sale of goods or rendition of services. Without limiting the
generality of the foregoing, no Account Receivable shall be an Eligible
Account Receivable if: (i) it arises out of a sale made by the Borrower
to a Subsidiary or an Affiliate of the Borrower or to a Person
controlled by an Affiliate of the Borrower; or (ii) it is unpaid for
more than sixty (60) days after the original due date shown on the
invoice; or (iii) it arises from service charges or similar charges or
is subject to a debit memo(s), to the extent of any such service
charges or similar charge or debit memo(s); or (iv) the total unpaid
Accounts Receivable of the Account Debtor exceed fifteen percent (15%)
of the net amount of all Accounts Receivable, to the extent of such
excess; or (v) the Account Debtor is also the Borrower's creditor or
supplier, or the Account Debtor has disputed liability with respect to
such Account Receivable, or the Account Receivable otherwise is subject
to any right of set-off by the Account Debtor, all to the extent of
such dispute, claim or asserted right of set-off; or (vi) the Account
Debtor has commenced a voluntary case under the federal bankruptcy
laws, as now constituted or hereafter amended, or made an assignment
for the benefit of creditors, or a decree or order for relief has been
entered by a court having jurisdiction in the premises in respect of
the Account Debtor in an involuntary case under the federal bankruptcy
laws, as now constituted or hereafter amended, or any other petition or
other application for relief under the federal bankruptcy laws has been
filed against the Account Debtor, or if the Account Debtor has failed,
suspended business, ceased to be solvent, or consented to or suffered a
receiver, trustee, liquidator or custodian to be appointed for it or
for all or a significant portion of its assets or affairs; or (vii) it
arises from a sale to an Account Debtor outside the United States,
unless the sale is on letter of credit, credit insurance, guaranty or
acceptance terms, in each case acceptable to Banks in their sole
discretion; or (viii) it arises from a sale to the Account Debtor on a
bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval,
consignment or any other repurchase or return basis; or (ix) the
Account Debtor is the United States of America or any department,
agency or instrumentality thereof, unless, to the extent required by
law, the Borrower assigns its right to payment of such Account
Receivable to Banks, in form and substance satisfactory to Banks, so as
to comply with the Assignment of Claims Act of 1940, as amended (31
U.S.C. Sub-Section 203 et seq.); or (x) the Account Receivable is
subject to a Lien other than a Permitted Lien; or (xi) the goods giving
rise to such Account Receivable have not been shipped to or have been
rejected by the Account Debtor or the services giving rise to such
Account Receivable have not been performed by the Borrower and accepted
by the Account Debtor or the Account Receivable otherwise does not
represent a final sale; or (xii) the Account Receivable is evidenced by
chattel paper or an instrument of any kind, or has been reduced to
judgment; or (xiii) the Borrower has made any agreement with the
Account Debtor for any deduction therefrom, except for discounts or
allowances which are made in the ordinary course of business for
returns, rebates, cash discounts, volume discounts, performance
discounts, co-of advertising discounts, price concession discounts,
service charges or credit discounts or allowances and which discounts
or allowances are reflected in the calculation of the face value of
each invoice related to such Account Receivable, to the extent of such
deduction; or (xiv) after the issuance of an invoice evidencing an
Account Receivable, the Borrower has made an agreement with the Account
Debtor to extend the time of payment thereof; or (xv) the Account
Receivable arises from a retail sale of goods to a Person who is
purchasing same primarily for personal, family or household purposes.
"Eligible Inventory" means Inventory of the Borrower,
provided that such inventory (i) is raw materials or finished goods
that is readily marketable in its current form, or is work-in-process,
(ii) is in good and saleable condition, (iii) is not obsolete or
unmerchantable, (iv) meets all standards imposed by any applicable
governmental agency or authority, (v) is at all times subject to no
Lien except a Permitted Lien, and (vi) is situated at a location in the
United States.
"Environmental Claim" means any notice of violation,
claim, demand, abatement order or other order or direction (conditional
or otherwise) by any Governmental Authority for any damage, including,
without limitation, personal injury (including sickness, disease or
death), tangible or intangible property damage, contribution,
indemnity, indirect or consequential damages, damage to the
environment, nuisance, pollution, release of any Hazardous Material to
the environment, contamination or other adverse effects on the
environment, or for fines, penalties or restrictions, resulting from or
based upon (i) the occurrence of a Release by Borrower (whether sudden
or non-sudden or accidental or non-accidental) of, or exposure to, any
Hazardous Material, in, into or onto the environment at, in, by, from,
onto or related to any Facility, (ii) the generation, use, handling,
transportation, storage, treatment or disposal of Hazardous Materials
by Borrower in connection with the operation of any Facility, or (iii)
the violation, or alleged violation, of any Environmental Laws or any
Governmental Authorizations by Borrower relating to environmental
matters in connection with the Facilities.
"Environmental Laws" means all applicable statutes,
ordinances, orders, rules, regulations, or decrees and the like relat-
ing to (i) fines, injunctions, penalties, damages, contribution, cost
recovery compensation, losses or injuries resulting from the Release
or threatened Release of Hazardous Materials, (ii) the generation,
use, handling, transportation, storage, treatment or disposal of
Hazardous Materials or (iii) occupational safety and health,
industrial hygiene, land use or the protection of human, plant or
animal health or welfare related to Hazardous Materials, in any manner
applicable to Borrower or the Facilities, including, without
limitation, the Comprehensive Environmental Response, Compensation,
and Liability Act (42 U.S.C. ss.9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. ss.1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss.6901 et seq.), the Federal
Water Pollution Control Act (33 U.S.C. ss.1251 et seq.), the Clean Air
Act (42 U.S.C. ss.7401 et seq.), the Toxic Substances Control Act (15
U.S.C. ss.2601 et seq.), the Occupational Safety and Health Act (29
U.S.C. ss.651 et seq.) and the Emergency Planning and Community
Right-To-Know Act (42 U.S.C. ss.11001 et seq.), each as amended or
supplemented.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as the same may be amended from time to time and, unless
the context otherwise requires, the regulations promulgated thereunder
and any successor statute.
"ERISA Affiliate" means each trade or business
(whether or not incorporated) which together with Borrower or an
Affiliate would be deemed to be a "single employer" within the meaning
of Section 4001(b) of ERISA or, where applicable, would be treated as a
"single employer" under Section 412(c)(11) of the Code.
"ERISA Termination Event" means (i) a "Reportable
Event" described in Section 4043 of ERISA (other than a "Reportable
Event" not subject to the 30-day reporting requirement to the PBGC
under applicable regulations), (ii) the withdrawal under Section 4063
or Section 4064 of ERISA of Borrower or any Affiliate from a Plan
during a plan year in which it was a "substantial employer," as defined
in Section 4001(a)(2) of ERISA, including a cessation of operations
that is treated as a withdrawal by a "substantial employer" under
Section 4062(e) of ERISA, (iii) the filing of a notice of intent to
terminate a Plan or the treatment of a Plan amendment as a termination
under Section 4041 of ERISA, (iv) the institution of proceedings under
Section 4042 of ERISA to terminate a Plan by the PBGC, (v) any other
event or condition which in the reasonable judgment of Borrower is
likely to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to or any ERISA
administer, any Plan, or (vi) the partial or complete withdrawal
pursuant to Section 4203 or Section 4205 of ERISA of Borrower or any
ERISA Affiliate from a Multiemployer Plan.
"Event of Default" shall have the meaning assigned to
such term in Paragraph 10.1 hereof.
"Excess Interest" shall have the meaning assigned to
such term in Paragraph 4.9 hereof.
"Facilities" means any and all real property
(including, without limitation, all buildings, or other improvements
located thereon) now, hereafter or heretofore, owned, leased, operated
or used by Borrower or any of its respective successors and assigns
including, but not limited to, the Waukegan Facility and the Facility
located at 7452 North Natchez Avenue, Niles, Illinois.
"Federal Funds Rate" shall mean, for any day, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of
1%) equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such day,
provided that (i) if the day for which such rate is to be determined is
not a Business Day, the Federal Funds Rate for such day shall be such
rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if such rate is
not so published for any day, the Federal Funds Rate for such day shall
be the average rate charged to LaSalle on such day on such transactions
as determined by LaSalle.
"Financials" means those financial statements of
Borrower heretofore or concurrently herewith delivered by or on behalf
of Borrower to Banks.
"Fixed Charges" means, without duplication, total
Interest Expense, dividends, rental amounts, lease amounts and required
principal payments on Debt.
"Funded Debt" means, without duplication, (i)
indebtedness for borrowed money, (ii) obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii) the face amount
of all letters of credit issued for the account of Borrower and,
without duplication, all drafts drawn thereunder, (iv) obligations to
pay the deferred purchase price of property or services, (v)
obligations as lessee under leases which have been or should be, in
accordance with GAAP, recorded as capital leases, (vi) obligations
under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness
or obligations of other of the kinds referred to in clauses (i) through
(v) above, (vii) all net obligations under any interest rate swap
agreements, any interest rate cap agreement, any interest rate collar
agreement or other similar agreement or arrangement, and (viii) all
obligations to pay a specified purchase price for goods or services
whether or not delivered or accepted (i.e., take-or-pay and similar
obligations); provided, that Funded Indebtedness shall not include
trade payables, accrued expenses and other obligations not yet due and
payable incurred in the ordinary course of business, in each case
arising in the ordinary course of business.
"GAAP" shall mean generally accepted accounting
principles as in effect from time to ---- time.
"General Intangibles" means all choses in action,
causes of action and all other intangible property of Borrower of every
kind and nature now owned or hereafter acquired by Borrower, including,
without limitation, corporate and other business records, deposit
accounts, inventions, designs, patents, patent and trademark
registrations and applications, trademarks, trade names, trade secrets,
goodwill, copyrights, registrations, licenses, franchises, deferred tax
benefits, tax refund claims, prepaid expenses, computer programs,
covenants not to compete, customer lists and mailing lists, contract
rights, indemnification rights, causes of action and any letters of
credit, guarantee claims, security interests or other security held by
or granted to Borrower.
"Governmental Authority" means any federal, state or
local governmental authority, department, agency or court.
"Governmental Authorization" means any permit,
license, authorization, plan, directive, consent order or consent
decree of or from any Governmental Authority.
"Hazardous Materials" means (i) any chemical,
material or substance defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous waste," "restricted hazardous waste," "infectious
waste," "toxic substances" or any other formulations intended to
define, list or classify substances by reason of deleterious properties
such as ignitability, corrosivity, reactivity, carcinogenicity,
toxicity, reproductive toxicity, "TCLP toxicity" or "EP toxicity" or
words of similar import under any applicable Environmental Laws or
publications promulgated pursuant thereto, (ii) any oil, petroleum or
petroleum derived substance, (iii) any drilling fluids, produced waters
and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources, (iv) any
flammable substances or explosives, (v) any radioactive materials, (vi)
asbestos in any form (which is or could become friable), (vii) urea
formaldehyde foam insulation, (viii) electrical equipment which
contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of fifty parts per million, (ix)
pesticides or (x) any other chemical, material or substance, exposure
to which is prohibited, limited or regulated by any governmental
authority or which may or could pose a hazard to the health and safety
of the owners, occupants or any Persons in the vicinity of the
Facilities.
"Interest Expense" means, for any period, the sum of
all interest in respect of Debt of Borrower accrued or capitalized
during such period (whether or not actually paid during such period),
determined in accordance with GAAP.
"Interest Period" means with respect to the LIBOR
Loans, the period used for the computation of interest commencing on
the date the relevant LIBOR Loan is effected by conversion or continued
and concluding on the date one (1) month, two (2) months, three (3)
months or six (6) months thereafter, at Borrower's option, with any
subsequent Interest Period commencing on the last day of the
immediately preceding Interest Period and concluding one (1) month, two
(2) months, three (3) months or six (6) months thereafter, at
Borrower's option; provided, however, that no Interest Period for any
LIBOR Loan made under the Commitment may extend beyond the Revolving
Credit Maturity Date or the Term Loan Maturity Date, as the case may
be. Each Interest Period for a LIBOR Loan which would otherwise end on
a day which is not a Business Day shall end on the next succeeding
Business Day (unless such next succeeding Business Day is the first
Business Day of a calendar month, in which case such Interest Period
shall end on the next preceding Business Day).
"Interest Rate Agreement" means any interest rate
swap agreement, any interest rate cap agreement, any interest rate
collar agreement or other similar agreement or arrangement designed to
protect the Borrower against fluctuations in interest rates.
"Inventory" shall have the meaning ascribed to it in
the Uniform Commercial Code, as adopted in the State of Illinois, and
shall include, without limitation, all of Borrower's goods held or
being processed for sale or lease including all materials,
work-in-process, finished goods, supplies and other goods customarily
classified as Inventory.
"Letter of Credit" means a standby or commercial
import letter of credit at any time issued by Agent or any Bank for the
account of Borrower.
"Letter of Credit Maturity Date" means December 31,
2000.
"Letter of Credit Termination Date" means the
earliest to occur of (i) the Letter of Credit Maturity Date or (ii) the
Early Termination Date.
"Leverage Ratio" means, as of any date, the ratio of
Funded Debt to Funded Debt plus Net Worth.
"LIBOR" means for each Interest Period the rate of
interest per annum as determined by Agent (rounded upward, if
necessary, to the nearest whole multiple of one-sixteenth of one
percent (1/16th of 1%) or such other integral multiple thereof at which
interest rates for LIBOR-based loans are commonly quoted to major banks
in the interbank eurodollar market) at which deposits of United States
Dollars in immediately available and freely transferable funds would be
offered at 11:00 a.m., Chicago time, three (3) Business Days prior to
the commencement of such Interest Period by the principal offshore
funding office of Agent to major banks in the interbank eurodollar
market upon request by such major banks for a period equal to such
Interest Period and in an amount equal to the principal amount of the
LIBOR Loan to be outstanding from Agent during such Interest Period.
Each determination of LIBOR made by Agent in accordance with this
paragraph shall be conclusive and binding on Borrower except in the
case of manifest error.
"LIBOR Loan" means all or a portion of a Loan bearing
interest with respect to the Adjusted LIBOR Rate as specified in
Paragraph 4.1(b).
"LIBOR Margin" means one and one-half percent
(1.50%); provided, however, that, as long as the ratio of Debt to Cash
Flow (determined on a rolling four-quarter basis taking into account
the immediately preceding four quarters) is equal to or greater than
(a) 3.50 to 1.0, LIBOR Margin shall mean one and one-quarter percent
(1.25%), (b) 2.50 to 1.0 (but less than 3.49 to 1.0), LIBOR Margin
shall mean one percent (1.0%) and (c) 1.50 to 1.0 (but less than 2.49
to 1.0), LIBOR Margin shall mean three-quarters of one percent (0.75%).
"Lien" means, with respect to any asset of Borrower,
any mortgage, pledge, security interest, encumbrance, lien or charge of
any kind (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any lease in the
nature thereof and the filing of or agreement to give any financing
statement under the Uniform Commercial Code in effect in any
jurisdiction).
"Loan" or "Loans" means and includes Letters of
Credit issued and all Base Rate Loans and LIBOR Loans made under the
Commitment, unless the context in which such term is used shall
otherwise require.
"Majority Banks" means Banks having more than
fifty-one percent (51%) of the aggregate amount of the Commitments;
provided that, if the Commitment shall have terminated, Majority Banks
shall mean Banks holding more than fifty-one percent (51%) of the
aggregate unpaid principal amount of the Loans.
"Maximum Rate" shall have the meaning assigned to
such term in Paragraph 4.9 hereof.
"Multiemployer Plan" means a plan defined as such in
Section 4001(a)(3) of ERISA to which contributions have been made by
Borrower or an ERISA Affiliate.
"Net Worth" means, as of any date of determination
thereof, the total stockholders' equity of Borrower, all as determined
in accordance with GAAP.
"Notes means the Revolving Notes and the Term Notes.
"Obligor" means any Person who is and/or may become
an Account Debtor.
"Other Agreements" means all agreements, instruments
and documents, including, without limitation, letters of credit,
mortgages, deeds of trust, guaranties, pledges, powers of attorney,
consents, assignments, contracts, notices, security agreements, leases,
financing statements and all other written matter heretofore, now
and/or from time to time hereafter executed by and/or on behalf of
Borrower and delivered to the Banks including, without limitation, the
Revolving Notes and the Term Notes.
"PBGC" means the Pension Benefit Guaranty Corporation
and any entity succeeding to any or all of its functions under ERISA.
"Permitted Debt" means (a) Debt incurred pursuant to
this Agreement or the Other Agreements, (b) Debt incurred pursuant to
purchase money mortgages (including, without limitation, capitalized
lease obligations) not to exceed $1,000,000 at any time outstanding in
the aggregate, (c) trade payables, accrued expenses and obligations not
yet due and payable incurred in the ordinary course of business, (d)
Funded Debt of Subsidiaries in the aggregate maximum principal amount
of $5,000,000 and (e) Debt incurred pursuant to any Interest Rate
Agreement with a third party reasonably acceptable to Banks.
"Permitted Investments" shall have the meaning
assigned to such term in Paragraph 9.3(d) hereof.
"Permitted Liens" means (a) Liens for taxes not yet
due or Liens for taxes being contested in good faith and by appropriate
proceedings for which adequate reserves (in the good faith judgment of
the management of Borrower) have been established; (b) Liens in respect
of property or assets of Borrower or any of its Subsidiaries imposed by
law which were incurred in the ordinary course of business, such as
carriers', warehousemen's and mechanics' Liens, statutory landlord's
Liens, and other similar Liens arising in the ordinary course of
business and (i) which do not in the aggregate materially detract from
the value of such property or assets or materially impair the use
thereof in the operation of the business of Borrower or any Subsidiary
or (ii) which are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing the
forfeiture or sale of the property or asset subject to such Lien; (c)
Liens on assets of the Borrower and each Subsidiary existing on the
Effective Date and listed on Exhibit 9.3(a); (d) Liens arising from
judgments, decrees or attachments in circumstances not constituting an
Event of Default, provided that no material amount of cash or property
is deposited or delivered to secure any respective judgment or award
(or any appeal bond in respect thereof, except as permitted by the
following clause (e)); (e) Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return-of-money bonds and other
similar obligations incurred in the ordinary course of business
(exclusive of obligations in respect of the payment for borrowed money)
provided, that the aggregate amount of deposits at any time pursuant to
this clause (e) shall not exceed $50,000; (f) Purchase money Liens
securing payables arising from the purchase by Borrower of any
equipment or goods in the normal course of business, provided that such
payables shall not constitute Funded Debt; (g) Liens arising pursuant
to purchase money mortgages relating to, or security interests securing
Debt representing the purchase price of, assets acquired by Borrower
after the Closing Date, provided that any such liens attach only to the
assets so acquired and that all Debt secured by Liens created pursuant
to this clause (g) shall not in the aggregate exceed $1,000,000 at any
time outstanding; (h) Liens on assets of Subsidiaries of Borrower
securing Debt of any Subsidiaries not in excess of $5,000,000 at any
time outstanding; (i) easements, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of Borrower or any of its Subsidiaries; and (j)
Liens created pursuant to leases deemed "capital leases" under GAAP and
otherwise permitted by this Agreement.
"Person" means and includes an individual, a
partnership, a joint venture, a corporation (whether or not for
profit), a trust, an unincorporated organization, any Governmental
Authority or any other entity or organization.
"Plan" means, at any time, any single-employer plan,
as defined in Section 4001(a)(15) and subject to Title IV of ERISA,
which is maintained, or at any time during the five calendar years
preceding the time in question was maintained, for employees of
Borrower or an ERISA Affiliate.
"Pro Rata Share" means (a) with respect to matters
relating to a particular Commitment of a Bank (including the making or
repayment of Loans pursuant to that Commitment), the percentage
obtained by dividing (i) such Commitment of that Bank by (ii) all such
Commitments of all Banks and (b) with respect to all other matters, the
percentage obtained by dividing (i) the Total Loan Commitment of a Bank
by (ii) the Total Loan Commitments of all Banks, in either case as such
percentage may be adjusted by assignments permitted pursuant to
Paragraph 12.5.
