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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997 Commission file number 0-20231
FIBERMARK, INC.
(Exact name of Registrant as specified in its charter)
Delaware 82-0429330
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
161 Wellington Road,
P.O. Box 498
Brattleboro, Vermont 05302
(Address of principal executive offices, including zip code)
(802) 257-0365
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
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 and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No|_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to be
the best of Registrant's knowledge, in definitive proxy or infor-mation
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|
The approximate aggregate market value of the Common Stock held by
non-affiliates of the Registrant, based upon the last sale price of the Common
Stock reported on the New York Stock Exchange was $186,587,467 as of March 16,
1998.*
The number of shares of Common Stock outstanding was 7,733,781 as of March
16, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
(To the extent indicated herein)
Registrant's definitive Proxy Statement that will be filed with the
Securities and Exchange Commission in connection with Registrant's 1997 annual
meeting of stockholders to be held on May 5, 1998 is incorporated by reference
into Part III of this Report.
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* Excludes 2,595,211 shares of Common Stock held by directors and officers
and stockholders whose beneficial ownership exceeds five percent of the
shares outstanding March 16, 1998. Exclusion of shares held by any person
should not be construed to indicate that such person possesses the power,
direct or indirect, to direct or cause the direction of the management or
policies of the Registrant, or that such person is controlled by or under
common control with the Registrant.
1
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<PAGE>
PART I.
Item 1. Business
FiberMark, Inc. is a leading manufacturer and converter of specialty
fiber-based materials. Through its eight United States production facilities,
the company has focused on niche markets where it can provide high value-added
specialty materials that meet rigorous technical specifications and customer
service requirements. Products, sold worldwide to customers who manufacture
finished products for both industrial and consumer use, include cover materials
for office, home, and school supplies; materials for specialty tapes and labels;
filter media for automotive, vacuum, water and industrial filters; and base
materials for graphic arts uses, electrical applications, book covers and
abrasive products.
Overview
The company has four distinctive categories of products. The table below
provides an overview of the company's primary product lines and facilities:
<TABLE>
<CAPTION>
Technical Durable
Filter Products Specialties Office Products Specialties
<S> <C> <C> <C> <C>
Primary o Saturated filter o Electrical o Pressboard filing, o Tape substrates
Products media transformer board cover and binder
materials
o Non-saturated o Acid-free board o Lightweight filing o Binding tapes
o filter media and cover materials
o Industrial filter o Abrasive backing o Premium cover o Hinge and
media papers reinforcing tapes
o Premium cover
o Printed circuit
board base
o Photographic
packaging paper
and board
o Wet-strength tag
o Book cover
Facilities Richmond,VA(b) Fitchburg, MA(b) Brattleboro, VT(b)
Rochester, MI Warren Glen, NJ Warren Glen, NJ Quakertown, PA(b)
(a) Fitchburg, MA Hughesville, NJ Hughesville, NJ Owensboro, KY(c)
Owensboro, KY(c)
Beaver Falls, NY
Richmond, VA
</TABLE>
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(a) The company also has sales offices in Annecy, France; Kowloon, Hong Kong;
and Tokyo, Japan.
(b) Division Headquarters.
(c) The company ceased operations at this facility on January 14, 1998. The
company has transferred or intends to transfer the production of this
facility to certain of its other facilities.
2
<PAGE>
Business Strategy
The company's strategy is to increase sales and earnings by building a
global customer-focused company, through the pursuit of selected strategic
acquisitions, while strengthening and growing our core business. The following
are the key elements of this strategy:
o Strategic Acquisitions. The company intends to continue pursuing
growth through strategic acquisitions that complement the company's
core markets, provide distribution or sales and marketing
efficiencies or provide opportunities for technology gains or other
operating efficiencies.
o Strengthen International Presence in Specialty Fiber-based
Materials. Historically, the company has devoted significant
resources to its international marketing efforts that were intended
to create export markets for the company's products. The Gessner
acquisition will strengthen the company's international presence and
allow it to capitalize on Gessner's extensive sales and marketing
capabilities to further increase sales of the company's products to
international customers.
o Business Rationalization. The company continually evaluates its
organizational structure and manufacturing operations to identify
opportunities to more effectively meet its customers' requirements
and to reduce costs. As a result, the company may reconfigure its
manufacturing operations, including the number of facilities
operated and the locations at which products are manufactured.
o Invest in Technology and Capital Improvements. The company seeks to
reduce costs, increase capacity where needed, enhance manufacturing
capabilities and improve product quality through selected capital
investments. The company intends to continue to upgrade its
facilities and equipment to achieve further operating efficiencies
and, in particular, to take advantage of the technology transfer
opportunities it expects to realize from the Gessner acquisition.
o Effective Utilization of Diverse Fibers, Including Recycled
Materials. The company intends to continue to capitalize on its
position as a leading manufacturer of specialty fiber-based
materials. In order to meet customer demand for recycled content and
high performance, as well as to achieve greater cost controls, the
company seeks to leverage its investments in fiber-cleaning
technology and maximize its use of recycled materials. The company
is actively pursuing new product development projects with existing
and potential new customers. See "Manufacturing - Use of Recycled
Fiber."
Filter Products
Market. The company is a major supplier of saturated and non-saturated
filter papers used in fluid and air filters for the automotive and heavy-duty
truck and equipment industries. The company estimates that the market for both
saturated and non-saturated papers was approximately $170 million in 1996, of
which 80% was utilized in the automotive and heavy-duty truck and equipment
markets. The other major market for these products includes dry cleaner solvent
filtration and potable water filtration. The market for automotive and
heavy-duty truck and equipment filters has grown at a compound annual growth
rate of approximately 5.7% over the ten-year period from 1986 to 1996. The
company also manufactures industrial filter paper used in a variety of
industrial applications and processes.
3
<PAGE>
Products. The table below sets forth the company's primary filter products
materials.
Filter Products
<TABLE>
<CAPTION>
Product Type Characteristics Typical End Uses
------------ --------------- ----------------
<S> <C> <C>
Saturated filter media Controlled porosity; enhanced Air, oil, fuel and hydraulic
strength and rigidity; high filters for heavy and light duty
temperature and chemical trucks and passenger cars;
resistance dry-cleaning solvent filters
Non-saturated filter media Controlled porosity; high Oil filters for heavy-duty
density; may be impregnated equipment and diesel trucks;
with activated carbon and home water filters
other fillers
Industrial filter media Controlled porosity; high Hot-oil filters for the fast-food
temperature resistance; industry; paint and lacquer
cleanliness manufacturing; fruit juice
processing
</TABLE>
The company's major filter product is solvent-based saturated filter
media, which is controlled porosity paper saturated with phenolic and other
resins to increase its strength and rigidity for use in various high temperature
applications. This product is purchased by filter manufacturers who cut, pleat
and cure the paper for use in oil, fuel and hydraulic fluid filters for heavy
and light duty trucks and passenger cars. These filters are sold primarily to
the replacement market but also to original equipment manufacturers. The company
manufactures many grades of saturated filter paper to specifications provided by
its customers. The company believes that it is one of the three largest
producers of saturated filter paper in the United States.
The company also produces non-saturated filter media. This category
includes non-saturated paper containing activated carbons and other fillers and
edge filter media. Primary uses of non-saturated filter paper include oil
filtration in heavy equipment and diesel trucks and home water filters. In
addition, the company produces industrial filter papers for various food service
and industrial applications, including filtration of hot oil used in fast-food
preparation, the manufacture of paints and lacquers and the processing of fruit
juices.
Customers. The company sells its filter products primarily through its own
sales staff directly to its customers. Principal customers for the company's
saturated filter media include the Fleetguard Filtration Systems division of
Cummins Engine Co., Inc. ("Fleetguard"), the Delphi Automotive Systems division
of General Motors Corp. ("General Motors"), AlliedSignal, Inc. (Fram filters),
Purolator Products, Inc. and Miki Sangyo U.S.A. Inc., a trading company and the
major supplier of filter paper used in filters supplied to the U.S.
manufacturing sites of Nissan Motor Co., Ltd. and Honda Motor Co., Ltd. The
company's saturated filter paper is used to make filters which are used on
vehicles manufactured by General Motors, Chrysler Corp. and Ford Motor Corp.
Fleetguard is also the company's primary customer for non-saturated filter
media. The company has long-term relationships with its customers and believes
that these relationships with its customers are based on its ability to provide
superior service and technical support.
The company's major customers for its industrial filter media products
include National Filters, Inc. and Lubrizol Corp. for commercial manufacturing
applications, Seneca Foods Corp. for food processing applications and KFC North
America division of PepsiCo Inc. in the hot-oil filter market. In addition, the
company supplies industrial filter media to various smaller manufacturers and
users.
4
<PAGE>
Competition. The company's primary competition in solvent-based saturated
filter media comes from Ahlstrom Filtration, Inc. ("Ahlstrom"), a division of A.
Ahlstrom Corp. In addition, the Hollingsworth & Vose Company is the dominant
manufacturer of water-based saturated filter papers, a market in which the
company has a smaller presence. To the extent that industry efforts to develop
water-based alternatives to solvent-based filter papers are successful, the
company's solvent-based filter papers may face increased competition from such
water-based alternatives.
In the markets for non-saturated filter media and industrial filter media,
the company competes primarily with Ahlstrom, Knowlton Specialty Papers, Inc.
and Lydall, Inc. In each of these markets, producers tend to manufacture custom
designed products on an exclusive basis for their customers.
Technical Specialties
Market. The company manufactures specialty fiber-based materials
customized to meet the unique performance characteristics required by specific
customers and end-use markets. Technical specialties include paper used as
insulation material in electrical transformer coils, acid-free board used for
archival quality picture mounting and records storage applications, photographic
packaging paper and board, printed circuit board base papers, wet-strength tag
used primarily in the laundry and dry-cleaning industries and paper backings for
sandpaper and other abrasives. The company has been able to successfully enter
niche markets in the technical specialties area in which it believes its
manufacturing flexibility and technical expertise give it a competitive
advantage in meeting rigorous customer requirements. The company believes that
it is the U.S. market leader in many of its markets, including electrical
transformer papers, acid-free board, wet-strength tag and heavyweight industrial
abrasive backing materials. In addition, the company is a leading producer of
saturating base paper for the manufacture of printed circuit boards. Many of the
company's technical specialties have been used in their current applications for
many years and have proven to be cost-effective in meeting the performance
requirements for which they are utilized. To supplement these products, the
company works to develop new products that have the potential to experience
positive growth due to superior performance, lower cost or both.
The company is one of the two leading domestic producers of
latex-reinforced material used in book covers and related products. These
materials are used by customers in applications where durability and distinctive
appearance are important, such as flexible covers for books, menus, photo
albums, desktop calendars, appointment books and reports.
5
<PAGE>
Products. The table below sets forth the company's primary technical
specialties:
Technical Specialties
<TABLE>
<CAPTION>
Product Type Characteristics Typical End Uses
------------ --------------- ----------------
<S> <C> <C>
Electrical transformer High dielectric strength Power transformer coil
paper insulation
Acid-free board High pH (acid-free), Archival quality picture
exceptional cleanliness mounting and document
storage
Abrasive backing paper High-tear strength, smooth Heavyweight sandpaper and
surfaces and controlled other commercial abrasives
electrostatic properties
Printed circuit board base Low density; uniform high Interior of printed circuit
paper bulk boards
Photographic packaging Totally opaque; high-strength Photographic film protection
paper and board
Wet-strength tag High-strength saturated sheet; Laundry and dry-cleaning
moisture and solvent resistant labels
Heavyweight book cover Strong cotton fiber base sheets Flexible covers for softbound
latex-reinforced and books, menus, photo albums,
leather-texture desktop calendars and
accessories, appointment books
and reports
Lightweight book cover Latex-reinforced base sheets of Exterior cover material for
higher bulk and lower weight hardbound books; photo
albums, report covers
Premium cover papers Well-formed papers with good Printed report covers;
strength, color/texture and promotional and advertising
printable surfaces materials
</TABLE>
The company supplies electrical transformer papers with high dielectric
strength which are wrapped around individual electrical transformer coils as
insulating material. The company is the major supplier of such paper to Bedford
Materials, Inc., which operates the transformer insulation business formerly
owned by Westinghouse Electrical Corp., and is one of two major suppliers to the
other major U.S. manufacturer of electrical transformers.
The company manufactures acid-free board used as picture mounting art
board and archival storage media. Acid-free picture mounting art board and
storage media are designed to prevent the degradation and discoloration of
artwork and documents caused by acidic exposure. The company believes that its
acid-free products have superior performance characteristics that have resulted
in their wide acceptance in the marketplace.
The company's photographic packaging paper is primarily dual composition
paper used by Eastman Kodak Company ("Kodak") and Polaroid Corp. ("Polaroid") to
package certain films. Such products must meet demanding standards for opacity
in order to prevent premature exposure of the film. The company's strong
position in the market for photographic packaging paper is based in part upon
the company's ability to manufacture multi-ply paper.
6
<PAGE>
The company also manufactures printed circuit board base materials that
are used in the manufacture of circuit boards for remote control devices and
other electrical components. The company's printed circuit board base papers
have the advantage of low density and high bulk, allowing circuit board
manufacturers to lower their costs and increase their output by processing fewer
sheets than they would with competing materials.
The company's wet-strength papers are primarily used as tags in the
laundry and dry cleaning industries to identify clothing as it is processed
through washing machines and dry cleaning equipment.
These products, in addition to withstanding physically and chemically
harsh processes, are manufactured in multiple colors that must not be
transferred onto the clothing to which they are attached. The company is a major
producer of this paper in the United States and is now exporting to the United
Kingdom, with opportunities to expand into other European markets.
Sandpaper and other abrasive backing materials are used in the manufacture
of heavyweight sandpaper and other commercial abrasives. The company's sandpaper
and other abrasive backing papers are designed to meet customers' exacting
specifications for tear strength, smooth surfaces and controlled electrostatic
properties.
Using proprietary manufacturing processes, the company combines pulp,
latex, recycled rag fiber and other materials to produce flexible and durable
specialty materials for use in a variety of book cover applications. The company
sells its book cover materials directly to customers in this market, who in turn
coat, emboss and decorate the material and sell it to manufacturers of end-use
products.
The company's primary latex product is manufactured using recycled rag
fibers, resulting in increased durability and a leather-like texture and
appearance. These products are used for day books, diaries, menu covers and
soft-cover books. The company is also a leading supplier of light-weight
materials used in covering hardbound books.
Customers. The company sells its technical specialties through its own
sales force to a variety of customers. Major customers include: Bedford
Materials, Inc. and the TMC division of Avery Dennison Corp. (electrical
transformer paper); the Nielsen and Bainbridge division of Esselte Corp. and the
Crescent Cardboard division of Potomac Corp. (acid-free paper); Kodak
(photographic packaging paper); and Pajco-Holliston (coating base for book
covers). The company works with its customers to develop new products and to
provide technical support for existing products.
Competition. The company's competitors in technical specialties vary by
product type. Generally, the company faces competition from both foreign and
domestic specialty manufacturers. The company's focus is to compete in products
and markets that require manufacturing flexibility, product properties and
quality levels not provided by integrated paper mills. The company's key
competitors include Kimberly-Clark Corporation ("Kimberly-Clark"), Sorg Paper
Co., a subsidiary of Mosinee Paper Corp., Arjo Wiggins USA, Inc., Robert Cordier
AG and Merrimac Paper Co., Inc. ("Merrimac"). In the latex-reinforced book cover
market, the company primarily competes with Rexam DSI, Inc. and, to a lesser
degree, with products of plastic-coated and coated cloth book cover materials.
7
<PAGE>
Office Products
Market. The company manufactures a wide range of materials used in the
manufacture of office products. The company believes that it is the largest
domestic supplier of pressboard, which is converted into data binders, notebook
covers, report covers, ring binders, and file and index guides. The company also
pursues niche markets within the office supplies market where its capabilities
and customer relationships give it a competitive advantage.
Products. The table below sets forth the company's primary office products
materials.
Office Products
<TABLE>
<CAPTION>
Product Type Characteristics Typical End Uses
------------ --------------- ----------------
<S> <C> <C>
Pressboard filing cover High density paperboard designed for Data binders; ring binders; report covers;
and binder material strength, rigidity, durability and notebook covers; pressboard folders
appearance; may be embossed or acrylic
coated; high recycled content
Lightweight filing and Lighter weight paperboard, designed for Filing products; portfolios; report covers;
cover materials decorative embellishments and less demanding document covers; presentation covers;
end-uses than pressboard promotional materials
Premium cover papers Well-formed papers with good strength, Printed report covers; promotional materials
Premium cover papers color/texture and printable surfaces
</TABLE>
The largest component of the office products division's net sales is a
heavyweight paperboard (pressboard) which is densified through a proprietary
manufacturing process developed by the company. This densification process
provides pressboard with the strength, rigidity, durability and appearance
required for data binders, ring binders, notebook covers and report covers. The
company and its predecessors have offered their pressboard line of products for
more than 100 years and believes it has established significant brand awareness
and loyalty among its customers.
The company produces certain types of lightweight filing and cover
materials for conversion into file folders, expanding wallets, notebook covers
and report covers. The company is continuing its focus on certain products for
the lightweight filing and cover material market, such as colored file folder
and report covers for the growing on-demand document printing market, with
specific emphasis on products meeting the market's recycled content
requirements. The company's lightweight filing and cover materials are generally
manufactured using similar equipment and processes and are sold to many of the
same customers as the company's heavyweight office products. The company
continues to experience the benefits of the Brattleboro paper machine upgrade,
completed in October 1995, which increased capacity by 25%. With the added
capacity, the company is working to build this lightweight business through the
strength of its relationships with office products converters. These lightweight
materials, manufactured to meet consumer and government demand for recycled
paper products, provide an opportunity for the company to increase its
penetration in the office products market.
8
<PAGE>
The company manufactures a line of premium cover stocks sold through paper
distributors to commercial printers. These papers have good strength and may
have colored or textured surfaces and are typically used for printed report
covers and promotional and advertising materials.
The company offers many of its products in acrylic coated and embossed
form, providing additional durability and stain resistance. The company has the
capability to custom manufacture materials in a variety of colors and can finish
its products to customer specifications, including glazing (densification),
coating, embossing, laminating, sheeting, slitting and rewinding.
Customers. The company sells its office products through its own sales
representatives to major domestic office products converters, including: Acco
World Corporation, a division of Fortune Brands Inc.; Smead Manufacturing
Company and Esselte Pendaflex Corp. The company has long-term relationships with
all of its major customers in this market. The company's customers produce
office products from the company's paper-based materials and sell end-use
products through contract stationers, paper merchants, office products
wholesalers, buying groups, warehouse clubs, catalog sales, office products
superstores, retail office supply stores and other outlets. The company also
markets its materials through direct sales representatives or manufacturer's
representatives in Asia, Canada, Mexico, Central and South America and Europe.
Competition. In the office products supply market, the company competes
with a number of other producers of heavyweight pressboard, colored file folder
paper and lightweight filing and cover materials, including International Paper
Company, Temple-Inland Inc., Brownville Specialty Products and Merrimac. The
company believes it holds a leading position in the domestic market for
pressboard and a growing presence in the lightweight filing and cover materials
market. In markets that use pressboard, the company also competes with producers
of vinyl and plastic materials for binding and presentation products. In the
premium cover and text market, the company also competes against divisions of
Georgia Pacific Corp., Fox River Paper Co., Crown Vantage Inc. and a number of
other manufacturers.
Durable Specialties
Market. The company is one of the largest producers of specialty tape
substrates and a broad range of saturated, coated and non-woven materials. The
primary markets for the company's durable specialties are tape substrates
(primarily industrial and consumer masking tapes), binding tapes and hinge and
reinforcing tapes, and book cover materials. There are seven major North
American producers of pressure sensitive tape, who, together, account for the
majority of the industry's total sales. Most of these producers have
self-saturating capabilities for general-purpose tapes and look to suppliers
like the company for specialty paper backings.
The company believes it is a leading supplier of binding tapes and hinge
and reinforcing tapes converted from specialty papers and substitutes for the
manufacture of notepads, books, expandable file folders and checkbooks.
The company has also sought out niche markets in which it believes it can
have a competitive advantage for its durable specialties. The company produces
high strength materials used in the apparel industry as blue jean tags and for
various other tag and label applications.
9
<PAGE>
Products. The table below sets forth the company's primary durable
specialties.
Durable Specialties
<TABLE>
<CAPTION>
Product Type Characteristics Typical End Uses
------------ --------------- ----------------
<S> <C> <C>
Tape substrates Enhanced strength, release, impermeability Industrial and commercial masking tapes;
or heat resistance barrier tapes; pressure-sensitive tapes;
bandolier tapes; packaging tapes
Binding tapes Tyvek(R) and latex-impregnated paper tapes Note pads; composition books; checkbooks
Hinge and reinforcing tapes Durable Tyvek(R) high fold-and tear-strength Expandable file folders
reinforcing materials
</TABLE>
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Tyvek(R) is a registered trademark of DuPont.
The company's tape substrates are used in the manufacture of industrial
and consumer masking tapes, barrier tapes, other pressure-sensitive tapes and
bandoliering tapes. The company's products have the strength and technical
properties to meet various performance demands. These products include
barrier-coated and heat resistant industrial masking tapes for the automotive
paint and aircraft manufacturing industries and packaging tapes which withstand
the rigors of worldwide shipping. The company's bandoliering tapes are used by
the electronics industry to carry resistors, capacitators and other items during
high-speed automated assembly of electronic devices.
The company is a leading producer of high strength binding tapes and hinge
and reinforcing tape using Tyvek(R) as a base material. These products are
primarily used to protect, bind and decorate books and documents, checkbooks and
note pads. The company's Tyvek(R) tapes, marketed under the trade name Super
ArcoFlex(R) are used to decorate pad bindings and are able to withstand the
stress incurred during cutting in high volume manufacturing. The company also
uses Tyvek(R) in the manufacture of supported gussets for red wallet expansion
folders. Gussets are the accordion folder material between the two folder side
sheets that allow the folder to expand. The company has developed a method to
strengthen the gussets by laminating coated Tyvek(R) to the folder material
forming the gusset and sells this material under the name Expanlin. The company
also sells coated Tyvek(R) to converters who laminate it to the folder material
themselves. The result is a material that is stronger, longer lasting and more
reliable than unsupported gussets. The company believes that Expanlin has become
the preferred material used in supported gussets by expansion folder
manufacturers.
Other durable specialties include imitation leather stock which is sold to
garment label manufacturers who cut and print the material with various brand
and product information for use as blue jean tags. This material is expected to
maintain its crisp appearance after repeated washing cycles. The company has
also developed a tag and label product line for manufacturers who require tags
and labels with the strength of Tyvek(R). These products can be color-coated and
are used as luggage tags by the airline industry, as flame-retardant labels for
the automotive industry and other types of demanding packaging applications.
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<PAGE>
Customers. The company offers its customers a broad product line with
flexible product development and manufacturing capabilities. This flexibility
has fostered long-term relationships with its client base. The company sells its
specialty tape substrates to many of the leading tape manufacturers, including
American Tape Company and 3M. The company believes that the international
customer base for these products may increase as the company's sales force is
trained to sell these additional product lines. In the checkbook industry, the
company's major customer is Deluxe Check Printers, a division of Deluxe Corp.
The company sells blue jean tags and its other tag and label products to a
variety of converters and end-users.
Competition. For tape backing the company primarily competes against
Kimberly-Clark. In the binding tape and hinge and reinforcing tape markets, the
company competes against several smaller competitors including Rexford Paper
Co., Northeast Paper Converting Company and Southern Label Company, Inc. The
company believes it holds a leading position in the market for Tyvek(R) based
binding tapes and hinge and reinforcing tapes. In other niche markets, the
company competes with various small competitors, none of which has a dominant
market position.
Manufacturing
Mills and Converting Facilities. The company operates eight facilities, seven of
which are owned and one is leased. The company closed its former Arcon facility
in Oceanside, New York in December 1997 and relocated the operation to its
facility in Quakertown, Pennsylvania. The company also closed its Owensboro,
Kentucky, paper mill in January 1998, moving its production to other FiberMark
facilities.
Office Products. The company's main mill for the production of office
products is located in Brattleboro, Vermont. Mills located at Warren Glen, New
Jersey and Hughesville, New Jersey also produce office products materials.
Recent improvements have included an upgrade to the Brattleboro mill that
significantly increased its capacity and its ability to produce a wider range of
lighter weight products. The company has also recently completed a series of
capital improvements at its Warren Glen mill, which have increased productivity,
reduced costs and waste and increased the ability of the mill to use a wider
range of pulps and recycled materials.
The cylinder paper machines in use at the Brattleboro and Warren Glen
mills are configured to produce a broad range of specialty materials, including
pressboard, filing and cover materials of various weights, colors and finishes.
The machine in the Brattleboro mill features computer-controlled monitoring of
color, weight, thickness and moisture content. The configuration of the cylinder
machine allows the production of multiple-ply products, resulting in greater
strength and stiffness than a comparable one-ply product made on a Fourdrinier
paper machine. In addition, this process enables the company to use lower-cost
recycled fiber pulp in the interior layers and higher-cost virgin pulp layers on
the exterior of a product, providing greater strength and the surface appearance
desired by consumers. Finishing capabilities at the Brattleboro mill include
glazing, coating, embossing, rewinding, laminating and sheeting.
Technical Specialties. The company manufactures technical specialties at a
number of its facilities, including its Hughesville, Warren Glen, Richmond,
Fitchburg, Owensboro (closed January 14, 1998) and Beaver Falls facilities. The
Hughesville mill manufactures primarily technical specialty papers, including
photographic packaging, electrical transformer paper and wet-strength tag. The
company's mill located in Beaver Falls, New York specializes in the production
of proprietary latex-impregnated materials for use as book covers and similar
products. The stock preparation process at the Beaver Falls mill allows blending
of latex, cork, cotton fiber, pulp and other materials into a variety of
products with specific performance characteristics. The mill has a fiber
reclamation system, enabling it to utilize recycled fiber.
11
<PAGE>
Durable Specialties. Durable specialties are manufactured in the company's
mills and its Quakertown converting facility. A significant portion of the
saturating base paper used in this facility was provided by the Owensboro mill,
which closed in January 1998. Its production has been or will be moved to other
technical specialties facilities.
Filter Products. The company's filter products are produced primarily at
its Richmond, Rochester and Fitchburg mills. The Richmond mill uses a
methanol-based resin saturating process that allows the saturation of base paper
off the paper machine. A recent upgrade of the Richmond mill increased
saturation capacity by 50%. The Rochester mill uses an in-line saturating
process. The company manufactures its non-saturated filter papers at its
Fitchburg mill.
Raw Materials. The company uses a wide array of raw materials to formulate
its products, including virgin hardwood and softwood pulp, secondary wood fiber
from pre- and post-consumer waste, secondary cotton fiber from the apparel
industry, synthetic fibers (such as nylon and fiberglass), synthetic latex and a
wide variety of chemicals, pigments and dyes. These materials are procured from
numerous suppliers in the United States, Canada, Brazil and Indonesia. The
company does not produce pulp. Pulp and secondary fiber prices are subject to
substantial cyclical price fluctuations. The company experienced a significant
increase in raw material costs during 1994 and 1995, but was able to partially
recover these increases with selling price increases, cost containment efforts
and the early benefits resulting from the paper machine upgrade performed in
1995. There can be no assurance that the company will be able to pass any future
increases in the price of pulp through to its customers in the form of price
increases.
The company's sole source of supply of the Tyvek(R) used in production of
certain of its products is DuPont. The company has a long-standing relationship
with DuPont as an approved converter of Tyvek(R) and has never experienced a
disruption in supply. Although management believes that it has a good
relationship with DuPont, there can be no assurance that the company will be
able to continually purchase adequate supplies of Tyvek(R). Any material
interruption in the company's supply of Tyvek(R) could have a material adverse
effect on the results of operations and financial condition of the company.
Use of Recycled Fiber. The company believes that materials with recycled
content continue to grow in consumer acceptance. The company has made
significant capital investments in recycling equipment and systems. The use of
the company's cylinder paper machines in the manufacturing process for
pressboard products allows the use of recycled fiber in the product interior,
while virgin pulp is used on the product exterior, providing greater strength as
well as the product appearance desired by customers. Recently completed capital
investments to upgrade Warren Glen's fiber processing facility has enhanced this
location's ability to process a wider range of pulps and recycled materials.
The company's office products are manufactured with up to 100% recycled
fiber, of which up to 50% may be post-consumer waste. Post-consumer waste refers
to paper waste from end-users of paper products, and is generally considered the
standard by which government agencies and environmentally conscious consumers
evaluate recycled content. The company presently meets and expects to continue
to meet government and consumer recycled content requirements.