"Release" means any actual release, spill, emission,
leaking, pumping, pouring, injection, escaping, deposit, disposal,
discharge, dumping, leaching, or migration of Hazardous Materials into
the indoor or outdoor environment (including, without limitation, the
abandonment or disposal of any barrels, containers or other closed
receptacles containing any Hazardous Materials in violation of any
Environmental Laws), or into or out of any Facility.
"Reserve Percentage" means, for the purpose of
computing the Adjusted LIBOR Rate, the reserve requirement imposed by
the Board of Governors of the Federal Reserve System (or any successor)
under Regulation D on Eurocurrency liabilities (as such term is defined
in Regulation D) for the applicable Interest Period as of the first day
of such Interest Period, but subject to any amendments of such reserve
requirement by such Board or its successor, and taking into account any
transitional adjustments thereto becoming effective during such
Interest Period. For purposes of this definition, LIBOR Loans shall be
deemed to be Eurocurrency liabilities as defined in Regulation D
without benefit of or credit for prorations, exemptions or offsets
under Regulation D.
"Revolving Credit Commitment" shall have the meaning
assigned to such term in Paragraph 2.1 hereof.
"Revolving Credit Maturity Date" means June 30, 2000.
"Revolving Credit Termination Date" means the
earliest to occur of (i) the Revolving Credit Maturity Date or (ii) the
Early Termination Date.
"Revolving Loan" means and includes all Loans made
under the Revolving Credit Commitment, unless the context in which such
term is used shall otherwise require.
"Revolving Loan Borrowing Base" means, as at any date
of determination thereof, an amount equal to the lesser of (i) Twenty
Million Dollars ($20,000,000) and (ii) an amount equal to the sum of
(A) eighty-five percent (85%) of the net amount of Eligible Accounts
Receivable outstanding at such date and (B) sixty percent (60%) of the
net amount of Eligible Inventory outstanding at such date.
"Revolving Notes" means those certain Revolving Notes
of even date herewith in the original aggregate maximum principal
amount of $20,000,000, as the same may be amended, modified or
supplemented from time to time, and together with any renewals thereof
or exchanges or substitutes therefor.
"Subordinated Debt" means, as of any date, the amount
of Debt which is subordinated in right of payment to Borrower's
Liabilities on terms satisfactory to the Banks in each particular case.
"Subsidiary" means any corporation of which a Person
owns, directly or indirectly through one or more intermediaries, more
than 50% of the voting stock at the time of determination.
"Term Base Margin" means one quarter of one percent
(1/4%).
"Term LIBOR Margin" means one and 8/10 percent
(1.80%).
"Term Loan Commitment" shall have the meaning
assigned to such term in Paragraph 2.2 hereof.
"Term Loan" means and includes all Loans made under
the Term Loan Commitment, unless the context in which such term is used
shall otherwise require.
"Term Loan Maturity Date" means June 30, 2003.
"Term Loan Termination Date" means the earliest to
occur of the (i)Term Loan Maturity Date or (ii) Early Termination Date.
"Term Notes" means those certain Term Notes of even
date herewith or as executed and delivered from time to time hereunder
in the original aggregate principal amount of $25,000,000 as the same
may be amended, modified or supplemented from time to time, and
together with any renewals thereof or exchanges or substitutes
therefor.
"Total Loan Commitment" means the aggregate
commitments of any Bank with respect to the Revolving Credit Commitment
and the Term Loan Commitment.
"Transaction Fee" shall have the meaning assigned to
such term in Paragraph 5.17 below.
"Unused Portion Fee" shall have the meaning assigned
to such term in Paragraph 5.16 below.
"Waukegan Facility" means that certain Facility
of Borrower located at 3801 West Norman Drive, Waukegan, Illinois.
1.2 Certain UCC and Accounting Terms. Except as otherwise defined in
this Agreement or the Other Agreements, all words, terms and/or phrases used
herein and therein shall be defined by the applicable definition therefor (if
any) in the Uniform Commercial Code as adopted by the State of Illinois.
Notwithstanding the foregoing, any accounting terms used in this Agreement which
are not specifically defined herein shall have the meaning customarily given to
them in accordance with GAAP. All financing computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
as consistently applied.
2. LOANS: BANKS' COMMITMENTS AND BORROWING PROCEDURES
2.1 Revolving Credit Commitment. On the terms and subject to the
conditions set forth in this Agreement, each Bank, severally and not jointly,
agrees to make revolving credit available and Letters of Credit available to
Borrower from time to time prior to the Revolving Credit Termination Date with
respect to revolving credit loans and the Letter of Credit Termination Date with
respect to Letters of Credit in such aggregate amounts as Borrower may from time
to time request but in no event exceeding each Bank's Pro Rata Share of the
Revolving Loan (as may be reduced from time-to-time pursuant to Paragraph 9.3(e)
below, the "Revolving Credit Commitment"); provided, however, that in no event
shall the Revolving Credit Commitment at any one time exceed the Revolving Loan
Borrowing Base. The Revolving Credit Commitment shall be available to Borrower
by means of Revolving Loans and Letters of Credit, it being understood that
Revolving Loans may be repaid and used again during the period from the date
hereof to and including the Revolving Credit Termination Date, at which time the
Revolving Credit Commitment shall expire.
2.2 Term Loan Commitment. On the terms and subject to the conditions
set forth in this Agreement, each Bank, severally and not jointly, agrees to
make the Term Loan to Borrower in no event exceeding each Bank's Pro Rata Share
of the Term Loan (the "Term Loan Commitment"). The Term Loan Commitment shall be
used to refinance existing term debt and to partially finance the construction
of the Waukegan Facility.
2.3 Borrowing Procedures under the Commitment. Borrower shall give
Agent irrevocable telephonic notice, written notice or telecopied notice by no
later than 11:00 a.m., Chicago time, on the date it requests to make a Loan
hereunder. Each such notice shall be effective upon receipt by Agent and shall
specify the date of the Loan (which shall be a Business Day), the amount of such
Loan, whether the Loan is a Base Rate Loan or LIBOR Loan and, with respect to a
LIBOR Loan, the Interest Period applicable thereto. Borrower shall give Agent
irrevocable telephonic notice (which notice shall be promptly confirmed in
writing) no later than 10:00 a.m., Chicago time, three (3) Business Days prior
to the date that it requests Agent to effect a conversion from a Base Rate Loan
to a LIBOR Loan, including a reborrowing as provided in Paragraph 4.3. Borrower
agrees that Agent may rely on any notice given by any person it reasonably
believes to be an Authorized Officer without the necessity of independent
investigation. Each borrowing shall be on a Business Day.
2.4 Letters of Credit. (a) Subject to all of the terms and conditions
of this Agreement, if requested to do so by Borrower, Agent shall, on behalf of
Banks, issue its, or cause to be issued Letters of Credit for the account of
Borrower; provided that the aggregate face amount of all Letters of Credit
outstanding at any time shall not exceed the availability under the Revolving
Credit Commitment. No Letter of Credit may have an expiration date that is
either greater than one (1) year from the date of issuance of such Letter of
Credit or later than the Letter of Credit Termination Date. Any amounts paid by
Agent or any Bank in connection with any Letter of Credit (i) shall become part
of Borrower's Liabilities, (ii) shall be paid from the proceeds of a Revolving
Loan requested pursuant to Paragraph 2.1 above, to the extent Banks are required
to make a Revolving Loan pursuant to the terms hereof, and (iii) otherwise,
shall be payable on demand. In no event shall Agent or Banks be required to
issue or cause to be issued Letters of Credit at any time there exists an Event
of Default or an event which with passage of time or giving of notice or both
would mature into an Event of Default.
(b) Immediately upon the issuance of each Letter of Credit by
Agent or any Bank hereunder, each Bank shall be deemed to have automatically,
irrevocably and unconditionally purchased from the Agent or issuing Bank, as the
case may be, an undivided interest and participation in and to such Letter of
Credit, the obligations of Borrower in respect thereof and the liability of the
Agent or issuing Bank, as the case may be, thereunder in an amount equal to the
amount available for drawing under such Letter of Credit multiplied by such
Bank's Pro Rata Share. The Agent or the issuing Bank, as the case may be, will
notify each Bank promptly upon presentation to it of a draw under a Letter of
Credit. On or before the Business Day on which the Agent or the issuing Bank, as
the case may be, makes payment under a Letter of Credit, each Bank shall make
payment to the Agent or issuing Bank, as the case may be, in immediately
available funds of an amount equal to such Bank's pro rata share of the amount
of such payment. The obligation of each Bank to reimburse the Agent or issuing
Bank, as the case may be, under this Paragraph 2.4(b) shall be unconditional,
continuing, irrevocable and absolute. In the event that any Bank fails to make
payment to the Agent or issuing Bank, as the case may be, of any amount due
under this Paragraph 2.4(b), the Agent or the issuing Bank, as the case may be,
shall be entitled to receive, retain and apply against such obligation the
principal and interest otherwise payable to such Bank hereunder until the Agent
or issuing Bank, as the case may be, receives such payment from such Bank or
such obligation is otherwise fully satisfied; provided, however, that nothing
contained in this sentence shall relieve such Bank of its obligation to
reimburse the Agent or issuing Bank, as the case may be, for such amount in
accordance with this Paragraph 2.4(b).
(c) Borrower agrees to unconditionally, irrevocably and
absolutely pay immediately to the Agent, for the account of the Banks, the
amount drawn under a Letter of Credit. If Borrower at any time fails to make
such payment, Borrower shall be deemed to have elected to borrow from the Banks
on such date Revolving Loans equal in aggregate amount to the amount paid by
Agent or the issuing Bank, as the case may be, under such Letter of Credit.
2.5 All Loans to Constitute One Obligation. The Loans shall constitute
one general obligation of Borrower.
3. LOANS: NOTES EVIDENCING LOANS
3.1 Revolving Notes. The Revolving Loans made by each Bank under the
Revolving Credit Commitment shall be evidenced by the Revolving Notes
substantially in the form set forth in Exhibit 3.1, with appropriate insertions,
dated the date hereof (or such other date prior thereto as shall be satisfactory
to Banks), payable to the order of such Bank in a principal amount not to exceed
each such Bank's Pro Rata Share of the Revolving Loan. The unpaid principal
amount of the Revolving Loan shall bear interest and be due and payable as
provided in this Agreement and the Revolving Notes. Payments to be made by
Borrower under the Revolving Notes shall be made at the time, in the amounts and
upon the terms set forth herein and therein.
3.2 Term Notes. The Term Loan made by each Bank under the Term Loan
Commitment shall be evidenced by the Term Notes substantially in the form set
forth in Exhibit 3.2, with appropriate insertions, dated the date hereof (or
such other date prior thereto as shall be satisfactory to Agent), payable to the
order of such Bank in a principal amount not to exceed each such Bank's Pro Rata
Share of the Term Loan. The unpaid principal amount of the Term Loan shall bear
interest and be due and payable as provided in this Agreement and the Term
Notes. Payments to be made by Borrower under the Term Notes shall be made at the
time, in the amounts and upon the terms set forth herein and therein.
3.3 Recordation. The type, date and amount of each Loan made by each
Bank, the interest rate, and the date and amount of each repayment of principal
received by each Bank shall be recorded by such Bank in its records. The
aggregate unpaid principal amount so recorded shall be prima facia evidence of
the principal amount owing and unpaid on the Revolving Notes and the Term Notes.
The failure to so record any such amount or any error in so recording any such
amount shall not limit or otherwise affect the obligations of Borrower hereunder
or under the Revolving Notes and the Term Notes to repay the principal amount of
the Loans together with all interest accrued thereon.
4. LOANS: AMOUNTS; INTEREST; BALANCES
4.1 Applicable Borrowing Amounts; Interest Rates; Default Rate
(a) Borrower hereby promises to pay interest on the unpaid
principal amount of each Revolving Loan at a rate per annum equal to the Base
Rate from time to time in effect for the period commencing on the date of such
Loan until such Base Rate Loan is (A) converted to a LIBOR Loan pursuant to
Paragraph 4.3 hereof, or (B) paid in full. Each Revolving Loan shall be in a
minimum amount of $25,000. Borrower hereby promises to pay interest on the
unpaid principal amount of the Term Loan at a rate per annum equal to the Base
Rate from time to time in effect plus the Term Base Margin for the period
commencing on the date of such Loan until such Base Rate Loan is (i) converted
to a LIBOR Loan pursuant to Paragraph 4.3 hereof or (ii) paid in full. Accrued
interest on the outstanding principal amount of Loans shall be payable (i)
quarterly in arrears on the last Business Day of each calendar quarter in the
case of a Base Rate Loan, (ii) on the last day of the Interest Period therefor
in the case of a LIBOR Loan, but in no event later than the last day of each
calendar quarter, (iii) upon conversion of any Loan into a LIBOR Loan (such
amount of accrued interest then coming due to be calculated based on the
principal amount of the Loan so converted) and (iv) upon the Revolving Credit
Termination Date (in the case of a Revolving Loan) and the Term Loan Maturity
Date (in the case of a Term Loan), which payments shall commence with the last
Business Day of September, 1996 in the case of a Base Rate Loan. After the
Revolving Credit Termination Date (in the case of a Revolving Loan) and the Term
Loan Maturity Date (in the case of a Term Loan) or Conversion Date (with respect
to accrued interest coming due as a result of the conversion), as applicable,
accrued interest on such Loans shall be payable on demand.
(b) Each LIBOR Loan shall be in a minimum amount of
$1,000,000 or such greater amount which is an integral multiple of $100,000 and
shall bear interest (computed on the basis of a year of 360 days and actual days
elapsed) on the unpaid principal amount thereof from the date such LIBOR Loan is
effected by conversion or continued until maturity (whether by acceleration or
otherwise) at a rate per annum equal to the sum of the LIBOR Margin plus the
Adjusted LIBOR Rate, with such interest payable in accordance with Paragraph
4.1(a) above.
(c) If any payment of principal on any Loan is not made when
due, such Loan shall bear interest from the date such payment was due until paid
in full, payable on demand, at a rate per annum (the "Default Rate") equal to
the sum of three percent (3%) plus the applicable interest rate from time to
time in effect (computed on the basis of a 360 day year and actual days
elapsed).
4.2 Computation of Interest. Interest on each Loan shall be computed
for the actual number of days elapsed on the basis of a 360-day year. The
interest rate applicable to each Base Rate Loan shall change simultaneously with
each change in such Base Rate. Upon conversion of less than all the aggregate
principal amount of Base Rate Loans outstanding at any one time to a LIBOR Loan,
interest on the remaining principal amount of Base Rate Loans shall continue to
bear interest at the Base Rate.
4.3 Conversion and Reborrowing of Loans.
(a) Provided that no Event of Default has occurred and is
continuing, Base Rate Loans may, subject to Paragraphs 2.3 and 4.1(b) hereof, at
any time be converted by Borrower to LIBOR Loans, which LIBOR Loans shall mature
and become due and payable on the last day of the Interest Period applicable
thereto. Provided that no Event of Default has occurred and is continuing,
Borrower shall have the right, subject to the terms and conditions of this
Agreement, to reborrow through a new LIBOR Loan in whole or in part, subject to
Paragraph 4.1(b), any LIBOR Loan from any current Interest Period into a
subsequent Interest Period, provided that Borrower shall give the Agent notice
of the reborrowing of any such LIBOR Loan as provided in Paragraph 2.3 hereof.
(b) In the event that (i) Borrower fails to give notice
pursuant to Paragraph 2.3 hereof of the reborrowing of any LIBOR Loan or fails
to specify the Interest Period applicable to such reborrowing or (ii) an Event
of Default has occurred and is continuing at the time any such LIBOR Loan is to
be reborrowed hereunder, then such LIBOR Loan shall be automatically reborrowed
as a Base Rate Loan, subject to Paragraphs 4.1(c) (in the case of subpart (ii)
of this Paragraph 4.3(b)) and 10.3 hereof if an Event of Default has occurred
and is continuing, whichever is applicable, unless the relevant LIBOR Loan is
paid in full on the last day of the then applicable Interest Period.
4.4 Change of Law. Notwithstanding any other provisions of this
Agreement or the Notes, if at any time Agent or any Bank shall determine in good
faith that any change in applicable law or regulation or in the interpretation
thereof makes it unlawful or impossible for Agent or such Bank to effect a
conversion of a Base Rate Loan into a LIBOR Loan or to continue to maintain any
LIBOR Loan, Agent or such Bank shall promptly give notice thereof (together with
an explanation of the reasons therefor) to Borrower, and the obligation of Agent
to effect by conversion or continue such LIBOR Loan under this Agreement shall
terminate until it is no longer unlawful or impossible for Agent or such Bank to
effect by conversion or maintain such LIBOR Loan. Upon the receipt of such
notice, Borrower may elect to either (i) pay or prepay, as the case may be, the
outstanding principal amount of any such LIBOR Loan, together with all interest
accrued thereon and all other amounts payable to the Banks under this Agreement,
or (ii) convert the principal amount of such affected LIBOR Loan to a Base Rate
Loan available hereunder, subject to the terms and conditions of this Agreement.
4.5 Unavailability of Deposits or Inability to Ascertain the LIBOR Rate
or Adjusted LIBOR Rate. Notwithstanding any other provision of this Agreement or
the Notes to the contrary, if prior to the commencement of any Interest Period
Agent shall determine in good faith (i) that deposits in the amount of any LIBOR
Loan scheduled to be outstanding are not available to Agent in the relevant
market or (ii) by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the LIBOR rate or
Adjusted LIBOR Rate, then Agent shall promptly give notice thereof to Borrower,
and the obligation of Agent to effect by conversion or continue any such LIBOR
Loan in such amount and for such Interest Period shall terminate until deposits
in such amount and for the Interest Period selected by Borrower shall again be
readily available in the relevant market and adequate and reasonable means exist
for ascertaining the LIBOR rate or Adjusted LIBOR Rate, as the case may be. Upon
the giving of such notice, Borrower may elect to either (i) pay or prepay, as
the case may be, the outstanding principal amount of any such LIBOR Loan,
together with all interest accrued thereon and all other amounts payable to the
Banks under this Agreement or (ii) convert the principal amount of such affected
LIBOR Loan to a Base Rate Loan available hereunder, subject to all the terms and
conditions of this Agreement.
4.6 Yield Protection, Etc.
(a) Increased Costs. If (x) Regulation D of the Board of
Governors of the Federal Reserve System, or (y) the adoption of any applicable
law, treaty, rule, regulation or guideline, or any change therein, or any change
in the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank or its lending branch with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency,
(i) shall subject such Bank, its lending branch or
any Loan to any tax, duty, change, stamp tax, fee, deduction,
withholding or other charge in respect of this Agreement, any Loan, the
Notes or the obligation of such Bank to make or maintain any Loan, or
shall change the basis of taxation of payments to such Bank of the
principal of or interest on any Loan or any other amounts due under
this Agreement in respect of any Loan or its obligation to make or
maintain any Loan (except for changes in the rate of tax on the overall
net income of such Bank imposed by the federal, state or local
jurisdiction in which such Bank's principal executive office or its
lending branch is located);
(ii) shall impose, modify or deem applicable any
reserve (including, without limitation, any reserve imposed by the
Board of Governors of the Federal Reserve System), special deposit or
similar requirement against assets of, deposits with or for the account
of, or credit extended by, any Bank; or
(iii) shall impose on any Bank any penalty with
respect to the foregoing or any other condition affecting this
Agreement, any Loan, the Notes or the obligation of such Bank to make
or maintain any Loan;
and the result of any of the foregoing is to increase the cost to (or to impose
a cost on) any Bank of making or maintaining any Loan, or to reduce the amount
of any sum received or receivable by any Bank under this Agreement or under the
Notes with respect thereto, then such Bank shall notify Borrower after it
receives final notice of any of the foregoing and, within 45 days after demand
by such Bank (which demand shall be accompanied by a statement setting forth the
basis of such demand), Borrower shall pay directly to the applicable Bank for
such additional amount or amounts as will compensate the Bank for such increased
cost or such reduction.