Research and Development. The company's expenditures on research and
development were $1.4 million, $1.2 million, and $1.0 million in the fiscal
years ended December 31, 1997, 1996 and 1995, respectively. The company has a
research and development staff with expertise in chemistry, papermaking and
materials science. This staff works closely with the company's customers to
develop, test and produce new product formulations designed to meet customer
specifications.
12
<PAGE>
Employees
As of December 31, 1997, the company employed a total of 1,042 employees,
of which 307 were salaried and 735 were hourly. Of the salaried employees, 161
were in manufacturing, 52 in sales and marketing, 13 in research and development
and 81 in professional or administrative support.
The hourly employees at the Quakertown, Pennsylvania location are
non-union. The remaining hourly employees are members of either the United
Paperworkers International Union, the International Brotherhood of Boilermakers,
Iron Ship Builders, Blacksmiths, Forgers and Helpers or the International
Brotherhood of Electrical Workers. The company believes that, in general, it has
good relations with its employees and their unions. The table below sets out the
expiration dates of the company's labor contracts:
Facility Expiration Date
-------- ---------------
Fitchburg, MA (a)........................................... April 30, 1998
Warren Glen, NJ (b)......................................... May 23, 1999
May 25, 1999
Hughesville, NJ(b).......................................... May 23, 1999
May 25, 1999
Rochester, MI............................................... May 23, 1999
Richmond, VA................................................ April 28, 2000
Beaver Falls, NY............................................ June 30, 2000
Brattleboro, VT............................................. August 31, 2002
- ----------
(a) The company expects to commence negotiations for a new collective
bargaining agreement ("New CBA") at the Fitchburg mill in the second
quarter of 1998. While the company believes that it has generally good
relations with its employees, no assurances can be given that a
satisfactory New CBA will be negotiated prior to the expiration of the
existing agreement or, if a satisfactory New CBA is not negotiated, that
there will not be a labor disruption. No assurances can be given, however,
that a work stoppage would not create such a material disruption or that,
if created, such a disruption would not have a material adverse impact on
the company's results of operations.
(b) Workers at Warren Glen, NJ and Hughesville, NJ are subject to two separate
collective bargaining agreements.
Cogeneration Project
In 1993, the company has entered into an agreement with Kamine, pursuant
to which the company's Beaver Falls facility is the host for a gas-fired,
79-megawatt combined-cycle cogeneration facility developed by Kamine at the
company's Beaver Falls mill. Construction of the facility has been completed,
although it is not currently operational. The company received an initial cash
payment of $4.4 million in 1993 and a series of deferred cash payments from
Kamine totaling $7.0 million between May 1995 and May 1997. The present value of
these deferred cash payments, in the amount of $6.5 million, was recorded as
income in the first quarter 1995. The payment received in May 1997 was the last
payment due under this agreement.
Environmental Regulation and Compliance
Like similar companies, the company's operations and properties are
subject to a wide variety of federal, state and local laws and regulations,
including those governing the use, storage, handling, generation, treatment,
emission, release, discharge and disposal of certain materials, substances and
13
<PAGE>
wastes, the remediation of contaminated soil and groundwater, and the health and
safety of employees (collectively, "Environmental Laws"). As such, the nature of
the company's operations exposes it to the risk of claims with respect to
environmental protection and health and safety matters and there can be no
assurance that material costs or liabilities will not be incurred in connection
with such claims.
The company and its predecessors have made substantial investments in
pollution control facilities to comply with existing Environmental Laws. The
company made expenditures for environmental purposes of $2.6 million, $1.7
million, and $2.5 million for the fiscal years ended December 31, 1997, 1996 and
1995, respectively. While the company believes that it has made sufficient
capital expenditures to maintain compliance with existing Environmental Laws,
any failure by the company to comply with present and future Environmental Laws
could subject it to future liability or require the suspension of operations. In
addition, such Environmental Laws could restrict the company's ability to expand
its facilities or could require the company to acquire costly equipment or incur
significant expenses to comply with environmental regulations.
The Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended ("CERCLA") and similar state laws provide for responses to,
and liability for, releases of certain hazardous substances from a facility into
the environment. These obligations are imposed on the current owner or operator
of a facility from which there has been a release, the owner or operator of a
facility at the time of the disposal of hazardous substances at the facility, on
any person who arranged for the treatment or disposal of hazardous substances at
the facility, and any person who accepted hazardous substances for transport to
a facility selected by such person. Liability under CERCLA can be strict, joint
and several. Pursuant to the Environmental Laws, there are currently pending
investigations at certain of the company's plants relating to the release of
hazardous substances, materials and/or wastes. In addition, various predecessors
of the company have been named as potentially responsible parties ("PRPs") by
the United States Environmental Protection Agency ("EPA") for costs incurred and
to be incurred in responding to the investigation and clean-up of various
third-party sites. The company has not received any notification or inquiry from
EPA or any other agency concerning these sites. Management believes that the
company will have no liability in connection with the clean-up of these sites.
However, no assurance can be given that such predecessors will perform their
responsibilities in connection with such sites and, in the event of such
non-performance, the company may incur material liabilities in connection with
such sites, and no assurance can be given that the company will not receive PRP
notices in connection with these or other sites in the future.
In connection with the acquisition of CPG, the former owners of CPG have
agreed to indemnify (subject to certain limitations) the company for certain
identified and potential environmental liabilities arising from the historical
use of the property acquired in the acquisition of CPG or from CPG's conduct
prior to the acquisition of CPG. Management believes that the amount of the
escrow established as security for these and other indemnity obligations of the
former CPG owners will be sufficient to cover environmental liabilities expected
to be incurred in connection with the acquisition of CPG. However, no assurance
can be given that the limited indemnity provided by the former owners of CPG
will be sufficient to cover all material environmental liabilities associated
with the acquisition of CPG.
Based upon its experience to date, the management of the company believes
that the future cost of compliance with existing Environmental Laws, and
liability for known environmental claims pursuant to such laws, will not have a
material adverse effect on the company's financial condition and results of
operation. However, future events, such as new information, changes in existing
Environmental Laws or their interpretation, and more vigorous enforcement
policies of regulatory authorities, may give rise to additional expenditures or
liabilities that could be material to the company's financial condition and
results of operations.
14
<PAGE>
Executive Officers
The company's executive officers are:
Name Age Position
- ---- --- --------
Alex Kwader......................... 55 President and
Chief Executive Officer
Bruce Moore......................... 50 Vice President and
Chief Financial Officer
Stephen A. Steidle.................. 53 Vice President and
General Sales Manager
David C. Bernhard................... 50 Vice President and General
Manager, Filter Products
David R. Kruft...................... 57 Vice President and General
Manager, Durable Specialties
David E. Rousse..................... 45 Vice President and General
Manager, Office Products
Robert W. Yousey.................... 51 Vice President and General
Manager, Technical Specialties
Alex Kwader has been the President and Chief Executive Officer of the
company since August 1991 and a director since November 1991. Since 1970, Mr.
Kwader has been employed by the company and Boise Cascade ("BCC") in various
management positions. He served as Senior Vice President of the company from
March 1990 to August 1991 and as Vice President from the company's inception in
June 1989 until March 1990. Mr. Kwader was also General Manager of the
Pressboard Division from June 1989 to August 1991, serving in the same capacity
for the BCC Pressboard Division from 1986 until June 1989. From 1980 to 1985, he
served as General Manager of the BCC Latex Fiber Products Division. Mr. Kwader
holds a B.S. in Mechanical Engineering from the University of Massachusetts and
a M.S. from Carnegie Mellon University and attended the Harvard Business School
Executive Program.
Bruce Moore has served as Vice President of the company since its
inception in June 1989 and as Chief Financial Officer since December 1990. From
1980 to 1989, Mr. Moore was employed by BCC in various management positions,
including Controller and General Manager of the Latex Fiber Products Division.
Mr. Moore holds a B.A. in Business Administration from Siena College and
attended the Stanford University Executive Program.
Stephen A. Steidle has served as Vice President and General Sales Manager
for the office products business since February 1994. He assumed international
sales responsibility for the company in January 1997. He has held sales
management positions with the company and BCC for more than 10 years and has a
total of 25 years of service with the company and BCC. Mr. Steidle received a
B.A. in Psychology from the University of Maine and an MBA from the University
of Maine.
David C. Bernhard has served as Vice President and General Manager, Filter
Products, since January 1997. With FiberMark since 1995, Mr. Bernhard most
recently served as General Manager for Endura Products, and previously was
Technology Development Manager for the company. He was employed for over 26
years with Scott Paper Company in Mobile, Alabama in the S.D. Warren subsidiary,
and Fort Edward, New York and Chester, Pennsylvania in the Consumer Products
business. Mr. Bernhard received a B.S. degree in Pulp and Paper from the College
of Forestry at Syracuse University.
15
<PAGE>
David R. Kruft has served as Vice President and General Manager, Durable
Specialties, since 1996 at the time of the Arcon acquisition, where he held the
position of President since 1993. Prior to joining Arcon in 1990, he was
employed by Esselte Pendaflex Corporation for over 20 years, most recently as
Senior Vice President and Division Head for the Boorum and Pease office products
line. Mr. Kruft received a B.S. in Mechanical Engineering from Hofstra
University.
David E. Rousse has served as Vice President and General Manager, Office
Products, since January 1997, and joined FiberMark in 1996 in the role of Vice
President - Marketing and Business Development. He was employed for 12 years
with Strathmore Paper Company and later International Paper in a number of
marketing and general management positions for the fine printing papers, office
papers, and envelopes product lines. He was selected for a Fellowship in the
President's Executive Exchange Program working in the U.S. International Trade
Commission. He began his career with W.R. Grace & Company in finance, marketing,
and sales / sales management roles. Mr. Rousse received a B.S. in Engineering
from Dartmouth College, and an MBA from the Amos Tuck School of Business at
Dartmouth.
Robert F. Yousey has served as Vice President and General Manager,
Technical Specialties, since 1996 at the time of the CPG acquisition, where he
held the position of Executive Vice President of Operations for all CPG
manufacturing sites. He joined James River in 1980 and through various
divestitures was employed as General Manager of the Riegel Fitchburg Division of
James River, and also as General Manager of the Fitchburg mill. He started his
career with Latex Fiber Industries and later Boise Cascade in 1969 and worked
for 11 years in significant mill and corporate roles. Mr. Yousey received a B.S.
in Chemical Engineering from the University of Texas.
Item 2. Properties
The company owns and operates six specialty fiber-based materials mills
and one converting facility and also leases one facility. The following table
depicts all of the company's properties as of December 31, 1997.
Owned/ Sq. Land
Facilities Leased Feet Acres
- ---------- ------ ---- -----
Brattleboro, VT.............................. Owned 200,000 39
Fitchburg, MA................................ Owned 255,000 161
Warren Glen, NJ.............................. Owned 299,000 162
Hughesville, NJ.............................. Owned 88,000 166
Beaver Falls, NY............................. Owned 100,000 167
Owensboro, KY (closed on January 14, 1998)... Owned 47,000 15
Rochester, MI................................ Owned 96,000 17
Richmond, VA................................. Leased 64,000 -
Quakertown, PA............................... Owned 165,000 7
The corporate headquarters is located at the Brattleboro, VT site. The
company owns a production facility in Lowville, NY that it leases to a customer.
Foreign sales offices are maintained in Kowloon, Hong Kong; Tokyo, Japan; and
Annecy, France.
16
<PAGE>
Item 3. Legal Proceedings
The company is involved in legal proceedings arising in the ordinary
course of business. The company does not believe that the outcome of any of
these proceedings will have a material adverse effect on the operations or
financial condition of the company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter ended December 1997.
17
<PAGE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
The company's Common Stock was first traded on March 11, 1993 on the
NASDAQ National Market System ("Nasdaq") under the symbol SPBI. As of the close
of business on April 8, 1997, the Common Stock ceased trading on Nasdaq and on
April 9, 1997 was listed on the New York Stock Exchange ("NYSE") under the
symbol "FMK". The following table shows the high and low sale prices per share
of the Common Stock as reported on the Nasdaq and on the NYSE Composite
Transations Tape, as the case may be. The high and low sales prices for the
first quarter of 1996 through the second quarter of 1997 have been adjusted to
give effect to a 3-for-2 stock split in the form of a dividend, which was
effective May 13, 1997 for shareholders of record at the close of business on
May 6, 1997 (the "Stock Split").
Year Ended December 31, 1996 High Low
---- ---
First Quarter............................................... $10.00 $7.83
Second Quarter.............................................. $10.17 $8.50
Third Quarter............................................... $13.00 $8.67
Fourth Quarter.............................................. $14.17 $10.83
Year Ended December 31, 1997
First Quarter............................................... $18.00 $13.33
Second Quarter.............................................. $21.38 $15.25
Third Quarter............................................... $22.50 $19.00
Fourth Quarter.............................................. $22.19 $19.13
The company had approximately 1,108 stockholders of record of its Common
Stock as of March 16, 1998. The company's transfer agent and registrar has
indicated that the company had approximately 2,149 beneficial owners of its
Common Stock as of March 16, 1998. The company has never paid any cash dividends
on its Common Stock and does not anticipate paying cash dividends in the
foreseeable future.
Item 6. Selected Consolidated Financial Data
The data set forth below should be read in conjunction with the financial
statements and notes included elsewhere in this Annual Report on Form 10-K.
18
<PAGE>
FIBERMARK, INC.
Selected Consolidated Financial Data
(In Thousands, Except Per Share Data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------
1997 1996 1995 1994 1993
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Consolidated Income Statement Data:
Net sales(1) .............................. $ 235,358 $ 124,771 $ 117,516 $ 105,416 $ 79,982
Cost of sales ............................. 189,294 101,981 100,106 88,138 66,360
----------------------------------------------------------------
Gross profit .............................. 46,064 22,790 17,410 17,278 13,622
General and administrative expenses ....... 16,331 9,908 8,397 8,584 7,881
Facility closure expense(5) ............... 10,000 0 0 0 0
----------------------------------------------------------------
Income from operations .................... 19,733 12,882 9,013 8,694 5,741
Loss on disposition of assets, net ........ 0 0 8,302 0 0
Cogeneration income ....................... (215) 0 (6,512) 0 (4,404)
Other expenses (income), net(2) ........... 600 (1,127) (1,198) (658) 374
Interest expense (net of interest income) . 9187 1,798 892 1,356 3,137
----------------------------------------------------------------
Income before income taxes and
extraordinary items ................... 10,161 12,211 7,529 7,996 6,634
Income tax (benefit) expense(3) ........... 3,992 4,697 (424) 2,768 1,921
----------------------------------------------------------------
Income before extraordinary items ......... 6,169 7,514 7,953 5,228 4,713
Extraordinary items(4) .................... 0 (297) 0 (149) (2,103)
Net income ................................ $ 6,169 $ 7,217 $ 7,953 $ 5,079 $ 2,610
----------------------------------------------------------------
Net income available to common shareholders 6,169 7,217 7,953 5,079 2,251
----------------------------------------------------------------
Weighted average shares outstanding ....... 6,141 6,054 6,050 6,031 5,258
Basic earnings per share .................. $ 1.01 $ 1.19 $ 1.31 $ 0.84 $ 0.43
Diluted earnings per share ................ 0.95 1.14 1.30 0.82 0.42
Other Consolidated Operating Data:
Depreciation and amortization ............. $ 7,393 $ 3,651 $ 3,342 $ 4,006 $ 3,681
Capital expenditures ...................... 13,528 7,546 4,865 1,603 900
----------------------------------------------------------------
December 31,
----------------------------------------------------------------
1997 1996 1995 1994 1993
----------------------------------------------------------------
Consolidated Balance Sheet Data:
Working capital ........................... $ 61,983 $ 29,151 $ 17,634 $ 14,296 $ 799
Total assets .............................. 248,001 212,008 74,618 87,817 55,754
Long-term debt (net of current maturities) 100,000 100,000 4,625 21,081 14,580
Redeemable preferred stock ................ 0 0 0 0 0
Stockholders' equity ...................... 82,771 48,093 40,735 32,662 27,390
==============================================================================================================
</TABLE>
(1) The increase in net sales for the year ended December 31, 1994 reflects
the impact of the acquisition of the Endura Products division of W.R.
Grace & Co. on June 30, 1994. The acquisition contributed $18.1 million to
the company's net sales for the last six months of 1994. For the year
ended December 31, 1995, the acquisition contributed $37.3 million to the
company's net sales. The increase in net sales for the year ended December
31, 1997 reflects the impact of the acquisition of CPG Investors Group
Inc. and Arcon Holdings Corp. on October 31, 1996. Net
19
<PAGE>
sales related to these acquisitions were $127.9 million in 1997 as
compared to $20.2 million in 1996.
(2) Other expenses (income) for the 1997, 1996, 1995 and 1994 periods include
$1,718,000, $1,719,000, $1,718,000 and $1,146,000, respectively, of
amortized income related to a deferred gain on a sale-leaseback
transaction. On April 29, 1994, the company sold and leased back certain
operating assets at the Brattleboro, Vermont, mill. The sale of these
assets resulted in a book gain of $17,187,000. This gain is being
amortized over the ten-year life of the lease.
(3) From its inception through December 31, 1991, the company generated net
operating losses. For the year ended December 31, 1993, the company
generated net income and recognized an income tax provision of $1,921,000.
For the year ended December 31, 1994, the company generated net income and
recognized an income tax provision of $2,768,000. For the year ended
December 31, 1995, the company generated net income and recognized an
income tax benefit of ($424,000) due primarily to the release of valuation
allowances.
(4) Extraordinary items for 1993 include a $3,518,000 loss related to the
early extinguishment of debt and a fee in connection with the termination
of an interest rate collar agreement, net of an income tax benefit of
$1,415,000. Extraordinary items for 1994 include a $248,000 loss related
to the early extinguishment of debt, net of an income tax benefit of
$99,000. Extraordinary items for 1996 include a $495,000 loss related to
the early extinguishment of debt, net of an income tax benefit of
$198,000.
(5) On November 19, 1997, the company announced that it planned to close
operations at its Owensboro, Kentucky mill and consolidate its production
demands with several of its other mills. Operations continued until a
sufficient level of transition inventory was established to ensure
continued service to customers during the production transfer period. The
Kentucky mill was closed on January 14, 1998. The company booked a $10.0
million charge related to this mill closure in the fourth quarter of 1997.
20
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
On March 22, 1995, the company sold the assets of its Lewis mill and the
company's gasket business to Armstrong World Industries, Inc. ("Armstrong") for
$12,933,000 (the "Sale"). As part of the Sale, inventory in the amount of
$1,080,000 was sold at book value to Armstrong. The net book value of the assets
sold was $19,311,000 and total expenses relating to the Sale were $1,924,000.
This transaction resulted in a loss of $8,302,000 before taxes. The company used
a substantial portion of the proceeds to retire outstanding indebtedness. The
remaining proceeds were added to working capital.
On October 31, 1996, the company acquired all of the outstanding stock of CPG
Investors Inc. ("CPG"). CPG operated five paper mills and manufactured a diverse
portfolio of specialty fiber-based products for industrial and technical
markets. Annual sales revenue approximated $95.0 million.
On October 31, 1996, the company also acquired all of the outstanding stock of
Arcon Holdings Corp. ("Arcon"). Arcon operated two converting facilities and
manufactured colored binding and stripping tapes and edge cover materials sold
primarily into the office products, checkbook and bookbinding markets. Annual
sales revenue approximated $28.0 million.
Both of the 1996 acquisitions were financed with proceeds from the issuance of
$100.0 million in senior notes. These notes are non-amortizing, have a ten-year
term and carry a fixed interest rate of 9.375%. The aggregate purchase price for
both CPG and Arcon, including acquisition costs, was approximately $91.5
million. Additionally, the company incurred approximately $4.5 million in
financing costs. The balance of the proceeds from the senior note offering was
added to the cash reserve of the company.
On November 19, 1997, the company announced that it planned to cease operations
at its Owensboro, Kentucky mill and consolidate its production demands with
several of its other mills. Operations continued until a sufficient level of
transition inventory was established to ensure continued service to customers
during the production transfer period. The Kentucky mill was closed on January
14, 1998. The company took a $10.0 million charge related to the closure of this
facility in the fourth quarter of 1997.
On November 19, 1997, the company also announced its intent to acquire Steinbeis
Gessner GmbH for a purchase price of $43.0 million. Steinbeis Gessner,
headquartered near Munich, Germany, is a leading producer of specialty
fiber-based materials sold into the filter products, technical specialties and
durable specialties markets. Annual sales revenue approximated $85.0 million.
Pursuant to this acquisition, the company sold 1,500,000 share of common stock
on December 15, 1997 with a customary 30-day over-allotment option granting the
underwriters of the offering the right to purchase up to an additional 225,000
shares. The December 15 sale resulted in gross proceeds of $30.8 to the company.
On January 15, 1998, the over-allotment was partially exercised through the sale
of an additional 135,000 shares. The shares were sold for a gross price of
$20.50 per share. After expenses, the company realized approximately $31.0
million in total net proceeds. To complete the financing of the Gessner
acquisition, the company also closed on a DM54.0 million (approximately $30.2
million) term loan with Bayerische Vereinsbank in Munich, Germany and seller
financing from the previous owner on January 12, 1998. The German bank loan
amortizes over seven years and has a fixed interest
21
<PAGE>
rate of 6.8%. The effective date of ownership transfer on the Steinbeis Gessner
business was January 1, 1998.
Excluding the impact of the Owensboro write down, the company's income from
operations improved from $8.7 million in 1994 (8.3% of sales) to $29.7 million
in 1997 (12.6% of sales). This improvement is largely attributable to the added
sales volume that resulted from the 1994 and 1996 acquisitions. Additionally the
company is benefiting from improved manufacturing efficiencies due to equipment
upgrades at several of its facilities and from cost reduction related to
consolidation of facilities and administrative staffs.
Results of Consolidated Operations
The following table sets forth, for the periods indicated, certain operating
data as a percentage of net sales.
================================================================================
1997 1996 1995
Net sales ........................................ 100.0% 100.0% 100.0%
Cost of sales .................................... 80.4 81.7 85.2
---------------------------
Gross profit ..................................... 19.6 18.3 14.8
General and administrative expenses .............. 6.9 7.9 7.1
Facility closure ................................. 4.3 -- --
---------------------------
Income from operations ........................... 8.4 10.4 7.7
Loss on sale of assets, other (income),
expense and cogeneration income, net .......... .2 (.9) 0.5
Interest expense ................................. 3.9 1.5 0.8
---------------------------
Income before income taxes ....................... 4.3 9.8 6.4
Net effect of income taxes and extraordinary tax
benefit ........................................ 1.7 4.0 (0.4)
---------------------------
Net income ....................................... 2.6% 5.8% 6.8%
================================================================================
Year Ended December 31, 1997 Compared to December 31, 1996
Net sales increased 88.6% to $235.4 million in 1997 from $124.8 million in 1996.
The company acquired CPG and Arcon on October 31, 1996. These acquisitions
contributed $127.9 million in sales revenue for the full year of 1997 as
compared to $20.2 million for the final two months of 1996.
Within the company's markets, office products sales increased by 2.6% to $55.8
million in 1997 from $54.4 million in 1996. This increase is attributable to
moderate growth in demand for our pressboard, and new business in lightweight
filing and cover materials. Sales of technical specialties increased by 150.2%
to $77.8 million in 1997 from $31.1 million in 1996, due to the impact of the
1996 acquisitions. Durable specialties net sales increased by 80.8% to $58.2
million in 1997 from $32.2 million in 1996. This increase is primarily due to
the impact of the 1996 acquisitions. In addition, sales with a key customer grew
due to their expansion into new geographic markets and new distribution
channels, in part fueled by a new product developed with them in 1995. Net sales
of filter products increased by 522.9% to $43.6 million in 1997 from $7.0
million in 1996 due to the impact of the 1996 acquisitions.
22
<PAGE>
Gross profit margin increased to 19.6% in 1997 from 18.3% in 1996. This
improvement relates to lower fiber prices, productivity gain at the company's
Brattleboro, Vermont mill and early benefits from the consolidation of acquired
operations at Oceanside, New York into the company's Quakertown, Pennsylvania
facility.
General and administrative expenses increased to $16.3 million (6.9% of sales)
in 1997 from $9.9 million (7.9% of sales) in 1996. This increase is due to the
impact of the 1996 acquisitions.
In 1997, the company booked a $10.0 million charge related to the closure of its
Owensboro, Kentucky mill. Operations at this mill permanently closed on January
14, 1998.
Income from operations increased to $19.7 million (8.4% of sales) in 1997 from
$12.9 million (10.4% of sales) in 1996. This improvement is due to the higher
sales volume brought about by the 1996 acquisitions, lower fiber prices, and
improved manufacturing efficiencies. These improvements were offset by the $10.0
million charge related to the closure of the Owensboro, Kentucky mill.
In 1997, the company recorded other expense of $.4 million as compared to other
income of $1.1 million in 1996. This change is due to higher levels of
amortization expense related to the 1996 acquisitions.
Net interest expense increased to $9.2 million in 1997 as compared to $1.8
million in 1996. This increase is due to the debt incurred to fund the 1996
acquisitions.
Income taxes were $4.0 million or 39.3% of taxable income in 1997 as compared to
$4.7 million or 38.5% of taxable income in 1996.
Net income before extraordinary items for 1997 was $6.2 million or $.95 per
share. Excluding the impact of the Owensboro closure, net income would have been
$12.3 million or $1.90 per share, as compared to $7.2 million or $1.14 per share
in 1996. Per share earnings are stated on a fully diluted basis.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net sales increased 6.2% to $124.8 million in 1996 from $117.5 million in 1995.
The CPG and Arcon acquisitions added $20.2 million in sales revenue over the
final two months of 1996. In March 1995, the company sold its gasket business to
Armstrong. This caused its gasket product revenue, part of technical
specialties, to decline by $6.7 million in 1996 as compared to 1995.
Within the company's markets, office products sales declined by 5.1% or $2.9
million to $54.4 million in 1996 from $57.3 million in 1995. This decline in
office products was due to the capacity loss associated with the sale of Lewis
mill to Armstrong in March 1995, predominantly in the lightweight cover and
filing grades. Technical specialties net sales increased by 1.6% or $0.5 million
to $31.1 million in 1996 from $30.6 million in 1995 due to the impact of the
prior acquisitions in the last two months of 1996, offset by the capacity loss
associated with the sale of the Lewis mill. Durable specialties net sales
increased by 8.8% or $2.6 million to $32.2 million in 1996 from $29.6 million in
1995. Filter products net sales increased from $0.0 in 1995 to $7.0 million in
1996, due to the impact of the acquisition of CPG.
Gross profit margin increased to 18.3% in 1996 from 14.8% in 1995. This
improvement is primarily due to lower prices for pulp and recycled fiber and to
improved manufacturing efficiencies resulting from equipment upgrades.
23
<PAGE>
General and administrative expenses increased 17.9% to $9.9 million (7.9% of
sales) in 1996 from $8.4 million (7.1% of sales) in 1995. This increase is
primarily due to expenses incurred in connection with CPG and Arcon
acquisitions.
Income from operations increased 43.3% to $12.9 million (10.4% of sales) in 1996
from $9.0 million (7.7% of sales) in 1995.
Other income decreased 14.0% to $1.0 million in 1996 as compared to $1.2 million
in 1995. On April 29, 1994, the company sold and leased back certain operating
assets at the Brattleboro, Vermont mill. The sale of these assets resulted in a
deferred gain of $17.2 million, which is being amortized at the rate of $1.7
million per year. This income was offset by amortization of organizational and
financing costs and goodwill.
Net interest expense increased to $1.8 million in 1996 as compared to $.9
million in 1995. This increase is due to the debt incurred to fund the prior
acquisitions.
Income taxes were $4.7 million or 38.5% of income before income taxes and
extraordinary item in 1996.
Net income before extraordinary items in 1996 was $7.5 million or $1.19 per
share compared to $8.0 million or $1.30 per share in 1995. Excluding the
positive effects of a non-recurring cogeneration payment and a one-time tax
adjustment, and the negative effect of the loss on the sale of the Lewis mill,
net income in 1995 would have been $6.3 million or $1.03 per share. Per share
earnings are stated on a fully diluted basis.
Liquidity and Capital Resources
As of December 31, 1997, the company had outstanding $100.0 million of senior
notes. The notes have a ten-year term, are non-amortizing and carry a fixed
interest rate of 9.375%. Additionally, the company had available to it a $20.0
million revolving credit facility as of December 31, 1997. As of such date, no
advances were outstanding under such credit facility. On January 12, 1998, the
company also closed on a DM 54.0 (approximately $30.2) million term loan with
Bayerische Vereinsbank AG in Munich, Germany and an unsecured note issued by
Gessner and guaranteed by the company to the seller in the amount of DM8.0
(approximately $4.6) million to fund a portion of the purchase price related to
the acquisition of Steinbeis Gessner. The German bank loan amortizes over seven
years and has a fixed interest rate of 6.8%. The seller note carries an
interest rate of 5% and amortizes over three years. On this same date the
company also closed on a $8.3 million revolving credit facility and on a $8.3
million capital spending facility with Bayerische Vereinsbank. As of such date,
no advances were outstanding under these facilities. Dollar equivalents are
based on a rate of 1.791DM per dollar, which was the noon buying rate on the New
York spot market for cable transfers.