(b) Capital Adequacy. If, after the date hereof, either (i)
the introduction of or any change in or change in the interpretation of any law
or regulation or (ii) compliance by any Bank with any guideline or request from
any central bank or other governmental authority (whether or not having the
force of law) affects or would affect the amount of capital required or expected
to be maintained by such Bank or any corporation controlling such Bank and such
Bank determines that the amount of such capital is increased solely by or solely
based upon the existence of such Bank's commitment to lend hereunder and other
commitments of this type, then, upon demand by such Bank, Borrower shall
immediately pay to the applicable Bank, from time to time as specified by the
Bank, additional amounts sufficient to compensate such Bank in the light of such
circumstances, to the extent that such Bank reasonably determines such increase
in capital to be allocable to the existence of such Bank's commitment to lend
hereunder.
4.7 Funding Indemnity. In the event any Bank shall incur any loss, cost
or expense (including, without limitation, any loss of profit and any loss, cost
or expense incurred by reason of the liquidation or re-employment of deposits or
other funds acquired by such Bank to fund or maintain any LIBOR Loan or the
relending or reinvesting of such deposits or amounts paid or prepaid to such
Bank) as a result of:
(a) any payment of a LIBOR Loan on a date other than
the last day of the then applicable Interest Period;
(b) any failure by Borrower to effect by conversion or
continue any LIBOR Loan on the date specified in the notice given pursuant to
Paragraph 2.3 hereof;
(c) any failure by Borrower to make any payment of
principal or interest when due on any LIBOR Loan, whether at stated maturity,
by acceleration or otherwise; or
(d) the occurrence of any Event of Default;
then, upon the demand by such Bank, Borrower shall pay to the applicable Bank
such amount as will reimburse such Bank for such loss, cost or expense. If any
Bank makes such a claim for compensation under this Paragraph 4.7, the
applicable Bank shall provide to Borrower a certificate setting forth the amount
of such loss, cost or expense in reasonable detail.
4.8 Discretion of Agent as to Manner of Funding. Notwithstanding any
provision of this Agreement to the contrary other than Paragraph 4.7, Banks
shall be entitled to fund and maintain their funding of all or any part of the
Loans in any manner each sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder shall be made as if
Banks had actually funded and maintained each LIBOR Loan during each Interest
Period for such LIBOR Loan through the purchase of deposits in the London
Interbank Market having a maturity corresponding to such Interest Period and
bearing an interest rate equal to the Adjusted LIBOR Rate for such Interest
Period.
4.9 Interest Laws. Notwithstanding any provision to the contrary
contained in this Agreement or the Other Agreements, Borrower shall not be
required to pay, and neither Agent nor any Bank shall be permitted to collect,
any amount of interest in excess of the maximum amount of interest permitted by
law ("Excess Interest"). If any Excess Interest is provided for or determined by
a court of competent jurisdiction to have been provided for in this Agreement or
in any of the Other Agreements, then in such event: (a) the provisions of this
Paragraph shall govern and control; (b) Borrower shall not be obligated to pay
any Excess Interest; (c) any Excess Interest that Agent or any Bank may have
received hereunder shall be, at Agent's option, (i) applied as a credit against
the outstanding principal balance of Borrower's Liabilities or accrued and
unpaid interest (not to exceed the maximum amount permitted by law), (ii)
refunded to the payor thereof, or (iii) any combination of the foregoing; (d)
the interest rate(s) provided for herein shall be automatically reduced to the
maximum lawful rate allowed from time to time under applicable law (the "Maximum
Rate"), and this Agreement and the Other Agreements shall be deemed to have been
and shall be reformed and modified to reflect such reduction; and (e) Borrower
shall not have any action against Agent or any Bank for any damages arising out
of the payment or collection of any Excess Interest. Notwithstanding the
foregoing, if for any period of time interest on any Borrower's Liabilities is
calculated at the Maximum Rate rather than the applicable rate under this
Agreement, and thereafter such applicable rate becomes less than the Maximum
Rate, the rate of interest payable on such Borrower's Liabilities shall remain
at the Maximum Rate until each Bank shall have received the amount of interest
which such Bank would have received during such period on such Borrower's
Liabilities had the rate of interest not been limited to the Maximum Rate during
such period.
4.10 Letter of Credit Fees. As additional consideration for issuing, or
causing to be issued, Letters of Credit for Borrower at Borrower's request
pursuant to Paragraph 2.4 hereof, Borrower agrees to pay fees in respect to each
Letter of Credit so issued. Said fees shall be payable on the date which such
Letter of Credit is issued and shall be in an amount equal to three-quarters of
one percent (3/4%) of the amount of the Letter of Credit multiplied by a
fraction, the numerator of which is the number of days in the term of the
applicable Letter of Credit and the denominator of which is 360. In the event a
Letter of Credit is renewed or extended, a fee calculated in the manner provided
above shall be payable for any such renewal or extended period. Further,
Borrower shall pay and/or reimburse Agent and/or Banks all fees and charges paid
by Agent or Banks on account of any Letter of Credit, and Borrower shall pay to
Agent its usual and customary charges in respect to the issuance, or renewal, of
Letters of Credit.
5. LOANS: GENERAL TERMS
5.1 Payments to Agent. That portion of Borrower's Liabilities
consisting of: (a) principal payable on account of the Loans made by the Banks
to Borrower pursuant to this Agreement shall be payable by Borrower to Agent for
account of each Bank (i) as provided in the Revolving Notes or any Letter of
Credit in respect of the Revolving Loans and (ii) as provided in the Term Notes
in respect of the Term Loan; (b) costs, fees and expenses payable pursuant to
this Agreement shall be payable by Borrower to Agent for account of each Bank,
on demand (except the Unused Portion Fee which shall be payable as described in
Paragraph 5.16 below); (c) interest payable pursuant to this Agreement shall be
payable by Borrower to Agent for account of each Bank as provided in Paragraph
4.1; and (d) the balance of Borrower's Liabilities, if any, shall be payable by
Borrower to Agent for account of each Bank as and when provided in this
Agreement or the Other Agreements.
5.2 Automatic Debit. In order to cause timely payment to be made to
Agent, for the account of the Banks, of all Borrower's Liabilities as and when
due, Borrower hereby authorizes and directs Agent, at Agent's option, to debit
the amount of such Borrower's Liabilities to any ordinary deposit account of
Borrower (including, without limitation, by increasing the principal balance due
under the Revolving Loan).
5.3 Application of Payment. Borrower shall, at the time of making each
payment under this Agreement or any Note (whether by account debit or
otherwise), specify to the Agent the Loan or other amounts payable by Borrower
hereunder to which such payment is to be applied (and in the event that it fails
to so specify, or if an Event of Default has occurred and is continuing, Agent
may distribute such payment to the Banks in such manner as Banks may determine
to be appropriate, subject to Paragraph 5.5 hereof).
5.4 Payment to the Banks. Each payment received by Agent under this
Agreement or any Note for account of a Bank shall be paid daily to such Bank, in
immediately available funds, for account of such Bank at the Applicable Lending
Office of such Bank.
5.5 Pro Rata Treatment. Except to the extent otherwise provided herein:
(a) each borrowing from the Banks under Paragraph 2.1, Paragraph 2.2 and
Paragraph 2.3 hereof shall be made from the Banks and shall be applied to the
Commitments of the Banks, based upon each Bank's Pro Rata Share; (b) the making
of the Loans of a particular type shall be made by the Banks according to the
amounts of each Bank's Pro Rata Share; (c) each payment or prepayment of
principal of the Loans by Borrower shall be made for account of the Banks pro
rata in accordance with the respective unpaid principal amounts of the Loans
held by the Banks; and (d) each payment of interest on Loans to the Borrower
shall be made for account of the Banks pro rata in accordance with the amounts
of interest due and payable to the respective Banks.
5.6 Non-Receipt of Funds by the Agent. Unless Agent shall have been
notified by Borrower prior to the date on which Borrower is scheduled to make
payment to Agent of the proceeds of a payment to Agent for account of one or
more of the Banks hereunder (such payment being herein called the "Required
Payment"), which notice shall be effective upon receipt, that Borrower does not
intend to make the Required Payment to Agent, Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption (but shall not
be required to), make the amount thereof available to the intended recipient(s)
on such date and, if Borrower has not in fact made the Required Payment to
Agent, the recipient(s) of such payment shall, on demand, repay to Agent the
amount so made available together with interest thereon in respect of each day
during the period commencing on the date such amount was so made available by
Agent until the date Agent recovers such amount at a rate per annum equal to the
Federal Funds Rate for such day.
5.7 Conditions Precedent Events. Each Loan made by the Banks to
Borrower at the request of Borrower pursuant to this Agreement or the Other
Agreements shall in any event be subject to the following conditions precedent:
(a) there shall not then exist an Event of Default (as hereinafter defined) or
any event or condition which with notice, lapse of time and/or the making of
such Loan would constitute an Event of Default; (b) the representations,
warranties and covenants of Borrower contained in this Agreement shall be true
and correct as of the date of such Loan except for those made as of a particular
date with the same effect as though made on such date; (c) all of the covenants
and agreements of Borrower in this Agreement, and all of the requirements of
this Agreement with respect to such Loan, shall have been complied with; and (d)
there shall not have occurred, since the date of this Agreement, any material
adverse change in the financial condition, results of operations or business of
Borrower. Each borrowing by Borrower hereunder shall be deemed a representation
and warranty by Borrower that the foregoing conditions have been fulfilled as of
the date of such borrowing. Agent shall have received upon request a certificate
signed by an Authorized Officer of Borrower dated the date of such requested
Loan certifying satisfaction of the conditions specified in clauses (a)-(d) of
this Paragraph 5.7.
5.8 Offset. Borrower agrees that, in addition to (and without
limitation of) any right of set-off, bankers' lien or counterclaim a Bank may
otherwise have, each Bank shall be entitled, at its option and on behalf of
itself and the other Banks, to offset balances held by it for account of
Borrower at any of its offices, in United States Dollars or in any other
currency, against any principal of or interest on any of such Bank's Loans, or
any other amount payable to such Bank hereunder, which is not paid when due
(regardless of whether such balances are then due to Borrower), in which case it
shall promptly notify Borrower and Agent thereof, provided that such Bank's
failure to give such notice shall not affect the validity thereof.
5.9 Discretionary Disbursements. Agent, in its sole and absolute
discretion, may immediately upon notice to Borrower, disburse any or all
proceeds of Loans made or available to Borrower pursuant to this Agreement
and/or the Other Agreements to pay any fees, costs, expenses or other amounts
due and payable which are required to be paid by Borrower hereunder and not so
paid. All monies so disbursed by Agent shall be a part of Borrower's
Liabilities, payable by Borrower on demand.
5.10 Credit Termination Date; Continuance of Obligations, Etc. This
Agreement, each Bank's obligation to loan monies to Borrower, and Borrower's
ability to borrow monies from the Banks shall be in effect until the Revolving
Credit Termination Date or Term Loan Termination Date, as applicable.
Notwithstanding the foregoing and until such date when Borrower's Liabilities
shall be paid in full, Borrower's obligations hereunder and under the Other
Agreements shall continue, interest shall continue to be paid in accordance with
the foregoing and the Banks shall retain all of their rights and remedies under
this Agreement.
5.11 Loan Evidence. Loans made by the Banks to Borrower pursuant to
this Agreement may or may not (at Banks' sole and absolute discretion) be
evidenced by notes or other instruments issued or made by Borrower to the Banks.
Where such loans are not so evidenced, such loans shall be evidenced solely by
entries upon the ledgers, books, records and/or computer records of each Bank
maintained for that purpose, which entries shall be rebuttably presumptive
evidence of such loans in the absence of manifest error.
5.12 Over-Advances. If, at any time and for any reason, the aggregate
amount of Borrower's Liabilities outstanding hereunder exceeds the limitation
set forth in Paragraph 2.1 or Paragraph 2.2 (an "Over-Advance"), then, upon
notice to Borrower of such Over-Advance, Borrower shall immediately pay to
Agent, for the benefit of Banks, in cash, the amount of such Over-Advance. If
such Over-Advance remains outstanding for more than three (3) Business Days
after notice by Agent to Borrower of such Over-Advance until such Over-Advance
is so repaid to Agent, the amount of such Over-Advance shall bear interest at
the applicable Default Rate.
5.13 Lending Offices. The Loans made by each Bank shall be
made and maintained at such Bank's Applicable Lending Office.
5.14 Several Obligations; Remedies Independent. The failure of any Bank
to make any Loan to be made by it on the date specified therefor shall not
relieve any other Bank of its obligation to make its Loan on such date, but
neither any Bank nor Agent shall be responsible for the failure of any other
Bank to make a Loan to be made by such other Bank. The amounts payable by
Borrower at any time hereunder and under any Note to each Bank shall be a
separate and independent debt and each Bank shall be entitled to protect and
enforce its rights arising out of this Agreement and the Other Agreements, and
it shall not be necessary for any other Bank or Agent to consent to, or be
joined as an additional party in, any proceedings for such purposes.
5.15 Lock-Box. Borrower shall maintain a lock box (the "Lock-Box") in
Borrower's and Agent's name with Agent, and Borrower shall use its reasonable
efforts to cause all Account Debtors to directly remit all payments on Accounts
and Borrower will deposit as soon as practicable all payments made for services
rendered in the identical form in which such payment was made, whether by cash
or check. The Lock-Box arrangement shall be governed by the Lock-Box Agreement
and the related instructions thereto between Agent and Borrower dated on or
about August 13, 1990, as the same is currently in effect.
5.16 Unused Portion Fee. To compensate Banks for the cost of reserving
funds to be made available to Borrower under this Agreement, Borrower shall pay
to Agent, for the benefit of Banks, on a pro rata basis, on the last day of each
calendar quarter an unused revolving line fee (the "Unused Portion Fee") equal
to the sum of the daily amounts by which the maximum aggregate principal amount
of the Revolving Credit Commitment exceeds the actual principal amount of
Revolving Loans made hereunder. The Unused Portion Fee is calculated for each
applicable day of such quarter in an amount equal to the excess of the maximum
aggregate principal amount of the Revolving Credit Commitment over the principal
amount of all outstanding advances under the Revolving Loans on such day,
multiplied by three-eighths of one percent (3/8%) and divided by three hundred
sixty (360). All fees and charges imposed on Borrower pursuant to this Agreement
including, without limitation, the Unused Portion Fee accrued through the date
of termination, shall be nonrefundable to Borrower, notwithstanding any
prepayment and termination by Borrower of this Agreement.
5.17 Transaction Fee. On or prior to the Closing Date, Borrower
shall pay a fee of $225,000 (the "Transaction Fee") to the Banks in accordance
with their Pro Rata Shares.
6. LOANS: CONDITIONS TO LENDING
6.1 Initial Loan Conditions Precedent. In addition to those conditions
set forth in Paragraph 5.7 above with respect to all Loans and advances
hereunder, prior to or contemporaneously with the making of the initial advance
of funds, each Bank's obligation to make any initial Loan is subject to the
satisfaction of the following conditions precedent:
(a) Fees and Expenses. Borrower shall have paid all fees owed
to Agent and reimbursed Agent for all expenses due and payable hereunder on or
before the date hereof including, but not limited to, counsel fees provided for
in Paragraph 12.12 hereof and the Transaction Fee provided for in Paragraph 5.17
hereof.
(b) Documents. Agent shall have received the following
documents, in form and substance satisfactory to Agent, and all of the
transactions contemplated by each such document shall have been consummated or
each condition contemplated by each such document shall have been satisfied:
(i) Related Documents. Copies of this
Agreement as required by Agent and one copy of each of the Revolving
Notes and the Term Notes payable to each Bank conforming to the
requirements hereof duly executed by Borrower.
(ii) Legal Opinion. The legal opinion of
Borrower's counsel in the form of Exhibit 6.1(b)(ii).
(iii) Officer's Certificate. A certificate executed
by an Authorized Officer of Borrower stating that (A) no default or
Event of Default has occurred and is continuing, (B) no material
adverse change in the financial condition or operations of the business
of Borrower has occurred since December 31, 1995, and (C) each
condition precedent of Borrower to the consummation of the Loans
contemplated hereby has been met or satisfied.
(iv) Insurance Policies. Certificates from
Borrower's insurance carriers evidencing that all insurance policies
and coverage required by Paragraph 9.2(h) below is in effect.
(v) Certificate of Incorporation and Bylaws. A copy
of Borrower's Certificate of Incorporation, and all amendments,
certified by the Secretary of State of its jurisdiction of
incorporation and a copy of Borrower's Bylaws certified by an
Authorized Officer.
(vi) Good Standing Certificate. A Good Standing
Certificate for Borrower from its jurisdiction of incorporation and
each state in which Borrower is required to be qualified to transact
business as a foreign corporation.
(vii) Board Resolutions. Certified copies of
resolutions of the Board of Directors of Borrower authorizing the
execution and delivery of and the consummation of the transactions
contemplated by this Agreement and the Other Agreements and all other
documents or instruments to be executed and delivered in conjunction
herewith and therewith on behalf of Borrower.
(viii) Incumbency Certificates. A certificate of the
Secretary or an Assistant Secretary of Borrower certifying the names of
the officer or officers of Borrower authorized to sign this Agreement
and the Other Agreements on behalf of Borrower together with a sample
of the true signature of each such officer.
(ix) Solvency Certificate. A solvency
certificate of Borrower in the form of Exhibit 6.1(b)(ix).
(x) Pay-Off Letter. Pay-off letter with respect to
all Debt of Borrower previously owed to Banque Paribas, Heller
Financial and/or LaSalle National Bank and Form UCC-3 Termination
Statements with respect to Liens granted in favor of such lenders.
(xi) Environmental Checklist. Completed
environmental checklist in the form supplied by Banks.
(xii) Other Documents. Such other documents as
Agent may reasonably request.
6.2 Accountant's Letter. On or prior to the date hereof, Borrower
shall have delivered to Agent a privity letter from Coopers & Lybrand L.L.P.
(in form and substance acceptable to Banks).
7. ACCOUNTS RECEIVABLE
7.1 Account Representations and Warranties. Except as otherwise
disclosed by Borrower to Agent in writing, Borrower warrants and represents to
the Banks and Agent with respect to the Eligible Accounts Receivable that: (a)
they are genuine, in all respects what they purport to be; (b) they represent
undisputed, bona fide transactions completed in accordance with the terms and
provisions contained in the invoices and other documents with respect thereto;
(c) the amounts thereof are actually and absolutely owing to Borrower and are
not contingent for any reason; and (d) there are no material setoffs,
counterclaims or disputes existing or asserted with respect thereto other than
those arising in the ordinary course of Borrower's business.
7.2 Verification of Accounts. After the occurrence of an Event of
Default, upon notice to Borrower, any of Agent's officers, employees or agents
shall have the right, in Agent's name or in the name of a nominee of Agent, to
verify the validity, amount or any other matter relating to any Accounts
Receivable by mail, telephone, telegraph or otherwise. All reasonable costs,
fees and expenses relating thereto that are incurred by Agent (or for which
Agent becomes obligated) shall be part of Borrower's Liabilities payable by
Borrower to Agent on demand.
8. INVENTORY
8.1 Inventory Representations and Warranties. Borrower warrants and
represents to and covenants with the Banks and Agent that: (a) Borrower, at
reasonable intervals upon the reasonable request of any Bank therefor, shall
execute and deliver to Banks designations of Inventory specifying Borrower's
cost of Inventory and such other matters and information relating to Inventory
as any Bank may reasonably request; and (b) Borrower does now keep and hereafter
at all times shall keep correct and accurate records, all of which records shall
be in conformity to Borrower's current and usual practices and shall be
available to any of Banks' officers, employees or agents for inspection and
copying thereof.