The company's historical requirements for capital have been primarily for
servicing debt, capital expenditures, working capital and acquisitions. Cash
flows from operating activities were $7.9 million, $17.1 million and $8.1
million in 1997, 1996 and 1995 respectively. During these periods, additions to
property, plant and equipment were $13.5 million, $8.5 million and $4.9 million
respectively. In addition, the company expects to fund certain expenditures
related to technology transfer projects between Gessner and the company, which
the company believes will provide quality improvements, cost reductions, product
performance enhancements and the ability to produce a broader range of products.
24
<PAGE>
The company currently anticipates that the implementation of these projects can
be accomplished over a two to three year period, at a cost of $20 to $25
million. The company believes that cash reserves on hand, cash flow from
operations, plus amounts available under credit facilities, will be sufficient
to fund its capital requirements, debt service and working capital requirements
for the foreseeable future.
The company intends to pursue strategic acquisitions that will enhance its range
of products, complement the company's core markets, provide distribution or
sales and marketing efficiencies or provide opportunities for technology gains
or other operating efficiencies. Any such acquisition could require the company
to secure independent debt or equity financing to complete such transaction.
Inflation
The company attempts to minimize the effect of inflation on earnings by
controlling operating expenses. During the past several years, the rate of
general inflation has been relatively low and has not had a significant impact
on the company's results of operations. The company purchases raw materials that
are subject to cyclical changes in costs that may not reflect the rate of
general inflation.
Seasonality
The company's business is mildly seasonal, with the third quarter of each year
typically having the lowest level of net sales and operating income. This
seasonality is the result of a lower level of purchasing activity in the third
quarter, since many of our U.S. customers shut down their manufacturing
operations during portions of July. The seasonality of the company's operations
including Gessner is likely to be similar, as many European manufacturers shut
down during portions of August.
New Accounting Pronouncements
In 1997 and early 1998, the Financial Accounting Standards Board issued the
following accounting standards:
SFAS No. 130, Reporting Comprehensive Income, will be effective for
periods beginning after December 15, 1997.
SFAS No. 131, Disclosure about Segments of an Enterprise and Related
Information, will be effective for periods beginning after December 15,
1997.
SFAS No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits, will be effective for periods beginning after
December 15, 1997.
Management does not believe that the above pronouncements will have a
significant effect on the company's financial statements.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-1: Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. The SOP is effective for
financial statements issued for fiscal years beginning after December 15, 1998.
The company has yet to analyze in detail the potential impact on its financial
statements upon adoption of this pronouncement.
25
<PAGE>
Year 2000
The company has implemented or is in the process of implementing new integrated
information systems that are already Year 2000 compliant. The company expects
full system implementation well before the year 2000. The company has
communicated with its principal customers to ensure that Year 2000 issues will
not have an adverse impact on the company. The costs of achieving Year 2000
compliance are not expected to have a material impact on the company's business,
operations or its financial condition.
Forward-looking Statements
Statements in this report that are not historical are forward-looking statements
subject to risk and uncertainties that could cause actual results to differ
materially. Such risk and uncertainties include fluctuations in economies
worldwide, fluctuations in our customers' demand and inventory levels (including
the loss of certain major customers), the price and availability of raw
materials and of competitive materials, which may preclude passing increases on
or maintaining prices with customers; changes in environmental and other
governmental regulations, changes in terms from lenders, ability to retain key
management and to reach agreement on labor issues, failure to identify or carry
out suitable strategic acquisitions, or other risk factors discussed in this
report.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
None
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data of the company required by this
item are file as exhibits hereto, are listed under Item 14(a)(1) and (2) and are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None
26
<PAGE>
PART III
Item 10. Directors and Executive Officers
See the section entitled "Executive Officers" in Part I, Item 1 hereof for
information regarding the company's executive officers.
The information required by this item with respect to the company's directors is
presented under the caption entitled "Election of Directors" of the company's
Definitive Proxy Statement, which will be filed with the Securities and Exchange
Commission in connection with the solicitation of proxies for the company's
Annual Meeting of Stockholders to be held on May 5, 1998 (the "Proxy
Statement"), and is incorporated herein be reference.
The information required by this item concerning compliance with Section 16(a)
of the Exchange Act is presented under the caption entitled "Compliance with
Section 16(a) of the Securities Exchange Ace of 1934" of the Proxy Statement,
and is incorporated herein by this reference.
Item 11. Executive Compensation and Other Information
The information required by this item is incorporated herein by reference to the
information presented under the caption entitled "Executive Compensation and
Other Information" of the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated herein by reference to the
information presented under the caption entitled "Security Ownership of Certain
Beneficial Owners and Management" of the Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated herein be reference to the
information presented under the caption entitled "Certain Transactions" of the
Proxy Statement.
27
<PAGE>
Part IV
Item. 14. Exhibits, Consolidated Financial Statement Schedules, and Reports on
Form 8-K
(a)(1) Index to Consolidated Financial Statements
The consolidated financial statements required by this term are submitted
beginning on page 24 of this Form 10-K.
Page
----
Report of Independent Accountants................................ 29
Consolidated Balance Sheets of December 31, 1997 and 1995........ 31
Consolidated Statements of Income for the years ended
December 31, 1997, 1996, and 1995............................. 32
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1997, 1996, and 1995....................... 33
Consolidated Statements of Cash Flow for the years ended
December 31, 1997, 1996, and 1995............................. 34
Notes to Consolidated Financial Statements....................... 35
(a)(2) Index to Consolidated Financial Statements Schedule:
Report of Independent Accountants................................ 54
Schedule II - valuation and Qualifying Accounts Reserves......... 56
(a)(3) Index to Exhibits beginning on page 57
(b) Reports on Form 8-K
Therewere no reports on Form 8-K filed by the Registrant during the
fourth quarter of the fiscal year ended December 31, 1997.
(c) Exhibits
The exhibits required by this Item are listed under Item 14(a)(3).
(d) Consolidated Financial Statement Schedule
The consolidated financial statement schedule required by this item
is listed under Item 14(a)(2).
28
<PAGE>
Independent Auditor's Report
Board of Directors
FiberMark, Inc.
We have audited the accompanying consolidated balance sheets of FiberMark, Inc.
as of December 31, 1997 and 1996 and the related consolidated statements of
income, stockholders' equity, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. The consolidated financial statements
of FiberMark, Inc. as of December 31, 1995 were audited by other auditors whose
report dated January 26, 1996 expressed an unqualified opinion on those
financial statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of FiberMark, Inc. as
of December 31, 1997 and 1996, and the results of their operations and their
cash flows for the years then ended in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Burlington, Vermont
February 6, 1998
Vt. Reg. No. 92-000024
29
<PAGE>
Independent Auditor's Report
To the Board of Directors and Stockholders of
FiberMark, Inc.:
We have audited the consolidated statements of income, stockholders' equity and
cash flow of FiberMark, Inc. (formerly Specialty Paperboard, Inc.) for the year
ended December 31, 1995. These consolidated financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
responsible assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of FiberMark, Inc.
(formerly Specialty Paperboard, Inc.) and its cash flow for the year ended
December 31, 1995 in conformity with generally accepted accounting principles.
COOPERS AND LYBRAND L.L.P.
Boston, Massachusetts
March 16, 1998
30
<PAGE>
FIBERMARK, INC.
Consolidated Balance Sheets
December 31, 1997 and 1996
(In Thousands)
<TABLE>
<CAPTION>
=========================================================================================
Assets 1997 1996
----------------------
Current assets:
<S> <C> <C>
Cash ........................................................... $ 37,275 $ 14,342
Accounts receivable, net of allowances of $203
in 1997 and $333 in 1996 ..................................... 23,278 20,847
Cogeneration receivable (note 3) ............................. 0 1,785
Inventories (note 4) ......................................... 37,486 29,293
Other ........................................................ 210 596
Deferred income taxes (note 9) ............................... 3,769 2,090
----------------------
Total current assets ....................................... 102,018 68,953
----------------------
Property, plant and equipment, net (note 5) .................... 90,243 89,696
Goodwill, net .................................................. 45,179 46,950
Other intangible assets, net ................................... 8,146 5,642
Prepaid expense (note 7) ....................................... 1,073 767
Other long-term assets (note 15) ............................... 1,342 0
----------------------
Total assets (note 6) .......................................... $ 248,001 $ 212,008
=========================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ............................................ 18,822 15,085
Accrued liabilities ......................................... 14,455 22,018
Accrued income taxes payable ................................ 4,262 840
Accrued pension liabilities ................................. 2,496 1,859
----------------------
Total current liabilities ................................. 40,035 39,802
----------------------
Long-term debt, less current portion (note 6) .................. 100,000 100,000
Deferred gain (note 7) ......................................... 10,885 12,603
Deferred income taxes (note 9) ................................. 9,308 11,510
Other long-term liabilities .................................... 5,002 0
----------------------
Total long-term liabilities ............................... 125,195 124,113
----------------------
Total liabilities ......................................... 165,230 163,915
----------------------
Commitments and contingencies (note 7)
Stockholders' equity (notes 8, 15 and 19):
Preferred stock, par value $.001 per share,
2,000,000 shares authorized and none issued ............... 0 0
Common stock, par value $.001 per share;
20,000,000 shares authorized
7,581,531 shares issued and outstanding in 1997 and
6,058,638 shares issued and outstanding in 1996 ........... 8 6
Additional paid-in capital .................................. 73,709 44,731
Retained earnings ........................................... 9,525 3,356
Minimum pension liability adjustment, net of tax benefit .... (471) 0
----------------------
Total stockholders' equity ..................................... 82,771 48,093
----------------------
Total liabilities and stockholders' equity ..................... $ 248,001 $ 212,008
=========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE>
FIBERMARK, INC.
Consolidated Statements of Income
Years Ended December 31, 1997, 1996 and 1995
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
=======================================================================================
1997 1996 1995
<S> <C> <C> <C>
Net sales ...................................... $ 235,358 $ 124,771 $ 117,516
------------------------------------
Cost of sales .................................. 189,294 101,981 100,106
------------------------------------
Gross profit ................................. 46,064 22,790 17,410
Selling, general and administrative expenses ... 16,331 9,908 8,397
Facility closure expense (note 13) ............. 10,000 0 0
------------------------------------
Income from operations ....................... 19,733 12,882 9,013
------------------------------------
Other (income) expense, net .................... 600 (1,013) (1,198)
Loss on sale of assets (note 12) ............... 0 0 8,302
Cogeneration income (note 3) ................... (215) (97) (6,512)
Interest expense ............................... 9,457 1,992 1,270
Interest income ................................ (270) (211) (378)
Income before income taxes and
extraordinary item ....................... 10,161 12,211 7,529
Income tax (benefit) expense (note 9) .......... 3,992 4,697 (424)
------------------------------------
Income before extraordinary item ............. 6,169 7,514 7,953
------------------------------------
Extraordinary item:
Loss on early extinguishment of debt
(net of income tax benefit of $198) (note 6) 0 (297) 0
------------------------------------
Net income ................................. $ 6,169 $ 7,217 $ 7,953
------------------------------------
Basic earnings per share:
Income before extraordinary items .......... $ 1.01 $ 1.24 $ 1.31
Extraordinary item ......................... 0.00 (0.05) 0.00
------------------------------------
Net income ............................... $ 1.01 $ 1.19 $ 1.31
------------------------------------
Diluted earnings per share: .................... $ .95 $ 1.14 $ 1.30
=======================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE>
FIBERMARK, INC.
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1997, 1996 and 1995
(In Thousands Except Share Amounts)
<TABLE>
<CAPTION>
===============================================================================================================
Additional Accumulated Total
Common Stock Paid-In Earnings Stockholders'
Shares Amount Capital (Deficit) Adjustments Equity
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 ... 6,050,148 $ 6 $ 44,711 $ (11,814) $ (241) $ 32,662
Net income ................... 0 0 0 7,953 0 7,953
Amortization of
unearned compensation ...... 0 0 0 0 120 120
----------------------------------------------------------------------------
Balance at December 31, 1995 ... 6,050,148 6 44,711 (3,861) (121) 40,735
Net income ................... 0 0 0 7,217 0 7,217
Exercise of stock options .... 8,490 0 20 0 0 20
Amortization of
unearned compensation ...... 0 0 0 0 121 121
----------------------------------------------------------------------------
Balance at December 31, 1996 ... 6,058,638 6 44,731 3,356 0 48,093
Net income ................... 0 0 0 6,169 0 6,169
Issuance of common stock ..... 1,500,000 2 28,717 0 0 28,719
Issuance of common stock ..... 1,043 0 20 0 0 20
Exercise of stock options .... 21,850 0 117 0 0 117
Tax benefit of option exercise 0 0 124 0 0 124
Minimum pension liability
adjustment ................. 0 0 0 0 (471) (471)
----------------------------------------------------------------------------
Balance at December 31, 1997 ... 7,581,531 $ 8 $ 73,709 $ 9,525 $ (471) $ 82,771
===============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
33
<PAGE>
FIBERMARK, INC.
Consolidated Statements of Cash Flows
Years Ended December 31, 1997, 1996 and 1995
(In Thousands)
<TABLE>
<CAPTION>
======================================================================================================
1997 1996 1995
------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income .................................................. $ 6,169 $ 7,217 $ 7,953
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................. 7,393 3,651 3,342
Amortization of deferred gain ............................. (1,718) (1,719) (1,718)
Write off of deferred debt costs and other deferred charges 0 495 27
Amortization of unearned compensation ..................... 0 121 120
Loss on closure of facility ............................... 10,000 0 0
Loss on sale of assets .................................... 0 0 8,302
Gain on sale of property, plant and equipment ............. 0 0 (8)
Cogeneration income ....................................... (215) (97) (6,512)
Deferred taxes ............................................ (3,586) 2,406 (3,724)
Changes in operating assets and liabilities:
Accounts receivable ..................................... (2,431) 1,475 1,821
Inventories ............................................. (8,535) (1,431) (301)
Other ................................................... 391 947 2,289
Accounts payable ........................................ 3,737 357 (3,262)
Accrued pension and other liabilities ................... (7,965) 3,067 96
Prepaid expense ......................................... (306) (255) (306)
Other long-term liabilities ............................. 1,570 0 0
Accrued income taxes payable ............................ 3,422 840 0
------------------------------------
Net cash provided by operating activities ............... 7,926 17,074 8,119
------------------------------------
Cash flows used for investing activities:
Cogeneration receipt ........................................ 2,000 2,000 3,000
Purchase of life insurance .................................. (1,342) 0 0
Additions to property, plant and equipment .................. (13,528) (8,457) (4,865)
Kobayashi payments .......................................... 0 0 (5,000)
Additions to organization costs ............................. 0 0 (741)
Net proceeds from sale of property, plant and equipment ..... 0 0 17
Net proceeds from sale of assets ............................ 0 0 12,933
Expenses paid in connection with sale of assets ............. 0 0 (1,744)
Payments for businesses acquired ............................ 0 (87,000) 0
Acquisition costs ........................................... (367) 0 0
Increase in other intangible assets ......................... (112) 0 0
------------------------------------
Net cash provided by (used in) investing activities ....... (13,349) (93,457) 3,600
------------------------------------
Cash flows from financing activities:
Proceeds from sale-leaseback agreement ...................... 0 0 5,000
Proceeds from issuance of common stock ...................... 29,205 0 0
Cost of stock offering ...................................... (466) 0 0
Proceeds from exercise of stock options ..................... 117 20 0
Increase in revolving credit line ........................... 2,811 64,159 133,466
Payments on revolving credit line ........................... (2,811) (64,159) (140,759)
Repayment of senior term debt ............................... 0 (6,313) (9,275)
Proceeds from issuance of Series B senior notes ............. 0 100,000 0
Debt issue costs ............................................ (500) (4,500) 0
------------------------------------
Net cash provided by (used in) financing activities ...... 28,356 89,207 (11,568)
------------------------------------
Net increase in cash ..................................... 22,933 12,824 151
</TABLE>
34
<PAGE>
<TABLE>
<S> <C> <C> <C>
Cash at beginning of year ..................................... 14,342 1,518 1,367
------------------------------------
Cash at end of year ........................................... $ 37,275 $ 14,342 $ 1,518
======================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
35
<PAGE>
FIBERMARK, INC.
Notes to Consolidated Financial Statements
December 31, 1997 and 1996
(1) Description of Business
FiberMark operates in a single segment as a manufacturer and converter of
specialty paper products. The company's market focus is in four core product
areas: office products, technical specialties, durable specialties and filter
products. FiberMark is headquartered in Brattleboro, Vermont and operates eight
paper mills and converting facilities located in the eastern and midwestern
regions of the United States.
(2) Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include FiberMark, Inc. and its wholly
owned subsidiaries. All significant intercompany transactions and accounts have
been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these estimates.
Cash Equivalents
For purposes of the statement of cash flows, the company considers all highly
liquid investments with original maturities of three months or less to be cash
equivalents.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined using
the moving weighted average cost method for raw materials and the first-in,
first-out (FIFO) method for work in process (WIP) and finished goods. During
1996 the company changed its method of accounting for WIP and finished goods
inventory from the average cost method to the FIFO method. The change in
accounting method had no material effect on income for the year ended December
31, 1996.
Property, Plant and Equipment
Property, plant and equipment are carried at cost. Depreciation for financial
reporting purposes is provided using the straight-line method based upon the
useful lives of the assets. Buildings and improvements and machinery and
equipment are depreciated over periods not exceeding forty (40) and twenty (20)
years, respectively. When assets are sold or retired, the cost and accumulated
depreciation are removed from the accounts and any gain or loss is included in
income. Improvements are capitalized and included in property, plant and
equipment while expenditures for
36
<PAGE>
maintenance and repairs are charged to expense. Leasehold improvements are
amortized over the shorter of the life of the improvement or the lease term.
37
<PAGE>
Other Intangible Assets and Goodwill
Intangible assets include primarily organization, debt issue, goodwill,
acquisition costs and intangible assets related to pension plans (see note 15).
Organization costs of $233,000 and $594,000, net of accumulated amortization of
$309,000 and $310,000 as of December 31, 1997 and 1996, respectively, arose in
conjunction with the acquisition of the Endura Products Division and are
amortized on a straight-line basis over seven years. During the fourth quarter
of 1997, organization costs amounting to $185,000, net of accumulated
amortization of $177,000 were written off in conjunction with the closing of the
Owensboro, Kentucky facility (see note 13). Debt issue costs of $5,000,000 and
$4,500,000, net of accumulated amortization of $483,000 and $33,000 as of
December 31, 1997 and 1996, respectively, are related to the issuance of the
Series B senior notes and are amortized using the interest method over the life
of those notes. Costs associated with the acquisition of Steinbeis Gessner GmbH
effective January 1, 1998 amounts to $367,000. These costs have been capitalized
as of December 31, 1997 and will be included in the costs of the acquired
enterprise. The acquisition will be accounted for under the purchase method (see
note 20).
Goodwill of $45,179,000 and $46,950,000, net of accumulated amortization of
$1,805,000 and $244,000 as of December 31, 1997 and 1996, respectively,
represents the cost in excess of net assets of acquired companies and is
amortized on a straight-line basis over thirty years. During the fourth quarter
of 1997, goodwill of $186,000 net of accumulated amortization of $24,000 was
written off in conjunction with the closing of the Owensboro, Kentucky facility
(see note 13).
Amortization of intangibles, including goodwill, amounted to $2,542,000,
$812,000 and $576,000 as of December 31, 1997, 1996 and 1995, respectively. The
company periodically evaluates the recoverability of intangibles resulting from
business acquisitions and measures the amount of impairment, if any, by
assessing current and future levels of income and cash flows as well as other
factors, such as business trends and prospects and market and economic
conditions.
Deferred Gain
The deferred gain incurred in connection with the sale-leaseback transaction is
being amortized on a straight-line basis over the life of the lease (see note
7).
Research and Development
The company expenses research and development costs as incurred. The costs
amounted to $1.4 million, $1.2 million, and $1.0 million for the years ended
December 31, 1997, 1996, and 1995, respectively.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
38
<PAGE>
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation, encourages, but does not require companies to record compensation
cost for stock-based employee compensation plans at fair value. The company has
chosen to continue to account for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the company's stock at the date of the grant
over the amount an employee must pay to acquire the stock.
Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, Earnings Per Share (SFAS 128). SFAS 128 replaced
the calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. Earnings per share amounts for all
periods have been presented, and where appropriate, restated to conform to the
SFAS 128 requirements. Weighted average number of common and common equivalent
shares outstanding and earnings per common and common equivalent share have also
been restated to give effect to a 3-for-2 stock split effective May 13, 1997.
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
=====================================================================================
1997 1996 1995
------------------------------------
<S> <C> <C> <C>
Numerator:
Income available to common shareholders used
in basic and diluted earnings per share .. $ 6,169 $ 7,217 $ 7,953
------------------------------------
Denominator:
Denominator for basic earnings per share:
Weighted average shares .................. 6,140,673 6,053,889 6,050,148
Effect of dilutive securities:
Fixed stock options ...................... 351,114 274,684 50,409
------------------------------------
Denominator for diluted earnings per share:
Adjusted weighted average shares ......... 6,491,787 6,328,573 6,100,557
------------------------------------
Basic earnings per share ..................... $ 1.01 $ 1.19 $ 1.31
Diluted earnings per share ................... $ .95 $ 1.14 $ 1.30
=====================================================================================
</TABLE>
39
<PAGE>
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
January 1, 1996. This statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. Adoption of the Statement did not have a material impact on the company's
financial position, results of operations, or liquidity in 1996. During the
fourth quarter of 1997 the company decided to close their Owensboro, Kentucky
facility. The costs of closing this facility, including the costs associated
with disposing of the assets, are reflected as a component of income from
operations (see note 13).
Commitments and Contingencies
Liabilities for loss contingencies, including environmental remediation costs,
arising from claims, assessments, litigation, fines and penalties, and other
sources are recorded when it is probable that a liability has been incurred and
the amount of the assessment and/or remediation can be reasonably estimated.
Recoveries from third parties which are probable of realization are separately
recorded, and are not offset against the related environmental liability, in
accordance with Financial Accounting Standards Board Interpretation No. 39,
Offsetting of Amounts Related to Certain Contracts.
Environmental Matters
In October 1996, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 96-1, Environmental Remediation Liabilities. SOP
96-1 was adopted by the company on January 1, 1997 and requires, among other
things, environmental remediation liabilities to be accrued when the criteria of
SFAS No. 5, Accounting for Contingencies, have been met. The guidance provided
by the SOP is consistent with the company's current method of accounting for
environmental remediation costs and, therefore, adoption of this new Statement
does not have a material impact on the company's financial position, results of
operations, or liquidity. Pursuant to the Environmental Laws, there are
currently pending investigations at certain of the company's plants relating to
the release of hazardous substances, materials and/or wastes. In addition,
various predecessors of the company have been named as potentially responsible
parties ("PRPs") by the United States Environmental Protection Agency ("EPA")
for costs incurred and to be incurred in responding to the investigation and
clean-up of various third-party sites. The company has not received any
notification or inquiry from EPA or any other agency concerning these sites.
Management believes that the company will have no liability in connection with
the clean-up of these sites. However, no assurance can be given that such
predecessors will perform their responsibilities in connection with such sites
and, in the event of such nonperformance, the company may incur material
liabilities in connection with such sites, and no assurance can be given that
the company will not receive PRP notices in connection with these or other sites
in the future.
Other Matters
The company is involved in various legal proceedings in the ordinary course of
business. Management
40
<PAGE>
believes that the outcome of these proceedings will not have a material adverse
effect on the company's financial condition, results of operations or cash
flows. Reclassifications
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
(3) Cogeneration Project
In 1993, the company entered into agreements with Kamine/Besicorp Beaver Falls
L.P. ("Kamine") pursuant to which the company's Latex Fiber Products Division
would host a gas-fired, 79-megawatt combined-cycle cogeneration facility
developed by Kamine in Beaver Falls, New York. Construction of the facility has
been completed. The company received $4.4 million in cash in 1993. The company
has a firm contract with Kamine to receive a series of cash payments totaling
$7.0 million between May 1995 and May 1997. The present value of these cash
payments, in the amount of $6.5 million, was recorded as income in the first
quarter of 1995. Cash payments of $2 million, $2 million and $3 million were
received in May 1997, 1996 and 1995, respectively.
(4) Inventories
Inventories consist of the following at December 31, 1997 and 1996 (in
thousands):
================================================================================
1997 1996
-------------------------
Raw materials .............................. $13,707 $11,356
Work in process ............................ 10,365 6,667
Finished goods ............................. 10,990 8,783
Stores inventory ........................... 1,415 1,568
Operating supplies ......................... 1,009 919
-------------------------
Total inventories ...................... $37,486 $29,293
================================================================================
(5) Property, Plant and Equipment
Property, plant and equipment consists of the following at December 31, 1997 and
1996 (in thousands):
================================================================================
1997 1996
------------------------
Land ............................................... $ 7,347 $ 6,816
Buildings and improvements ......................... 17,217 16,666
Machinery and equipment ............................ 70,425 65,995
Construction in progress ........................... 9,347 11,234
104,336 100,711
Less accumulated depreciation and amortization ..... (14,093) (11,015)
------------------------
Net property, plant and equipment .................. $ 90,243 $ 89,696
================================================================================
Depreciation expense was $4,852,000, $2,839,000 and $2,766,000 for the years
ended December 31, 1997, 1996, and 1995, respectively.
41
<PAGE>
(6) Debt
The company's long-term debt is summarized as follows at December 31, 1997 and
1996 in thousands:
================================================================================
1997 1996
-----------------------
Series B senior notes - interest at 9-3/8%, interest
payable semi-annually in arrears on April 15 and
October 15, unsecured, due October 15, 2006......... 100,000 100,000
================================================================================
The Series B senior notes are redeemable at the company's option in whole or in
part, on or after October 15, 2001 at redemption prices ranging from 100% to
104.688% of face value. Up to 35% of the notes are redeemable at the company's
option on or prior to October 15, 1999 using the net proceeds of a public equity
offering at a redemption price equal to 109.375% of the principal amount plus
accrued and unpaid interest thereon subject to certain other conditions as
described in the agreement.
In conjunction with the issuance of the Series B senior notes, (see note 11),
the company repaid the senior term debt from CIT then outstanding. As a result,
the company expensed $297,000 of deferred financing costs, net of income tax
expense of $198,000. The loss has been reflected in the consolidated statements
of income as an extraordinary item.
Approximately, $9,430,000, $1,797,000 and $1,362,000 of interest was paid during
the years ended December 31, 1997, 1996 and 1995, respectively.
The company has $20,000,000 in available funds through a revolving credit line
with the CIT Group, Inc., at December 31, 1997, 1996 and 1995. The interest rate
on the line as of December 31, 1997 is prime plus .5% or LIBOR plus 2%. The
revolving credit line is subject to a commitment fee payable at the rate of 1/2
of 1% per annum on the daily average unused portion of this line. This fee is
payable on a quarterly basis. In addition, the company is required to pay an
annual Collateral Management Fee of $35,000 in connection with periodic
examinations, analyzing and evaluating the collateral.
(7) Leases
Deferred Gain and Sale-Leaseback
In April 1994, FiberMark entered into a sale-leaseback agreement with the CIT
Group, Inc. ("CIT"). FiberMark sold CIT $7,813,000 in fixed assets for a
purchase price of $25,000,000. As a result FiberMark recorded a deferred gain of
$17,187,000 which is amortized on a straight-line over the life of the ten year
lease. In 1997, 1996 and 1995 the company amortized $1,718,000, $1,719,000 and
$1,718,000, respectively, of the deferred gain into income. At December 31, 1997
and 1996, the deferred gain amounted to $10,885,000 and $12,603,000 net of
accumulated amortization of $6,302,000 and $4,584,000, respectively.
In connection with the sale-leaseback transaction, CIT leased back the fixed
assets to FiberMark utilizing a ten-year operating lease. The lease requires
quarterly payments of $843,000 for the first five years and quarterly payments
of $690,000 for the remaining five years of the lease.
42
<PAGE>
In December 1995, FiberMark amended the sale-leaseback agreement whereby
FiberMark sold a newly constructed wet end machine ("Kobayashi") for $10
million. No gain or loss was recorded on the transaction. FiberMark received
$5.0 million of the purchase price from CIT in December 1995, the remaining $5.0
million was placed in escrow and paid during 1996 when all specifications were
met. CIT leased back the Kobayashi machine to FiberMark using the remaining 8.5
years of the operating lease discussed above. The amended lease required
additional payments including a first quarter payment of $113,000 and quarterly
payments of $339,901 for the next 33 quarters.
Rental expense associated with these leases is recognized on a straight-line
basis and amounted to $4,426,000, $4,426,000 and $3,067,000 for the years ending
December 31, 1997, 1996 and 1995, respectively. Accumulated deferred rent
expense included in prepaid expense amounted to $1,073,000 and $767,000 as of
December 31, 1997 and 1996, respectively.
Total future minimum lease payments under the sale-leaseback agreement are set
forth as follows (in thousands):
- --------------------------------------------------------------------------------
Payments to be made in the years ending December 31:
1998 ............................................................... $4,732
1999 ............................................................... 4,273
2000 ............................................................... 4,120
2001 ............................................................... 4,120
2002 ............................................................... 4,120
Thereafter ......................................................... 4,810
- --------------------------------------------------------------------------------
Other Leases
The company assumed obligations under operating leases for certain machinery,
equipment and facilities purchased from CPG on October 31, 1996. Rental expense
was $1,043,000 and $150,000 for the year and two month period ended December 31,
1997 and 1996, respectively.
As of December 31, 1997, obligations to make future minimum lease payments under
these leases were as follows (in thousands):
- --------------------------------------------------------------------------------
Payments to be made in the years ending December 31:
1998 ............................................................... $1,099
1999 ............................................................... 940
2000 ............................................................... 400
2001 ............................................................... 291
2002 ............................................................... 282
Thereafter ......................................................... 721
------
$3,733
- --------------------------------------------------------------------------------
(8) Preferred Stock
At December 31, 1997, 1996 and 1995, the company has 2,000,000 shares of
preferred stock authorized with none issued. The company, without stockholder
approval, can issue preferred stock with voting,
43
<PAGE>
conversion, and other rights.
44
<PAGE>
(9) Income Taxes
The components of the provision for income taxes before extraordinary item for
the years ended December 31, 1997, 1996 and 1995 are as follows (in thousands):
================================================================================
1997 1996 1995
----------------------------------
Current:
Federal .............................. $ 6,137 $ 2,607 $ 2,557
State ................................ 1,439 1,031 743
----------------------------------
7,576 3,638 3,300
Deferred ............................... 3,584 1,059 (3,724)
----------------------------------
Income tax (benefit) expense ......... $ 3,992 $ 4,697 $ (424)
================================================================================
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities at December 31, 1997 and 1996 are
presented below (in thousands):
================================================================================
December 31, 1997
----------------------------
Deferred Tax Deferred Tax
Assets Liabilities
Accounts receivable ............................ $ 342 $ 0
Inventory ...................................... 707 0
Property, plant and equipment .................. 0 15,654
Payroll related accruals ....................... 2,434 0
Intangible assets .............................. 585 0
Miscellaneous reserves ......................... 1,279 0
Deferred gain .................................. 4,191 0
Facility closure ............................... 577 0
----------------------------
$10,115 $15,654
December 31, 1996
----------------------------
Deferred Tax Deferred Tax
Assets Liabilities
----------------------------
Accounts receivable ............................ $ 308 $ 0
Inventory ...................................... 758 0
Property, plant and equipment .................. 0 17,684
Payroll related accruals ....................... 1,672 0
Intangible assets .............................. 282 0
Miscellaneous reserves ......................... 808 0
Deferred gain .................................. 5,041 0
Cogeneration income ............................ 0 605
----------------------------
$ 8,869 $18,289
================================================================================
45
<PAGE>
SFAS No. 109 requires a valuation allowance against deferred tax assets if,
based on the weight of available evidence, it is more likely than not that some
or all of the deferred tax assets will not be realized. For the year ended
December 31, 1995, the company reduced the valuation allowance to $0. Although
realization is not assured, management believes it is more likely than not that
the deferred tax assets will be realized through future taxable earnings.
A reconciliation of income taxes from continuing operations at the United States
statutory rate to the effective rate for the years ended December 31, 1997, 1996
and 1995 are as follows:
================================================================================
1997 1996 1995
--------------------------------
U.S. federal rate ....................... 34.0% 34.0% 34.0%
Decrease in valuation allowance ......... 0.0% 0.0% (49.9%)
State taxes net of federal benefit ...... 6.1% 5.8% 5.9%
Other ................................... (0.8%) (1.4%) 4.4%
--------------------------------
Effective tax rate ...................... 39.3% 38.4% (5.6%)
================================================================================
Income taxes paid during 1997, 1996 and 1995 were $5,696,000, $3,698,000 and
$3,130,000, respectively.
(10) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, Disclosures About the Fair
Value of Financial Instruments, requires disclosure of information about the
fair value of certain financial instruments for which it is practicable to
estimate that value. For purposes of the following disclosure the fair value of
a financial instrument is the amount at which the instrument could be exchanged
in a current transaction between willing parties other than in a forced sale or
liquidation. The fair value of long-term debt is based upon the quoted market
price and amounts to $103,313,000 (carrying value $100,000,000) at December 31,
1997. Management has determined that the carrying values of its other financial
assets and liabilities approximate fair value at December 31, 1997.
(11) Acquisitions
1996 Acquisitions
The company purchased all of the outstanding stock of Arcon Holdings ("Arcon")
as of October 31, 1996. Concurrently with the transfer of the purchase price to
the stockholders of Arcon, the stockholders agreed to repay all amounts owed
under Arcon's revolver and term loans and repurchase and cancel warrants then
outstanding.
The company also purchased all of the issued and outstanding common stock of CPG
Investors Inc. ("CPG") on October 31, 1996. Concurrently with the transfer of
the purchase price to the stockholders of CPG, the stockholders agreed to repay
all amounts owed under CPG's revolving and term loans.
The aggregate purchase price of CPG and Arcon was approximately $91,500,000
which includes costs of the acquisitions. The acquisitions were financed through
the issuance of senior notes in the amount of $100,000,000 and were accounted
for using the purchase method. Accordingly, the purchase price was allocated to
the assets acquired and liabilities assumed based upon their respective
46
<PAGE>
fair values. This treatment resulted in approximately $46,668,000 of cost in
excess of net assets acquired. Such excess, or goodwill, is being amortized on a
straight-line basis over thirty years. The 1996 consolidated results include
Arcon and CPG's results of operations from the date of the acquisitions through
the end of the year. The following summarized unaudited pro forma results of
operations for the year ended December 31, 1996, assumes the Arcon and CPG
acquisitions occurred as of the beginning of the period (dollars in thousands
except per share amounts):
- --------------------------------------------------------------------------------
Unaudited
-----------
Net sales ................................................ $227,822
Net income ............................................... 10,709
Basic earnings per share ................................. 1.77
- --------------------------------------------------------------------------------
The unaudited pro forma results are not necessarily indicative of actual results
of operations that would have occurred had the acquisitions been consummated as
of the above dates, nor are they necessarily indicative of future operating
results.
(12) Sale of Assets
On March 22, 1995, the company sold the assets of its Lewis Mill and the
company's gasket business to Armstrong World Industries Inc. ("Armstrong") for
$12,933,000 (the "Sale"). As part of the sale, inventory in the amount of
$1,080,000 was sold at book value to Armstrong. The net book value of the assets
sold was $19,311,000 and total expenses relating to the sale are estimated at
$1,924,000. At December 31, 1995, $1,744,000 of these expenses had been paid;
the remaining expenses were accrued in 1995 and paid in 1996. This transaction
resulted in a loss of $8,302,000 before taxes. Approximately $160,000 of the
purchase price was held by Armstrong pending the receipt of a New York State tax
clearance certificate. This payment was received by the company in May 1995. The
Lewis mill was part of a two-mill division located at the company's Latex Fiber
Products Division in Beaver Falls, New York.
(13) Facility Closure
On January 14, 1998, the company closed the Owensboro, Kentucky facility.
Production at this facility will be moved into certain of the company's other
operations. The exit plan contemplates moving some of the inventory and
equipment to other facilities and management expects to sell the remaining
assets at or above the adjusted carrying value. As of December 31, 1997 the
company recorded a facility closure charge of $10,000,000 to recognize severance
and benefits for the employees to be terminated ($450,000), to reflect contract
cancellation costs ($325,000), to reflect the write down to fair market value of
the plant and equipment not expected to be transferred to other facilities
($8,129,000), to write off goodwill ($186,000) and organization costs ($185,000)
and to write off or accrue for other miscellaneous costs ($725,000). Results of
operations of the facility amounted to a $.3 million loss for the year ended
December 31, 1997.
(14) Related Party Transactions
The company paid a management fee of $250,000 for the years ended December 31,
1997, 1996 and 1995, to an equity owner, MDC Management Company ("MDC"). The
company has a management
47
<PAGE>
agreement with MDC which calls for an annual fee of $250,000 through 1997. In
1996 the company also paid MDC $250,000 in conjunction with the CPG and Arcon
acquisitions.
48
<PAGE>
(15) Retirement and Deferred Compensation Plans
Qualified Plans
The company has a defined contribution plan (salaried and hourly) and a defined
benefit (hourly) retirement plan for FiberMark.
Defined Contribution Plan
The defined contribution plan is a 401(k) ERISA and IRS-qualified plan covering
substantially all employees that permits employee salary deferrals up to 16% of
salary with the company matching 50% of the first 6%. Defined contribution
expense for the company was $564,000, $229,000 and $193,000 for the years ended
December 31, 1997, 1996 and 1995, respectively.
Defined Benefit Plan for Hourly Employees
Effective August 13, 1997 the CPG defined benefit pension plan was merged into
the FiberMark, Inc. pension plan and the assets and liabilities of both plans
were combined. The defined benefit plan is an ERISA and IRS-qualified plan. Plan
assets are invested principally in equity securities, government and corporate
debt securities and other fixed income obligations. The company annually
contributes at least the minimum amount as required by ERISA.
A summary of the components of net periodic pension expense for the year ended
December 31, 1997 is as follows (in thousands):
================================================================================
Service cost - benefits earned during the period ................. $ 445
Interest cost on projected benefit obligation .................... 686
Actual return on plan assets ..................................... (668)
Net amortization and deferral .................................... 69
-----
Net periodic pension expense ................................... $ 532
================================================================================
The following table sets forth the funded status of the plan and the amount
reflected in the accompanying consolidated balance sheet (in thousands):
Actuarial present value of accumulated and projected benefit obligation:
Vested...................................................... $ (9,585)
Nonvested ............................................ (622)
--------
(10,207)
Plan assets at fair value ....................................... 7,832
--------
Projected benefit obligation in excess of plan assets ........... (2,375)
Unrecognized net loss ........................................... 765
Unrecognized net transition obligation .......................... 18
Unrecognized prior service costs ................................ 162
49
<PAGE>
Adjustment required to recognize minimum liability .............. (945)
--------
Accrued pension cost ...................................... $(2,375)
================================================================================
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation at December 31, 1997 was 7.25%. The
expected long-term rate of return on plan assets was 9% in 1997.
As is required by SFAS No. 87, Employers' Accounting for Pensions, for plans in
which the accumulated benefit obligation exceeds the fair value of plan assets,
the company has recognized in the accompanying consolidated balance sheets the
minimum liability of the unfunded accumulated benefit obligation as a long-term
liability with an offsetting intangible asset and equity adjustment, net of tax
impact. The closure of the facility in Owensboro, Kentucky resulted in a
curtailment of the plan. However, since the plan benefit is not salary related,
there is no curtailment gain or loss as a result of the facility closure.
Defined Benefit Plan (1996 and Prior)
The defined benefit plan is an ERISA and IRS-qualified plan based upon the
negotiated benefit and years of service in the collective bargaining agreement
between the Unions and the company. Plan assets are invested principally in
equity securities, government and corporate debt securities and other fixed
income obligations. The company annually contributed at least the minimum amount
as required by ERISA.
A summary of the components of net periodic pension expense for the year ended
December 31, 1996 is as follows (in thousands):
================================================================================
Service cost - benefits earned during the period ................. $ 126
Interest cost on projected benefit obligation .................... 101
Actual return on plan assets ..................................... (133)
Net amortization and deferral .................................... 69
-----
Net periodic pension expense ............................... $ 163
================================================================================
Pension expense was approximately $134,000 for the year ended December 31, 1995.
The following table sets forth the funded status of the plan and the amount
reflected in the accompanying consolidated balance sheet (in thousands):
Actuarial present value of accumulated and projected benefit obligation:
Vested...................................................... $ (1,411)
Nonvested................................................... (134)
--------
(1,545)
Plan assets at fair value......................................... 1,360
--------
Projected benefit obligation in excess of plan assets............. (185)
50
<PAGE>
Unrecognized net loss............................................. 0
Unrecognized transition obligation................................ 21
Unrecognized prior service costs.................................. 90
Adjustment required to recognize minimum liability................ (111)
--------
Accrued pension cost........................................ $ (185)
================================================================================
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation at December 31, 1996 was 7.5%. The
expected long-term rate of return on plan assets was 9% in 1996.
Defined Benefit Plan - CPG Employees
CPG employees were covered by a noncontributory defined benefit plan. This is an
ERISA and IRS-qualified plan which has benefits based on stated amounts for each
year of credited service. The plan's assets consist principally of equity
securities, government and corporate debt securities and other fixed income
obligations. The company annually contributed at least the minimum amount as
required by ERISA.
Net periodic pension expense for the two months ended December 31, 1996 included
the following components (in thousands):
================================================================================
Service cost ..................................................... $ 42
Interest cost on projected benefit obligation .................... 83
Actual return on plan assets ..................................... (80)
Net amortization and deferral .................................... (7)
----
Net periodic pension expense ............................... $ 38
================================================================================
The following table presents the funded status of the company's pension plan and
the net pension liability included in the consolidated balance sheet as of
December 31, 1996 (in thousands):
================================================================================
Actuarial present value of benefit obligations:
Vested benefits ............................................. $(6,827)
Nonvested benefits .......................................... (517)
-------
Projected benefit obligation .............................. (7,344)
Fair value of plan assets ....................................... 5,651
-------
Projected benefit obligation in excess of plan assets ........... (1,693)
Unrecognized net gain ........................................... 102
Additional minimum liability .................................... (102)
-------
Accrued pension cost ...................................... $(1,693)
================================================================================
51
<PAGE>
The actuarial present value of the projected benefit obligation as of December
31, 1996 was calculated using a discount rate of 7.5%. A long-term rate of
return of 9% was used to calculate the net periodic pension expense.
Non-Qualified Plans
In addition to the benefits provided under the qualified pension plans,
retirement and deferred compensation benefits associated with wages in excess of
the IRS allowable wages are provided to certain employees under non-qualified
plans. During 1997 the company established a trust pursuant to two executive
deferral plans for the benefit of a select group of management, highly
compensated employees and/or directors who contribute materially to the
continued growth, development and business success of the company. The plans
established under the trust agreement are set forth as follows:
Supplemental Executive Retirement Plan (SERP)
The plan is a defined benefit plan and shall be unfunded for tax purposes and
for purposes of Title I of ERISA. Pension benefits are based upon final average
compensation and years of service. Benefits earned are subject to cliff vesting
after fifteen (15) years or more of service.
A summary of the components of net periodic pension cost for the year ended
December 31, 1997 is as follows (in thousands):
================================================================================
Service cost - benefits earned during the period .................. $ 87
Interest cost on projected benefit obligation ..................... 104
Net amortization and deferral ..................................... 128
----
Net periodic pension expense ............................... $319
================================================================================
The following table sets forth the funded status of the plan and the amount
reflected in the accompanying consolidated balance sheet as of December 31, 1997
(in thousands):
================================================================================
Actuarial present value of benefit obligations:
Vested benefits ............................................... $(1,332)
Nonvested benefits ............................................ (1,474)
-------
Accumulated benefit obligation .................................. (2,806)
Effect of projected future compensation levels ................ (353)
Projected benefit obligation .................................... (3,159)
Plan assets at fair value ....................................... 0
-------
Projected benefit obligation in excess of fair value ............ (3,159)
Unrecognized prior service cost ................................. 2,840
Adjustment required to recognize minimum liability .............. (2,487)
-------
52
<PAGE>
Accrued pension cost ............................................ $(2,806)
================================================================================
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation at December 31, 1997 was 7%.
As required by SFAS No. 87, Employers' Accounting for Pensions, for plans where
the accumulated benefit obligation exceeds the fair value of plan assets, the
company has recognized in the accompanying consolidated balance sheet the
minimum liability of the unfunded accumulated benefit obligation as a long-term
liability with an offsetting intangible asset.
53
<PAGE>
Deferred Compensation Plan
The company has a deferred compensation plan that permits eligible participants
to defer a specified portion of their compensation. The deferred compensation,
together with certain company contributions, earn a guaranteed rate of return.
As of December 31, 1997 the company has accrued $1,494,000 for its obligation
under the plan. The company's expense which includes company contributions and
interest expense amounted to $89,000 for the year ended December 31, 1997.
To assist in the funding of the plan, the company purchased corporate-owned life
insurance contracts. Proceeds from the insurance policies are payable to the
company upon the death of the participant. The cash surrender value of the
policies, included in other long-term assets, was $1,342,000 as of December 31,
1997.
(16) Postretirement Benefits Other Than Pensions
The company provides certain health care and life insurance benefits to specific
groups of former CPG employees when they retire. The salaried group of employees
generally become eligible for retiree medical benefits after reaching age 62 and
with 15 years of service or after reaching age 65. The medical plan for salaried
employees provides for an allowance, which must be used towards the purchase of
a Medicare supplemental insurance policy, based on a retiree's length of
service. The allowance may be adjusted to reflect annual changes in the Consumer
Price Index ("CPI"); however, once the initial allowance has doubled, there will
be no further increases. Salaried employees hired after January 1, 1993 are not
eligible to participate in this retiree medical plan. Upon satisfying certain
eligibility requirements, approximately 45% of the hourly employees are eligible
upon retirement to receive a medical benefit, which is an allowance to be used
toward the purchase of a Medicare supplemental insurance policy and cannot
exceed a specified annual amount. The postretirement benefit obligations related
to employees who retired prior to the acquisition were not assumed by the
company and remain the responsibility of prior owners.
Net periodic postretirement benefits cost included the following components (in
thousands):
================================================================================
Year Two Months
Ended Ended
December 31, December 31,
1997 1996
-----------------------------
Service cost .................................. $ 43 $ 14
Interest cost on accumulated postretirement
benefit obligation ........................ 99 23
Net amortization and deferral ................. 0 (1)
-----------------------------
Net periodic postretirement benefits cost . $142 $ 36
================================================================================
54
<PAGE>
The following table sets forth the accumulated postretirement benefit obligation
included in accrued liabilities on the company's consolidated balance sheets (in
thousands):
================================================================================
Year Two Months
Ended Ended
December 31, December 31,
1997 1996
----------------------------
Accumulated postretirement benefit obligation:
Fully eligible participants ................. $ (44) $ 181)
Retirees .................................... (493) (208)
Other active plan participants .............. (926) (938)
----------------------------
Accumulated postretirement benefit obligation ... (1,463) (1,327)
Unrecognized net loss ....................... 129 74
----------------------------
Accrued postretirement benefit liability ........ $(1,334) $(1,253)
================================================================================
The assumed health care cost trend rate used in measuring future benefit costs
was 8%, gradually declining to 6% by 2001 and remaining at that level
thereafter. A 1% increase in this annual trend rate would increase the
accumulated postretirement benefit obligation at December 31, 1997 by $85,000
and the aggregate of service and interest cost components of net periodic
postretirement benefit expense for the year ended December 31, 1997 by less than
$10,000. The assumed discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% and 7.5% as of December 31, 1997 and
1996, respectively.
(17) Supplemental Cash Flow Information
Non-cash investing and financing activities:
During 1997 the company recorded an intangible asset related to the hourly
defined benefit pension plan amounting to $180,000 and a long-term liability of
$946,000. The offset resulted in a minimum pension liability adjustment of
$471,000, net of tax benefit. During 1997 the company recorded an intangible
asset related to the SERP in the amount of $2,487,000 and recorded a long-term
liability for the same amount.
(18) Significant Business Concentrations
Approximately 28%, 41%, and 47% of the company's total 1997, 1996 and 1995
sales, respectively, were concentrated in five customers. In 1996 and 1995
revenue from a single customer was $15,425,000 (12% of total sales) and,
$18,933,000 (16% of total sales), respectively. Sales to a second customer
accounted for 10% of total sales in both 1996 and 1995. In 1997, no sales to a
single customer accounted for an amount equal to or greater than 10% of the
company's total sales.
Approximately 8%, 12%, and 13% of the company's products were sold to foreign
customers (excluding Canada) in 1997, 1996 and 1995, respectively. The principal
international markets served by the company include Asia/Pacific Rim, Latin
America, Mexico and Europe.
55
<PAGE>
(19) Stock Option and Bonus Plans
The company has three stock option plans which provide for grants of
nonqualified or incentive stock options. The 1992 Amended and Restated Stock
Option Plan ("1992 Plan") is fully granted at 301,422 shares of common stock to
management of the company. Options granted under the 1992 Plan typically vest at
a rate of 20% per year and are exercisable for a period of ten years from the
grant date.
The 1994 Stock Option Plan ("1994 Plan") is fully granted at 300,000 shares of
common stock to selected officers and employees of the company. Options granted
under the Plan vest at a rate of 20% per year commencing on the one year
anniversary of the grant date and 1.66% at the end of each month thereafter. The
options are exercisable for a period of ten years from the grant date.
The 1994 Director Stock Option Plan ("Directors' Plan") authorizes the grant of
up to 225,000 shares of common stock to directors who are not otherwise
full-time employees of the company. The Plan was amended in 1996 to increase the
authorized shares from 75,000 to 225,000 shares and to allow for an accelerated
vesting schedule not to exceed five years. Options will vest and become
exercisable based upon target levels set for the fair market value of the common
stock or in the event of a merger or asset sale. The options are exercisable for
a period of eight years from the date of grant.
During 1997 the company authorized the grant of up to 600,000 incentive stock
options under a new plan, the 1997 Stock Option Plan ("1997 Plan") to selected
officers and employees of the company. Options granted under the 1997 Plan vest
at a rate of 20% per year and are exercisable for a period of ten years from the
grant date.
The following table sets forth the stock option transactions for the three years
ended December 31, 1997:
================================================================================
Weighted
Number of Average Exercise
Shares Price
----------------------------
Outstanding December 31, 1994 ............. 392,220 $ 4.15
Granted ............................. 66,150 7.83
Forfeited ........................... (45,477) 3.87
----------------------------
Outstanding December 31, 1995 ............. 412,893 4.77
Granted ............................. 381,102 10.99
Exercised ........................... (8,490) 4.05
Forfeited ........................... (31,275) 7.06
----------------------------
Outstanding December 31, 1996 ............. 754,230 7.83
Granted ............................. 182,500 21.87
Exercised ........................... (21,850) 5.36
Forfeited ........................... (7,500) 9.96
----------------------------
Outstanding December 31, 1997 ............. 907,380 $ 10.69
================================================================================
56
<PAGE>
The following table summarizes information about the stock options outstanding
at December 31, 1997:
<TABLE>
<CAPTION>
=============================================================================================
Options Outstanding Options Exercisable
----------------------------------------------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Outstanding Contractual Exercise Exercisable Exercise
Range of Exercise Prices at 12/31/97 Life Price at 12/31/97 Price
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 3.33 ............... 225,378 4.0 $ 3.33 225,378 $ 3.33
6.00 to 7.83......... 128,400 6.2 6.81 83,142 6.64
9.00 to 9.41......... 217,250 7.3 9.24 143,753 9.34
13.5 ............... 153,852 8.6 13.50 30,770 13.50
$ 21.87 ............... 182,500 9.3 $21.87 16,500 $21.87
----------------------------------------------------------------
907,380 499,543
=============================================================================================
</TABLE>
The company has adopted the disclosure-only provisions of Statement of Financial
Standards No. 123, Accounting for Stock-Based Compensation. Accordingly, no
compensation cost has been recognized for stock options granted under the plans
during 1997, 1996 and 1995 as the options were all granted at exercise prices
which equaled the market value at the date of the grant. Compensation for the
options granted prior to December 31, 1992 at $3.33 per share was measured as of
the grant date based upon a fair market value of $5.33 per share as determined
by the Board of Directors and is being recognized as expense over the vesting
period. Had compensation cost for the company's stock option plans been
determined based on the fair value at the grant date for awards during 1997,
1996 and 1995 consistent with the provisions of SFAS No. 123, the company's net
income would have been reduced to the pro forma amounts indicated below:
================================================================================
1997 1996 1995
----------------------------------
Net income, as reported................... $6,169 $7,217 $7,953
Net income, pro forma..................... 5,304 7,075 7,918
Basic earnings per share, as reported..... $ 1.01 $ 1.19 $ 1.31
Basic earnings per share, pro forma....... .86 1.17 1.31
Diluted earnings per share, as reported... $ .95 $ 1.14 $ 1.30
Diluted earnings per share, pro forma..... .82 1.12 1.30
================================================================================
Pro forma net income reflects only options granted in 1997, 1996 and 1995.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income amounts
presented above because compensation cost is reflected over the options' vesting
periods and compensation cost for options granted prior to January 1, 1995 is
not considered.
The fair value of each option grant is estimated on the date of the grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1997, 1996 and 1995: risk-free interest rate of
6%; dividend yield of $0; expected volatility of 45%; and expected lives of ten
(10) years.
57
<PAGE>
Effective January 1, 1994, the Compensation Committee adopted the Executive
Bonus Plan, which provides for bonus payments of a percentage of base salary
based upon achievement by the company of certain levels of earnings per share.
The Executive Bonus Plan utilizes a sliding scale so that the percentage of base
salary paid as bonus compensation increases as the earnings per share of the
company increase. The Executive Bonus Plan is designed to directly align the
interests of the executive officers and the stockholders. Although the Executive
Bonus Plan is subject to annual review by the Committee, the Committee expects
it to remain in place for a five-year term. Expense recorded under the plan
amounted to $1,001,000, $398,000 and $322,000 in 1997, 1996 and 1995,
respectively.
(20) Subsequent Event
Effective January 1, 1998 the company purchased all of the outstanding shares of
Steinbeis Gessner GmbH ("Gessner") for $40.0 million and DM5.315 ($3.1) million
in cash. Gessner manufacturers crepe masking and specialty tape materials, wet
and dry abrasive papers, filter media for automotive air, oil and gasoline and
filter media for automotive cabins and vacuum cleaner bags. This acquisition was
financed with a portion of the proceeds of the sale of 1,500,000 shares of the
company's common stock for $28.7 million along with borrowings under a DM54.0
($30.2) million bank facility provided by Bayerische Vereinsbank AG and an
unsecured note issued by Gessner and guaranteed by the company to the seller in
the amount of DM8.0 ($4.6) million. The acquisition will be accounted for as a
purchase and will result in approximately $5.1 million in goodwill.
(21) Unaudited Quarterly Summary Information
The following is a summary of unaudited quarterly summary information for the
years ended December 31, 1997 and 1996 (in thousands except per share data).
================================================================================
1997 Mar 31 Jun 30 Sep 30 Dec 31(1)
------------------------------------------
Net sales ......................... $ 59,442 $ 59,415 $ 57,802 $ 58,699
Gross profit ...................... 11,265 11,318 11,517 11,964
Net income (loss) ................. 2,733 3,054 3,199 (2,817)
Basic earnings per share .......... 0.45 0.50 0.53 (0.44)
Diluted earnings per share ........ 0.43 0.48 0.50 (0.44)
------------------------------------------
1996 Mar 31 Jun 30 Sep 30 Dec 31(2)
------------------------------------------
Net sales ......................... $ 24,859 $ 26,086 $ 26,789 $ 47,037
Gross profit ...................... 3,503 5,011 5,115 9,161
Net income ........................ 1,048 1,816 2,093 2,260
Basic earnings per share .......... 0.17 0.30 0.35 0.37
Diluted earnings per share ........ 0.17 0.29 0.33 0.35
================================================================================
(1) In the fourth quarter of 1997 the company announced its decision to close
the facility located in Owensboro, Kentucky. Income from operations
reflects a $10,000,000 loss as a result of this event. Equivalent shares
of common stock have not been included in the 1997 fourth quarter diluted
earnings per share calculation as their effect would be antidilutive.
58
<PAGE>
(2) In the fourth quarter of 1996 the company acquired Arcon Holdings
Corporation and CPG Investors Inc.
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders of
FiberMark, Inc.
Under date of February 6, 1998, we reported on the consolidated balance sheets
of FiberMark, Inc. as of December 31, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the two years ended December 31, 1997, which are included in the Annual
Report on Form 10-K. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related consolidated
financial statement schedules in item (14(a)(2) herein. These financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement schedules
based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
KPMG Peat Marwick LLP
Burlington, Vermont
February 6, 1998
59
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors and Stockholders of
FiberMark, Inc.:
In connection with our audits of the consolidated financial statements of
FiberMark, Inc. (formerly Specialty Paperboard, Inc.) as of December 31, 1995
and for the period ended December 31, 1995, which consolidated financial
statements are included in the Annual Report on Form 10-K, we have also audited
the consolidated financial statement schedule listed in Item 14(a)(2) herein.