9. REPRESENTATIONS AND WARRANTIES; COVENANTS;
INDEMNIFICATION; CONTINUING OBLIGATION
9.1 Representations and Warranties of Borrower. Borrower hereby
represents and warrants to the Banks and Agent as of the date hereof and with
respect to subsections (a) through (d) and subsections (f) through (y) below,
the date of disbursement of each Loan or advance hereunder, as follows:
(a) Corporate Existence and Authority. Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly qualified to do business and is in good
standing under the laws of each state in which the ownership of its properties
and the nature and extent of the activities transacted by it makes such
qualification necessary except where the failure to be so qualified could not
reasonably be expected to have a material adverse effect on the performance,
business, assets, liabilities, operations, properties, financial condition or
prospects of Borrower. Borrower has the requisite corporate power and authority
to conduct its activities as presently conducted, to own its properties and to
perform its obligations under this Agreement.
(b) Authorization; No Conflict. The execution, delivery and
performance by Borrower of this Agreement and the Other Agreements to which it
is a party are within Borrower's corporate powers, have been duly authorized by
all necessary corporate action and do not contravene (i) Borrower's Certificate
of Incorporation or Bylaws or (ii) any law or any contractual restriction
binding on or affecting Borrower or its properties, and do not result in or
require the creation of any Lien (except as may be created under this Agreement
or the Other Agreements) upon or with respect to any of its properties.
(c) No Approval. No authorization or approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is required for the due execution, delivery and performance by Borrower of
this Agreement or any Other Agreement to which Borrower is a party.
(d) Validity and Binding Nature. This Agreement is, and the
Other Agreements to which Borrower is a party when delivered hereunder will be,
legal, valid and binding obligations of Borrower, enforceable against Borrower
in accordance with their respective terms, except as such enforcement is limited
by bankruptcy, insolvency, rehabilitation or moratorium laws or general
principles of equity.
(e) Financial Statements and Condition. The balance sheet
(including the notes thereto) of Borrower and its consolidated Subsidiaries as
at December 31, 1995, and the related statements of operations and stockholders'
equity and statements of cash flows of Borrower for the fiscal year then ended,
have been audited by Coopers & Lybrand L.L.P. and are complete and correct and
fairly present the financial condition of Borrower as at such date and the
results of the operations of Borrower for the period ended on such date, in
accordance with GAAP, and since December 31, 1995, there has been no material
adverse change in Borrower's financial condition, business, properties or
operations. The condensed interim balance sheet (including the notes thereto) of
Borrower and its consolidated Subsidiaries as at May 31, 1996, and the related
statements of operations and stockholders' equity and statements of cash flows
for the period then ended, are complete and correct and fairly present the
financial condition of Borrower at such date, in accordance with GAAP (subject
to normal year-end audit adjustments and except as specified in the notes
thereto). Borrower has not on the date hereof, nor will have on the date of any
Loan or advance made by Bank hereunder, any material contingent obligations,
long-term leases or material forward or long-term commitments, which are
required to be reflected in the foregoing statements (and the related notes
thereto) and are not so reflected.
(f) Litigation. There is no pending or, to the best knowledge
of Borrower, threatened action, suit, inquiry, investigation, or proceeding
affecting, directly or indirectly, Borrower before any court, governmental
agency or arbitrator, which, in any case, (i) is reasonably likely to materially
and adversely affect the financial condition or operations of Borrower, (ii)
seeks to restrain or would otherwise have a material adverse effect on the
transactions contemplated herein, or (iii) would affect the validity or
enforceability of this Agreement or the Other Agreements.
(g) Intentionally Omitted.
(h) Regulation U. Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System), and no proceeds of any Loan or advance made by Banks to
Borrower 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.
(i) ERISA Termination Event and Funding. No ERISA Termination
Event has occurred with respect to any Plan and all Plans, to the extent
governed by ERISA, meet the minimum funding standards of Section 302 of ERISA.
(j) Withdrawal Liability and Reportable Events. Neither
Borrower nor any ERISA Affiliate has incurred, or expects to incur, any
withdrawal liability under Section 4201 of ERISA to any Multiemployer Plan. No
Reportable Event (as defined in ERISA Section 4043, other than a Reportable
Event not subject to the 30-day reporting requirement to the PBGC under
applicable regulations) has occurred with respect to any Plan.
(k) Taxes. Borrower has filed all tax returns (Federal, state
and local) required to be filed and paid all taxes shown thereon to be due,
including interest and penalties, other than such taxes that Borrower is
contesting in good faith by appropriate legal proceedings and as to which proper
reserves therefor have been established on the books of Borrower.
(l) Liens. There are no Liens upon or with respect to any of
the properties of Borrower or any right to receive revenues of Borrower other
than Liens permitted pursuant to Paragraph 9.3(a) hereof.
(m) Conflicts. Neither Borrower nor any Subsidiary is a party
to any indenture, loan or credit agreement or any lease or other agreement or
instrument (including corporate charters) which is likely to have a material
adverse effect on the ability of Borrower to perform its obligations under this
Agreement or the Other Agreements or which would restrict or otherwise limit the
incurring of the Debt represented by this Agreement and the Other Agreements.
(n) Environmental Matters. Except as disclosed on
Exhibit 9.1(n) and to the knowledge of Borrower,
(i) the operations of Borrower and each
Subsidiary, (including, without limitation, all operations and
conditions at or in the Facilities) comply with all Environmental Laws;
(ii) Borrower and each Subsidiary have obtained or
have timely applied for all Governmental Authorizations under
Environmental Laws necessary to their respective operations, if any,
and all such Governmental Authorizations as have been obtained are in
good standing, and Borrower and each Subsidiary are in compliance with
all terms and conditions of such Governmental Authorizations;
(iii) neither Borrower nor any Subsidiary has
received from any Person (A) any notice or claim to the effect that it
is or may be liable to any Person as a result of the Release or
threatened Release of any Hazardous Materials or (B) any letter or
request for information under Section 104 of the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C.
ss.9604) or comparable state laws, and none of the operations of
Borrower or any Subsidiary is the subject of any federal or state
investigation evaluating whether any remedial action is needed to
respond to a Release or threatened Release of any Hazardous Materials
at any Facility or at any other location;
(iv) no operations of Borrower or any Subsidiary
are subject to any investigation or judicial or administrative
proceeding alleging the violation of or liability under any
Environmental Laws;
(v) neither Borrower nor any Subsidiary or any of
their respective Facilities or operations are subject to any
outstanding written order or agreement with any governmental authority
or private party relating to (a) any Environmental Laws or (b) any
Environmental Claims;
(vi) neither Borrower or any Subsidiary has any
contingent liability in connection with any Release or threatened
Release of any Hazardous Materials;
(vii) neither Borrower nor any Subsidiary or any of
their respective predecessors has filed any notice under any
Environmental Law indicating past or present treatment, storage,
disposal or Release of Hazardous Materials at any Facility except in
accordance with Environmental Laws, and neither Borrower's nor any
Subsidiary's operations involve the generation, transportation,
treatment, storage or disposal of hazardous waste, as defined under 40
C.F.R. Parts 260-270 or any state equivalent;
(viii) no Hazardous Material exists on, under or
about any Facility in a manner that is reasonably likely to give rise
to an Environmental Claim and neither Borrower nor any Subsidiary has
filed any notice or report of a Release of any Hazardous Materials that
is reasonably likely to give rise to an Environmental Claim;
(ix) neither Borrower nor any Subsidiary or any of
their respective predecessors has disposed of any Hazardous Materials
in a manner that is reasonably likely to give rise to an Environmental
Claim;
(x) no underground storage tanks or surface
impoundments are on or at any Facility; and
(xi) no lien in favor of any Person for (a) any
liability under any Environmental Laws or (b) damages arising from or
costs incurred by such Person in response to a Release or threatened
Release has been filed or has been attached to any Facility.
(o) Investment Company Act. Neither Borrower nor
any Subsidiary is an "investment company" or a company "controlled by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
(p) Compliance with Laws. Borrower is in compliance with all
laws, orders, regulations and ordinances of all federal, foreign, state and
local governmental authorities binding upon or affecting the business, operation
or assets of Borrower including, without limitation, zoning or other ordinances
relating to permissive non-conforming uses of property, except where the failure
to be in compliance could not reasonably be expected to have a material adverse
effect on the business, financial condition or operations of Borrower.
(q) Other Agreements. Borrower makes each of the
representations and warranties of Borrower contained in the Other Agreements
to which Borrower is a party operative and applicable for the benefit of the
Bank as if the same were set forth at length herein.
(r) Subsidiaries. Except as disclosed on Exhibit 9.1(r),
Borrower has no Subsidiaries.
(s) Labor. Except as described on Exhibit 9.1(s), none of the
employees of Borrower is subject to any collective bargaining agreement, and
there are no strikes, work stoppages, election or decertification petitions or
proceedings pending or, to Borrower's knowledge, threatened involving Borrower
and any of its employees and Borrower has not received notice of unfair labor
charges, equal employment opportunity proceedings, wage payment or material
unemployment compensation proceedings, material workmen's compensation
proceedings or other material labor or employee-related controversies pending or
threatened involving Borrower and any of its employees, except for any of the
foregoing which would not in the aggregate have a material adverse effect on the
financial condition, results of operations or business of Borrower.
(t) Solvency. Borrower has capital sufficient to carry on its
business and transactions and all businesses and transactions in which it is
about to engage and is solvent and able to pay its debts as they mature and
Borrower owns property the fair saleable value of which is greater than the
amount required to pay Borrower's Debt. No transfer of property is being made
and no Debt is being incurred in connection with the transactions contemplated
by this Agreement with the intent to hinder, delay or defraud either present or
future creditors of Borrower or any Affiliate.
(u) Title. Borrower has good and merchantable title to and
ownership of its assets, free and clear of all Liens, claims, security interests
and other encumbrances except for the Permitted Liens.
(v) Credit Agreements. Exhibit 9.1(v) hereto is a complete
and correct list, as of the date of this Agreement, of each credit agreement,
loan agreement, indenture, guarantee or other arrangement providing for or
otherwise relating to any Debt or any extension of credit (or commitment for any
extension of credit) to, or guarantee by, Borrower (other than this Agreement)
in each case involving, in the aggregate, more than $250,000, and the aggregate
principal or face amount outstanding or which may become outstanding under each
such arrangement is correctly described in such exhibit.
(w) Debt. As of the date of this Agreement, Borrower
has no Debt except for the Permitted Debt or Debt otherwise permitted by this
Agreement.
(x) Insurance. Borrower is adequately insured under its
policies of insurance currently in effect, no notice of cancellation has been
received with respect to such policies and Borrower is in material compliance
with all conditions contained in such policies.
(y) Accuracy of Information. All factual information
heretofore or contemporaneously furnished by or on behalf of Borrower to Banks
for purposes of or in connection with this Agreement or any transaction
contemplated hereby (excluding projections referred to below in this Paragraph
and factual information superseded or replaced prior to the date hereof) is, and
all other factual information (taken as a whole) hereafter furnished by or on
behalf of Borrower to Banks will be true and accurate in every material respect
on the date as of which such information is dated or certified, and Borrower has
not omitted and will not omit any material fact necessary to prevent such
information from being false or misleading.
9.2 Affirmative Covenants. At all times prior to the Term Loan
Termination Date and thereafter for so long as any amounts are due or owing to
the Bank hereunder, Borrower hereby covenants that it will, unless the Banks
otherwise consent in writing:
(a) Existence, Etc. Do or cause to be done all things
necessary to preserve and maintain Borrower's corporate existence in good
standing.
(b) Compliance with Laws, Etc. Comply with all applicable
present and future laws, rules, ordinances, regulations and orders including,
without limitation, laws, rules, ordinances, regulations and orders regarding
the operation and maintenance of Borrower's business, except where the
non-compliance with which could not reasonably be expected to have a material
adverse effect on the financial condition, properties, business or operations of
Borrower.
(c) Payment of Taxes and Other Claims. Pay or discharge or
cause to be paid or discharged, before the same shall become delinquent, all
material Charges levied or imposed upon Borrower or upon the income, profits or
property of Borrower, provided, however, that Borrower shall not be required to
pay or discharge or cause to be paid or discharged any such Charge or claim
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings to the extent adequate reserves have been established on
the books of Borrower.
(d) Reporting Requirements. Maintain a system of
accounting in accordance with GAAP consistently applied and shall furnish to
the Banks:
(i) (A) within thirty (30) days after the close of
business on the last day of each calendar month from and after the date
hereof, if requested by Banks, Borrower shall deliver to each Bank (x)
a detailed aged trial balance of all then existing Accounts Receivable,
with a declaration of contra liabilities, in a form and with such
specificity as is satisfactory to the Banks, certified as accurate by
the Chief Financial Officer or Controller (if such Controller is a
corporate officer) of Borrower and such other matters and information
relating to the status of then existing Accounts Receivable as Banks
shall reasonably request, and (y) a list of Inventory showing
locations, (B) within thirty (30) days after the close of business on
the last day of each calendar month from and after the date hereof,
Borrower shall deliver to each Bank a duly executed Borrowing Base
Certificate in the form attached hereto as Exhibit 9.2(d)(i)(B), and
(C) within thirty (30) days of the end of each calendar quarter from
and after the date hereof, Borrower shall deliver to each Bank a
certificate in the form of Exhibit 9.2(d)(i)(C) hereto showing
compliance by Borrower with the financial covenants set forth in
Paragraph 9.2(g) below;
(ii) as soon as possible and in any event within ten
(10) days after the occurrence of an Event of Default or any event
which, with the giving of notice, lapse of time, or both, would
constitute an Event of Default, the statement of an Authorized Officer
setting forth details of such Event of Default or event and the action
which Borrower has taken or proposes to take to cure the same;
(iii) as soon as available and in any event within
thirty (30) days after the end of calendar month beginning with the
month ending June 30, 1996, an internally prepared balance sheet of
Borrower and its consolidated Subsidiaries as at the end of such month
and the related statements of operations and stockholders' equity and
statements of cash flows of Borrower for such month and for the portion
of the fiscal year ended at the end of such month, setting forth in
each case in comparative form the figures for the corresponding month
and the corresponding portion of the previous fiscal year, all in
reasonable detail and certified (subject to normal year-end adjustment)
as to fairness of presentation in accordance with GAAP (other than
footnotes thereto), by the Chief Financial Officer or Controller (if
such Controller is a corporate officer) of Borrower;
(iv) as soon as available, copies of the periodic
Form 10-Q quarterly report or comparable successor report filed by
Borrower with the Securities and Exchange Commission or any successor
agency; provided, that if such report is not made available within
sixty (60) days after the end of each of the first three quarterly
accounting periods in each fiscal year of Borrower beginning with the
quarter ending June 30, 1996, Borrower shall immediately deliver to
Banks an internally-prepared balance sheet of Borrower and its
consolidated Subsidiaries as at the end of such quarter and the related
statements of operations and stockholders' equity and statements of
cash flows of Borrower for such quarter and for the portion of the
fiscal year ended at the end of such quarter, setting forth in each
case in comparative form the figures for the corresponding quarter and
the corresponding portion of the previous fiscal year, all in
reasonable detail and certified (subject to normal year-end
adjustments) as to fairness of presentation, in accordance with GAAP
(other than footnotes thereto), by the Chief Financial Officer or
Controller (if such Controller is a corporate officer) of Borrower;
(v) as soon as available, copies of the Form 10-K
Annual Report or comparable successor report filed by Borrower with the
Securities and Exchange Commission or any successor agency; provided,
that if such report is not made available within one hundred twenty
(120) days after the close of each fiscal year of Borrower, Borrower
shall immediately deliver to Banks a balance sheet and the related
consolidated statements of operations and stockholders' equity and
statements of cash flows of Borrower and its consolidated Subsidiaries
as of the end of such fiscal year, fairly and accurately presenting the
financial condition of Borrower and its Subsidiaries as at such date
and the results of operations of Borrower and its Subsidiaries for such
fiscal year and setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding
fiscal year, all in reasonable detail, prepared in accordance with GAAP
consistently applied, and audited by Coopers & Lybrand LLP or such
other independent certified public accountants acceptable to the Banks
(the "Accountants");
(vi) Together with each delivery of financial
statements required by subsection (v) above, Borrower shall deliver to
Banks (x) a certificate of the Accountants who performed the audit in
connection with such statements stating that in making the audit
necessary to the issuance of a report on such financial statements,
they have obtained no knowledge that any Event of Default or event
which, with notice or a lapse of time or both, would constitute an
Event of Default, as it relates to accounting matters, has occurred and
is continuing or, if such Accountants have obtained knowledge of an
Event of Default or such event, specifying the nature and period of
existence thereof and (y) a certificate executed by the President or
Chief Financial Officer of Borrower stating whether any Event of
Default, or event which, with the passage of time or giving of notice
or both, would constitute such an Event of Default, currently exists
and is continuing and what activities, if any, Borrower is taking or
proposing to take with respect thereto;
(vii) promptly upon receipt and, in any event, within
fifteen (15) days after receipt thereof, copies of all auditors'
letters to management and management's response thereto pertaining to
the balance sheet and related financial statements of Borrower;
(viii) within forty-five (45) days after the
commencement of each fiscal year of Borrower, a budget of Borrower and
its subsidiaries in reasonable detail for each of the twelve (12)
months of such fiscal year. Together with each delivery of financial
statements referred to in items (iii) and (iv) above, a comparison of
the current year to-date financial results against the budgets required
to be submitted hereto shall be presented;
(ix) (A) as soon as possible and in any event (i)
within thirty (30) days after Borrower or any ERISA Affiliate knows or
has reason to know that any ERISA Termination Event described in clause
(i) of the definition of ERISA Termination Event with respect to any
Plan has occurred and (ii) within ten (10) days after Borrower or any
ERISA Affiliate knows or has reason to know that any other ERISA
Termination Event with respect to any Plan has occurred, a statement of
the Chief Financial Officer (or designee) of Borrower describing such
ERISA Termination Event and the action, if any, which Borrower, or any
such ERISA Affiliate proposes to take with respect thereto;
(B) promptly and in any event within five (5)
Business Days after receipt thereof by Borrower or any ERISA Affiliate
from the PBGC, copies of each notice received of the PBGC's intention
to terminate any Plan or to have a trustee appointed to administer any
Plan; and
(C) promptly and in any event within ten (10)
Business Days after receipt thereof by Borrower or any ERISA Affiliate
from a Multiemployer Plan sponsor, a copy of each notice received
concerning the imposition or amount of withdrawal liability which has
been assessed pursuant to Section 4202 of ERISA;
(x) within ten (10) Business Days after notice to
Borrower of the commencement thereof, notice, in writing, of any
action, suit, arbitration or other proceeding instituted, commenced or
threatened against or affecting Borrower with an amount in controversy
in excess of $250,000;
(xi) if an Event of Default has occurred and is
continuing and if requested by any Bank, Borrower's federal, state and
local tax returns as soon as said returns are completed in the form
said returns will be filed with the Internal Revenue Service and any
state or local department of revenue or taxing authority;
(xii) promptly upon their becoming available, copies
of (A) all registration statements and regular periodic reports which
Borrower shall have filed with the Securities and Exchange Commission
(or any governmental agency substituted therefor) or any national
securities exchange and (B) all financial statements, reports and proxy
statements so mailed; and
(xiii) such other information respecting the
condition or operations, financial or otherwise, of Borrower or any
Affiliate as the Banks may from time to time reasonably request.
(e) Visitation Rights. At any time or times during the
regular business hours of Borrower (but no more than twice annually prior to the
occurrence of an Event of Default), permit Banks or any agents or
representatives thereof to examine the records and books of account of and visit
and inspect the properties and assets of Borrower, all as Banks shall reasonably
request, and to discuss the affairs, finances, Accounts Receivable and Inventory
of Borrower with Borrower's officers or directors.
(f) Environmental Disclosure and Inspection.
(i) Exercise due diligence in order to comply
with all Environmental Laws.
(ii) Permit the Banks, from time to time and in their
sole and absolute discretion, to retain, at the Banks' expense, an
independent professional consultant to review any report relating to
Hazardous Materials prepared by or for Borrower and at reasonable times
and subject to reasonable conditions to conduct their own investigation
at the Banks' expense of any Facility currently owned, leased, operated
or used by Borrower or any Subsidiary and Borrower agrees to use its
best efforts to obtain permission for the Banks' professional
consultant to conduct its own investigation of any Facility previously
owned, leased, operated or used by Borrower or any Subsidiary. Borrower
hereby grants to Banks, their agents, employees, consultants, and
contractors the right to enter into or on to, at reasonable times, the
Facilities currently owned, leased, operated or used by Borrower or any
Subsidiary to perform such tests on such property as are reasonably
necessary to conduct such a review and/or investigation.
(iii) Promptly advise Banks in writing and in
reasonable detail upon obtaining knowledge of (i) any Release of any
Hazardous Materials required to be reported to any federal, state or
local governmental or regulatory agency under any applicable
Environmental Laws, (ii) any and all written communications with
respect to Environmental Claims or any Release of Hazardous Material
required to be reported to any federal, state or local governmental or
regulatory agency, (iii) any remedial action taken by Borrower or any
other person in response to (1) any Hazardous Material on, under or
about any Facility, the existence of which is reasonably likely to give
rise to an Environmental Claim, or (2) any Environmental Claim that
could have a material adverse effect on Borrower or any Subsidiary,
(iv) Borrower's discovery of any occurrence or condition on any real
property adjoining or in the vicinity of any Facility that could cause
such Facility or any part thereof to be subject to any restrictions on
the ownership, occupancy, transferability or use there of under any
Environmental Laws, and (v) any request for information from any
governmental agency indicating that such agency has initiated an
investigation as to whether Borrower or any Subsidiary may be
potentially responsible for a Release or threatened Release of
Hazardous Materials.
(iv) Promptly notify Banks of (i) any acquisition of
stock, assets, or property by Borrower or any Subsidiary that
reasonably could be expected to expose Borrower to, or result in,
Environmental Claims that could have a material adverse effect or that
could be expected to have a material adverse effect on any Governmental
Authorization then held by Borrower or any Subsidiary, and (ii) any
proposed action outside of the normal course of business to be taken by
Borrower or any Subsidiary to commence industrial or other operations
that could subject Borrower or such Subsidiary to additional laws,
rules or regulation, including, without limitation, laws, rules and
regulations requiring additional environmental permits or licenses.
(v) At its own expense, provide copies of such
documents or information as Banks may reasonably request in relation to
any matters disclosed pursuant to this Paragraph 9.2(f).
(vi) Promptly take any and all necessary remedial
action in connection with the presence, storage, use, disposal,
transportation, Release or threatened Release of any Hazardous
Materials on, under or about any Facility in order to comply with all
applicable Environmental Laws and Governmental Authorizations. In the
event Borrower or any Subsidiary undertakes any remedial action with
respect to any Hazardous Material on, under or about any Facility,
Borrower or such Subsidiary shall conduct and complete such remedial
action in compliance with all applicable Environmental Laws and in
accordance with the policies, orders and directives of all federal,
state and local governmental authorities.
(g) Financial Covenants (each of which in clauses (i) and
(ii) below shall be measured each quarter on a rolling four (4) quarter basis
taking into account the immediately preceding four fiscal quarters of Borrower).
(i) Not permit the ratio of Funded Debt to
EBITDA minus Capital Expenditures to exceed 3.75:1.
(ii) Not permit the Cash Flow Coverage Ratio to
be less than 1.3:1.
(iii) Not permit the Leverage Ratio to exceed (A) for
the fiscal year ending December 31, 1996, .60:1 measured as of such
date; (B) for the fiscal year ending December 31, 1997, .55:1 measured
as of such date; and (C) for the fiscal year ending December 31, 1998
and each fiscal year thereafter, .40:1 measured as of such date.
(h) Insurance.
(i) At its sole cost and expense, keep and maintain
business interruption insurance and public liability and property
damage insurance relating to its business and properties and its
ownership and use of its assets. All such policies of insurance shall
be in form and with insurers recognized as adequate by prudent business
persons and all such policies shall be in amounts as may be reasonably
satisfactory to Banks. Borrower shall deliver to Banks a certificate of
insurance, and evidence of payment of all premiums then due and owing
for each such policy on or prior to the date of this Agreement. Such
policies shall: (A) contain a lender's loss payable clause naming
Agent, for the benefit of the Banks, as loss payee and additional
insured as its interest may appear; and (B) provide that the insurance
companies will give Agent, for the benefit of Banks, at least thirty
(30) days written notice before any such policy or policies of
insurance shall be altered or cancelled.
(ii) In the event Borrower at any time or times
hereafter shall fail to obtain or maintain any of the policies of
insurance required above or to pay any premium in whole or in part
relating thereto, then Banks after giving five (5) days' prior notice
to Borrower, without waiving or releasing any obligation or Event of
Default by Borrower hereunder, may at any time or times thereafter (but
shall be under no obligation to) obtain and maintain such policies of
insurance and pay such premium and take any other action with respect
thereto which Banks deem advisable. All sums so disbursed by Banks,
including reasonable attorneys fees, court costs, expenses and other
charges relating thereto, shall be part of Borrower's Liabilities,
payable by Borrower to Banks on demand. Borrower authorizes Agent, in
Agent's sole discretion, to cause such sums to be paid by making an
advance in the amount thereof to Borrower under the Revolving Loan and
paying the proceeds thereof to Banks.
(i) Architect Inspections. Permit and cooperate with Banks in
arranging for, inspections of the Waukegan Facility from time to time
by Banks' architect and any other representatives of Banks. In the
event that Banks' architect or another representative furnishes Banks
with reports covering such inspections, Banks may, but are not under
any obligation whatsoever to, furnish Borrower with copies of any of
said reports. Borrower acknowledges and agrees that (i) all of such
inspections and reports shall be made for the sole benefit of Banks and
not for the benefit of Borrower or any third party, and none of Banks,
Banks' architect or any other of Banks' representatives assume any
responsibility or liability (except to Banks) by reason of such
inspections, reports or the furnishing of any of such reports to
Borrower, (ii) Borrower shall not rely upon any of such inspections or
reports for any purpose whatsoever, and (iii) such inspections and the
furnishing of any of such reports to Borrower shall not constitute a
waiver of any of the provisions of this Agreement or any of the
obligations of Borrower hereunder. Borrower further acknowledges and
agrees that none of Banks, Banks' architect or any other of Banks'
representatives shall be deemed in any way responsible for any matters
related to design or construction of the improvements at such Facility.
Borrower agrees to bear all fees and expenses of any inspections made
by the Banks' architects and representatives for the purposes set forth
in this Paragraph 9.2(i) up to a maximum amount of $5,000.
(j) Interest Rate Agreement. No later than the date occurring
forty-five (45) days after the Closing Date, enter into an Interest
Rate Agreement with a term of at least three (3) years in respect of
amounts equal to or greater than $12.5 million of the outstanding Term
Loan on such date on terms satisfactory to Banks, plus, at Borrower's
election, additional interest rate caps acceptable to the Banks.
9.3 Negative Covenants. Prior to the Term Loan Termination Date and
thereafter for so long as any amount is due or owing to the Banks hereunder,
unless the Banks shall otherwise consent in writing, neither Borrower nor any
Subsidiary shall:
(a) Liens, Etc. Create or suffer to exist any Lien or any
other type of preferential arrangement, upon or with respect to any of its
assets or properties, whether now owned or hereafter acquired, or assign any
right to receive income, except for Permitted Liens and pledges of assets of
Subsidiaries to secure indebtedness of Subsidiaries, in the maximum aggregate
principal amount of $5,000,000.
(b) Maintain Existence, Merger, Etc. (i) dissolve or
liquidate; or (ii) convey, transfer, lease or otherwise dispose of (whether in
one transaction or in a series of transactions) any assets (whether now owned or
hereafter acquired) to any Person except in the ordinary course of business;
provided, however, that Borrower may dispose of up to $500,000 in aggregate
value of assets in any one calendar year (prorated to $210,000 for the remainder
of 1996), which amount will be increased to $1,000,000 in aggregate value of
assets in any one calendar year (prorated to $420,000 for the remainder of 1996)
if and only if (A) the transaction is pursuant to the reasonable requirements of
Borrower's business and is upon fair, reasonable and arm's length terms and (B)
if the entire amount of proceeds received in such disposition of assets is
immediately paid over to Bank to repay the Loans in accordance with and at the
sole discretion (as to manner of application) of the Banks; or (iii) together
with one or more Affiliates convey, transfer, lease or otherwise dispose of
(whether in one transaction or in a series of transactions) all or substantially
all of the assets of Borrower and such Affiliates (whether now owned or
hereafter acquired) to any Person; or (iv) purchase, lease or otherwise acquire
all or substantially all of the assets or properties of, or acquire any capital
stock, equity interests or other securities of any Person other than as
expressly permitted under Paragraph 9.3(f) below, or enter into any joint
venture or become a partner in any partnership; provided, however, that Borrower
may purchase, lease or otherwise acquire up to $5,000,000 of assets during any
calendar year (prorated to $2,100,000 for the remainder of 1996) from any
unaffiliated third party if, after giving effect to such transaction, no Event
of Default has occurred and is continuing hereunder; or (v) merge or consolidate
with any Person.
(c) Debt. Incur, create, assume, become or be liable
in any manner with respect to or permit to exist, any Funded Debt except for
Permitted Debt.
(d) Investments or Loans. Make or permit to exist investments
or loans in or to any other Person, except for (i) salaries and reasonable
advances of money to its employees in payment of reasonable expenses incurred by
such employees in the ordinary course of business and consistent with past
practices, (ii) investments in certificates of deposits of a banking institution
having a net worth in excess of $100,000,000 or in securities of the United
States of America or commercial paper with a P1 rating (all of the foregoing
maturing within one year) and (iii) loans up to $5,000,000 in the aggregate by
Borrower to all Subsidiaries, taken as a whole; provided, however, that the
amount of such loans, when aggregated with all other Funded Debt of
Subsidiaries, shall not exceed $5,000,000 in the aggregate ("Permitted
Investments").
(e) Guaranties. Guaranty, endorse or otherwise in any way
directly, indirectly or contingently become liable for the obligations or
liabilities of any other Person, except endorsements of negotiable instruments
for collection in the ordinary course of business and guaranties by Borrower of
Funded Debt of Subsidiaries up to $5,000,000 in the aggregate; provided,
however, that the amount of the Revolving Credit Commitment shall be reduced on
a dollar-for-dollar basis by the amount of any such guaranty by Borrower of
Funded Debt of any Subsidiary for so long as such guaranty remains in effect and
for a period of ninety-one (91) days thereafter.
(f) Stock and Dividends. Redeem, retire, purchase or
otherwise acquire, directly or indirectly, any common capital stock of Borrower
or other evidence of ownership interest, or declare or pay dividends upon any
common capital stock of Borrower or make any distribution of Borrower's property
or assets to its stockholders except Borrower may (i) declare and pay dividends
and (ii) repurchase shares of its common capital stock, in each case if no Event
of Default has occurred and is continuing or would occur as a result of any
transaction contemplated or permitted by this Paragraph 9.3(f).
(g) Transactions with Affiliates or Insiders. Enter into, or
be a party to, any transaction with any Affiliate of Borrower, except in the
ordinary course of and pursuant to the reasonable requirements of Borrower's
business and upon fair and reasonable terms which are fully disclosed to Banks
and are no less favorable to Borrower than would obtain in a comparable arm's
length transaction with a Person not an Affiliate of Borrower.
9.4 Maintenance of Accounts. Borrower agrees to maintain its primary
operational accounts with LaSalle and shall maintain an average balance of
collected, available funds in a non-interest bearing demand deposit account with
LaSalle (the "Operating Account") in an amount at least equal to that amount
required to compensate LaSalle for its services in maintaining such account.
Borrower acknowledges that LaSalle will charge Borrower standard service charges
in effect from time to time for various services performed by LaSalle in
connection with any aspect of the relationship between Borrower and LaSalle, and
Borrower hereby agrees that if such service charges exceed the credit to
Borrower arising from earnings attributable to funds on deposit with LaSalle in
the applicable Operating Account, such service charge deficiency shall be
deducted by LaSalle from the Borrower's Operating Account, monthly, in arrears,
within ten (10) days following the end of each month. LaSalle may cause interest
and other amounts payable on the obligations of Borrower to LaSalle hereunder to
be paid by making a direct charge to the applicable Operating Account in
accordance with the terms hereof.
10. DEFAULT
10.1 Events of Default. The occurrence of any one of the following
events shall constitute a default ("Event of Default") by Borrower under this
Agreement: (a) if Borrower fails or neglects to perform, keep or observe any
covenant or agreement contained in this Agreement or in the Other Agreements
which is required to be performed, kept or observed by Borrower; provided,
however, that Borrower shall have thirty (30) days to cure any such failure or
neglect of the covenants contained in Paragraphs 9.2(a), 9.2(b), 9.2(c), 9.2(f),
9.2(h) and 9.3(a); (b) any representation or warranty made by Borrower herein or
in any Other Agreement is untrue in any material respect, or any exhibit or
certificate furnished by Borrower or any of its Affiliates, directors, officers,
employees, or agents to any Bank is untrue in any material respect on the date
as of which the facts therein set forth are stated or certified; (c) if Borrower
fails to pay Borrower's Liabilities when due and payable or declared due and
payable; (d) if a material portion of Borrower's assets are attached, seized,
subjected to a writ or distress warrant or is levied upon, or come within the
possession of any receiver, trustee, custodian or assignee for the benefit of
creditors and the same is not terminated or dismissed within sixty (60) days
thereafter; (e) if a petition under any section or chapter of the Bankruptcy
Reform Act of 1978, as amended, or any similar law or regulation shall be filed
by Borrower or if Borrower shall make an assignment for the benefit of its
creditors or if any case or proceeding is filed by Borrower for its dissolution
or liquidation; (f) if a petition under any section or chapter of the Bankruptcy
Reform Act of 1978, as amended, or any similar law or regulation is filed
against Borrower or if any case or proceeding is filed against Borrower for its
dissolution or liquidation and such injunction, restraint or petition is not
dismissed or stayed within sixty (60) days after the entry or filing thereof;
(g) if an application is made by Borrower for the appointment of a receiver,
trustee or custodian for any of Borrower's assets; (h) if an application is made
by any Person other than Borrower for the appointment of a receiver, trustee or
custodian for the assets of Borrower and the same is not dismissed within sixty
(60) days after the application therefor; (i) if Borrower is adjudicated
insolvent or admits its inability to pay its debts as they become due; (j) if
Borrower is in default in the payment of Debt in an amount in excess of
$100,000; or (k) the appointment of a conservator for all or any material
portion of the assets of Borrower.
10.2 Cumulative Remedies. All of the Banks' and Agent's rights
and remedies under this Agreement and the Other Agreements are cumulative and
non-exclusive.
10.3 Acceleration and Termination of Loans. Upon the occurrence and
during the continuance of an Event of Default, (a) upon notice by any Bank to
Borrower, Borrower's Liabilities shall be immediately due and payable, unless
there shall have occurred an Event of Default under subparagraphs 10.1(d), (e),
(f), (g), (h), (i) or (k), in which case Borrower's Liabilities shall
automatically become due and payable without notice or demand, and (b) without
notice by any Bank to or demand by any Bank of Borrower, the Banks shall have no
further obligation to and may then forthwith cease advancing monies or extending
credit to or for the benefit of Borrower under this Agreement and the Other
Agreements.
10.4 Rights of Creditor. Upon an Event of Default, Banks, in their sole
and absolute discretion, may exercise any one or more of the rights and remedies
accruing (a) under applicable law upon default by a debtor, (b) under any
instrument or (c) under any document or agreement. Nothing contained herein
shall interfere with any Bank's right under law to set-off the balances of any
deposit accounts maintained by Borrower with such Bank against Borrower's
Liabilities.
10.5 Injunctive Relief. Borrower recognizes that in the event Borrower
fails to perform, observe or discharge any of its obligations or liabilities
under this Agreement or the Other Agreements, no remedy of law will provide
adequate relief to Banks, and agrees that Banks shall be entitled to temporary
and permanent injunctive relief in any such case without the necessity of
proving actual damages or the posting of bond, surety or other security.
11. THE AGENT
11.1 Appointment, Powers and Immunities. Each Bank hereby irrevocably
appoints and authorizes Agent to act as its agent hereunder and under the Other
Agreements with such powers as are specifically delegated to Agent by the terms
of this Agreement and of the Other Agreements, together with such other powers
as are reasonably incidental thereto. Agent (as such term is used shall include
its Affiliates and its own and its Affiliates' officers, directors, employees
and agents): (a) shall have no duties or responsibilities except those expressly
set forth in this Agreement and in the Other Agreements, and shall not by reason
of this Agreement or the Other Agreements be a trustee for any Bank; (b) shall
not be responsible to the Bank for any recitals, statements, representations or
warranties contained in this Agreement or the Other Agreements, or in any
certificate or other document referred to or provided for in, or received by any
of them under, this Agreement or the Other Agreements, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or the Other Agreements or any other document referred to or provided
for herein or therein or for any failure by Borrower or any other Person to
perform any of its obligations hereunder or thereunder; (c) shall not be
required to initiate or conduct any litigation or collection proceedings
hereunder or under the Other Agreements; (d) shall not be responsible for any
action taken or omitted to be taken by it hereunder or under the Other
Agreements or under any other document or instrument referred to or provided for
herein or therein or in connection herewith or therewith, except for its own
gross negligence or willful misconduct; and (e) shall not be responsible to
Borrower or any Bank for (i) determining whether or not any of the transactions
contemplated hereby qualifies as a highly leveraged transaction ("HLT") as
defined by any bank regulatory authority, (ii) notifying any Bank regarding the
HLT status of any transaction contemplated hereby or of any change in that
status or (iii) the correctness of any determination as to HLT status. Agent may
employ agents and attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact selected by it
in good faith. Agent may deem and treat the payee of any Note as the holder
thereof for all purposes hereof unless and until a written notice of the
assignment or transfer thereof shall have been filed with Agent, together with
the written consent of the Borrower to such assignment or transfer, and Agent
shall have consented to such assignment or transfer.
11.2 Reliance by Agent. Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telex, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel, independent accountants and
other experts selected by Agent. As to any matters not expressly provided for by
this Agreement or the Other Agreements, Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder and thereunder in
accordance with instructions signed by the Banks, and such instructions of the
Banks and any action taken or failure to act pursuant thereto shall be binding
on all of the Banks.
11.3 Defaults. Agent shall not be deemed to have knowledge or notice of
the occurrence of an Event of Default (other than the non-payment of principal
of or interest on Loans) unless Agent has received notice from a Bank or
Borrower specifying such Event of Default and stating that such notice is a
"Notice of Default". In the event that Agent receives such a notice of the
occurrence of an Event of Default, Agent shall give prompt notice thereof to the
Banks (and shall give each Bank prompt notice of each such non-payment). Agent
shall (subject to Paragraph 11.7 hereof) take such action with respect to such
Event of Default as shall be directed by the Banks, provided that, unless and
until Agent shall have received such directions, Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Event of Default as it shall deem advisable in the best interest of the
Banks.
11.4 Rights as a Bank. With respect to its Commitment and the Loans
made by it, Agent (and any successor acting as Agent) in its capacity as a Bank
hereunder shall have the same rights and powers hereunder as any other Bank and
may exercise the same as though it were not acting as Agent, and the term "Bank"
or "Banks" shall, unless the context otherwise indicates, include Agent in its
individual capacity. Agent (and any successor acting as agent) and its
Affiliates may (without having to account therefor to any Bank) accept deposits
from, lend money to and generally engage in any kind of banking, trust or other
business with Borrower (and any of its Affiliates) as if it were not acting as
Agent, and Agent and its Affiliates may accept fees and other consideration from
Borrower for services in connection with this Agreement or otherwise without
having to account for the same to the Banks.