In our opinion, this consolidated financial statements schedule, when
considered in relation to the basic consolidated financial statements taken as
whole, present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 26, 1996
60
<PAGE>
FIBERMARK, INC.
Schedule II - Valuation and Qualifying Accounts and Reserves
(in Thousands)
<TABLE>
<CAPTION>
Balance at Charged to Balance
Beginning Costs and at End
Description of Period Expenses Deductions of Period
- ----------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Year Ended December 31, 1997 Allowances for possible
losses on accounts receivable ...................... $ 333 ($113) $ 17 $ 203
Year Ended December 31, 1996 Allowance for possible
losses on accounts receivable ...................... $ 253 $ 173 $ 93 $ 333
Year Ended December 31, 1995 Allowances for possible
losses on accounts receivable ...................... $ 258 $ 104 $ 109 $ 253
</TABLE>
61
<PAGE>
Item 14(a)(3) Exhibits
Number Description
- ------ -----------
2.1(11) Share Purchase Agreement dated as of November 26, 1997, among
Steinbeis Holding GmbH ("Steinbeis"), Zetaphoenicis Beteiligungs
GmbH and Thetaphoenicis Beteiligungs GmbH.
3.1(1) Restated Certificate of Incorporation of the Company as amended
through March 25, 1997.
3.2(10) Certificate of Ownership and Merger of FiberMark, Inc. with and into
Specialty Paperboard, Inc. filed with the Secretary of State of
Delaware on March 26, 1997.
3.3(1) Restated By-laws.
4.1(1) Reference is made to Exhibits 3.1, 3.2 and 3.3.
4.2(1) Specimen stock certificate.
4.3(9) Indenture dated as of October 15, 1996 (the "Indenture") among the
Company, CPG Co., Specialty Paperboard/Endura, Inc. ("Endura") and
the Wilmington Trust Company ("Wilmington").
4.4(9) Specimen Certificate of 9 3/8% Series A Senior Note due 2006
(included in Exhibit 4.3 hereof).
4.5(9) Specimen Certificate of 9 3/8% Series B Senior Note due 2006
(included in Exhibit 4.3 hereof).
4.6(9) Form of Guarantee of Senior Notes issued pursuant to the Indenture
(included in Exhibit 4.3 hereof).
4.7(9) Registration Rights Agreement dated as of October 16, 1996 among the
Company, Endura, CPG Co. and BT Securities Corporation.
10.1(5) Lease Agreement dated April 29, 1994, between CIT Group/Equipment
Financing Inc. ("CIT/Financing") and the Company.
10.2(5) Grant of Security Interest in Patents, Trademarks and Leases dated
April 29, 1994, between the Company and CIT/Financing.
10.3(5) Bill of Sale dated April 29, 1994, to CIT/Financing.
10.4(1)(3) Form of Indemnity Agreement entered into between the Company and its
directors and executive officers.
10.5(1)(3) The Company's 1992 Amended and Restated Stock Option Plan and
related form of Option Agreement.
10.6(1) Paper Procurement Agreement, between the Company and Acco-U.S.A.
10.7(8) Paper Procurement Agreement, between the Company and
Pajco/Holliston, dated February 23, 1995.
10.8(1) Energy Service Agreement (Latex mill), dated as of November 19,
1992, between Kamine and the Company.
10.9(2) Amendment No. 1 to the Energy Service Agreement (Latex mill), dated
as of May 7, 1993, between Kamine and the Company.
10.10(1) Energy Service Agreement (Lewis mill), dated as of November 19,
1992, between Kamine and the Company.
10.11(2) Amendment No. 1 to the Energy Service Agreement (Lewis mill), dated
as of May 7, 1993, between Kamine and the Company.
62
<PAGE>
10.12(1) Restated Ground Lease, dated as of November 19, 1992, between Kamine
and the Company.
10.13(1) Beaver Falls Cogeneration Buyout Agreement, dated as of November 20,
1992, between Kamine, Kamine Beaver Falls Cogen. Co., Inc. and the
Company.
10.14(2) Consent and Agreement (Energy Services Agreement), dated as of May
7, 1993, by the Company.
10.15(2) First Amendment of Restated Ground Lease, dated as of May 7, 1993,
between Kamine and the Company.
10.16(2) Memorandum of Lease, dated as of May 7, 1993, between Kamine and the
Company.
10.17(2) Lessor Consent and Estoppel Certificate, dated as of May 7, 1993,
between the Company and Deutsche Bank AG, New York Branch, Ansaldo
Industria of America, Inc. and SV Beavers Falls, Inc.
10.18(7)(3) The Company's 1994 Stock Option Plan and related forms of Option
Agreements.
10.19(7)(3) The Company's 1994 Directors Stock Option Plan and related form of
Option Agreement.
10.20(9)(3) Amendment to the Company's 1994 Directors Stock Option Plan.
10.21(4)(3) The Company's Executive Bonus Plan.
10.22(9) Deed of Lease between James River Paper Company, Inc. and
CPG-Virginia Inc. dated as of October 31, 1993.
10.23(9) Amended and Restated Agreement of Lease, between Arnold Barsky doing
business as A&C Realty and Arcon Mills Inc., dated June 1, 1988.
10.24(9) Lease Agreement dated November 15, 1995, between IFA Incorporated
and Custom Papers Group Inc. ("Custom Papers Group").
10.25(9) Master Lease Agreement dated January 1, 1994, between Meridian
Leasing Corp. and Custom Papers Group.
10.26(9) Master Equipment Lease Agreement dated February 3, 1995, between
Siemens Credit Corp. and CPG Holdings Inc.
10.27(6) Endura Sale Agreement, by and among W.R. Grace & Co. Conn., W.R.
Grace (Hong Kong) Limited, Grace Japan Kabushiki Kaisha
(collectively, the "Sellers"), the Company, Specialty Paperboard
(Hong Kong Limited) and Specialty Paperboard Japan Kabushiki Kaisha
(collectively the "Buyers"), dated May 10, 1994.
10.28(11) Loan Agreement dated as of November 24, 1997, between Steinbeis and
Gessner.
10.29(11) Expansion Land Option and Preemption Right Agreement dated as of
November 13, 1997, between Steinbeis and Gessner.
10.30 Third Amended and Restated Financing Agreement & Guaranty
10.31 Second Amended and Restated Security Agreement dated December 31,
1997, between FiberMark Office Products, LLC and CIT Group/Equipment
Financing, Inc.
10.32 Second Amended and Restated Security Agreement dated December 31,
1997, between FiberMark, Inc. FiberMark Durable Specialties, Inc.,
and FiberMark Filter and Technical Products
10.33 Loan Agreement dated as of January 7, 1998, between Zetaphoenicis
Beteiligungs GmbH and Bayerische Vereinsbank AG ("Bayerische").
10.34 Working Credit Facility dated as of January 13, 1998, between
Gessner and Bayerische.
10.35 Capex Loan Agreement dated as of January 13, 1998, between Gessner
and Bayerische.
10.36 Form of Amended and Restated Non-Employee Directors Stock Option
Plan dated February 18, 1998.
21 List of FiberMark subsidiaries
63
<PAGE>
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
- ----------
(1) Incorporated by reference to exhibits filed with the company's
Registration Statement on Form S-1 (No. 33-47954), as amended, which
became effective March 10, 1993.
(2) Incorporated by reference to exhibits filed with the company's report on
Form 10-Q for the quarter ended June 30, 1993, filed August 13, 1993.
(3) Indicates management contracts or compensatory arrangements filed pursuant
to Item 601(b)(10) of Regulation S-K.
(4) Incorporated by reference to exhibits filed with the company's report on
Form 10-K for the year ended December 31, 1993 (No. 0-20231).
(5) Incorporated by reference to exhibits filed with the company's report on
Form 10-Q for the quarter ended March 31, 1994, filed May 14, 1994.
(6) Incorporated by reference to exhibits filed with the company's report on
Form 8-K, filed July 14, 1994.
(7) Incorporated by reference to exhibits filed with the company's
Registration Statement on Form S-8 filed, July 18, 1994.
(8) Incorporated by reference to exhibits filed with the company's report on
Form 10-K for the year ended December 13, 1994 (No. 0-20231).
(9) Incorporated by reference to exhibits filed with the company's report on
Form 10-K for the year ended December 31, 1996, filed April 1, 1997.
(10) Previously filed.
(11) Incorporated by reference to exhibits filed with the company's
Registration Statement on Form S-3, filed December 15, 1997.
64
<PAGE>
FIBERMARK, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Brattleboro,
County of Windham, State of Vermont, on the 25th day of March, 1998.
FiberMark, Inc.
By /s/
----------------------------------
Alex Kwader
President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Alex Kwader and Bruce Moore, or any of them, his
or her attorney-in-fact, each with the power of substitution, for him or her in
any and all capacities, to sign any amendments to this Report, and to file the
same, with exhibits thereto and other documents in connections therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue hereof. This Form 10-K may be executed in multiple
counterparts, each of which shall be an original, but which shall together
constitute but one agreement.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ President and March 25, 1998
- --------------------------- Chief Executive Officer
Alex Kwader
/s/ Chairman of the Board March 25, 1998
- ---------------------------
K. Peter Norrie
/s/ Director March 25, 1998
- ---------------------------
Brian C. Kerester
/s/ Director March 25, 1998
- ---------------------------
Marion A. Keyes
/s/ Director March 25, 1998
- ---------------------------
George E. McCown
/s/ Director March 25, 1998
- ---------------------------
Jon H. Miller
/s/ Director March 25, 1998
- ---------------------------
Glenn S. McKenzie
/s/ Director March 25, 1998
- ---------------------------
E. P. Swain, Jr.
/s/ Director March 25, 1998
- ---------------------------
Fred P. Thompson
/s/ Director March 25, 1998
- ---------------------------
John D. Weil
/s/ Vice President and March 25, 1998
- ---------------------------
65
<PAGE>
Bruce Moore Chief Financial Officer
66
EXHIBIT 10.30
<PAGE>
DB Draft 1/11/98
THIRD AMENDED AND RESTATED
FINANCING AGREEMENT AND GUARANTY
among
FiberMark, Inc.
(as Guarantor)
FiberMark Durable Specialties, Inc.,
FiberMark Filter and Technical Products, Inc.
and
FiberMark Office Products, LLC
(as Borrowers and Guarantors)
The CIT Group/Business Credit, Inc.
Such other Lenders that may become
signatory hereto
(as Lenders)
and
The CIT Group/Business Credit, Inc.
(as Agent for the Lenders)
Dated as of December 31, 1997
<PAGE>
THIRD AMENDED AND RESTATED FINANCING AGREEMENT AND GUARANTY dated as
of December 31, 1997, among FiberMark, Inc. ("FiberMark"), a Vermont
corporation, FiberMark Specialties, Inc. ("FiberMark Durable") a
___________________ corporation, FiberMark Filter and Technical Products, Inc.
("FiberMark Filter"), a ____________________ corporation, and FiberMark Office
Products, LLC, ("FiberMark Office"), a _________________ limited liability
company, The CIT Group/Business Credit, Inc., a New York corporation ("CITBC")
with offices located at 1211 Avenue of the Americas, New York, New York, the
other lenders that may, subsequent to the date hereof, purchase from CITBC a
portion of its rights and obligations under this Third Amended and Restated
Financing Agreement and Guaranty pursuant to, and in accordance with, Section
14.07 hereof (CITBC and such other lenders each individually a "Lender" and
collectively the "Lenders"), and CITBC as agent for the Lenders (in such
capacity, together with its successors or assigns in such capacity, the
"Agent"). FiberMark Durable, FiberMark Filter and FiberMark Office are referred
to as a "Borrower" and collectively as the "Borrowers". FiberMark, FiberMark
Durable, FiberMark Filter and FiberMark Office and each Acquired Entity are
referred to herein as a "Guarantor" and collectively as the "Guarantors". The
Guarantors and the Borrowers are referred to herein collectively as the
"Obligors".
PRELIMINARY STATEMENTS
1. Reference. Reference is made to the Second Amended and Restated
Financing Agreement and Guaranty dated December 31, 1996 among Specialty
Paperboard, Inc., Specialty Paperboard/Endura, Inc., CPG Investors, Inc., CPG
Holdings, Inc., CPG-Warren Glen Inc., Custom Papers Group Inc., Arcon Holdings
Corp., Arcon Coating Mills Inc., CITBC, each of the other Lenders signatory
thereto and CITBC, as Agent for the Lenders (the "December 1996 Agreement").
2. Amendment and Restatement. To the extent this Third Amended and
Restated Financing Agreement and Guaranty amends the December 1996 Agreement,
the December 1996 Agreement is amended, and to the extent this Third Amended and
Restated Financing Agreement and Guaranty restates the December 1996 Agreement,
the December 1996 Agreement is restated.
The Borrowers desire that the Lenders extend credit as provided
herein and the Lenders are prepared to extend such credit. Accordingly, the
Borrowers, the Guarantors, the Lenders and the Agent agree as follows:
ARTICLE I. DEFINITIONS, ACCOUNTING TERMS AND RULES OF CONSTRUCTION
Section 1.01. Defined Terms. As used in this Third Amended and
Restated Financing Agreement and Guaranty the following terms have the following
meanings (terms defined in the singular to have the same meanings when used in
the plural and vice versa):
Account Debtor means each Person obligated to pay on an Account
Receivable.
Accounts shall mean all of an Obligor's now existing and future: (a)
Accounts Receivable (whether or not specifically listed on schedules furnished
to the Agent), and any and all instruments, documents, contract rights, chattel
paper, general intangibles, including, without limitation, all accounts created
by or arising from all of the Obligor's sales of goods or rendition of services
to its customers, (b) unpaid seller's rights (including rescission, replevin,
reclamation and stoppage in transit) relating to the foregoing or arising
therefrom; (c) rights to any goods represented by any of the foregoing,
including rights to returned or repossessed goods; (d) reserves and credit
balances arising hereunder; (e) guarantees or collateral for any of the
foregoing; (f) insurance policies or rights relating to any of the foregoing;
and (g) cash and non-cash proceeds of any and all the foregoing.
Accounts Receivable means any right to payment for goods sold by or
services rendered by an Obligor, including all accounts arising from sales or
rendition of services made under any of the Obligor's trade names or styles, or
through any of the Obligor's divisions; regardless of how such right is
evidenced, whether secured or unsecured, or now existing or hereafter arising.
<PAGE>
Acquired Entity shall mean (x) any Person acquired by any Obligor
hereunder by way of (i) the purchase of stock or assets of such Person and all
or a portion of the consideration paid for such stock or assets is paid directly
or indirectly with the proceeds of the Revolving Credit Loans or (ii)
consolidation or merger of such Person with or into any Obligor or (y) any
entity formed to acquire the assets or stock of another Person and all or a
portion of the consideration paid for such stock or assets is paid directly or
indirectly with the proceeds of the Revolving Credit Loans.
Acquired Indebtedness means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Subsidiary or at the
time it merges or consolidates with any Obligor or assumed in connection with
the acquisition of assets from such Person and in each case not incurred by such
Person in connection with, or in anticipation or contemplation of, such Person
becoming a Subsidiary or such acquisition, merger or consolidation.
Additional Costs shall have the meaning specified in Section 3.17.
Affected Loans shall have the meaning specified in Section 3.20.
Affiliate means with respect to any designated Person, any Person
which, directly or indirectly, controls or is controlled by or is under common
control with such designated Person. For purposes of this definition, "control",
"controlled by" and "under common control with", as used with respect to any
Person shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
Agent means The CIT Group/Business Credit, Inc., or any successor
thereof, acting as agent for Lenders pursuant to this Financing Agreement.
Anniversary Date shall mean the date occurring one (1) year from
April 30, 1996 and the same date in every year thereafter.
Applicable Lending Office means, for each of the Lenders, the
lending office of such Lender (or of an Affiliate of such Lender) designated as
such for such Type of Loan on the signature page hereto or in the applicable
Assignment and Acceptance Agreement or such other office of such Lender (or of
an Affiliate of such Lender) as such Lender may from time to time specify to
Agent and the Borrower as the office by which its Revolving Credit Loans of such
Type are to be made and maintained.
Applicable Margin means (a) with respect to the Chase Manhattan Bank
Rate one half percent (0.50%); and (b) with respect to the Libor Rate two
percent (2.00%).
Approvals and Permits means any permits, variance, permission,
authorization, consent, approval, license, franchise, ruling, permit, tariff,
rate, certification, exemption, or registration issued by any Governmental
Authority which is required to be obtained in accordance with applicable Law in
connection with the ownership, operation, construction, or maintenance of its
property.
Assignment and Acceptance shall have the meaning ascribed to such
term in Section 14.07.
Assignment of Claims Act shall mean 31 United States Code Annotated
Section 3727 and all amendments and supplements thereto and all rules and
regulations promulgated thereof.
Availability shall mean the excess of
(a) the sum of
(i) eighty-five percent (85%) of the Eligible Accounts
Receivable of the Obligors, plus
<PAGE>
(ii) fifty percent (50%) of the aggregate value of
Eligible Inventory of the Obligors,
over
(b) the sum of
(i) the outstanding aggregate amount of all outstanding
Obligations of all the Borrowers taken together, and
(ii) the Availability Reserve, if any, with respect to
the Borrowers.
Availability Reserve shall mean (a) $5,000,000 until such time as
FiberMark shall furnish to the Agent audited financial statements of the
Borrower for the Fiscal Year ending on December 31, 1997, such financials
indicate that no Default or Event of Default shall have occurred or be
continuing under this Financing Agreement and (b) any reserve which the Agent
and/or the Lenders may require from time to time pursuant to this Financing
Agreement if applicable.
Board of Directors shall mean, as to any Person, the board of
directors of such Person or any duly authorized committee thereof.
Board of Governors means the Board of Governors of the Federal
Reserve Bank or any entity succeeding to any or all of its functions.
Board Resolution shall mean, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Agent.
Borrowing Base means an amount equal to the sum of (a) eighty-five
percent (85%) of the Eligible Accounts Receivable, plus (b) fifty percent (50%)
of the aggregate value of Eligible Inventory.
Borrowing Base Certificate means a Certificate substantially in the
form of Exhibit H, certified by an officer of FiberMark, with respect to the
Borrowing Base.
Brattleboro Collateral shall mean all of FiberMark Office's present
and future Equipment and Real Estate of FiberMark Office whether now or
hereafter owned by FiberMark Office and located on the Brattleboro, Vermont
property owned by FiberMark Office; and to the extent not otherwise included,
all proceeds and products of any and all of the foregoing.
Business Day shall mean (a) for all purposes other than those
covered by clause (b) below, any day that CITBC and The Chase Manhattan Bank are
open for business excluding Saturday, Sunday and any day that either is a legal
holiday under the laws of the State of New York or is a day on which banking
institutions located in such state are closed and (b) with respect to all
notices, determinations, fundings and payments in connection with the Libor
Rate, any date that is a Business Day as described in clause (a) above that is
also a day for trading by and between banks in dollar deposits in the applicable
interbank Libor market.
Capital Lease means any lease of property (real or personal or
mixed) which, in accordance with GAAP, would be required to be capitalized on a
balance sheet of the lessee.
Capitalized Lease Obligations shall mean, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such obligation at any date shall be capitalized
amount of such obligations at such date, determined in accordance with GAAP.
<PAGE>
Chase Manhattan Bank Rate shall mean the rate of interest from time
to time announced by The Chase Manhattan Bank at its principal office in the
City of New York. (The prime rate is not intended to be the lowest rate of
interest charged by The Chase Manhattan Bank to its borrowers).
Chase Manhattan Bank Rate Loans shall mean all or any portion of the
Revolving Credit Loans for which the Borrower has elected to use the Chase
Manhattan Bank Rate for interest rate calculations.
CITEF means The CIT Group/Equipment Financing, Inc.
Closing Date means the date upon which the conditions set forth in
Section 2.01 shall have been fulfilled to the satisfaction of the Agent.
Code means The Internal Revenue Code of 1986, as thereafter amended.
Collateral shall mean with respect to an Obligor all of each
Obligor's present and future Accounts and Inventory of such Obligor whether now
or hereafter owned by such Obligor, and wherever located; and to the extent not
otherwise included, all proceeds and products of any and all of the foregoing,
including all rights under all permits granted in favor of the Borrower relating
to its facility in Brattleboro, Vermont. For purposes of this Agreement,
Collateral shall also include the Brattleboro Collateral.
Collateral Management Fee shall mean the sum of Thirty-Five Thousand
Dollars ($35,000) which shall be paid to the Agent for its own account in
accordance with Section 6.03 of this Financing Agreement to offset the expenses
and costs of the Agent in connection with record keeping, periodic examinations,
analyzing and evaluating the Collateral.
Consolidated EBITDA shall mean, for any period, the sum (without
duplication) of (i) Consolidated Net Income and (ii) to the extent Consolidated
Net Income has been reduced thereby, (A) all income taxes of FiberMark and its
Subsidiaries paid or accrued in accordance with GAAP for such period (other than
income taxes attributable to extraordinary, unusual or nonrecurring gains or
losses or taxes attributable to sales or dispositions outside the ordinary
course of business), (B) Consolidated Interest Expense and (C) Consolidated
Non-cash Charges less any non-cash items increasing Consolidated Net Income for
such period, all as determined on a consolidated basis for FiberMark and its
Subsidiaries in accordance with GAAP.
Consolidated Fixed Charge Coverage Ratio shall mean the ratio of
Consolidated EBITDA during the four full fiscal quarters (the "Four Quarter
Period") ending on or prior to the date of the transaction giving rise to the
need to calculate the Consolidated Fixed Charge Coverage Ratio (the "Transaction
Date") to Consolidated Fixed Charges for the Four Quarter Period. In addition to
and without limitation of the foregoing, for purposes of this definition,
"Consolidated EBITDA" and "Consolidated Fixed Charges" shall be calculated after
giving effect on a pro forma (including any pro forma expense and cost
reductions calculated on a basis consistent with Regulation S-X under the
Securities Act of 1933, as amended) basis for the period of such calculation to
(i) the incurrence or repayment of any Indebtedness of FiberMark or any of its
Subsidiaries (and the application of the proceeds thereof) giving rise to the
need to make such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), other than the
incurrence or repayment of Indebtedness in the ordinary course of business for
working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period and (ii) any
Asset Sales (as defined in the Indenture) or Asset Acquisitions (as defined in
the Indenture) (including, without limitation, any Asset Acquisition giving rise
to the need to make such calculation as a result of FiberMark or one of its
Subsidiaries (including any Person who becomes an Acquired Entity as a result of
the Asset Acquisition) incurring, assuming or otherwise being liable for
Acquired Indebtedness and also including any Consolidated EBITDA attributable to
the assets which are the subject of the Asset Acquisition or Asset Sale during
the Four Quarter Period) occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such Asset Sale or Asset Acquisition (including the
incurrence, assumption or liability for any such Acquired Indebtedness) occurred
on the first day of the Four Quarter Period. If FiberMark or any of its
Subsidiaries directly or indirectly guarantee Indebtedness of a third Person,
the preceding sentence shall give effect to the incurrence of such guaranteed
Indebtedness as if FiberMark or
<PAGE>
any such Subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio", (1) interest on outstanding
Indebtedness determined on a fluctuating basis as of the Transaction Date and
which will continue to be so determined thereafter shall be deemed to have
accrued at a fixed rate per annum equal to the rate of interest in such
Indebtedness in effect on the Transaction Date; (2) if interest on any
Indebtedness actually incurred on the Transaction Date may optionally be
determined at an interest rate based upon a factor of a prime or similar rate,
an eurocurrency interbank offered rate, or other rates, then the interest rate
in effect on the Transaction Date will be deemed to have been in effect during
the Four Quarter Period; and (3) notwithstanding clause (1) above, interest on
Indebtedness determined on a fluctuating basis, to the extent such interest is
covered by agreements relating to Interest Swap Obligations, shall be deemed to
accrue at the rate per annum resulting after giving effect to the operation of
such agreements.
Consolidated Fixed Charges shall mean, with respect to FiberMark for
any period, the sum, without duplication, of (i) Consolidated Interest Expense,
plus (ii) the product of (x) the amount of all dividend payments on any series
of Preferred Stock (as defined in the Indenture) of FiberMark (other than
dividends paid in Qualified Capital Stock (as defined in the Indenture) paid,
accrued or scheduled to be paid or accrued during such period times (y) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current effective consolidated federal, state and local tax rate
of such Person, expressed as a decimal.
Consolidated Interest Expense shall mean, with respect to FiberMark
for any period, the sum of, without duplication: (i) the aggregate of the
interest expense of FiberMark and its Subsidiaries for such period determined on
a consolidated basis in accordance with GAAP, including without limitation, (a)
any amortization of debt discount, (b) the net costs under Interest Swap
Obligations, (c) the capitalized interest and (d) the interest portion of any
deferred payment obligation; and (ii) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by
FiberMark and its Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
Consolidated Net Income shall mean, with respect to FiberMark, for
any period, the aggregate net income (or loss) of FiberMark and its Subsidiaries
for such period on a consolidated basis, determined in accordance with GAAP;
provided that there shall be excluded therefrom (a) after-tax gains or losses
from Asset Sales or abandonments or reserves relating thereto, (b) after-tax
items classified as extraordinary or nonrecurring gains or losses, (c) the net
income (or loss) of any Person acquired in a "pooling of interests" transaction
accrued prior to the date it becomes a Subsidiary or is merged or consolidated
with FiberMark or any Subsidiary, (d) the net income (but not loss) of any
Subsidiary to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is restricted by a contract,
operation of law or otherwise, (e) the net income of any Person, other than a
Subsidiary, except to the extent of cash dividends or distributions paid to
FiberMark or to a Subsidiary by such Person, (f) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued and (g) in the case of a successor to FiberMark by consolidation or
merger or as a transferee of FiberMark's assets, any net income of the successor
corporation prior to such consolidation, merger or transfer of assets.
Consolidated Non-cash Charges shall mean, with respect to FiberMark,
for any period, the aggregate depreciation, amortization and other non-cash
expenses of FiberMark and its Subsidiaries reducing Consolidated Net Income of
FiberMark for such period, determined on a consolidated basis in accordance with
GAAP (excluding any such charges constituting an extraordinary item or loss or
any such charge which requires an accrual of or a reserve for cash charges for
any future period).
Continue, Continuation and Continued shall refer to the continuation
pursuant to Section 6.01 hereof of a Libor Rate Loan as a Libor Rate Loan from
one Libor Rate Period to the next Libor Rate Period.
Convert, Conversion and Converted shall refer to a conversion
pursuant to Section 6.01 hereof of Chase Manhattan Bank Rate Loans into Libor
Rate Loans or Libor Rate Loans into Chase Manhattan Bank Rate Loans, each of
which may be accompanied by the transfer by a Lender (at its sole discretion) of
a Loan from one Applicable Lending Office to another.
Corporate Obligors means each of FiberMark, FiberMark Durable and
FiberMark Filter.
<PAGE>
Customarily Permitted Liens shall mean:
(a) Liens of local, provincial, or state authorities for franchise
or other like taxes provided the aggregate amounts secured by such Liens shall
not exceed One Hundred Thousand Dollars ($100,000) in the aggregate outstanding
at any one time;
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other like Liens imposed by Law,
created in the ordinary course of business and for amounts not yet due or which
are the subject of a Good Faith Contest;
(c) deposits made (and the Liens thereon) in the ordinary course of
business (including, without limitation, security deposits for leases, surety
bonds and appeal bonds) in connection with workers' compensation, unemployment
insurance and other types of social security benefits or to secure the
performance of tenders, bids, contracts (other than for the repayment or
guarantee of Indebtedness), statutory obligations and other similar obligations
arising as a result of progress payments under government contracts; and
(d) easements (including, without limitation, reciprocal easement
agreements and utility agreements), encroachments, minor defects or
irregularities in title, variation and other restrictions, charges or
encumbrances (whether or not recorded) affecting the Real Estate and which are
listed in Schedule B of the title insurance policy delivered to the Agent
herewith; provided, however, that in no event shall any Environmental Lien be
deemed to be a Customarily Permitted Lien.
Default shall mean any event specified in Section 12.01 hereof,
whether or not any requirement for the giving of notice, the lapse of time, or
both, or any other condition, event or act, has been satisfied.
Default Rate of Interest shall mean a rate of interest per annum
equal to the sum of: (a) four percent (4%) plus (b) the Chase Manhattan Bank
Rate, which the Agent shall be entitled to charge the Borrower on all
Obligations due the Lenders and not paid by the Borrower.
Depository Accounts shall mean those accounts owned by, and in the
name of, the Agent and designated by the Agent for the deposit of proceeds of
Collateral.