11.5 Indemnification. The Banks agree to indemnify Agent (to the extent
not reimbursed under Paragraphs 12.12 and 12.18 hereof, but without limiting the
obligations of Borrower under said Paragraphs 12.12 and 12.18, and including in
any event any payments under any indemnity which Agent is required to issue),
ratably in accordance with the aggregate principal amount of the Loans made by
the Banks (or, if no Loans are at the time outstanding, ratably in accordance
with their respective Commitments), for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against Agent in any way relating to or arising out of
this Agreement or the Other Agreements or any other documents contemplated by or
referred to herein or therein or the transactions contemplated hereby
(including, without limitation, the costs and expenses which Borrower is
obligated to pay under Paragraphs 12.12 and 12.18 hereof, and including also any
payments under any indemnity which Agent is required to issue, but excluding,
unless an Event of Default has occurred and is continuing, normal administrative
costs and expenses incident to the performance of its agency duties hereunder)
or the enforcement of any of the terms hereof or thereof or of any such other
documents, provided that no Bank shall be liable for any of the foregoing to the
extent they arise from the gross negligence or willful misconduct of the party
to be indemnified.
11.6 Non-Reliance on Agent and other Banks. Each Bank agrees that it
has, independently and without reliance on Agent or any other Bank, and based on
such documents and information as it has deemed appropriate, made its own credit
analysis of Borrower and decision to enter into this Agreement and that it will,
independently and without reliance upon Agent or any other Bank, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under this Agreement or the Other Agreements. Agent shall not be required to
keep itself informed as to the performance or observance by Borrower of this
Agreement or the Other Agreements or any other document referred to or provided
for herein or therein or to inspect the properties or books of the Borrower or
its Affiliates. Except for notices, reports and other documents and information
expressly required to be furnished to the Bank by Agent hereunder, Agent shall
not have any duty or responsibility to provide any Bank with any credit or other
information concerning the affairs, financial condition or business of the
Borrower or its Affiliates which may come into the possession of Agent or any of
its affiliates.
11.7 Failure to Act. Except for action expressly required of Agent
hereunder and under the Other Documents, Agent shall in all cases be fully
justified in failing or refusing to act hereunder and thereunder unless it shall
receive further assurances to its satisfaction from the Banks of their
indemnification obligations under Paragraph 11.5 hereof against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.
11.8 Resignation or Removal of Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, Agent may resign at any time
by giving notice thereof to the Banks and Borrower, and Agent may be removed at
any time with or without cause by the Majority Banks. Upon any such resignation
or removal, the Banks shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Banks and shall have
accepted such appointment within 30 days after the retiring Agent's giving of
notice of resignation or the Banks' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Banks, appoint a successor Agent, which
shall be a bank which has an office in Chicago, Illinois with a combined capital
and surplus of at least $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations hereunder. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Section 11 shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken by
it while it was acting as Agent.
11.9 Consents under this Agreement and the Other Agreements. Without
the prior written consent of each Bank, Agent will not consent to any
modification, supplement or waiver of or under this Agreement or any of the
Other Agreements.
11.10 Distribution of Notices. At any time Agent receives a notice from
Borrower hereunder that does not state on its face that it has been sent to each
Bank, Agent shall use reasonable efforts to transmit a copy of such notice to
any non-receiving Bank as promptly as practicable after receipt thereof by
Agent.
11.11 Collateral Sub-Agents. Each Bank by its execution and delivery of
this Agreement agrees, as contemplated by Paragraph 9.3(d) hereof, that, in the
event it shall hold any Permitted Investments referred to herein, such Permitted
Investments shall be held in the name and under the control of such Bank and
such Bank shall hold such Permitted Investments as a collateral sub-agent for
the Agent thereunder. Borrower by its execution and delivery of this Agreement
hereby consents to the foregoing.
12. GENERAL
12.1 Payment Application Date. Any check, draft, or similar item of
payment by or for the account of Borrower delivered to Agent or any Bank on
account of Borrower's Liabilities shall be applied by Agent or such Bank on
account of Borrower's Liabilities on the date final settlement thereof is
reflected by irrevocable credit to Agent or such Bank, as applicable.
12.2 Statement of Account. Each statement of account by Agent or any
Bank delivered to Borrower relating to Borrower's Liabilities shall be presumed
correct and accurate, absent manifest error, and shall constitute an account
stated between Borrower and Agent or such Bank unless, within ninety (90) days
after Borrower's receipt of said statement, Borrower delivers to Agent or such
Bank, by registered or certified mail addressed to Agent or such Bank at its
Address for Notices specified on the signature pages hereto, written objection
thereto specifying the error or errors, if any, contained in any such statement.
12.3 Manner of Application; Waiver of Setoff Prohibition. Upon the
occurrence and during the continuance of an Event of Default, Borrower waives
the right to direct the application of any and all payments at any time or times
hereafter received by Agent or any Bank on account of Borrower's Liabilities and
Borrower agrees that Agent or any Bank shall have the right, in its absolute and
sole discretion, to apply and re-apply any and all such payments toward
Borrower's Liabilities in such manner as Agent or such Bank may deem advisable,
notwithstanding any entry by Agent or such Bank upon any of its books and
records. Borrower further waives any right under or benefit of any law that
would restrict or limit the right or ability of Agent or any Bank to obtain
payment of Borrower's Liabilities, including any law that would restrict or
limit Agent or such Bank in the exercise of its right to appropriate any
indebtedness owing from Agent or such Bank to Borrower and any deposits or other
property of Borrower in the possession or control of Agent or such Bank and
apply the same toward or setoff the same against the payment of Borrower's
Liabilities.
12.4 Survival of Representations and Warranties. Borrower covenants,
warrants and represents to the Banks that all representations and warranties of
Borrower contained in this Agreement and the Other Agreements shall be true at
the time of Borrower's execution of this Agreement and the Other Agreements and
shall survive the execution, delivery and acceptance thereof by the parties
thereto and the closing of the transactions described therein or related
thereto.
12.5 Integration; Amendment; Assignment; Participation.
(a) This Agreement and the Other Agreements constitute the
entire agreement and understanding between the parties relating to the subject
matter hereof and supersede all prior agreements, whether oral or written. This
Agreement and the Other Agreements may not be modified, altered or amended
except by an agreement in writing signed by Borrower and the Banks, and no
provision of this Agreement may be waived except with the consent of the Banks.
(b) Borrower may not sell, assign or transfer this Agreement,
or the Other Agreements or any portion thereof, including without limitation
Borrower's rights, titles, interests, remedies, powers and/or duties hereunder
or thereunder without the prior written consent of the Banks.
(c) Any Bank may at any time or from time to time assign to
other commercial lenders any of its Loan, its Revolving Note, its Term Note or
its Commitment. Upon written notice to Borrower and Agent of an assignment
permitted by the provisions of the preceding sentences (which notice shall
identify the assignee Bank, the amount of the assigning Bank's Commitment and
Loan assigned in detail reasonably satisfactory to Agent) and upon the
effectiveness of any other assignment consented to by Borrower and Agent, the
assignee shall have, to the extent of such assignment (unless otherwise provided
in such assignment with the consent of Borrower and Agent), the obligations,
rights and benefits of a Bank hereunder holding the Commitment and Loan (or
portions thereof) assigned to it (in addition to the Commitment and Loan, if
any, theretofore held by such assignee) and the assigning Bank shall, to the
extent of such assignment, be released from the Commitment (or portions thereto)
so assigned.
(d) A Bank may sell or agree to sell to one or more other
Persons a participation in all or any part of any Loan held by it or Loans made
or to be made by it, in which event each such participant shall be entitled to
the rights and benefits of the provisions of Paragraph 9.2(d) hereof with
respect to its participation in such Loan as if (and Borrower shall be directly
obligated to such participant under such provisions as if) such participant were
a "Bank" for purposes of said Paragraph, but shall not have any other rights or
benefits under this Agreement or the Other Agreements (the participant's rights
against such Bank in respect of such participation to be those set forth in the
agreement (the "Participation Agreement") executed by such Bank in favor of the
participant). All amounts payable by Borrower to any Bank hereunder shall be
determined as if such Bank had not sold or agreed to sell any participation in
such Loan and as if such Bank were funding all of such Loan in the same way that
it is funding the portion of such Loan in which no participation have been sold.
In no event shall a Bank that sells a participation be obligated to the
participant under the Participation Agreement to take or refrain from taking any
action hereunder or under the Other Agreements except that such Bank may agree
in the Participation Agreement that it will not, without the consent of the
participant, agree to (i) the increase or extension of the term, or the
extension of time or the waiver of any requirement for the reduction or
termination, of such Bank's Commitment, (ii) the extension of any date fixed for
the payment of principal of or interest on the related Loan or Loans or any
portion of any fees payable to the participant or (iii) the reduction of any
payment of principal thereof.
(e) Anything in this Paragraph 12.15 to the contrary
notwithstanding, any Bank may assign and pledge all or any portion of its Loans
to any Federal Reserve Bank as collateral security pursuant to Regulation A of
the Board of Governors of the Federal Reserve System and any operating circular
issued by such Federal Reserve Bank. No such assignment shall release the
assigning Bank from its obligations hereunder.
(f) A Bank may furnish any publicly available information
concerning Borrower in the possession of such Bank from time to time to
assignees and participants (including prospective assignees and participants).
12.6 No Waiver. Any Bank's or Agent's failure at any time or times
hereafter to require strict performance by Borrower of any provision of this
Agreement shall not waive, affect or diminish any right of such Bank or Agent
thereafter to demand strict compliance and performance therewith. Any suspension
or waiver by any Bank or Agent of an Event of Default by Borrower under this
Agreement or the Other Agreements shall not suspend, waive or affect any other
Event of Default by Borrower under this Agreement or the Other Agreements,
whether the same is prior or subsequent thereto and whether of the same or of a
different type. None of the undertakings, agreements, warranties, covenants or
representations of Borrower contained in this Agreement or the Other Agreements
and no Event of Default by Borrower under this Agreement or the Other Agreements
shall be deemed to have been suspended or waived by any Bank or Agent unless
such suspension or waiver is by an instrument in writing by each Bank and Agent
specifying such suspension or waiver and given pursuant to the requirements of
Paragraph 12.16 hereof.
12.7 Severability. If any provision of this Agreement or the Other
Agreements or the application thereof to any Person or circumstance is held
invalid or unenforceable, the remainder of this Agreement and the Other
Agreements and the application of such provision to other Persons or
circumstances will not be affected thereby and the provisions of this Agreement
and the Other Agreements shall be severable in any such instance.
12.8 Successors and Assigns. This Agreement and the Other Agreements
shall be binding upon and inure to the benefit of the successors and assigns of
Borrower, the Banks and Agent. This provision, however, shall not be deemed to
modify Paragraph 12.5 hereof.
12.9 Conflict with Other Agreements. The provisions of the Other
Agreements are incorporated in this Agreement by this reference thereto. Except
as otherwise provided in the Other Agreements by specific reference to the
applicable provision of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in the Other
Agreements, the provision contained in this Agreement shall govern and control.
12.10 No Impairment by Termination. Except to the extent provided to
the contrary in this Agreement and in the Other Agreements, no termination or
cancellation (regardless of cause or procedure) of this Agreement or the Other
Agreements shall in any way affect or impair the powers, obligations, duties,
rights and liabilities of Borrower, the Banks or Agent in any way or respect
relating to (a) any transaction or event occurring prior to such termination or
cancellation and/or (b) any of the undertakings, agreements, covenants,
warranties and representations of Borrower contained in this Agreement or the
Other Agreements. All such undertakings, agreements, covenants, warranties and
representations shall survive such termination or cancellation.
12.11 Waivers. Except as otherwise specifically provided in this
Agreement, Borrower waives any and all notice or demand which Borrower might be
entitled to receive with respect to this Agreement or the Other Agreements by
virtue of any applicable statute or law and waives presentment, demand and
protest and notice of presentment, protest, default, dishonor, non-payment,
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, contract rights, documents, instruments, chattel
paper and guaranties at any time held by the Banks or Agent on which Borrower
may in any way be liable and hereby ratifies and confirms whatever the Banks or
Agent may do in this regard.
12.12 Costs, Fees and Expenses Related to Agreement and Other
Agreements. In accordance with this Agreement on or prior to the date hereof and
thereafter upon demand by Agent or any Bank therefor, Borrower shall pay or
reimburse Agent or any Bank for all reasonable costs, fees and expenses incurred
by Agent or any Bank, or for which Agent or any Bank becomes obligated, in
connection with the negotiation, preparation and consummation of this Agreement
and the Other Agreements, including but not limited to, attorneys' fees up to a
maximum amount of $20,000 (exclusive of costs and expenses), costs and expenses;
search fees, costs and expenses; and all taxes payable in connection with this
Agreement or the Other Agreements. That portion of Borrower's Liabilities
consisting of costs, expenses or advances to be reimbursed by Borrower to Agent
or Banks pursuant to this Agreement or the Other Agreements which are not paid
on or prior to the date hereof shall be payable by Borrower to Agent on demand.
12.13 Environmental Indemnity. Borrower agrees to indemnify and save
each Bank and Agent, its officers, directors, employees and agents, harmless of,
from and against any liability, loss, damage or expense (including reasonable
attorneys' fees) to which any Bank or Agent or any of such persons may become
subject, arising from or based upon (a) any violation, or claim of violation, by
Borrower of any laws, regulations or ordinances relating to Hazardous Materials,
or (b) any Hazardous Materials located or disposed of on or released or
transported from any property owned, leased or operated by Borrower, or any
claim of any of the foregoing.
12.14 Release. Borrower releases each Bank and Agent from any and all
causes of action, claims or rights which Borrower may now or hereafter have for,
or which may arise from, any loss or damage caused by or resulting from any act
or omission to act on the part of any Bank or Agent, its officers, agents or
employees, except in each instance for willful misconduct and gross negligence.
12.15 Governing Law. This Agreement and the Other Agreements shall be
governed and controlled by the internal laws of the State of Illinois without
regard to principles of conflicts of laws as to interpretation, enforcement,
validity, construction, effect, and in all other respects including, but not
limited to, the legality of the interest rate and other charges.
12.16 Notices. All notices, consents, requests, demands and other
communications hereunder shall be in writing and shall be deemed duly given to
any party or parties (a) upon delivery to the address of the party or parties as
specified in the "Address for Notices" below such party or parties' name on the
signature pages hereof if delivered in person or by courier or if sent by
certified or registered mail (return receipt requested), or (b) upon dispatch if
transmitted by telecopy or other means of facsimile transmission, in any case to
the party or parties at the telecopy numbers specified on the same, or to such
other address or telecopy number as any party may hereafter designate by written
notice in the aforesaid manner.
12.17 FORUM; AGENT; VENUE; JURY TRIAL WAIVER. TO INDUCE THE BANKS TO
ACCEPT THIS AGREEMENT AND THE OTHER AGREEMENTS, BORROWER, IRREVOCABLY AGREES
THAT ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER, OR RESPECT, ARISING OUT OF
OR FROM OR RELATED TO THIS AGREEMENT OR THE OTHER AGREEMENTS SHALL BE LITIGATED
ONLY IN COURTS HAVING SITUS WITHIN CHICAGO, ILLINOIS. BORROWER HEREBY CONSENTS
AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED
WITHIN SAID CITY AND STATE. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY ANY
BANK OR AGENT IN ACCORDANCE WITH THIS PARAGRAPH. BORROWER HEREBY IRREVOCABLY
WAIVES THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION IN WHICH BORROWER
IS A PARTY.
12.18 Other Costs, Fees and Expenses. If at any time or times hereafter
any Bank or Agent: (a) employs counsel for advice or other representation (i)
with respect to this Agreement or the Other Agreements, (ii) to represent such
Bank or Agent in any litigation, contest, dispute, suit or proceeding or to
commence, defend, or intervene or to take any other action in or with respect to
any litigation, contest, dispute, suit, or proceeding (whether instituted by
such Bank, Agent, Borrower, or any other Person other than actions or litigation
solely between the Banks or actions arising solely out of the gross negligence
or willful misconduct of the Banks (as determined by a court of competent
jurisdiction)) in any way or respect relating to this Agreement or the Other
Agreements or (iii) to enforce any rights of such Bank or Agent against Borrower
or any other Person which may be obligated to such Bank or Agent by virtue of
this Agreement or the Other Agreements; and/or (b) attempts to or enforces any
of such Banks' or Agent's rights or remedies under the Agreement or the Other
Agreements, the reasonable costs and expenses incurred by Banks in any manner or
way with respect to the foregoing, shall be part of Borrower's Liabilities,
payable by Borrower to such Bank or Agent on demand.
12.19 Revival. To the extent that Agent or any Bank receives any
payment on account of Borrower's Liabilities and any such payment(s) and/or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, subordinated and/or required to be repaid
to a trustee, receiver or any other party under any bankruptcy act, state or
federal law, common law or equitable cause, then, to the extent of such
payment(s) and/or proceeds received, Borrower's Liabilities or part thereof
intended to be satisfied shall be revived and continue in full force and effect,
as if such payment(s) and/or proceeds had not been received by Agent or any Bank
and applied on account of Borrower's Liabilities.
12.20 Acknowledgments. Borrower acknowledges that (i) it has been
advised by counsel of its choice with respect to this Agreement and the
transactions contemplated hereby, (ii) each of the waivers set forth herein was
knowingly and voluntarily made; and (iii) the obligations of the Banks and Agent
hereunder, including the obligation to advance and lend funds to Borrower in
accordance herewith, shall be strictly construed and shall be expressly subject
to Borrower's compliance in all respects with the terms and conditions herein
set forth.
12.21 Section Headings. Section headings used in this Agreement
are for convenience only and shall not effect the construction or interpretation
of this Agreement.
12.22 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same instrument.
12.23 Effectiveness. This Agreement shall become effective upon the
execution and delivery to Agent of counterparts of this Agreement by Borrower,
the Banks and Agent.
[SIGNATURES ON NEXT PAGES]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year specified at the beginning hereof.
ATTEST: STIMSONITE CORPORATION
THOMAS C. RATCHFORD By: JAY R. TAYLOR
Secretary Title: PRESIDENT
Address for Notices:
7542 N. Natchez Avenue
Niles, Illinois 60714
Telecopier No.: (847) 647-0269
Telephone No.: (847) 647-7717
Attention: Chief Financial Officer
With a copy to:
Timothy J. Melton, Esq.
Jones Day Reavis & Pogue
77 West Wacker Drive
Chicago, Illinois 60601-1692
Telephone No.: (312) 782-3939
Telecopier No.: (312) 782-8585
Commitment HARRIS TRUST AND SAVINGS BANK
$22,500,000
By:
Title:
Lending Office for all Loans:
111 West Monroe Street
Chicago, Illinois 60690
Address for Notices:
111 West Monroe Street
Chicago, Illinois 60690
Telecopier No.: (312) 765-8348
Telephone No.: (312) 461-2121
Attention: Mr. Thomas Carmody
Commitment LASALLE NATIONAL BANK
$22,500,000
By:JEFFREY A. RAIDER
Title: Vice President
Lending Office for all Loans:
120 South LaSalle Street
Chicago, Illinois 60603
Address for Notices:
LaSalle National Bank
120 South LaSalle Street
Chicago, Illinois 60603
Telecopier No.: (312) 904-6546
Telephone No.: (312) 904-2766
Attention: Mr. Jeffrey A. Raider
Vice President
With a copy to:
Michael A. Nemeroff, Esq.
Vedder, Price, Kaufman & Kammholz
222 N. LaSalle Street
Chicago, Illinois 60601-1003
Telecopy No.: (312) 609-5005
Telephone No.: (312) 609-7500
LASALLE NATIONAL BANK
as Agent
By:JEFFREY A. RAIDER
Title: Vice President
Lending Office for all Loans:
120 South LaSalle Street
Chicago, Illinois 60603
Address for Notices:
LaSalle National Bank,
as Agent
120 South LaSalle Street
Chicago, Illinois 60603
Telecopier No.: (312) 904-6546
Telephone No.: (312) 904-2766
Attention: Mr. Jeffrey A. Raider
Vice President
<PAGE>
LIST OF EXHIBITS
Exhibit 3.1 Form of Revolving Note
Exhibit 3.2 Form of Term Note
Exhibit 9.2(d)(i)(B) Borrowing Base Certificate
<PAGE>
EXHIBIT 3.1
to
Loan Agreement
REVOLVING NOTE
$10,000,000 Chicago, Illinois
July 23, 1996
FOR VALUE RECEIVED, on or before June 30, 2000 (or, if such day is not
a Business Day, on the next following Business Day), the undersigned, STIMSONITE
CORPORATION, a Delaware corporation (herein, together with its successors and
assigns, called the "Borrower"), promises to pay to the order of
___________________, a _____________________________ (herein, together with its
successors and assigns, called the "Bank"), the maximum principal sum of TEN
MILLION and 00/100 DOLLARS ($10,000,000) or, if less, the aggregate unpaid
principal amount of all Revolving Loans made by the Bank to the undersigned
pursuant to that certain Loan Agreement of even date herewith between the
Borrower, Banks and Agent (herein, as the same may be amended, modified or
supplemented from time to time, called the "Loan Agreement") as shown in the
Bank's records.
The Borrower further promises to pay to the order of the Bank interest
on the aggregate unpaid principal amount hereof from time to time outstanding
from the date hereof until paid in full at such rates and at such times as shall
be determined in accordance with the provisions of the Loan Agreement. Accrued
interest shall be payable on the dates specified in the Loan Agreement.
Payments of both principal and interest are to be made in the lawful
money of the United States of America in immediately available funds at the
Bank's principal office at _______________________________________, or at such
other place as may be designated by the Bank to the Borrower in writing.
This Note is the Revolving Note referred to in, evidences indebtedness
incurred under, and is subject to the terms and provisions of, the Loan
Agreement. The Loan Agreement, to which reference is hereby made, sets forth
said terms and provisions, including those under which this Note may or must be
paid prior to its due date or may have its due date accelerated. Terms used but
not otherwise defined herein are used herein as defined in the Loan Agreement.
In addition to, and not in limitation of, the foregoing and the
provisions of the Loan Agreement hereinabove referred to, the Borrower further
agrees, subject only to any limitation imposed by applicable law, to pay all
expenses, including attorneys' fees and expenses, incurred by the holder of this
Note in seeking to collect any amounts payable hereunder which are not paid when
due, whether by acceleration or otherwise.
All parties hereto, whether as makers, endorsers or otherwise,
severally waive presentment, demand, protest and notice of dishonor in
connection with this Note.
This Note is binding upon the undersigned and its successors and
assigns, and shall inure to the benefit of the Bank and its successors and
assigns. This Note is made under and governed by the laws of the State of
Illinois without regard to conflict of laws principles.
STIMSONITE CORPORATION,
a Delaware corporation
ATTEST:
By: THOMAS C. RATCHFORD By:JAY R. TAYLOR
Secretary Title: PRESIDENT
Borrower's Address:
7542 N. Natchez Avenue
Niles, Illinois 60714
<PAGE>
EXHIBIT 3.2
to
Loan Agreement
TERM NOTE
$12,500,000 Chicago, Illinois
July 23, 1996
FOR VALUE RECEIVED, the undersigned, STIMSONITE CORPORATION, a Delaware
corporation (herein, together with its successors and assigns, called the
"Borrower"), promises to pay to the order of ___________________, a
_______________ (herein, together with its successors and assigns, called the
"Bank"), the principal sum of TWELVE MILLION FIVE HUNDRED THOUSAND DOLLARS
($12,500,000), plus interest as described herein, payable in quarterly
installments commencing December 31, 1996 of principal of Three Hundred Twelve
Thousand Five Hundred Dollars ($312,500), on the last Business Day of each
quarter through ___________, 2003, with a final payment of the entire principal
balance outstanding hereunder due on June 30, 2003, pursuant to that certain
Loan Agreement of even date herewith between the Borrower, the Banks and Agent
(herein, as the same may be amended, modified or supplemented from time to time,
called the "Loan Agreement") as shown in the Bank's records, plus interest as
described below.
The Borrower further promises to pay to the order of the Bank interest
on the aggregate unpaid principal amount hereof from time to time outstanding
from the date hereof until paid in full at such rates and at such times as shall
be determined in accordance with the provisions of the Loan Agreement. Accrued
interest shall be payable on the dates specified in the Loan Agreement.
Payments of both principal and interest are to be made in the lawful
money of the United States of America in immediately available funds at the
Bank's principal office at _____________________________________________, or at
such other place as may be designated by the Bank to the Borrower in writing.
This Note is the Term Note referred to in, evidences indebtedness
incurred under, and is subject to the terms and provisions of, the Loan
Agreement. The Loan Agreement, to which reference is hereby made, sets forth
said terms and provisions, including those under which this Note may or must be
paid prior to its due date or may have its due date accelerated. Terms used but
not otherwise defined herein are used herein as defined in the Loan Agreement.
In addition to, and not in limitation of, the foregoing and the
provisions of the Loan Agreement hereinabove referred to, the Borrower further
agrees, subject only to any limitation imposed by applicable law, to pay all
expenses, including attorneys' fees and expenses, incurred by the holder of this
Note in seeking to collect any amounts payable hereunder which are not paid when
due, whether by acceleration or otherwise.
All parties hereto, whether as makers, endorsers or otherwise,
severally waive presentment, demand, protest and notice of dishonor in
connection with this Note.
This Note is binding upon the undersigned and its successors and
assigns, and shall inure to the benefit of the Bank and its successors and
assigns. This Note is made under and governed by the laws of the State of
Illinois without regard to conflict of laws principles.
STIMSONITE CORPORATION,
a Delaware corporation
ATTEST:
By: THOMAS C. RATCHFORD By: JAY R. TAYLOR
Secretary Title: President
Borrower's Address:
7542 N. Natchez Avenue
Niles, Illinois 60714
<PAGE>
Exhibit 9.2(d)(i)(B)
Form of Borrowing Base Certificate
Date:_______________, 19___
To: LaSalle National Bank and Harris Trust and Savings Bank pursuant to the
Loan Agreement dated July 23, 1996
Amount in
U.S. Dollar ($)
1. Accounts Receivable
Total face amount of all receivables of the Borrower $___________
Less:
Returns, discounts, claims, credits and allowances ($__________)
Accounts Receivables arising from Affiliate or ($__________)
Subsidiary transaction
All Accounts Receivable not paid in full within 60 ($__________)
days of the due date
thereof or which have been disputed by the account ($__________)
debtor
Amount by which Accounts Receivable attributable to ($__________)
account debtor exceed 15% of all Accounts Receivable
Reserves for any other matter affecting the ($__________)
creditworthiness of account debtors owing any
Accounts Receivable
Bill and hold (deferred shipment) transactions ($__________)
Sales to account debtor outside of the United States ($__________)
not covered by irrevocable letters of credit or credit
insurance acceptable to Bank
All other Accounts Receivable which no longer ($__________)
continue to be in full conformity with the
eligibility requirements, representations and
warranties contained in the Loan Agreement
2. Eligible Accounts Receivable (Net Amount of No. 1) $___________
3. 85% of Eligible Receivables $___________
4. Inventory
Gross dollar value (valued at the lower of cost $___________
(determined on a first-in, first-out basis)
or market value) of inventory located in
the United State of the Borrower
Less:
Supplies (other than raw materials and finished ($__________)
goods) and spare parts
Inventory subject to any Lien except a Permitted Lien ($__________)
Inventory which no longer continues to be in full ($__________)
conformity with the eligibility requirements,
representations and warranties contained in
the Loan Agreement
5. Eligible Inventory (Net Amount of No. 4) $___________
6. 60% of Eligible Inventory $___________
7. Borrowing Base (Sum of Nos. 3 and 6)* $___________
8. Outstanding Principal Amount of Revolving Loans $___________
9. Outstanding Amount of Letter of Credit $___________
10. Borrowing Base Surplus (Deficiency) (No. 7 minus (No. $___________
8 and No. 9)
The undersigned hereby certifies that all the information provided is true and
correct as of the date first above written.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this ____ day of
__________________, 19___.
STIMSONITE CORPORATION
By: ___________________________
Name: ___________________________
Title: ___________________________
* Revolving Credit Commitment reduces on a dollar-for-dollar basis from $20
million total commitment by the amount of certain guaranties by Borrower of
Subsidiary debt pursuant to Paragraph 9.3(e) of the Loan Agreement.
<PAGE>
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into this 30 day
of May, 1996, between Stimsonite Corporation, a Delaware corporation (the
"Company"), and Jay R. Taylor (the "Executive").
WHEREAS, the Company recognizes that the future growth,
profitability and success of the Company's business will be substantially and
materially advanced by the employment of the Executive by the Company.
WHEREAS, the Company desires to secure for itself or its
subsidiaries the benefit of the Executive's background, experience, ability,
expertise and industry.
WHEREAS, the Company desires to employ the Executive and the
Executive has indicated his willingness to provide his services, on the terms
and conditions set forth herein;
NOW, THEREFORE, on the basis of the foregoing and in
consideration of the mutual covenants and agreements contained herein, the
parties hereto agree as follows:
1. Employment. The Company hereby agrees to employ the
Executive and the Executive hereby accepts employment with the Company, on the
terms and subject to the conditions hereinafter set forth in this Agreement.
2. Term. Subject to the provisions and conditions of this
Agreement, Executive's employment hereunder shall commence on the date hereof
and shall expire one year from such date (the "Expiration Date"); provided,
however, that the term of this Agreement will, on each Expiration Date,
automatically be extended for an additional year unless, no later than sixty
(60) days prior to each Expiration Date, the Company or the Executive shall have
given written notice that it or the Executive, as the case may be, does not wish
to have the term of this Agreement extended (hereinafter referred to as the
"Employment Term"), unless otherwise terminated pursuant to the terms hereof.
3. Compensation.
(a) As compensation for the performance of Executive's services hereunder,
the Company shall pay to the Executive (i) a salary (the "Regular Base Salary")
of $222,600 per annum or such greater amount as may be determined by the Board
of Directors and (ii) an annual bonus (the "Bonus"), payable in accordance with
the Company's payroll policy and the Company's incentive compensation plan,
respectively, as of the date of this Agreement, as the same may be modified or
replaced by the Company from time to time.
(b) During the Employment Term, the Executive shall be entitled to receive
such other benefits and conditions of employment, including, without limitation,
participation in such group health, life, disability and dental benefit plans
provided by the Company (such benefits collectively, the "Welfare Benefits"),
and such paid vacation, as are afforded from time to time hereafter to the other
executive employees of the Company holding similar positions.
4. Position and Duties. Subject to the terms and conditions
contained herein, the Executive shall serve as the President and Chief Executive
Officer of the Company and, in such capacity, shall provide such services and
perform such functions, consistent with the nature of such position, as shall be
determined from time to time by, or pursuant to authority of, the board of
directors of the Company (the "Board of Directors"). If elected or appointed,
the Executive shall also serve as a director or officer of any of the Company,
its subsidiaries or affiliated companies, without further compensation. The
Executive understands and agrees that he may be required to undertake normal
business travel from time to time.
5. Exclusivity. During the Employment Term, the Executive
shall devote his working hours to the business of the Company, shall faithfully
serve the Company, shall in all respects conform to and comply with the lawful
and reasonable directions and instructions given to him by the Company which are
not otherwise prohibited by this Agreement, shall use his best efforts to
promote and serve the interests of the Company and shall not engage in any other
business or commercial activity for compensation; provided, however, that
nothing in this Agreement shall be deemed to prevent the Executive from
investing his personal, immediate family or trust assets; provided, however,
that with respect to businesses that compete with the Company's business, his
participation, or that of his immediate family or such trust, is solely that of
a passive investor owning no more than 1% of any class of such company's
outstanding debt or equity securities, provided that such activities do not
contravene the provisions of Section 8 hereof.
6. Reimbursement for Expenses. Upon the presentation of
itemized vouchers, the Company shall reimburse the Executive for travel, meals,
entertainment and other expenses reasonably incurred by the Executive in the
performance of his duties under this Agreement in accordance with the Company's
expense reimbursement policy as the same may be modified by the Company from
time to time.
7. Termination.
(a) In the event that the Executive has (A) committed an act of fraud or
embezzlement against the Company or an act which he knew to be in gross
violation of his duties to the Company (including the unauthorized disclosure of
confidential information); (B) continually failed to render services to the
Company in accordance with his employment, which failure (I) amounts to gross
neglect of his duties to the Company and (II) is not remedied within ten (10)
days after notice thereof by the Company; (C) been convicted of a felony; or (D)
willfully disregards the lawful directives of the Board of Directors which is
not remedied within thirty (30) days after notice thereof by the Company, the
Company shall be entitled to terminate this Agreement (other than Sections 8 and
9 hereof unless otherwise specified by the Company) and the employment
relationship established hereby immediately upon the giving of written notice to
the Executive of such termination specifying the grounds therefor. After the
effective date of termination under this Section 7(a), the Company shall not be
obligated to make any further payments under this Agreement, except for amounts
due the Executive hereunder as of such effective date.
(b) In the event that the Executive resigns, or the Executive gives notice
pursuant to Section 2 that he does not wish to have the term of this Agreement
extended as provided therein (other than for reasons that would entitle the
Executive to terminate his employment pursuant to Section 7(d)), this Agreement,
other than Sections 8 and 9 hereof, and the employment relationship established
hereby shall terminate immediately upon the receipt by the Company of notice of
the Executive's resignation. After the effective date of termination under this
subsection (b), the Company shall not be obligated to make any further payments
under this Agreement, except for amounts due the Executive hereunder as of such
effective date.
(c) In the event that the Executive dies, Retires (as hereinafter defined)
or becomes Disabled (as hereinafter defined) during the term of this Agreement,
this Agreement, other than Sections 8 and 9 and, in the case of retirement or
disability, 10 hereof, and the employment relationship established hereby shall
terminate immediately upon the date on which the Executive dies, Retires or
becomes disabled, as the case may be. After the effective date of termination
under this Section 7(c), the Company shall not be obligated to make any further
payments under this Agreement (except as provided in Section 10 hereof, if
applicable), other than to the Executive or the Executive's heirs, executors,
administrators or legal representatives, as the case may be, all amounts due the
Executive hereunder as of such effective date, including any amounts or benefits
to which the Executive may be entitled under the terms of any employee benefit
plan of the Company, as in effect on the effective date of such termination. For
purposes of this Section 7(c) "Retires" shall mean the voluntary termination of
employment by the Executive after the Executive attains age 65 and "Disabled"
shall mean, as of any date, the permanent disability of the Executive in
accordance with the then applicable provisions of the disability benefit program
of the Company generally available to executives of the Company.
(d) In the event that the Company elects to terminate the full time
employment of the Executive during the Employment Term (other than pursuant to
subsections (a), (b) and (c) of this Section 7) or gives notice pursuant to
Section 2 that it does not wish to have the term of this Agreement extended as
provided therein (other than for reasons that would entitle the Company to
terminate Executive's employment pursuant to subsections (a), (b) and (c) of
this Section 7), or if the Executive resigns from his employment hereunder
following a Substantial Breach, as defined in this Section 7(d) (such
Substantial Breach having not been corrected by the Company within 30 days of
receipt of written notice from the Executive of the occurrence of such
Substantial Breach, which notice shall specifically set forth the nature of the
Substantial Breach which is the reason for such resignation), the Company shall
continue to pay the Executive as provided in Section 11 hereof. "Substantial
Breach" shall mean any material breach by the Company of its obligation under
this Agreement including without limitation, (A) the assignment of the Executive
to any position or duties materially inconsistent with the provisions of Section
4 hereof; (B) a reduction by the Company in the Regular Base Salary; (C) the
failure by the Company to allow the Executive to participate in the Company's
employee benefit plans generally available from time to time to executive
employees of the Company, or (D) the failure of any successor to all or
substantially all of the business and/or assets of the Company to assume this
Agreement; provided, however, that the term "Substantial Breach" shall not
include (x) an immaterial breach by the Company of any provisions of this
Agreement including those referred to in clause (A) above or (y) a termination
for cause under Section 7(a) hereof. The date of termination of employment by
the Company under this Section 7(d) (the "Section 7(d) Termination Date") shall
be the later of the date, if any, specified in a written notice of termination
to the Executive or the date on which such notice is given to the Executive. The
date of resignation under this Section 7(d) shall be 30 days after receipt by
the Company of written notice of resignation, provided that the Substantial
Breach specified in such notice shall not have been corrected by the Company
during such 30-day period.
(e) Notwithstanding anything in this Section 7 to the contrary, the
Executive's rights in any employee benefit plans offered by the Company shall be
governed by the rules of such plans as well as by applicable law.
8. Secrecy and Non-Competition.
(a) No Competing Employment. The Executive acknowledges that (i) the
agreements and covenants contained in this Section 8 are essential to protect
the value of the Company's business and assets and (ii) by virtue of his past
employment with Amerace and his employment with the Company, the Executive has
obtained and will obtain such knowledge, know-how, training and experience and
there is a substantial probability that such knowledge, know-how, training and
experience could be used to the substantial advantage of a competitor of the
Company and to the Company's substantial detriment. Therefore, the Executive
agrees that, for the period (the "Restricted Period") commencing on the date of
this Agreement and ending on the later of (x) the date which is 12 months after
the termination of the Executive's full time employment hereunder and (y) at the
Company's election given by written notice delivered to Executive no later than
30 days prior to the expiration of the period described in subsection (x) of
this Section 8(a), such other date no later than 24 months after the termination
of Executive's full time employment hereunder, the Executive shall not, in (a)
any location where the Company, or any predecessor to the Company's business,
has conducted business during the three year period prior to the expiration of
the Employment Term or (b) in any location in which the Company then
specifically intends to conduct business which location shall be described in a
written notice delivered to the Executive within ninety (90) days following the
expiration of the Employment Term; provided, however, that if the Company fails
to provide such written notice to the Executive the provisions of this Section
8(a) shall apply only to those locations described in (a) above, participate or
engage, directly or indirectly, for himself or on behalf of or in conjunction
with any person, partnership, corporation or other entity, whether as an
employee, agent, investor or otherwise, in any business activities (a
"Competitive Activity") if such activity constitutes the manufacturing,
production, sale or provision of products or services that are similar to
products or services then being manufactured, produced, sold or provided by the
Company or any of its subsidiaries; provided, however, that the Executive may
maintain and/or undertake purely passive investments on behalf of himself, his
immediate family or any trust in companies engaged in a Competitive Activity so
long as the aggregate interest represented by such investments does not exceed
1% of any class of the outstanding debt or equity securities of any company
engaged in a Competitive Activity. The Executive shall not be bound by the
restrictions contained in this Section 8(a) if (i) the Executive's employment
with the Company is terminated pursuant to Section 7(d) hereof, and (ii) the
Company shall have failed to comply with its obligations under Section 11 of
this Agreement.