Documentation Fee shall mean (a) the sum intended to compensate the
Agent (for its own account) for the use of the Agent's internal or outside
counsel and facilities in documenting, in whole or in part, the initial
transaction solely on behalf of the Lenders, exclusive of Out-Of-Pocket
Expenses, which sum shall be included as part of the Loan Facility Fee due and
payable in accordance with Section 6.03 of this Financing Agreement, and (b) the
Agent's standard fees relating to any and all modifications, waivers, releases,
amendments or additional collateral with respect to this Financing Agreement,
the Collateral and/or the Obligations.
Dollars and $ means lawful money of the United States of America.
Eligible Accounts Receivable shall mean the gross amount of each
Obligor's Accounts Receivable that conform to the warranties contained herein
and at all times continue to be acceptable to the Agent in the exercise of its
reasonable business judgment, less, without duplication, the sum of:
(a) any returns, discounts, claims, credits and allowances of any
nature (whether issued, owing, granted or outstanding); and
(b) reserves for:
(i) sales to the United States of America or to any agency,
department or division thereof except where assignment of all
resulting accounts receivable due or to become due under a
particular contract is made by any Obligor to the Agent and the
Agent is satisfied that all requirements for compliance with the
Assignment of Claims Act and/or other applicable statutes, rules, or
regulations have been fulfilled;
<PAGE>
(ii) foreign sales other than sales (A) secured by stand-by
letters of credit (in form and substance satisfactory to the Agent)
issued or confirmed by, and payable at, banks having a place of
business in the United States of America and payable in United
States currency, (B) covered by policies of foreign credit insurance
that are in form and substance satisfactory to the Agent and are
issued by one or more insurance carriers that are fully acceptable
to the Agent, and are assigned to the Agent with the Agent named as
loss payee thereunder or (C) to customers residing in Canada
provided such sales otherwise comply with all of the other criteria
for eligibility hereunder, are payable in U.S. Dollars and all such
sales do not exceed Seven Hundred Fifty Thousand Dollars ($750,000)
in the aggregate at any one time;
(iii) accounts that remain unpaid more than ninety (90) days
from invoice date;
(iv) contras;
(v) sales to any Affiliate of an Obligor;
(vi) bill and hold (deferred shipment) or consignment sales;
(vii) sales to any customer which is (w) insolvent, (x) the
debtor in any bankruptcy, insolvency, arrangement, reorganization,
receivership or similar proceedings under any federal or state law,
(y) negotiating, or has called a meeting of its creditors for
purposes of negotiating, a compromise of its debts or (z) in the
Agent's reasonable business judgment, financially unacceptable to
the Agent or has a credit rating unacceptable to the Agent;
(viii) all sales to any customer if fifty percent (50%) or
more of either (x) all outstanding invoices or (y) the aggregate
dollar amount of all outstanding invoices, are unpaid more than
ninety (90) days from invoice date;
(ix) any other reasons deemed necessary by the Agent in its
reasonable business judgment and which are customary either in the
commercial finance industry or in the lending practices of the Agent
or the Lenders; and
(x) an amount representing, historically, returns, discounts,
claims, credits and allowances.
Eligible Inventory shall mean the gross amount of each Obligor's
Inventory that conforms to the warranties contained herein and which at all
times continues to be acceptable to the Agent in the exercise of its reasonable
business judgment less any work-in-process, supplies (other than raw material),
goods not present in the United States of America, goods returned or rejected by
the customers of such Obligor and other than goods that are undamaged and
resalable in the normal course of business, goods to be returned to the
suppliers of such Obligor, goods in transit to third parties (other than the
agents or warehouses of such Obligor) and less any reserves required by the
Agent in its reasonable discretion for special order goods, market value
declines and bill and hold (deferred shipment) or consignment sales.
Employee Benefit Plan means any plan, agreement, arrangement or
commitment which is an employee benefit plan, as defined in Section 3(3) of
ERISA, maintained by any Obligor, or any ERISA Affiliate or with respect to
which such Obligor, or any ERISA Affiliate at any relevant time has any
liability or obligation to contribute.
Environmental Discharge means any spill, emission, leaking, pumping,
injection, deposit, dispersal, leaching, migration, disposal, discharge or
release or threatened release of Hazardous Materials into the indoor or outdoor
environment or into or out of any property, including, without limitation, the
movement of Hazardous Materials through or in the air, soil, surface water or
groundwater.
<PAGE>
Environmental Law means any applicable Law relating to human health
or safety or the environment and any terms and conditions of any Approvals or
Permits issued thereunder, including, without limitation, Laws relating to noise
or to Environmental Discharges or to the generation, manufacture, processing,
distribution, use, treatment, storage, disposal, transport, handling or
remediation of Hazardous Materials or to the transfer of industrial or
manufacturing facilities or property.
Environmental Lien means any Lien in favor of any Governmental
Authority for (a) any liability under Environmental Laws, or (b) damages arising
from, or costs incurred by, such Governmental Authority in response to, an
Environmental Discharge.
Environmental Notice means any written complaint, order, claim,
citation, letter, inquiry, notice or other written communication from any Person
(a) relating to the Borrower's compliance with or liability or potential
liability under any Environmental Law, (b) relating to the occurrence or
presence of or exposure to or possible or threatened or alleged occurrence or
presence of or exposure to Environmental Discharges or Hazardous Materials at,
to, or from any of Obligor's past, present or future locations or facilities or
Real Estate or at, to or from any other location or facility including, without
limitation: (i) the existence of any contamination or possible or threatened
contamination at any such location or facility or the Real Estate; and (ii)
Remedial Action in connection with any Environmental Discharge or Hazardous
Materials at any such location or facility or Real Estate or any part thereof;
or (c) relating to any violation or alleged violation of any Environmental Law
by any Obligor, the Real Estate, or any prior owner of operator of the Real
Estate.
Equipment shall mean all present and hereafter acquired machinery,
equipment, furnishings and fixtures, and all additions, substitutions and
replacements thereof, located at the Brattleboro, Vermont property owned by
FiberMark Office, together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto and all proceeds of
whatever sort.
ERISA means the Employee Retirement Income Security Act of 1974, as
thereafter amended.
ERISA Affiliate means any entity required to be aggregated with any
Obligor under Section 414(b), (c), (m) or (o) of the Code.
Event(s) of Default shall have the meaning provided for in Section
12.01 of this Financing Agreement.
Executive Officers shall mean the Chairman, President, Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, Executive
Vice President(s), Senior Vice President(s), and Secretary of FiberMark.
FiberMark Durable Guarantors means each of FiberMark, FiberMark
Filter, FiberMark Office and each Acquired Entity.
FiberMark Filter Guarantors means each of FiberMark, FiberMark
Durable, FiberMark Office and each Acquired Entity.
FiberMark Guarantors means each of FiberMark Durable, FiberMark
Filter and FiberMark Office.
FiberMark Office Guarantors means each of FiberMark, FiberMark
Durable, FiberMark Filter and each Acquired Entity.
FiberMark Durable Obligations shall mean all loans and advances made
or to be made by the Lenders or by the Agent on behalf of the Lenders to
FiberMark Durable or to others for FiberMark Durable's account; any and all
indebtedness and obligations which may at any time be owing by FiberMark Durable
to the Agent or the Lenders howsoever arising, whether now in existence or
incurred by FiberMark Durable from time to time hereafter; whether secured by
pledge, Lien upon or security interest in any of FiberMark Durable's assets or
property or the assets or property of any other person, firm, entity or
corporation; whether such indebtedness is absolute or contingent, joint or
several, matured or unmatured, direct or indirect and whether FiberMark Durable
is
<PAGE>
liable to the Lenders and/or the Agent for such indebtedness as principal,
surety, endorser, guarantor or otherwise. FiberMark Durable Obligations shall
also include indebtedness owing to the Lenders and/or the Agent by FiberMark
Durable under this Financing Agreement or under any other agreement or
arrangement now or hereafter entered into between FiberMark Durable and the
Lenders; indebtedness or obligations incurred by, or imposed on, the Lenders
and/or the Agent, as a result of environmental claims (other than as a result of
actions of the Lenders or the Agent) arising out of any FiberMark Durable's
operation, premises or waste disposal practices or sites; FiberMark Durable's
liability to the Lenders and/or the Agent as maker or endorser on any promissory
note or other instrument for the payment of money; FiberMark Durable's liability
to the Lenders and/or the Agent under any instrument of guaranty or indemnity,
or arising under any guaranty, endorsement or undertaking which the Lenders
and/or the Agent may make or issue to others for FiberMark Durable's account,
including any accommodation extended with respect to applications for letters of
credit, the Lenders' and/or the Agent's acceptance of drafts or the Lenders'
and/or the Agent's endorsement of notes or other instruments for FiberMark
Durable's account and benefit.
FiberMark Filter Obligations shall mean all loans and advances made
or to be made by the Lenders or by the Agent on behalf of the Lenders to
FiberMark Filter or to others for FiberMark Filter's account; any and all
indebtedness and obligations which may at any time be owing by FiberMark Filter
to the Agent or the Lenders howsoever arising, whether now in existence or
incurred by FiberMark Filter from time to time hereafter; whether secured by
pledge, Lien upon or security interest in any of FiberMark Filter's assets or
property or the assets or property of any other person, firm, entity or
corporation; whether such indebtedness is absolute or contingent, joint or
several, matured or unmatured, direct or indirect and whether FiberMark Filter
is liable to the Lenders and/or the Agent for such indebtedness as principal,
surety, endorser, guarantor or otherwise. FiberMark Filter Obligations shall
also include indebtedness owing to the Lenders and/or the Agent by FiberMark
Filter under this Financing Agreement or under any other agreement or
arrangement now or hereafter entered into between FiberMark Filter and the
Lenders; indebtedness or obligations incurred by, or imposed on, the Lenders
and/or the Agent, as a result of environmental claims (other than as a result of
actions of the Lenders or the Agent) arising out of any FiberMark Filter's
operation, premises or waste disposal practices or sites; FiberMark Filter's
liability to the Lenders and/or the Agent as maker or endorser on any promissory
note or other instrument for the payment of money; FiberMark Filter's liability
to the Lenders and/or the Agent under any instrument of guaranty or indemnity,
or arising under any guaranty, endorsement or undertaking which the Lenders
and/or the Agent may make or issue to others for FiberMark Filter's account,
including any accommodation extended with respect to applications for letters of
credit, the Lenders' and/or the Agent's acceptance of drafts or the Lenders'
and/or the Agent's endorsement of notes or other instruments for FiberMark
Filter's account and benefit.
FiberMark Obligations shall mean all loans and advances made or to
be made by the Lenders or by the Agent on behalf of the Lenders to FiberMark or
to others for FiberMark's account; any and all indebtedness and obligations
which may at any time be owing by FiberMark to the Agent or the Lenders
howsoever arising, whether now in existence or incurred by FiberMark from time
to time hereafter; whether secured by pledge, Lien upon or security interest in
any of FiberMark's assets or property or the assets or property of any other
person, firm, entity or corporation; whether such indebtedness is absolute or
contingent, joint or several, matured or unmatured, direct or indirect and
whether FiberMark is liable to the Lenders and/or the Agent for such
indebtedness as principal, surety, endorser, guarantor or otherwise. FiberMark
Obligations shall also include indebtedness owing to the Lenders and/or the
Agent by FiberMark under this Financing Agreement or under any other agreement
or arrangement now or hereafter entered into between FiberMark and the Lenders;
indebtedness or obligations incurred by, or imposed on, the Lenders and/or the
Agent, as a result of environmental claims (other than as a result of actions of
the Lenders or the Agent) arising out of any FiberMark's operation, premises or
waste disposal practices or sites; FiberMark's liability to the Lenders and/or
the Agent as maker or endorser on any promissory note or other instrument for
the payment of money; FiberMark's liability to the Lenders and/or the Agent
under any instrument of guaranty or indemnity, or arising under any guaranty,
endorsement or undertaking which the Lenders and/or the Agent may make or issue
to others for FiberMark's account, including any accommodation extended with
respect to applications for letters of credit, the Lenders' and/or the Agent's
acceptance of drafts or the Lenders' and/or the Agent's endorsement of notes or
other instruments for FiberMark's account and benefit.
FiberMark Office Obligations shall mean all loans and advances made
or to be made by the Lenders or by the Agent on behalf of the Lenders to
FiberMark Office or to others for FiberMark Office's account; any and all
indebtedness and obligations which may at any time be owing by FiberMark Office
to the Agent or the Lenders howsoever arising, whether now in existence or
incurred by FiberMark Office from time to time hereafter;
<PAGE>
whether secured by pledge, Lien upon or security interest in any of FiberMark
Office's assets or property or the assets or property of any other person, firm,
entity or corporation; whether such indebtedness is absolute or contingent,
joint or several, matured or unmatured, direct or indirect and whether FiberMark
Office is liable to the Lenders and/or the Agent for such indebtedness as
principal, surety, endorser, guarantor or otherwise. FiberMark Office
Obligations shall also include indebtedness owing to the Lenders and/or the
Agent by FiberMark Office under this Financing Agreement or under any other
agreement or arrangement now or hereafter entered into between FiberMark Office
and the Lenders; indebtedness or obligations incurred by, or imposed on, the
Lenders and/or the Agent, as a result of environmental claims (other than as a
result of actions of the Lenders or the Agent) arising out of any FiberMark
Office's operation, premises or waste disposal practices or sites; FiberMark
Office's liability to the Lenders and/or the Agent as maker or endorser on any
promissory note or other instrument for the payment of money; FiberMark Office's
liability to the Lenders and/or the Agent under any instrument of guaranty or
indemnity, or arising under any guaranty, endorsement or undertaking which the
Lenders and/or the Agent may make or issue to others for FiberMark Office's
account, including any accommodation extended with respect to applications for
letters of credit, the Lenders' and/or the Agent's acceptance of drafts or the
Lenders' and/or the Agent's endorsement of notes or other instruments for
FiberMark Office's account and benefit.
Financing Agreement means this Third Amended and Restated Financing
Agreement and Guaranty.
Fiscal Year shall mean each period from January 1 to December 31.
GAAP shall mean generally accepted accounting principles in the
United States of America as in effect from time to time and for the period as to
which such accounting principles are to apply.
Good Faith Contest means the contest of an item if: (a) the item is
diligently contested in good faith by appropriate proceedings timely instituted;
(b) adequate reserves are established with respect to the contested item; (c)
during the period of such contest, the enforcement of the contested item is
effectively stayed; and (d) the failure to pay or comply with the contested item
during the period of such contest could not result in a Material Adverse Change.
Governmental Authority means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
Guarantors means all of FiberMark, FiberMark Durable, FiberMark
Filter, FiberMark Office and each Acquired Entity.
Guaranty Obligations shall mean, all obligations of any Guarantor as
guarantor of the obligations of a Borrower or other Guarantor under this
Financing Agreement. Guarantor Obligations shall also include indebtedness owing
to the Lenders and/or the Agent by any Guarantor under this Financing Agreement
or under any other agreement or arrangement now or hereafter entered into
between such Guarantor and the Lenders.
Hazardous Materials means any pollutants, contaminants, toxic or
hazardous substances or wastes, chemicals, radioactive material, medical wastes
or special waste, including, without limitation, asbestos fibers and friable
asbestos, polychlorinated biphenyls, and petroleum or hydrocarbon-based
products, derivatives wastes, or breakdown, constituent or decomposition
products thereof.
Indebtedness shall mean at any date:
(a) indebtedness or liability for borrowed money, or for the
deferred purchase price of property or services (including trade obligations);
(b) obligations as lessee under Capital Leases;
(c) reimbursement obligations under letters of credit issued for the
account of any Person;
<PAGE>
(d) all reimbursement obligations arising under bankers' or trade
acceptances;
(e) all guarantees, endorsements (other than for collection or
deposit in the ordinary course of business), and other contingent obligations to
purchase any of the items included in this definition, to provide funds for
payment, to supply funds to invest in any Person, or otherwise to assure a
creditor against loss;
(f) all obligations secured by any Lien on property owned by such
Person, whether or not the obligations have been assumed; and
(g) all obligations under any agreement providing for a swap,
ceiling rates, ceiling and floor rates, contingent participation or other
hedging mechanisms with respect to interest payable on any of the items
described in this definition.
Indenture means the Indenture dated as of October 15, 1996 among
FiberMark, the Guarantors (as defined therein) and the Trustee (as defined
therein) pursuant to which the Senior Notes are issued.
Insolvency means, at any particular time, a Multiemployer Plan is
insolvent within the meaning of Section 4245 of ERISA.
Interest Swap Obligations means the obligations of any Person
pursuant to any arrangement with any other Person, whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such other
Person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
Inventory of an Obligor shall mean all of such Obligor's present and
hereafter acquired merchandise, inventory and goods held for sale or lease or to
be furnished under contracts of service, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used or usable in manufacturing, processing, packaging or shipping same; in all
stages of production- from raw materials through work-in-process to finished
goods - and all proceeds thereof of whatever sort.
Law means any treaty, foreign, federal, state or local statute, law,
rule, regulation, ordinance, order, code, policy, or rule of common law, now or
hereafter in effect, and in each case as amended, and any judicial or
administrative interpretation thereof by a Governmental Authority or otherwise,
including any judicial or administrative order, consent decree or judgment.
Lease Agreement shall mean that certain Lease Agreement by and
between Specialty Paperboard, Inc., as lessee and the CIT Group/Equipment
Financing, Inc., as lessor, dated as of April 29, 1994, as amended and
supplemented by that certain First Amendment to Lease Agreement dated as of
September 29, 1995. [AS ASSIGNED.]
Lender(s) shall mean CITBC, each Assignee which becomes a Lender
pursuant to Section 14.07 hereof, and their respective successors.
Lender Loan Commitment shall mean, with respect to each Lender's
making of the Revolving Credit Loans, the obligation of such Lender to make
Revolving Credit Loans under this Financing Agreement up to the aggregate
principal amount outstanding at any time set forth below:
<PAGE>
================================================================================
Pro Rata
Share of Amount of Pro Rata Amount of
Revolving Revolving Share of Discretionary
Credit Credit Overadvance Overadvance
Lender Facility Commitment Availability Availability
=============================================================================
CITBC 100% $20,000,000 100% $3,000,000
=============================================================================
Lender Party shall mean the Agent and each of the Lenders.
Libor Period shall mean a thirty (30) day, sixty (60) day, or ninety
(90) day interest period with respect to Libor Rate Loans, as selected by the
Borrower.
Libor Rate shall mean, at any time of determination, the then
highest prevailing London Interbank Offered Rate paid in London on thirty (30)
day, sixty (60) day, or ninety (90) day dollar deposits from other banks as
published two (2) days prior to the commencement of the applicable interest
period, under "Money Rate," in the New York City edition of The Wall Street
Journal or if there is no such publication or statement therein as to a Libor
Rate, then in any publication used in the New York City financial community
which was published two (2) days prior to the commencement of the applicable
interest period.
Libor Rate Loans shall mean all or an portion of the Revolving
Credit Loans for which the Borrower has elected to use the Libor Rate for the
interest rate calculations.
Libor Rate Prepayment Premium shall mean, for any payment of
principal of any Libor Rate Loan prior to the end of an applicable interest
period, an amount computed pursuant to the following formula:
(R - T) x P x D
---------------
360
R = interest rate applicable to the Libor Rate Loan
T = effective interest rate per annum at which any readily marketable
bonds or other obligations of the United States, selected at the
Agent's sole discretion, maturing on or near the last day of
the then applicable interest period for such Libor Rate Loan and in
approximately the same principal amount as such Libor Rate Loan, can
be purchased by the Agent on the day of such prepayment of principal
P = the amount of principal prepaid
D = the number of days remaining in the Libor Period as of the date of
such prepayment
The Borrower shall pay such amount within five (5) business days of
presentation by CITBC to the Borrower of a statement setting forth the
amount and CITBC's calculation thereof pursuant hereto, which statement
shall be conclusive on the Borrower absent manifest error.
Lien means any mortgage, pledge, hypothecation, security interest,
collateral assignment, Lien (statutory or other), or other security interest or
encumbrance of any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction (except any such filing that is expired or that relates to
an operating lease)).
Loan Documents shall mean each of this Financing Agreement, the
Revolving Credit Notes, and the Security Documents.
<PAGE>
Loan Facility Fee shall mean the fee payable to the Agent for the
ratable benefit of the Lenders in accordance with, and pursuant to, the
provisions of Section 6.03 of this Financing Agreement. [ADJUSTED?]
Material Adverse Change means (a) a material adverse change in the
status of the business, results of operations, condition (financial or
otherwise), prospects, profitability, assets, operations, or property of an
Obligor, or (b) any event or occurrence of whatever nature which could have a
material adverse effect on an Obligor's ability to perform its obligations under
the Loan Documents.
Moody's means Moody's Investors Service, Inc. and any successor
thereto which provides credit ratings.
Non-Brattleboro Equipment shall mean all present and hereafter
acquired machinery, equipment, furnishings and fixtures owned by any Obligor,
and all additions, substitutions and replacements thereof, wherever located
(other than at the Brattleboro, Vermont property owned by FiberMark Office),
together with all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto and all proceeds of whatever sort.
Non-Brattleboro Real Estate shall mean the fee and/or leasehold
interests in the real property of any Obligor (other than those interests in the
Brattleboro, Vermont property).
Non-Excluded Taxes shall have the meaning specified in Section 3.16.
Notice of Borrowing shall mean a Revolving Credit Notice of
Borrowing.
Obligations shall mean collectively the FiberMark Obligations,
FiberMark Durable Obligations, FiberMark Filter Obligations and FiberMark Office
Obligations. [ACQUIRED ENTITY?]
Obligors means all of FiberMark, FiberMark Durable, FiberMark
Filter, FiberMark Office and each Acquired Entity.
Officer's Certificate shall mean a certificate signed in the name of
the Borrower by its President, Vice President, Controller or Treasurer.
Operating Leases shall mean all leases of property (whether real,
personal or mixed) other than Capital Leases.
Other Taxes shall have the meaning specified in Section 3.16.
Out-of-Pocket Expenses shall mean all of the Lenders' and the
Agent's present and future expenses incurred relative to this Financing
Agreement, whether incurred heretofore or hereafter, which expenses shall
include, without being limited to, the cost of record searches, all costs and
expenses incurred by the Agent in opening bank accounts, depositing checks,
receiving and transferring funds, and any charges imposed on the Agent due to
"insufficient funds" of deposited checks and the Agent's standard fee relating
thereto, local counsel fees, title insurance premiums, real estate survey costs,
fees and taxes relative to the filing of financing statements, costs of
preparing and recording mortgages/deeds of trust against the Real Estate and all
expenses, costs and fees set forth in Section 3.18 of this Financing Agreement.
Overadvance shall have the meaning specified in Section 3.03.
Overadvance Availability has the meaning specified in Section 3.03.
PBGC means Pension Benefit Guaranty Corporation.
Pension Plan means any Employee Benefit Plan which is an employee
pension benefit plan as defined in Section 3(2) of ERISA.
<PAGE>
Permitted Encumbrances shall mean:
(a) Liens expressly permitted, or consented to, by the Agent;
(b) Purchase Money Liens;
(c) Customarily Permitted Liens;
(d) Liens granted the Agent by the Borrower or a Guarantor;
(e) Liens of judgment creditors provided such Liens do not exceed,
in the aggregate, at any time, Two Hundred Fifty Thousand Dollars ($250,000)
(other than Liens bonded or insured to the reasonable satisfaction of the
Agent);
(f) Liens for taxes not yet due and payable or which are the subject
of a Good Faith Contest and which Liens are not x) other than with respect to
Real Estate, senior to the Liens of the Agent or y) for taxes due the United
States of America; provided, however, that in no event shall any Environmental
Lien be deemed to be a Permitted Encumbrance;
(g) Liens granted by FiberMark Office to CITEF securing its
obligations under the Lease Agreement and Liens granted by FiberMark, FiberMark
Durable and FiberMark Filter securing such Person's guaranty of such
obligations; and
(h) Liens granted by any Obligor on any of its assets other than (i)
the Brattleboro Collateral, (ii) each Obligor's Accounts and (iii) each
Obligor's Inventory.
Permitted Indebtedness shall mean:
(a) Indebtedness incurred in the ordinary course of business for raw
materials, supplies, property, equipment, services, taxes or labor or otherwise;
(b) Indebtedness secured by Purchase Money Liens;
(c) Indebtedness of FiberMark which is subordinated to the prior
payment and satisfaction of FiberMark's Obligations to the Lenders by means of a
subordination agreement or similar instrument, in each case in form and
substance satisfactory to the Lenders;
(d) deferred taxes and other expenses incurred in the ordinary
course of business;
(e) Indebtedness existing on the date of execution of this Financing
Agreement and listed in the most recent financial statement delivered to the
Lenders or otherwise disclosed to the Lenders in writing on or prior to the date
of execution of this Financing Agreement; and
(f) the Senior Notes.
Permitted Investments means:
(a) direct obligations of the United States of America or any agency
thereof backed by the full faith and credit of the United States of America with
maturities of one (1) year or less from the date of acquisition;
(b) commercial paper with maturities of two hundred seventy (270)
days or less of (a) a Lender or any parent of a Lender, or (b) a domestic issuer
rated at least "P-1" by Moody's or "A-1" by S&P; and
(c) certificates of deposit with maturities of one (1) year or less
from the date of acquisition issued by (i) any Lender, or (ii) any commercial
bank operating within the United States of America whose outstanding long-term
debt is rated at least "A" by Moody's or "A" by S&P.
<PAGE>
Person means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
Prepayment Fee shall mean the fee payable to the Agent for the
ratable benefit of the Lenders in accordance with, and pursuant to, the
provisions of Section 6.03 of this Financing Agreement.
Pro Rata Share means, for purposes of this Financing Agreement and
with respect to each Lender, in the case of the Revolving Credit Loans and the
Unused Line Fees and the Overadvances, a fraction, the numerator of which is
such Lender's Revolving Credit Commitment and the denominator of which is the
total of all the Lenders' Revolving Credit Commitments.
Purchase Money Liens shall mean Liens on any item of equipment
acquired by an Obligor after the Closing Date, provided that (a) each such Lien
shall attach only to the property to be acquired, (b) a description of the
property so acquired is furnished to the Agent, and (c) the debt incurred in
connection with such acquisitions shall not exceed, in the aggregate for all
Obligations, Five Hundred Thousand Dollars ($500,000) in any Fiscal Year.
Quarterly Payment Date means each March 31, June 30, September 30
and December 31.
Real Estate shall mean the fee and/or leasehold interests in the
real property of FiberMark Office located at Brattleboro, Vermont which has been
encumbered, mortgaged, pledged or assigned to the Agent or to the Agent's
designee for the ratable benefit of the Lenders, pursuant to the Mortgage
(Brattleboro, Vermont).
Regulatory Change means, with respect to any Lender, any change
after December 31, 1996 in United States federal, state, municipal or foreign
Laws (including Regulation D) or the adoption or making after such date of any
interpretations, directives or requests applying to a class of banks including
such Lender of or under any United States, federal, state, municipal or foreign
Laws or regulations (whether or not having the force of Law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
Remedial Action means action required to (a) clean up, remove, treat
or in any other way address Hazardous Materials in the indoor or outdoor
environment; (b) prevent an Environmental Discharge or minimize any further
Environmental Discharge; or (c) investigate and determine if a remedial response
is needed, design such a response or conduct post-remedial investigation,
monitoring operation, maintenance or care.
Reorganization means with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of such term as
used in Section 4241 of ERISA.
Reportable Event means an event described in Section 4043(b) of
ERISA or in the regulations thereunder (other than those events as to which the
thirty (30) day notice period is waived under Subsections .13, .14, .15, .18,
.19 or .20 of PBGC Regulation Section 2615).
Required Lenders shall mean, on the date calculation of Required
Lenders is made, the Lenders having Revolving Credit Commitments to lend at
least sixty six and two thirds percent (66 2/3%) of the Revolving Credit Loans
hereunder.
Revolving Credit Commitment has the meaning specified in Section
3.01.
Revolving Credit Commitment Termination Date shall mean April 30,
2001; provided, however, the Borrowers and the Lenders agree that such date
shall be automatically extended for an additional year on such date or on each
subsequent anniversary date thereof unless and until at least sixty (60) days
prior to any such date Borrowers or the Lenders shall have given the other
notice in writing that such date shall not be so extended.
Revolving Credit Facility means Twenty Million Dollars
($20,000,000).
Revolving Credit Loans shall have the meaning specified in Section
3.01.
<PAGE>
Revolving Credit Note shall have the meaning specified in Section
3.02.
Revolving Credit Notice of Borrowing shall have the meaning
specified in Section 3.12.
S&P means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc. or any successor thereto which provides credit ratings.
Security Agreement means the Security Agreement in substantially the
form of Exhibit I hereto, to be delivered by each Obligor under the terms of
this Agreement.
Security Documents means the Security Agreement, the Mortgage
(Brattleboro, Vermont) and any other security agreement granting a Lien on any
assets of an Obligor to secure such Obligor's Obligations.
Security Interest shall have the meaning specified in Section 5.03.
Senior Notes means the $100,000,000 9.375% Senior Notes of Borrower
due October 15, 2006 issued pursuant to the terms and provisions of the
Indenture.
Settlement Date shall mean the date each week on which the Agent and
the Lenders shall settle amongst themselves so that the Agent shall not have, as
Agent, any money at risk and on such Settlement Date each of the Lenders shall
have its Pro Rata Share of all outstanding Revolving Credit Loans, based upon
its Revolving Credit Commitments. Notwithstanding the previous sentence, upon
the occurrence of an Event of Default or a continuing decline or increase of the
Revolving Credit Loans or other Obligations, the Agent may, at its discretion,
elect to settle its and the Lenders' accounts more often than weekly.
Solvency Certificate means a certificate in substantially the form
of Exhibit E, to be delivered by each Obligor pursuant to the terms of this
Financing Agreement.
Solvent means, when used with respect to any Person, that (a) the
fair value of the property of such Person, on a going concern basis, is greater
than the total amount of liabilities (including, without limitation, contingent
liabilities) of such Person, (b) the present fair salable value of the assets of
such Person, on a going concern basis, is not less than the amount that will be
required to pay the probable liabilities of such Person on its debts as they
become absolute and matured, (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay as such debts and liabilities mature, and (d) such Person is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would constitute unreasonably
small capital after giving due consideration to the prevailing practice in the
industry in which such Person is engaged. Contingent liabilities will be
computed at the amount that, in light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability.
Specialty Hong Kong shall mean Specialty Paperboard (Hong Kong)
Limited, a Hong Kong corporation. [STATUS?]
Specialty Japan shall mean Specialty Paperboard Kabushiki Kaisha, a
Japanese corporation. [STATUS?]
Subsidiary shall mean, as to any Person, a corporation of which
shares of stock having ordinary voting power (other than stock having such power
only by reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation are at the time owned,
or the management of which is otherwise controlled, directly, or indirectly
through one or more intermediaries, or both, by such Person. [REVISE TO INCLUDE
OTHER ENTITIES?]
Transferee shall have the meaning specified in Section 14.03.
Type of any Loan shall mean a Chase Manhattan Bank Rate Loan or a
Libor Rate Loan or both or either of the foregoing, all as the context may
require.
<PAGE>
Unused Line Fee shall (a) mean the aggregate fee due to the Agent
for the ratable benefit of the Lenders at the end of each quarter for each
Revolving Line of Credit and (b) be determined by multiplying the difference
between such Revolving Line of Credit and the average daily Revolving Credit
Loans of the Borrower for said quarter by three-eighths of one percent (.375%)
per annum for the number of days in said quarter.
Section 1.02. Computation of Time Periods. In this Financing
Agreement unless otherwise specified, in the computation of periods of time from
a specified date to a later specified date, the word "from" means "from and
including" and words "to" and "until" each means "to but excluding".
Section 1.03. Accounting Principles and Terms. Except as otherwise
provided in this Financing Agreement, (a) all computations and determinations as
to financial matters, and all financial statements to be delivered under this
Financing Agreement, shall be made or prepared in accordance with GAAP and (b)
all accounting terms used in this Financing Agreement shall have the meaning
ascribed to such terms by such principles.
Section 1.04. Rules of Construction. When used in this Financing
Agreement: (a) "or" is not exclusive; (b) a reference to a Law includes any
amendment or modification to such Law; (c) a reference to a Person includes its
permitted successors and permitted assigns; and (d) unless otherwise provided
for in this Financing Agreement, a reference to an agreement, instrument or
document shall include such agreement, instrument or document as the same may be
amended, modified or supplemented from time to time in accordance with its terms
and as permitted by the Loan Documents.
ARTICLE II. CONDITIONS PRECEDENT
Section 2.01. Conditions Precedent to Initial Revolving Credit Loan.
The obligation of the Lenders to make an initial Revolving Credit Loan is
subject to the condition precedent that (1) the Agent shall have received each
of the following documents, in form and substance satisfactory to the Agent and
its counsel, and (2) each of the following other requirements shall have been
fulfilled:
(a) Evidence of Due Organization and all Corporate Actions by the
Corporate Obligors. A certificate of the Secretary or Assistant Secretary of
each Corporate Obligor, dated the Closing Date, attesting to the certificate of
incorporation and bylaws of such Corporate Obligor and all amendments thereto
and to all corporate actions taken by such Corporate Obligor, including
resolutions of its board of directors, taken by such Corporate Obligor,
including resolutions of its board of directors, authorizing the execution,
delivery and performance of the Loan Documents and each other document to be
delivered pursuant to the Loan Documents.
(b) Incumbency and Signature Certificate of each Corporate Obligor.
A certificate of the Secretary or Assistant Secretary of each Corporate Obligor,
dated as of the Closing Date, certifying the names and true signatures of the
officers of such Corporate Obligor authorized to sign the Loan Documents, and
the other documents to be delivered pursuant to the Loan Documents.
(c) Good Standing Certificates of each Corporate Obligor. A
certificate, dated reasonably near the Closing Date, from the Secretary of State
(or other appropriate official) of the jurisdiction of incorporation of such
Corporate Obligor certifying as to the due incorporation and good standing of
such Corporate Obligor and certificates, dated reasonably near the Closing Date,
from the Secretary of State (or other appropriate official) of each other
jurisdiction where such Corporate Obligor is required to be qualified to conduct
business, certifying that such Corporate Obligor is duly qualified to do such
business and is in good standing in such state.
(d) Evidence of Due Organization and all Actions by FiberMark
Filter. A certificate of the Manager of FiberMark Filter, dated the Closing
Date, attesting to the certificate of formation and operating of agreement
FiberMark Filter and all amendments thereto and to all actions taken by
FiberMark Filter, including resolutions of its managers and members, taken by
FiberMark Filter, including resolutions of its managers and
<PAGE>
members, authorizing the execution, delivery and performance of the Loan
Documents and each other document to be delivered pursuant to the Loan
Documents.
(e) Incumbency and Signature Certificate of FiberMark Filter. A
certificate of the Manager of FiberMark Filter, dated as of the Closing Date,
certifying the names and true signatures of the Persons authorized to sign the
Loan Documents for FiberMark Office, and the other documents to be delivered
pursuant to the Loan Documents.
(f) Good Standing Certificates of FiberMark Filter. A certificate,
dated reasonably near the Closing Date, from the Secretary of State (or other
appropriate official) of the jurisdiction of incorporation of FiberMark Office
certifying as to the due formation and good standing of FiberMark Office and
certificates, dated reasonably near the Closing Date, from the Secretary of
State (or other appropriate official) of each other jurisdiction where FiberMark
Office is required to be qualified to conduct business, certifying that
FiberMark Office is duly qualified to do such business and is in good standing
in such state.
(g) Revolving Credit Notes. A Revolving Credit Note duly executed by
each Borrower.
(h) Depository Accounts. Each Obligor shall have established a
system of lock box accounts (satisfactory to the Agent) for the collection of
such Obligor's Accounts and shall have taken all steps necessary to insure that
all Accounts Receivable such Obligor shall have established are delivered to
such Depository Account of such Obligor.
(i) Lien Searches. The Agent shall have received tax, judgment,
Uniform Commercial Code searches satisfactory to the Agent for all locations
presently occupied or used by each Obligor.
(j) UCC Filings. Any documents (including without limitation,
financing statements) required to be filed in order to create, in favor of the
Agent for the ratable benefit of the Lenders, a first and exclusive perfected
security interest (except for Permitted Encumbrances) in the Collateral with
respect to which a security interest may be perfected by a filing under the
Uniform Commercial Code shall have been properly filed in each office in each
jurisdiction required in order to create in favor of the Agent for the ratable
benefit of the Lenders a perfected Lien on the Collateral. The Agent shall have
received acknowledgement copies of all such filings (or, in lieu thereof, the
Agent shall have received other evidence satisfactory to the Agent that all such
filings have been made); and the Agent shall have received evidence that all
necessary filing fees and all taxes or other expenses related to such filings
have been paid in full.
(k) Casualty Insurance. Borrower shall have delivered to the Agent
evidence satisfactory to the Lenders that casualty insurance policies listing
the Agent as loss payee or mortgagee, as the case may be, for the Brattleboro,
Vermont property and for the Inventory of each Obligor, are in full force and
effect, all as set forth in Section 9.07 of this Financing Agreement.
(l) Examination and Verification. The Agent shall have completed to
the satisfaction of the Lenders an examination and verification of the Accounts,
Inventory, books and records of each Obligor.
(m) Approvals and Permits. Evidence satisfactory to the Agent that
all Approvals and Permits required for the operation of the business of each
Obligor are in effect.
(n) Solvency Certificates. Solvency Certificates duly executed by
each Obligor.
(o) Landlord's Waiver(s). The Agent shall have received from each
landlord of any premises occupied by any Obligor a landlord's waiver waiving any
Lien such landlord has on any of the Inventory of any Obligor pursuant to an
agreement in form and substance satisfactory to the Lenders.
(p) Warehouse Documents. The Agent shall have received from each
public warehouse in which Inventory of any Obligor is stored, an acknowledgement
in form and substance acceptable to the Lenders concerning the Lenders' security
interest in such Inventory.
<PAGE>
(q) Third Party Processor Letters. The Agent shall have received,
from each third party processor of Inventory of any Obligor, an acknowledgement
in form and substance acceptable to the Lenders concerning the Lenders' security
interest in such Inventory.
(r) Fees and Expenses. Payment in full to the Agent and the Lenders
of all fees required to be paid to the Agent pursuant to the terms and
conditions of this Financing Agreement; and payment in full of all other fees
required to be paid in accordance with the terms of the Loan Documents.
(s) Opinions of Counsel. Favorable opinion of counsel to the
Obligors acceptable to the Required Lenders in form and substance satisfactory
to the Required Lenders.
(t) Due Diligence. Satisfactory completion of all reasonable due
diligence items the Agent deems necessary, including but not limited to
interviews with key customers and any other Persons material to the operation of
each Obligor's business and review of actual and potential liabilities of each
Obligor under Environmental Laws or in connection with Environmental Discharges
relating to all past and present real estate, properties and operations of each
Obligor and their respective predecessors.
[WILL INCLUDE A REFERENCE TO THE ASSIGNMENT AND ASSUMPTION FOR THE
LEASE.]
(u) Officer's Certificate. The following statements shall be true
and Agent shall have received certificates signed by duly authorized officers of
the Borrower stating that:
(i) The representations and warranties contained in this Agreement
and in each of the other Loan Documents are correct on and as of the date
of this Financing Agreement, as though made on and as of such date; and
(ii) No Default or Event of Default has occurred and is continuing.
(v) Brattleboro, Vermont Mortgage Modification. The Borrower shall
have executed and delivered to the Agent for the benefit of the Agent and the
Lenders, the Mortgage Modification Agreement (Brattleboro, Vermont) dated
December 31, 1996 by and between the Borrower and CITBC, and such Mortgage
Modification Agreement (Brattleboro, Vermont) shall have been delivered to a
title company for recording. [DOES THIS NEED TO BE UPDATED?]
(w) Disbursement Authorizations. Each Borrower shall have delivered
to the Agent all information necessary for the Agent to issue wire transfer
instructions on behalf of such Borrower for the initial Revolving Credit Loan
and subsequent Revolving Credit Loans to be made to it under this Agreement,
including, but not limited to, disbursement authorizations in form acceptable to
the Agent.
(x) Security Agreement. The Security Agreement duly executed by the
Borrower together with (a) duly executed financing statements (UCC-1) to be
filed under the Uniform Commercial Code of all jurisdictions necessary or, in
the opinion of the Agent, desirable to perfect the security interest created by
the Security Agreement; (b) duly executed copies of the financing statements
(UCC-3) to be filed under the Uniform Commercial Code of all jurisdictions
necessary, or in the opinion of the Agent, desirable to terminate any Liens in
favor of any party other than the Agent; and (c) Uniform Commercial Code
searches identifying all of the financing statements on file with respect to
such party in all jurisdictions referred to under (a), including the financing
statements filed by the Agent against such party, indicating that no party other
than the Agent claims an interest in any of the Collateral.
(y) Additional Documentation. Such other approvals, opinions or
documents as the Agent or any Lender shall reasonably request.
Section 2.02. Conditions Precedent to Each Revolving Credit Loan.
The obligations of the Lenders to make each Revolving Credit Loan (including the
initial Revolving Credit Loans under this Agreement), shall be subject to the
further conditions precedent that on the date of providing such Revolving Credit
Loan:
<PAGE>
(a) The following statements shall be true:
(i) all of the representations and warranties contained in
this Financing Agreement and in each of the other Loan
Documents are correct on and as of the date of providing
such Revolving Credit Loan as though made on and as of
such date; and
(ii) no Default or Event of Default has occurred and is
continuing, or could result from providing such
Revolving Credit Loan;
(b) The Agent shall have received such other approvals, opinions
or documents as the Agent or any Lender may reasonably
request.
Section 2.03. Deemed Representation. Each delivery of a Notice of
Borrowing requesting a Revolving Credit Loan shall constitute a representation
and warranty that the statements contained in Section 2.02 are true and correct
both on the date of such delivery of the Notice of Borrowing and as of the date
of the providing of such Revolving Credit Loan.
ARTICLE III. AMOUNT AND TERMS OF THE REVOLVING CREDIT LOANS.
Section 3.01. Revolving Credit Loans. Subject to the terms and
conditions of this Financing Agreement, each Lender severally agrees to make
loans ("Revolving Credit Loans") to each Borrower from time to time during the
period from the Closing Date through the Revolving Credit Commitment Termination
Date, provided that (a) the amount of each Revolving Credit Loan does not exceed
the then effective Availability, and (b) the aggregate principal amount of all
Revolving Credit Loans outstanding at any time does not exceed the lesser of:
(i) the Revolving Credit Facility or (ii) the then effective Borrowing Base
("Revolving Credit Commitment"). Within the limits of the Revolving Credit
Commitment, each Borrower may borrow, make a payment pursuant to Section 3.10,
and reborrow under this Section 3.01. The Revolving Credit Loans may be
outstanding as Chase Manhattan Bank Rate Loans or Libor Loans. Each Type of
Revolving Credit Loan of each Lender shall be made and maintained at such
Lender's Applicable Lending Office for such Type of Loan.
Section 3.02. Revolving Credit Note. All Revolving Credit Loans made
by each Lender under this Financing Agreement shall be evidenced by, and repaid
with interest in accordance with, a promissory note of the applicable Borrower
in substantially the form of Exhibit A hereto, in the principal amount equal to
such Lender's Pro Rata Share of the Revolving Credit Commitment, payable to such
Lender for the account of its Applicable Lending Office and maturing as to
principal on the Revolving Credit Commitment Termination Date (the "Revolving
Credit Note"). Each Lender is hereby authorized by each Borrower to endorse on
the schedule attached to the Revolving Credit Note of such Borrower held by it
the date of making each Revolving Credit Loan, the amount of each Revolving
Credit Loan, the type of the Revolving Credit Loan and each Conversion,
Continuation and payment of principal amount received by such Lender for the
account of its Applicable Lending Office of its Revolving Credit Loans, which
endorsement shall, in the absence of manifest error, be conclusive as to the
outstanding balance of the Revolving Credit Loans made by such Lender; provided,
however, that the failure to make such notation with respect to any Revolving
Credit Loan or Conversion, Continuation or payment shall not limit or otherwise
affect the Obligations of the applicable Borrower under this Financing Agreement
or the Revolving Credit Note of such Borrower held by such Lender. Each Lender
agrees that prior to any assignment of any of such Revolving Credit Notes it
will endorse the schedule attached to its Revolving Credit Note. All outstanding
principal on the Revolving Credit Loans shall be due and payable on the
Revolving Credit Commitment Termination Date.
Section 3.03. Overadvances. The Agent may, on behalf of the Lenders,
make a Revolving Credit Loan in excess of the Availability or the Revolving
Credit Facility ("Overadvances") in either case, up to an aggregate amount
outstanding at any time of Three Million Dollars ($3,000,000) ("Overadvance
<PAGE>
Availability"); provided that the Agent and the Lenders shall not be obligated
to make any Overadvances hereunder and any Overadvance made by the Agent in
excess of Availability or the Revolving Credit Facility shall be in the sole and
absolute discretion of the Agent subject to payment in the amount of such
Overadvances or to any additional terms the Agent deems necessary. In the event
that the Agent makes Overadvances on behalf of the Lenders, each Lender
severally agrees to make a Revolving Credit Loan equal to its Pro Rata Share of
all Overadvances.
Section 3.04. Information Relating to Accounts. In furtherance of
the continuing assignment and security interest in each Obligor's Accounts, each
Obligor will, upon the creation of Accounts, execute and deliver to the Agent in
such form and manner as the Agent may reasonably require, solely for the Agent's
convenience in maintaining records of collateral, such confirmatory schedules of
Accounts as the Agent may reasonably request, and such other appropriate reports
designating, identifying and describing the Accounts as the Agent may reasonably
require. In addition, upon the Agent's request, such Obligor shall provide the
Agent and each of the Lenders with copies of agreements with, or purchase orders
from, the Obligor's customers, and copies of invoices to customers, proof of
shipment or delivery and such other documentation and information relating to
said Accounts and other collateral as the Agent may reasonably require. Failure
to provide the Agents or any of the Lenders with any of the foregoing shall in
no way affect, diminish, modify or otherwise limit the security interests
granted herein. Each Obligor hereby authorizes the Agent to regard its printed
name or rubber stamp signature on assignment schedules or invoices as the
equivalent of a manual signature by one of such Borrower's authorized officers
or agents.
Section 3.05. Representations Relating to Accounts. Each Obligor
hereby represents and warrants that (a) each Account of such Obligor is based on
an actual and bona fide sale and delivery of goods or rendition of services to
customers, made by such Obligor in the ordinary course of its business; (b) the
goods and inventory being sold and the Accounts created are the exclusive
property of such Obligor and are not and shall not be subject to any lien,
consignment arrangement, encumbrance, security interest or financing statement
whatsoever, other than the Permitted Encumbrances; (c) the invoices evidencing
such Accounts are in the name of such Obligor; and (d) the customers of such
Obligor have accepted the goods or services, owe and are obligated to pay the
full amounts stated in the invoices according to their terms, without dispute,
offset, defense, counterclaim or contra, except for disputes and other matters
arising in the ordinary course of business of which such Obligor has advised the
Agent pursuant to Section 3.07. Each Obligor confirms to the Lenders that any
and all taxes or fees relating to its business, its sales, the Accounts of such
Obligor or goods relating thereto, are its sole responsibility and that same
will be paid by such Obligor or when due and that none of said taxes or fees
represent a lien on or claim against the Accounts. Each Obligor also warrants
and represents that it is a duly and validly existing corporation and is
qualified in all states and provinces where the failure to so qualify would have
an adverse effect on the business of such Obligor or the ability of such Obligor
to enforce collection of Accounts due from customers residing in such locations.
Each Obligor agrees to maintain such books and records regarding Accounts as the
Agent may reasonably require and agrees that the books and records of such
Obligor will reflect the Lenders' interest in the Accounts of such Obligor. All
of the books and records of such Obligor will be available to the Agent and the
Lenders at normal business hours, including any records handled or maintained
for such Obligor by any other company or entity.
Section 3.06. Collection of Accounts. Until the Agent has advised an
Obligor to the contrary after the occurrence of an Event of Default, such
Obligor may and will enforce, collect and receive all amounts owing on the
Accounts of such Obligor for the Lenders' benefit and on the Lenders' behalf,
but at such Obligor's expense; such privilege shall terminate automatically upon
the institution by or against such Obligor of any proceeding under any
bankruptcy or insolvency law or, at the election of the Agent, upon the
occurrence of any other Event of Default and until such Event of Default is
waived. Any checks, cash, notes or other instruments or property received by
such Obligor with respect to any Accounts of such Obligor shall be held by such
Obligor in trust for the Lenders, separate from such Obligor's own property and
funds, and immediately turned over to the Agent for the ratable benefit of the
Lenders with proper assignments or endorsements by deposit to the Depository
Accounts. All amounts received by the Agent in payment of Accounts of an Obligor
will be credited to such Obligor's accounts upon the Agent's receipt of
"collected funds" at the Agent's bank account in New York, New York on the
Business Day of receipt if received no later than 1:00 p.m. (New York time) or
on the next succeeding Business Day if received after 1:00 p.m. (New York time).
<PAGE>
No checks, drafts or other instrument received by the Agent shall constitute
final payment to the Agent or the Lenders unless and until such instruments have
actually been collected.
Pursuant to separate arrangements between the Agent and each
institution at which a Depository Account is maintained (herein the "Depository
Banks"), each such Depository Bank has agreed, or will agree, if instructed by
the Agent as permitted hereunder to remit funds collected and to be collected in
the Depository Account to an account specified by the Agent. It is hereby agreed
between the Agent and each Obligor that until the first day the Lenders make
Revolving Credit Loans to such Obligor and (i) the Availability is $5,000,000 or
greater and (ii) there is then no Default or Event of Default, the Agent shall
permit such Obligor to instruct the Depository Banks to transfer any funds in
the Depository Accounts to their respective operating accounts or such other
accounts located in the United States (other than payroll accounts) as such
Obligor may designate. Upon the occurrence of an Event of Default, the Agent
shall have the right to immediately, without notice to an Obligor, instruct such
Depository Banks to remit funds collected and to be collected in the Depository
Accounts to an account specified by the Agent and with respect to the
disposition of any and all funds collected or to be collected in such Depository
Accounts. [STILL ACCURATE?]
Section 3.07. Notice Regarding Accounts. Each Obligor agrees to
notify each of the Lenders promptly of any matters materially affecting the
value, enforceability or collectibility of any Account of such Obligor and of
all material customer disputes, offsets, defenses, counterclaims, returns,
rejections and all reclaimed or repossessed merchandise or goods. Each Obligor
agrees that it shall issue credit memoranda promptly (with duplicates to the
Agent upon request after the occurrence of an Event of Default) upon accepting
returns or granting allowances, and may continue to do so until the Agent has
notified such Obligor that an Event of Default has occurred and that all future
credits or allowances are to be made only after the Agent's prior written
approval. Upon the occurrence of an Event of Default and until such time as such
Event of Default is waived and on notice from the Agent, each Obligor agrees
that all returned, reclaimed or repossessed merchandise or goods shall be set
aside by such Obligor, marked with the Agent's name and held by such Obligor for
the Agent's account as owner and assignee for the ratable benefit of the
Lenders.
Section 3.08. Borrowers' Account. The Agent shall maintain a
separate account on its books in each Borrower's name in which each Borrower
will be charged with Revolving Credit Loans made by the Agent on behalf of the
Lenders to it or for such Borrower's account, and with any other Obligations of
each such Borrower, including any and all costs, expenses and reasonable
attorney's fees which the Lenders and/or the Agent may incur in connection with
the exercise by or for the Agent or the Lenders of any of the rights or powers
herein conferred upon the Agent or in the prosecution or defense of any action
or proceeding to enforce or protect any rights of the Agent or the Lenders in
connection with this Financing Agreement or the Collateral assigned hereunder,
or any Obligations owing to the Lenders and/or the Agent by such Borrower. The
applicable Borrower will be credited with all amounts received by the Agent from
such Person or from others for such Person's account, including, as above set
forth, all amounts received by the Agent in payment of assigned Accounts and
such amounts will be applied to payment of the Obligations. In no event shall
prior recourse to any Accounts or other security granted to or by any Borrower
be a prerequisite to the Agent's right to demand payment of any Obligation.
Further, it is understood that the Lenders and the Agent shall have no
obligation whatsoever to perform in any respect any of such Obligor's contracts
or obligations relating to its Accounts.
After the end of each month, the Agent shall promptly send each
Borrower a statement showing the accounting for the charges, Revolving Credit
Loans and other transactions occurring between the Agent and such Borrower
during that month. The monthly statements shall be deemed correct and binding
upon such Borrower and shall constitute an account stated among such Borrower,
the Lenders and the Agent unless the Agent receives a written statement of the
exceptions within thirty (30) days of the date of the monthly statement.
Section 3.09. Application of Payments. Notwithstanding anything to
the contrary contained in this Article 3 or elsewhere in this Financing
Agreement, the Agent shall apply all amounts received by it in payment of
Accounts or Obligations of the applicable Borrower to Chase Manhattan Bank Rate
Revolving Credit Loans of such Borrower prior to any application to other Types
of Revolving Credit Loans of such Borrower; provided, however, (a) upon the
occurrence of an Event of Default or (b) in the event the aggregate amount of
outstanding Revolving Credit Loans of the Borrowers which are Libor Rate Loans
exceeds
<PAGE>
the Borrowing Base, the Agent may apply all such amounts received by it to the
payment of Obligations in such manner and in such order as the Agent may elect
in its reasonable business discretion. In the event that any such amounts are
applied to Revolving Credit Loans of any Borrower which are Libor Rate Loans,
such application shall be treated as a prepayment of such loans of such Borrower
and the Agent shall be entitled to the Libor Rate Prepayment Premium with
respect thereto.
Section 3.10. Prepayments. Subject to the limitation noted below,
any Borrower may prepay its Revolving Credit Loans upon at least one (1)
Business Day's notice to Agent in the case of Chase Manhattan Bank Rate Loans,
and at least three (3) Business Day's notice to Agent in the case of Libor Rate
Loans, in whole or in part with accrued interest to the date of such prepayment
on the amount prepaid, provided that (a) each partial prepayment shall be in the
case of a Libor Rate Loan, in a principal amount of not less than One Million
Dollars ($1,000,000) and integral multiples of One Hundred Thousand Dollars
($100,000) [AMOUNTS?]; and (b) Libor Rate Loans prepaid on any Business Day
other than the last day of the Libor Rate Period applicable for such Loan shall
require such Borrower to pay the Libor Rate Prepayment Premiums. Notwithstanding
anything to the contrary in this Financing Agreement, no Borrower may cancel
Revolving Credit Commitment prior to the payment in full of all outstanding
Obligations owed to CITEF under the Lease Agreement or any loan agreements.
In the event that the Borrowers shall cause the Revolving Credit
Facility to be cancelled and FiberMark or any Borrower shall obtain an
alternative commitment from another lender for financing, all Borrowers shall
prepay all Revolving Credit Loans in whole with accrued interest to the date of
such cancellation and in addition, the Borrowers shall pay to the Agent, for the
account of each Lender, a fee ("Prepayment Fee"), in the following amounts:
- --------------------------------------------------------------------------------
Period Amount
- --------------------------------------------------------------------------------
Twelve (12) month period from 1.0% of the average principal amount of
December 31, 1997 to December 31, 1998 all Revolving Credit Loans outstanding
at any time for the six month period
prior to such cancellation
- --------------------------------------------------------------------------------
Twelve (12) month period from 0.5% of the average principal
December 31, 1998 to December 31, 1999 amount of all Revolving Credit Loans
outstanding at any time for the six
month period prior to such cancellation
- --------------------------------------------------------------------------------
To the extent the outstanding principal amount of all the Revolving
Credit Loans taken together exceed the Borrowing Base, the Borrower shall prepay
such Revolving Credit Loans in an amount equal to the excess of the aggregate
outstanding principal amount of Revolving Credit Loans over the then effective
Borrowing Base.
Section 3.11. Funding of Revolving Credit Loans. The Agent, for the
account of the Lenders, shall disburse all Revolving Credit Loans and shall
handle all collections of Collateral and repayment of Obligations. It is
understood that for purposes of Revolving Credit Loans and for purposes of this
Section 3.11, the Agent is using the funds of CITBC.
On each Settlement Date, the Agent and the Lenders shall each remit
to the other, in immediately available funds, all amounts necessary so as to
ensure that, as of such Settlement Date, each Lenders shall have its Pro Rata
Share of all outstanding Revolving Credit Loans in accordance with its Revolving
Credit Commitments.
The Agent shall forward to each Lender, at the end of each month, a
copy of the account statement rendered by the Agent to the Borrower.
Section 3.12. Notice and Manner of Borrowing. With regard to each
Revolving Credit Loan, the applicable Borrower shall deliver to the Agent and,
if required by the Agent, with a copy to each Lender, a written or telegraphic
or facsimile notice substantially in the form of Exhibit B hereto (effective
<PAGE>
upon receipt) ("Revolving Credit Notice of Borrowing") not later than 12:00 noon
(New York time) on the day of making each Chase Manhattan Bank Rate Revolving
Credit Loan and at least three (3) Business Days prior to the date of any Libor
Rate Revolving Credit Loan. Each Revolving Credit Notice of Borrowing must
specify: (a) the date of such Revolving Credit Loan; (b) the amount of such
Revolving Credit Loan; (c) the initial Type or Types which will comprise the
requested Revolving Credit Loan and (d) in the case of a Libor Rate Revolving
Credit Loan, the initial Libor Rate Period applicable thereto. The Agent will
promptly notify each Lender of receipt by the Agent of a Revolving Credit Notice
of Borrowing and of the contents thereof.