(b) Nondisclosure of Confidential Information. The Executive, except in
connection with his employment hereunder, shall not disclose to any person or
entity or, use, either during the Employment Term or at any time thereafter, any
information not in the public domain, in any form, acquired by the Executive
while employed by the Company or any predecessor to the Company's business or,
if acquired following the Employment Term, such information which, to the
Executive's knowledge, has been acquired, directly or indirectly, from any
person or entity owing a duty of confidentiality to the Company or any of its
affiliates, relating to the Company, its subsidiaries and affiliates, including
but not limited to trade secrets, technical information, designs, drawings,
processes, systems, procedures, formulae, test data, know-how, improvements,
price lists, financial or other data (including the revenues, costs or profits
associated with any of the Company's products), business plans, code books,
invoices and other financial statements, computer programs, discs and printouts,
sketches, plans (engineering, architectural or otherwise), customer and supplier
lists, personnel files, equipment maintenance records, equipment warranty
information, sales and advertising material, telephone numbers, names, addresses
or any other compilation of information, written or unwritten, which is or was
used in the business of the Company, any predecessor of the Company or any
subsidiary thereof. The Executive agrees and acknowledges that all of such
information, in any form, and copies and extracts thereof are and shall remain
the sole and exclusive property of the Company, and upon termination of his
employment with the Company, the Executive shall return to the Company the
originals and all copies of any such information provided to or acquired by the
Executive in connection with the performance of his duties for the Company, and
shall return to the Company all files, correspondence and/or other
communications received, maintained and/or originated by the Executive during
the course of his employment.
(c) No Interference. During the Restricted Period, the Executive shall not,
whether for his own account or for the account of any other individual,
partnership, firm, corporation or other business organization (other than the
Company), intentionally solicit, endeavor to entice away from the Company or any
of its subsidiaries, or otherwise interfere with the relationship of the Company
or any of its subsidiaries with, any person who, to the knowledge of the
Executive, is employed by or otherwise engaged to perform services for the
Company or any of its subsidiaries (including, but not limited to, any
independent sales representatives or organizations) or any entity who is, or was
within the then most recent twelve-month period, a customer or client of the
Company, its predecessor or any of its subsidiaries (a "Customer"); provided,
however, that this Section 8(c) shall not prohibit the Executive from employing,
for his own account, following a termination of the employment of the Executive,
any person employed by a Customer or supplier, if such employment is not in
connection with a Competitive Activity.
(d) Inventions. The Executive hereby sells, transfers and assigns to the
Company or to any person or entity designated by the Company all of the entire
right, title and interest of the Executive in and to all inventions, ideas,
disclosures and improvements, whether patented or unpatented, and copyrightable
material, made or conceived by the Executive, solely or jointly, or in whole or
in part, during his employment (including employment prior to the date hereof)
by the Company or Amerace Corporation, a Delaware corporation ("Amerace") which
are not generally known to the public or recognized as standard practice and
which (i) relate to methods, apparatus, designs, products, processes or devices
sold, leased, used or under construction or development by the Company, any
predecessor of the Company or any subsidiary and (ii) arise (wholly or partly)
from the efforts of the Executive during his employment with the Company or any
predecessor of the Company (an "Invention"). The Executive shall communicate
promptly and disclose to the Company, in such form as the Company requests, all
information, details and data pertaining to any such Inventions; and, whether
during the Restricted Period or thereafter, the Executive shall execute and
deliver to the Company such form of transfers and assignments and such other
papers and documents as reasonably may be required of the Executive to permit
the Company or any person or entity designated by the Company to file and
prosecute the patent applications and, as to copyrightable material, to obtain a
copyright thereon. The Company shall pay all costs incident to the execution and
delivery of such transfers, assignments and other documents. Any invention by
the Executive within six months following the termination of his employment
hereunder shall be deemed to fall within the provisions of this Section 8(d)
unless the Executive bears the burden of proof of showing that the Invention was
first conceived and made following such termination.
9. Deductions from Compensation. The Executive agrees that the
Company shall be entitled to deduct and withhold from any compensation payable
to the Executive hereunder (i) any taxes in respect of the Executive that the
Company is required to deduct and withhold under federal, state or local law
whether arising from compensation hereunder or otherwise and (ii) offsets for
any other amounts lawfully due from the Executive as determined in good faith by
the Company and/or the Board of Directors. In the event that the Executive is no
longer employed by the Company at a time when the Company otherwise would be
entitled to deduct and withhold any amount pursuant to the preceding sentence,
the Executive shall remit such amount to the Company within five (5) days after
the receipt of notice from the Company specifying such amount or otherwise in
accordance with the Executive's obligations with respect thereto.
10. Consultation. The Executive agrees that for a period
commencing on the date of the termination of his full time employment by virtue
of his disability or retirement, as provided in Section 7(c) and extending for
the balance of the Restricted Period, the Executive shall be available to the
Company for consultation for up to 15 days per year at such times and locations
as are agreed upon by both the Executive and the Company. In consideration for
the Executive's consulting and advisory services and, in addition to any amounts
provided for in Sections 7 and 11 hereof, the Company agrees to make payments to
the Executive in the amount of $10,000 per annum payable quarterly. In addition,
the Company will reimburse the Executive for any reasonable out-of-pocket
expenses incurred by the Executive in connection with the Executive's consulting
and advisory services following presentation to the Company of reasonable
documentation evidencing such expenses. The rate of the Executive's compensation
pursuant to this Section 10 shall be reviewed annually and may be increased, but
not decreased, by the Company. Upon thirty days prior written notice to the
Executive, the Company may elect to terminate the Executive's obligations under
this Section 10 and discontinue payments pursuant to this Section 10.
Neither the Company nor the Executive shall have any
obligation under this Section 10 if the Company has terminated the Executive's
employment pursuant to Section 7(a), (b) or (d) hereof or, the Employment Term
hereunder expires without an agreement between the parties hereto to extend the
Employment Term. The preceding sentence however shall not reduce the Executive's
obligations under Section 8 hereof.
11. Termination Benefits. If the Executive's full time
employment with the Company is terminated pursuant to Section 7(d) hereof, the
Executive shall be entitled to receive the termination benefits provided under
this Section 11 for a minimum period commencing on the Section 7(d) Termination
Date and ending one year thereafter ("Minimum Period"); provided, however, that
if a Change in Control (as hereinafter defined) occurs after the date of this
Agreement and prior to the Section 7(d) Termination Date, the Minimum Period
shall be extended through the end of the Restricted Period. For purposes of this
Agreement, "Change in Control" shall mean the occurrence of any of the following
events:
(i) The execution by the Company of an agreement for the merger,
consolidation or reorganization into or with another corporation or other legal
person; provided, however, that no such merger, consolidation or reorganization
shall constitute a Change in Control if as a result of such merger,
consolidation or reorganization not less than a majority of the combined voting
power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
securities entitled to vote generally in the election of directors of the
Company ("Voting Stock") immediately prior to such transaction;
(ii) The execution by the Company of an agreement for the sale or other
transfer of all or substantially all of its assets to another corporation or
other legal person; provided, however, that no such sale or other transfer shall
constitute a Change in Control if as a result of such sale or transfer not less
than a majority of the combined voting power of the then-outstanding securities
of such corporation or person immediately after such sale or transfer is held in
the aggregate by the holders of Voting Stock of the Company immediately prior to
such sale or transfer.
(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), each as promulgated pursuant to the
Exchange Act disclosing that any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act) (other than Terrence D.
Daniels, Quad-C, Inc., Quad-C Partners, L.P., Quad-C Offshore Investors L.P. or
Commonwealth Investors, L.P.) has or intends to become the beneficial owner (as
the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities representing a
majority or more of the combined voting power of the then-outstanding Voting
Stock, including, without limitation, pursuant to a tender offer or exchange
offer;
(iv) If, during any period of two consecutive years, individuals who at the
beginning of any such period constitute the directors of the Company cease for
any reason to constitute at least a majority thereof; provided, however, that
for purposes of this subsection (iv) each director who is first elected, or
first nominated for election by the Company's stockholders, by a vote of a least
two-thirds of the directors of the Company (or a committee thereof) then still
in office who were directors of the Company at the beginning of any such period
shall be deemed to have been a director of the Company at the beginning of such
period; or
(v) Except pursuant to a transaction described in the proviso to subsection
(i) of this Section 11, the Company adopts a plan for the liquidation or
dissolution of the Company.
Any termination of employment of the Executive pursuant to
Section 7(d) following the commencement of discussions with a third person that
ultimately results in a Change in Control shall be deemed to be a termination of
the employment of the Executive after a Change in Control and prior to the
Section 7(d) Termination Date.
In the event that the Executive obtains other employment,
whether full or part time, after the Section 7(d) Termination Date and prior to
the end of the Minimum Period, the Executive shall forthwith notify the Company.
The Company shall not be entitled to set off from amounts due the Executive
under subsections (a) and (b) below amounts paid to the Executive in respect of
other employment.
(a) Compensation-Regular Base Salary. After the Section 7(d) Termination
Date and until the expiration of the Minimum Period, the Executive shall be paid
his Regular Base Salary periodically, according to the Company's wage practices,
at the rate in effect on the Section 7(d) Termination Date. If the Minimum
Period is extended on account of the extension of the Restricted Period pursuant
to Section 8(a)(y) such periodic payments shall continue to be made by the
Company to the Executive in the same amounts, and with the same frequency as
those made during the first 12 months of the Minimum Period until the end of the
Restricted Period.
(b) Compensation-Bonus. After the Section 7(d) Termination Date and until
the expiration of the Minimum Period, the Executive shall be paid in periodic
ratable installments, at the same time as payments of the Regular Base Salary
are made to the Executive pursuant to Section 11(a), an amount equal to the most
recent annual Bonus actually paid to the Executive under the Company's incentive
compensation plan or any predecessor plan, if applicable; provided, however,
that if the Minimum Period is extended on account of the extension of the
Restricted Period pursuant to Section 8(a)(y) such periodic payments shall
continue to be paid by the Company to the Executive in the same amounts, and
with the same frequency, as those made during the first 12 months of the Minimum
Period until the end of the Restricted Period.
(c) Vacation Pay. Any accrued vacation pay due but not yet taken at the
Section 7(d) Termination Date shall be paid to the Executive on the date upon
which the Executive receives his first payment under Section 11(a).
(d) Welfare Benefits, etc. The Executive's participation (including
dependent coverage) in any life, disability, group health and dental benefit
plans provided by the Company, in effect immediately prior to the Section 7(d)
Termination Date, shall be continued after the Section 7(d) Termination Date, in
accordance with Company policy relating to such plans as of the Section 7(d)
Termination Date, or substantially equivalent benefits shall be provided by the
Company until the earlier of (i) the end of the Minimum Period or (ii) the date
upon which the Executive accepts other employment, whether full or part time.
Following the Section 7(d) Termination Date, the Company shall not be obligated
to (i) provide business accident insurance covering the Executive and (ii) make
contributions in respect of the Executive to any qualified retirement and
pension plans including, without limitation, the SERP Plan (as defined in
Section 13 hereof), or profit sharing plans.
(e) Company Automobile. The Executive shall have the option to (i) purchase
from the Company, at any time not more than ninety days subsequent to the
Section 7(d) Termination Date, one automobile owned by the Company which the
Executive regularly used in the course of his employment during the period of
time immediately preceding the Section 7(d) Termination Date, at a purchase
price equal to the average book value for dealer purchases of such automobile on
the date of purchase as indicated in any "blue book" of automobile value which
the Company generally uses for such purpose, or (ii) assume the Company's rights
and obligations, by notice given no later than 90 days subsequent to the Section
7(d) Termination Date, pursuant to the lease agreement covering the one
automobile leased by the Company which the Executive regularly used in the
course of his employment during the period of time immediately preceding the
Section 7(d) Termination Date, to the extent permitted by such lease agreement.
(f) Executive Outplacement Counseling. Within thirty (30) days following
the Section 7(d) Termination Date, the Company shall engage an outplacement
counseling service of national reputation, at its own expense provided that such
expense shall not exceed in the aggregate Ten Thousand Dollars ($10,000), to
assist the Executive in obtaining employment, until the earlier of two years
from the Section 7(d) Termination Date or such date as the Executive has
obtained employment.
12. Limitation on Termination Benefits Payments.
(a) Definitions. For purposes of this Section, (1) a "Payment" shall mean
any payment or distribution in the nature of compensation to or for the benefit
of the Executive, whether paid or payable pursuant to this Agreement or
otherwise; (2) "Agreement Payment" shall mean a Payment paid or payable pursuant
to this Agreement (disregarding this Section); (3) "Net After Tax Receipt" shall
mean the Present Value of a Payment net of all taxes imposed on the Executive
with respect thereto under Sections 1 and 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), determined by applying the highest marginal rate
under Section 1 of the Code which applied to the Executive's taxable income for
the immediately preceding taxable year; and (4) "Present Value" shall mean such
value determined in accordance with section 280G(d)(4) of the Code.
(b) Reduction of Payments. Notwithstanding anything in this Agreement to
the contrary, if receipt of all Payments would subject the Executive to tax
under Section 4999 of the Code, the aggregate Agreement Payments shall be
reduced to an amount (but not below zero) which would result in the maximum
possible Net After Tax Receipts for the Executive from all Payments (the
"Reduced Amount"). The Reduced Amount and the applicability of Section 4999 of
the Code shall be determined within 10 days after termination of the employment
of the Executive at the Company's expense by a nationally recognized accounting
firm, whose decision shall be final and binding upon both parties.
(c) Manner of Reduction. If it is determined that the Executive should
receive a Reduced Amount, the Company shall promptly give the Executive notice
to that effect and a copy of the detailed calculation thereof. Within 10 days
after receiving such notice and calculations, the Executive shall advise the
Company in writing of the manner in which the Agreement Payments shall be
reduced. If no such election is made by the Executive within such ten (10) day
period, the Company shall make the Agreement Payments in the manner prescribed
in Section 11 above until the Reduced Amount has been paid to the Executive,
after which the Agreement Payments shall cease.
13. Supplemental Executive Retirement Plan. The Company has
agreed to assume all obligations of Amerace under the Participation Agreement
for Supplemental Executive Retirement Plan dated December 15, 1988 between
Amerace and the Executive (the "SERP Plan"). The Company hereby agrees that it
shall assume and discharge the obligations of Amerace under the SERP Plan in
accordance with the terms thereof and such agreement by the Company shall
survive the termination of this Agreement. The Executive acknowledges and agrees
that the Company shall succeed to all of Amerace's rights under the SERP Plan.
14. Confidentiality of Employment Terms. The Executive shall
not disclose to any person other than the Executive's lawyer, financial advisor,
accountant and members of his immediate family any of the terms and conditions
of his employment with the Company, whether contained herein or in any other
agreement, unless such disclosure shall be required by law, government
regulation, or the order of any court, administrative authority or other
government agency.
15. Injunctive Relief. Without intending to limit the remedies
available to the Company, the Executive acknowledges that a breach of any of the
covenants contained in Section 8 hereof may result in material irreparable
injury to the Company or its affiliates for which there is no adequate remedy at
law, that it will not be possible to measure damages for such injuries precisely
and that, in the event of such a breach or threat thereof, the Company shall be
entitled to obtain a temporary restraining order and/or a preliminary or
permanent injunction restraining the Executive from engaging in activities
prohibited by Section 8 hereof or such other relief as may be required to
specifically enforce any of the covenants in Section 8 hereof. The Executive
hereby agrees and consents that such injunctive relief may be sought in any
state or federal court of record in the State of Illinois, or in the state and
county in which such violation may occur, or in any other court, at the election
of the Company.
16. Extension of Restricted Period. In addition to the
remedies the Company may seek and obtain pursuant to Section 15 of this
Agreement, the Restricted Period shall be extended by any and all periods during
which the Executive shall be found by a court to have been in violation of the
covenants contained in Section 8 hereof.
17. Successors; Binding Agreement.
(a) In the event of any sale of all or substantially all of the assets of
the Company, or the merger, consolidation or other corporate reorganization
involving the Company, any successor to the Company by reason of any such
transaction shall succeed to all of the Company's obligations, rights and
benefits hereunder.
(b) Except as provided in subsection (a) above, neither this Agreement, nor
any rights or benefits hereunder, may be assigned, delegated, transferred,
pledged or hypothecated without the written consent of both parties hereto, and
any such assignment, delegation, transfer, pledge or hypothecation shall be null
and void and shall be disregarded by the Company.
(c) The Company will require any transferee of all or substantially all of
its assets (whether or not by merger or consolidation) to assume, whether by
operation of law or otherwise, the Company's obligations under Section 11 of
this Agreement in the same manner and to the same extent that the Company would
be required to perform them if no such succession had taken place. Failure of
the Company to obtain such agreement prior to the effectiveness of any such
succession shall constitute a Substantial Breach by the Company and shall
entitle the Executive to benefits described in Section 11 hereof upon his
resignation from the Company within three business days of the date such
succession becomes effective. For purposes of implementing the foregoing, the
later of (i) the date on which any such succession becomes effective or (ii) the
date upon which the Company receives written notice of the Executive's
resignation shall be deemed the Section 7(d) Termination Date.
18. Waiver and Modification. Any waiver, alteration or
modification of any of the terms of this Agreement shall be valid only if made
in writing and signed by the parties hereto; provided, however, that any such
waiver, alteration or modification is consented to on the Company's behalf by a
director other than the Executive. No waiver by either of the parties hereto of
their rights hereunder shall be deemed to constitute a waiver with respect to
any subsequent occurrences or transactions hereunder unless such waiver
specifically states that it is to be construed as a continuing waiver.
19. Severability and Governing Law. The Executive acknowledges
and agrees that the covenants set forth in Section 8 hereof are reasonable and
valid in geographical and temporal scope and in all other respects. If any of
such covenants or such other provisions of this Agreement are found to be
invalid or unenforceable by a final determination of a court of competent
jurisdiction (a) the remaining terms and provisions hereof shall be unimpaired
and (b) the invalid or unenforceable term or provision shall be deemed replaced
by a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision. This
Agreement shall be governed by and interpreted in accordance with the laws of
the State of Illinois.
20. Blue-Pencilling. In the event that, notwithstanding the
first sentence of Section 19 hereof, any of the provisions of Section 8 relating
to the geographic or temporal scope of the covenants contained therein or the
nature of the business restricted thereby shall be declared by a court of
competent jurisdiction to exceed the maximum restrictiveness such court deems
enforceable, such provision shall be deemed to be replaced herein by the maximum
restriction deemed enforceable by such court.
21. Arbitration. The parties agree to submit any dispute
arising under this Agreement to arbitration. Arbitration shall be by a single
arbitrator experienced in the matters at issue selected by the Company and the
Executive in accordance with the commercial arbitration rules of the American
Arbitration Association. The decision of the arbitrator shall be final and
binding as to any matter submitted to him under this Agreement. All costs and
expenses incurred in connection with such arbitration proceeding shall be borne
by the party against whom the decision is rendered.
22. Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed effective and given upon
actual delivery of presented personally, one business day after the date sent if
sent by prepaid telegram, overnight courier service, telex, or by facsimile
transmission or five business days after the date sent if sent by certified or
registered mail, postage prepaid, return receipt requested, which shall be
addressed, in the case of the Company, Stimsonite Corporation, 7524 N. Natchez
Avenue, Niles, Illinois 60714, Attention: Chairman, Fax (708) 647-1827, with a
copy to Elizabeth C. Kitslaar, Esq., Jones, Day Reavis & Pogue, 77 West Wacker
Drive, Chicago, Illinois, 60610, FAX: (312) 782-8585 and, in the case of the
Executive, Jay Taylor, 1296 West Kajer Lane, Lake Forest, Illinois 60045 or, in
each case, to such other address as may be designated in writing by any such
party.
23. Captions and Paragraph Headings. Captions and
section headings herein are for convenience only, are not a part hereof and
shall not be used in construing this Agreement.
24. Entire Agreement. This Agreement constitutes the
entire understanding and agreement of the parties hereto regarding the
employment of the Executive.
25. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
STIMSONITE CORPORATION
By:TERRENCE D. DANIELS
-----------------------
Terrence D. Daniels, Chairman
Title:
EXECUTIVE
By:JAY R. TAYLOR
------------------------
Jay R. Taylor
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM FORM 10-Q FOR THE
QUARTERLY PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<CIK> 0000876400
<NAME> STIMSONITE CORPORATION
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<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
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0
0
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