Section 3.13. Obligations of Agent and Lenders. Each Lender is
solely responsible for its Pro Rata Share of each Revolving Credit Commitment
and neither Agent nor any Lender shall be responsible for, nor assume any
obligations for, the failure of any Lender to make available its Pro Rata Share
of any such Revolving Credit Loans. Should any Lender refuse to make available
its Revolving Credit Loans, then each of the other Lenders may, but without
obligation to do so, increase, unilaterally, its portion of the Revolving Credit
Loans in which event the Borrower shall be so obligated to such other Lender.
Nothing contained herein shall be deemed to obligate the Agent to
make available to the Borrower the full amount of a requested Revolving Credit
Loan when the Agent has not received any Lender's Pro Rata Share of such
Revolving Credit Loan or if the Agent otherwise has any notice that any of the
Lenders will not advance its Pro Rata Share thereof. The Agent, for the account
of the Lenders, shall disburse all Revolving Credit Loans and shall handle all
collections of Collateral and repayment of Obligations. It is understood that
for purposes of Revolving Credit Loans and for purposes of this Article 3 and
prior to settlement among the Lenders on any Settlement Date the Agent is using
the funds of CITBC.
Unless the Agent shall have been notified in writing by any Lender
prior to any advance to the Borrower that such Lender will not make the amount
which would constitute its share of the borrowing on such date available to the
Agent, the Agent may assume that such Lender shall make such amount available to
the Agent on a Settlement Date, and the Agent may, in reliance upon such
assumption, make available to the Borrower for the benefit of the Borrower a
corresponding amount. Absent such notice each Lender's commitment shall be
absolute and unconditional and such Lender shall reimburse the Agent its Pro
Rata Share of such borrowing upon demand. A certificate of the Agent submitted
to any Lender with respect to any amount owing under this subsection shall be
conclusive, absent manifest error. If such Lender's Pro Rata Share of such
borrowing is not in fact made available to the Agent by such Lender on the
Settlement Date, the Agent shall be entitled to charge the applicable Borrower's
account with any such amount with interest thereon at the rate per annum
applicable to Revolving Credit Loans hereunder, on demand, from the applicable
Borrower without prejudice to any rights which the Agent may have against such
Lender hereunder. Nothing contained in this subsection shall relieve any Lender
which has failed to make available its Pro Rata Share of any borrowing hereunder
from its obligation to do so in accordance with the terms hereof. Nothing
contained herein shall be deemed to obligate the Agent to make available to the
applicable Borrower the full amount of a requested advance when the Agent has
not received any Lender's Pro Rata Share of such Revolving Credit Loan or if the
Agent has any notice that any of the Lenders will not advance its Pro Rata Share
thereof.
Section 3.14. Minimum Amounts. The amount of each Revolving Credit
Loan borrowed on any given day and the aggregate amount of each Revolving Credit
Loan with the same interest rate after giving effect to the conversions and
continuations provided for in Section 5.01 shall, in the case of Libor Rate
Loans, be in an amount at least equal to One Million Dollars ($1,000,000) or a
greater amount which is an integral multiple of One Hundred Thousand Dollars
($100,000) (Libor Rate Loans having different Libor Rate Periods outstanding at
the same time shall be deemed separate Loans for purposes of the foregoing, one
for each Libor Rate Period). [AMOUNTS?] There shall be no minimum amount of
principal applicable to a conversion or continuation of a Chase Manhattan Bank
Rate Loan.
Section 3.15. Use of Proceeds. The proceeds of the Revolving Credit
Loans shall be used by the applicable Borrower for its working capital and
general corporate purposes [and may be used by such Borrower to make loans to
any Obligor for working capital purposes]; [STILL TRUE?] provided, however, that
an amount not to exceed $15,000,000 of the proceeds of all the Revolving Credit
Loans may be used by all Borrowers taken together to pay all or a portion of the
consideration for the acquisition of stock or assets of
<PAGE>
another Person. No Borrower will, directly or indirectly, use any Revolving
Credit Loan proceeds for the purpose of purchasing or carrying any margin stock
within the meaning of Regulations G, T, U or X of the Board of Governors or to
extend credit to any Person for the purpose of purchasing or carrying any such
margin stock.
Section 3.16. Taxes. Any and all payments by each Borrower made
hereunder shall be made free and clear of and without deduction for any and all
taxes, levies, imposts, deductions, charges or withholdings imposed by any
Governmental Authority, and all liabilities with respect thereto, excluding
taxes imposed on or measured by the net income of any of the Lenders on the
receipt or accrual of stated principal and interest payments by the jurisdiction
under the laws of which such Lender is organized or any political subdivision
thereof or in which such Lender maintains an office or conducts business (all
such non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Non-Excluded Taxes"). If any
Borrower shall be required by Law to withhold or deduct any Non-Excluded Taxes
from or in respect of any sum payable hereunder, (a) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
3.16) Lender receives an amount equal to the sum it would have received had no
such deductions been made, (b) such Borrower shall make such deductions, and (c)
such Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable Law.
In addition, each Borrower jointly and severally agrees to pay any
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies that arise under the laws of the United States
of America or the State of New York or any other taxing authority from any
payment made hereunder or from the execution or delivery or otherwise with
respect to this Agreement or any other Loan Document (hereinafter referred to an
"Other Taxes").
Each Borrower shall jointly and severally indemnify each Lender for
the full amount of Non-Excluded Taxes and Other Taxes (including, without
limitation, any Non-Excluded Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 3.16) paid by such Lender or any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Non-Excluded Taxes or Other Taxes were correctly or
legally asserted. Payments by a Borrower pursuant to this indemnification shall
be made within thirty (30) days from the date a Lender makes written demand
therefor.
Within thirty (30) days after the date of any payment of
Non-Excluded Taxes or Other Taxes by a Borrower, such Borrower shall furnish to
the applicable Lender the original or a certified copy of a receipt evidencing
payment thereof. The applicable Borrower shall compensate the applicable Lender
for all losses and expenses sustained by such Lender as a result of any failure
by such Borrower to so furnish such copy of such receipt.
Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers contained
in this Section 3.16 shall survive the payment in full of the Revolving Credit
Loans.
Each Lender that is organized under the laws of any jurisdiction
other than the United States of America or any State thereof (including the
District of Columbia) agrees, if eligible, to furnish to the Borrower and the
Agent, prior to the first Quarterly Payment Date, two copies of either U.S.
Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 or
any successor forms thereto (wherein such Lender claims entitlement to complete
exemption from U.S. federal withholding tax on all payments made by the Borrower
hereunder) and upon request of the Borrower to provide to such Person and the
Agent a new Form 4224 or Form 1001 or any successor form thereto (claiming a
complete exemption from U.S. federal withholding tax on all payments made by
such Person hereunder) if any previously delivered form is found to be
incomplete or incorrect in any material respect or upon the obsolescence of any
previously delivered form.
Section 3.17. Additional Costs. The applicable Borrower shall pay
directly to the applicable Lender from time to time on demand such amounts as
such Lender may determine to be necessary to compensate it for any increased
costs which such Lender determines are attributable to its making or maintaining
<PAGE>
any Libor Rate Loan to such Borrower, or its obligation to convert any Chase
Manhattan Bank Rate Loan to a Libor Rate Loan hereunder, or any reduction in any
amount receivable by such Lender hereunder in respect of any of such Libor Rate
Loans or such obligation (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), resulting from any
Regulatory Change which:
(a) changes the basis of taxation of any amounts payable to such
Lender under this Agreement or the Revolving Credit Loans or the Revolving
Credit Note in respect of any of such Libor Rate Loans (other than changes in
the rate of net income tax imposed on such Lender); or
(b) imposes or modifies any reserve, special deposit, deposit
insurance or assessment, minimum capital, capital ratio or similar requirements
relating to any extensions of credit or other assets of, or any deposits with or
other liabilities of, such Lender (including any Libor Rate Loans or any
deposits referred to in the definition of "Libor Rate" in Section 1.01 hereof),
or any Revolving Credit Commitment of such Lender; or
(c) imposes any other condition affecting this Financing Agreement
or the Revolving Credit Loans or the Revolving Credit Note (or any of such
extensions of credit or liabilities).
Without limiting the effect of the provisions of the first paragraph
of this Section 3.17, in the event that, by reason of any Regulatory Change, a
Lender either (1) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits of other
liabilities of such Lender which includes deposits by reference to which the
Libor Rate is determined as provided in this Financing Agreement or a category
of extensions of credit or other assets of such Lender which includes Revolving
Credit Loans based on the Libor Rate or (2) becomes subject to restrictions on
the amount of such a category of liabilities or assets which it may hold, then,
if such Lender so elects by notice to the Borrowers and the Agent, the
obligation of such Lender to make or continue, or to convert Chase Manhattan
Bank Rate Loans into Libor Rate Loans shall be suspended until such Regulatory
Change ceases to be in effect (in which case the provisions of Section 3.18
hereof shall be applicable).
A certificate of any Lender claiming compensation under this
Section, setting forth the additional amount or amounts to be paid to it
hereunder, shall be conclusive in the absence of manifest error.
Section 3.18. Limitation on Types of Revolving Credit Loans.
Anything herein to the contrary notwithstanding, if, on or prior to the
determination of a Libor Rate for any Libor Rate Period:
(a) The Agent or any of the Lenders determines (which determination
shall be conclusive) that quotations of interest rates for the relevant deposits
referred to in the definition of "Libor Rate" in Section 1.01 hereof are not
being provided in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for Libor Rate Loans as provided in
this Financing Agreement; or
(b) Any Lender determines (which determination shall be conclusive)
that the relevant rates of interest referred to in the definition of "Libor
Rate" in Section 1.01 hereof upon the basis of which the rate of interest for
Libor Rate Loans for such Libor Rate Period are to be determined do not
adequately cover the cost to such Lender of making or maintaining such Libor
Rate Loans for such Libor Rate Period; then Agent shall give the Borrower prompt
notice thereof, and so long as such condition remains in effect, such Lenders
shall be under no obligation to make such Libor Rate Loans, convert Chase
Manhattan Bank Rate Loans into such Libor Rate Loans or continue such Libor Rate
Loans and if the Borrower has outstanding Libor Rate Loans shall, on the last
day(s) of the then current Libor Rate Period(s) for such outstanding Libor Rate
Loans, either prepay such Libor Rate Loans or convert such Libor Rate Loans into
a Chase Manhattan Bank Rate Loan in accordance with Section 6.01.
Section 3.19. Illegality. Notwithstanding any other provision of
this Agreement, in the event that it becomes unlawful for any Lender to honor
its obligation to make or maintain Libor Rate Loans hereunder or convert Chase
Manhattan Bank Rate Loans into Libor Rate Loans, then such Lender shall promptly
notify the Borrowers thereof and such Lender's obligation to make or continue,
or to convert a Chase Manhattan Bank Rate Loan into the affected Libor Rate Loan
shall be suspended until such time as such Lender may again
<PAGE>
make and maintain such Libor Rate Loans (in which case the provisions of Section
3.20 hereof shall be applicable).
Section 3.20. Treatment of Affected Loans. If the obligations of a
Lender to make or continue a Libor Rate Loan, or to convert Chase Manhattan Bank
Rate Loans into Libor Rate Loans are suspended pursuant to Section 3.17 or 3.19
hereof (Libor Rate Loans so affected being herein called "Affected Loans"), such
Lender's Affected Loans shall be automatically converted into Chase Manhattan
Bank Rate Loans on the last day(s) of the then current Libor Rate Period(s) for
the Affected Loans (or, in the case of a conversion required by Section 3.17 or
3.19, on such earlier date as such Lender may specify to the Borrowers).
To the extent that such Lender's Affected Loans have been so
converted, all payments and prepayments of principal which would otherwise be
applied to such Lender's Affected Loans shall be applied instead to its Chase
Manhattan Bank Rate Loans. All Revolving Credit Loans which would otherwise be
made or continued by Lenders as Libor Rate Loans shall be made or continued
instead as Chase Manhattan Bank Rate Loans and all Chase Manhattan Bank Rate
Loans of Lenders which would otherwise be converted into Libor Rate Loans shall
remain as Chase Manhattan Bank Rate Loans.
Section 3.21. Adequacy. If any of the Lenders shall have determined
that, after the date hereof, the adoption of any applicable Law, rule or
regulation regarding capital adequacy, 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 any request or directive regarding capital adequacy
(whether or not having the force of Law) of any such Governmental Authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on capital of such Lender (or its Parent) as a consequence of
such Lender's obligations hereunder to a level below that which such Lender
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, the applicable
Borrower shall pay to such Lender such additional amount or amounts as will
compensate such Lender for such reduction. A certificate of a Lender claiming
compensation under this Section 3.21, shall be conclusive in the absence of
manifest error.
ARTICLE IV. GUARANTY
Section 4.01. FiberMark Durable Guaranty. Each FiberMark Durable
Guarantor, jointly and severally, hereby irrevocably, absolutely and
unconditionally guarantees to each Lender Party and their successors, endorsees,
transferees and assigns the prompt and complete payment by FiberMark Durable as
and when due and payable (whether at stated maturity or by required prepayment,
acceleration, demand or otherwise), of all FiberMark Durable Obligations now
existing or hereafter incurred by FiberMark Durable, and agrees to pay on demand
any and all expenses (including counsel fees and expenses) which may be paid or
incurred by any Lender Party in collecting any or all of FiberMark Durable
Obligations and/or enforcing any rights under this Guaranty or under FiberMark
Durable Obligations.
Section 4.02. Fibermark Durable Guarantors' Guaranty Obligations
Unconditional. Each FiberMark Durable Guarantor hereby jointly and severally
guarantees that the FiberMark Durable Obligations will be paid strictly in
accordance with the terms of the Loan Documents and other agreements to which
FiberMark Durable is a party, regardless of any Law now or hereafter in effect
in any jurisdiction affecting any such terms or the rights of any Lender Party
with respect thereto. The obligations and liabilities of each FiberMark Durable
Guarantor under this Guaranty shall be absolute and unconditional irrespective
of: (1) any lack of validity or enforceability of any of FiberMark Durable
Obligations, any Loan Document, or any agreement or instrument relating thereto;
(2) any change in the time, manner or place of payment of, or in any other term
in respect of, all or any of FiberMark Durable Obligations, or any other
amendment or waiver of or consent to any departure from any Loan Document or any
other documents or instruments executed in connection with or related to
FiberMark Durable Obligations; (3) any exchange or release of, or non-perfection
of any Lien on or in, any Collateral, or any release or amendment or waiver of
or
<PAGE>
consent to any departure from any other guaranty, for all or any of FiberMark
Durable Obligations; or (4) any other circumstances which might otherwise
constitute a defense available to, or a discharge of, FiberMark Durable or any
guarantor in respect of FiberMark Durable Obligations or the FiberMark Durable
Guarantors in respect of this Guaranty.
This FiberMark Durable Guaranty is a continuing guaranty and shall
remain in full force and effect until: (1) the payment in full and indefeasible
satisfaction of all FiberMark Durable Obligations (after the Revolving Credit
Termination Date), and (2) the payment of the other expenses to be paid by
FiberMark Durable pursuant hereto. This FiberMark Durable Guaranty shall
continue to be effective or shall be reinstated, as the case may be, if at any
time any payment, or any part thereof, of any of FiberMark Durable Obligations
is rescinded or must otherwise be returned by any Lender Party upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of FiberMark
Durable or any Guarantor or otherwise, all as though such payment had not been
made.
The obligations and liabilities of FiberMark Durable and each
FiberMark Durable Guarantor under this FiberMark Durable Guaranty shall not be
conditioned or contingent upon the pursuit by any Lender or any other Person at
any time of any right or remedy against FiberMark Durable or any FiberMark
Durable Guarantor or any other Person which may be or become liable in respect
of all or any part of FiberMark Durable Obligations or against any Collateral or
security or guarantee therefor or right of setoff with respect thereto.
FiberMark Durable and each FiberMark Durable Guarantor hereby
consents that, without the necessity of any reservation of rights against
FiberMark Durable or any FiberMark Durable Guarantor and without notice to or
further assent by FiberMark Durable or any FiberMark Durable Guarantor any
demand for payment of any of FiberMark Durable Obligations made by any Lender
Party may be rescinded by such Lender Party and any of FiberMark Durable
Obligations continued after such rescission.
Section 4.03. Waivers. To the extent permitted by applicable law,
FiberMark Durable and each FiberMark Durable Guarantor hereby waives: (1)
promptness and diligence; (2) notice of or proof of reliance by any Lender Party
upon this FiberMark Durable Guaranty or acceptance of this FiberMark Durable
Guaranty; (3) notice of the incurrence of any FiberMark Durable Obligations by
FiberMark Durable or FiberMark Durable Guaranty Obligation by any FiberMark
Durable Guarantor or the renewal, extension or accrual of any FiberMark Durable
Obligation or FiberMark Durable Guaranty Obligation; (4) notice of any actions
taken by any Lender Party, FiberMark Durable, any FiberMark Durable Guarantor or
any other party under any Loan Document, or any other agreement or instrument
relating to FiberMark Durable Obligations; (5) all other notices, demands and
protests, and all other formalities of every kind in connection with the
enforcement of FiberMark Durable Obligations or of the obligations of FiberMark
Durable or any FiberMark Durable Guarantor hereunder, the omission of or delay
in which, but for the provisions of this Section 4.3, might constitute grounds
for relieving FiberMark Durable or any FiberMark Durable Guarantor of its
obligations hereunder; and (6) any requirement that any Lender Party protect,
secure, perfect or insure any Lien on any property subject thereto or exhaust
any right or take any action against FiberMark Durable or any FiberMark Durable
Guarantor or any other Person or any Collateral.
Section 4.04. Subrogation. FiberMark Durable and each FiberMark
Durable Guarantor agrees that it hereby waives and releases any rights which it
may acquire by way of subrogation under this FiberMark Durable Guaranty, whether
acquired by any payment made hereunder, by any setoff or application of funds of
FiberMark Durable or any FiberMark Durable Guarantor by any Lender Party or
otherwise.
Section 4.05. FiberMark Filter Guaranty. Each FiberMark Filter
Guarantor, jointly and severally, hereby irrevocably, absolutely and
unconditionally guarantees to each Lender Party and their successors, endorsees,
transferees and assigns the prompt and complete payment by FiberMark Filter as
and when due and payable (whether at stated maturity or by required prepayment,
acceleration, demand or otherwise), of all FiberMark Filter Obligations now
existing or hereafter incurred by FiberMark Filter, and agrees to pay on demand
any and all expenses (including counsel fees and expenses) which may be paid or
incurred by any Lender Party in collecting any or all of FiberMark Filter
Obligations and/or enforcing any rights under this Guaranty or under FiberMark
Filter Obligations.
<PAGE>
Section 4.06. Fibermark Filter Guarantors' Guaranty Obligations
Unconditional. Each FiberMark Filter Guarantor hereby jointly and severally
guarantees that the FiberMark Filter Obligations will be paid strictly in
accordance with the terms of the Loan Documents and other agreements to which
FiberMark Filter is a party, regardless of any Law now or hereafter in effect in
any jurisdiction affecting any such terms or the rights of any Lender Party with
respect thereto. The obligations and liabilities of each FiberMark Filter
Guarantor under this Guaranty shall be absolute and unconditional irrespective
of: (1) any lack of validity or enforceability of any of FiberMark Filter
Obligations, any Loan Document, or any agreement or instrument relating thereto;
(2) any change in the time, manner or place of payment of, or in any other term
in respect of, all or any of FiberMark Filter Obligations, or any other
amendment or waiver of or consent to any departure from any Loan Document or any
other documents or instruments executed in connection with or related to
FiberMark Filter Obligations; (3) any exchange or release of, or non-perfection
of any Lien on or in, any Collateral, or any release or amendment or waiver of
or consent to any departure from any other guaranty, for all or any of FiberMark
Filter Obligations; or (4) any other circumstances which might otherwise
constitute a defense available to, or a discharge of, FiberMark Filter or any
guarantor in respect of FiberMark Filter Obligations or the FiberMark Filter
Guarantors in respect of this Guaranty.
This FiberMark Filter Guaranty is a continuing guaranty and shall
remain in full force and effect until: (1) the payment in full and indefeasible
satisfaction of all FiberMark Filter Obligations (after the Revolving Credit
Termination Date), and (2) the payment of the other expenses to be paid by
FiberMark Filter pursuant hereto. This FiberMark Filter Guaranty shall continue
to be effective or shall be reinstated, as the case may be, if at any time any
payment, or any part thereof, of any of FiberMark Filter Obligations is
rescinded or must otherwise be returned by any Lender Party upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of FiberMark Filter or
any Guarantor or otherwise, all as though such payment had not been made.
The obligations and liabilities of FiberMark Filter and each
FiberMark Filter Guarantor under this FiberMark Filter Guaranty shall not be
conditioned or contingent upon the pursuit by any Lender or any other Person at
any time of any right or remedy against FiberMark Filter or any FiberMark Filter
Guarantor or any other Person which may be or become liable in respect of all or
any part of FiberMark Filter Obligations or against any Collateral or security
or guarantee therefor or right of setoff with respect thereto.
FiberMark Filter and each FiberMark Filter Guarantor hereby consents
that, without the necessity of any reservation of rights against FiberMark
Filter or any FiberMark Filter Guarantor and without notice to or further assent
by FiberMark Filter or any FiberMark Filter Guarantor any demand for payment of
any of FiberMark Filter Obligations made by any Lender Party may be rescinded by
such Lender Party and any of FiberMark Filter Obligations continued after such
rescission.
Section 4.07. Waivers. To the extent permitted by applicable law,
FiberMark Filter and each FiberMark Filter Guarantor hereby waives: (1)
promptness and diligence; (2) notice of or proof of reliance by any Lender Party
upon this FiberMark Filter Guaranty or acceptance of this FiberMark Filter
Guaranty; (3) notice of the incurrence of any FiberMark Filter Obligations by
FiberMark Filter or FiberMark Filter Guaranty Obligation by any FiberMark Filter
Guarantor or the renewal, extension or accrual of any FiberMark Filter
Obligation or FiberMark Filter Guaranty Obligation; (4) notice of any actions
taken by any Lender Party, FiberMark Filter, any FiberMark Filter Guarantor or
any other party under any Loan Document, or any other agreement or instrument
relating to FiberMark Filter Obligations; (5) all other notices, demands and
protests, and all other formalities of every kind in connection with the
enforcement of FiberMark Filter Obligations or of the obligations of FiberMark
Filter or any FiberMark Filter Guarantor hereunder, the omission of or delay in
which, but for the provisions of this Section 4.3, might constitute grounds for
relieving FiberMark Filter or any FiberMark Filter Guarantor of its obligations
hereunder; and (6) any requirement that any Lender Party protect, secure,
perfect or insure any Lien on any property subject thereto or exhaust any right
or take any action against FiberMark Filter or any FiberMark Filter Guarantor or
any other Person or any Collateral.
Section 4.08. Subrogation. FiberMark Filter and each FiberMark
Filter Guarantor agrees that it hereby waives and releases any rights which it
may acquire by way of subrogation under this
<PAGE>
FiberMark Filter Guaranty, whether acquired by any payment made hereunder, by
any setoff or application of funds of FiberMark Filter or any FiberMark Filter
Guarantor by any Lender Party or otherwise.
Section 4.09. FiberMark Office Guaranty. Each FiberMark Office
Guarantor, jointly and severally, hereby irrevocably, absolutely and
unconditionally guarantees to each Lender Party and their successors, endorsees,
transferees and assigns the prompt and complete payment by FiberMark Office as
and when due and payable (whether at stated maturity or by required prepayment,
acceleration, demand or otherwise), of all FiberMark Office Obligations now
existing or hereafter incurred by FiberMark Office, and agrees to pay on demand
any and all expenses (including counsel fees and expenses) which may be paid or
incurred by any Lender Party in collecting any or all of FiberMark Office
Obligations and/or enforcing any rights under this Guaranty or under FiberMark
Office Obligations.
Section 4.10. Fibermark Office Guarantors' Guaranty Obligations
Unconditional. Each FiberMark Office Guarantor hereby jointly and severally
guarantees that the FiberMark Office Obligations will be paid strictly in
accordance with the terms of the Loan Documents and other agreements to which
FiberMark Office is a party, regardless of any Law now or hereafter in effect in
any jurisdiction affecting any such terms or the rights of any Lender Party with
respect thereto. The obligations and liabilities of each FiberMark Office
Guarantor under this Guaranty shall be absolute and unconditional irrespective
of: (1) any lack of validity or enforceability of any of FiberMark Office
Obligations, any Loan Document, or any agreement or instrument relating thereto;
(2) any change in the time, manner or place of payment of, or in any other term
in respect of, all or any of FiberMark Office Obligations, or any other
amendment or waiver of or consent to any departure from any Loan Document or any
other documents or instruments executed in connection with or related to
FiberMark Office Obligations; (3) any exchange or release of, or non-perfection
of any Lien on or in, any Collateral, or any release or amendment or waiver of
or consent to any departure from any other guaranty, for all or any of FiberMark
Office Obligations; or (4) any other circumstances which might otherwise
constitute a defense available to, or a discharge of, FiberMark Office or any
guarantor in respect of FiberMark Office Obligations or the FiberMark Office
Guarantors in respect of this Guaranty.
This FiberMark Office Guaranty is a continuing guaranty and shall
remain in full force and effect until: (1) the payment in full and indefeasible
satisfaction of all FiberMark Office Obligations (after the Revolving Credit
Termination Date), and (2) the payment of the other expenses to be paid by
FiberMark Office pursuant hereto. This FiberMark Office Guaranty shall continue
to be effective or shall be reinstated, as the case may be, if at any time any
payment, or any part thereof, of any of FiberMark Office Obligations is
rescinded or must otherwise be returned by any Lender Party upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of FiberMark Office or
any Guarantor or otherwise, all as though such payment had not been made.
The obligations and liabilities of FiberMark Office and each
FiberMark Office Guarantor under this FiberMark Office Guaranty shall not be
conditioned or contingent upon the pursuit by any Lender or any other Person at
any time of any right or remedy against FiberMark Office or any FiberMark Office
Guarantor or any other Person which may be or become liable in respect of all or
any part of FiberMark Office Obligations or against any Collateral or security
or guarantee therefor or right of setoff with respect thereto.
FiberMark Office and each FiberMark Office Guarantor hereby consents
that, without the necessity of any reservation of rights against FiberMark
Office or any FiberMark Office Guarantor and without notice to or further assent
by FiberMark Office or any FiberMark Office Guarantor any demand for payment of
any of FiberMark Office Obligations made by any Lender Party may be rescinded by
such Lender Party and any of FiberMark Office Obligations continued after such
rescission.
Section 4.11. Waivers. To the extent permitted by applicable law,
FiberMark Office and each FiberMark Office Guarantor hereby waives: (1)
promptness and diligence; (2) notice of or proof of reliance by any Lender Party
upon this FiberMark Office Guaranty or acceptance of this FiberMark Office
Guaranty; (3) notice of the incurrence of any FiberMark Office Obligations by
FiberMark Office or FiberMark Office Guaranty Obligation by any FiberMark Office
Guarantor or the renewal, extension or accrual of any FiberMark Office
Obligation or FiberMark Office Guaranty Obligation; (4) notice of any actions
taken by any
<PAGE>
Lender Party, FiberMark Office, any FiberMark Office Guarantor or any other
party under any Loan Document, or any other agreement or instrument relating to
FiberMark Office Obligations; (5) all other notices, demands and protests, and
all other formalities of every kind in connection with the enforcement of
FiberMark Office Obligations or of the obligations of FiberMark Office or any
FiberMark Office Guarantor hereunder, the omission of or delay in which, but for
the provisions of this Section 4.3, might constitute grounds for relieving
FiberMark Office or any FiberMark Office Guarantor of its obligations hereunder;
and (6) any requirement that any Lender Party protect, secure, perfect or insure
any Lien on any property subject thereto or exhaust any right or take any action
against FiberMark Office or any FiberMark Office Guarantor or any other Person
or any Collateral.
Section 4.12. Subrogation. FiberMark Office and each FiberMark
Office Guarantor agrees that it hereby waives and releases any rights which it
may acquire by way of subrogation under this FiberMark Office Guaranty, whether
acquired by any payment made hereunder, by any setoff or application of funds of
FiberMark Office or any FiberMark Office Guarantor by any Lender Party or
otherwise.
Section 4.13. FiberMark Guaranty. Each FiberMark Guarantor, jointly
and severally, hereby irrevocably, absolutely and unconditionally guarantees to
each Lender Party and their successors, endorsees, transferees and assigns the
prompt and complete payment by FiberMark as and when due and payable (whether at
stated maturity or by required prepayment, acceleration, demand or otherwise),
of all FiberMark Obligations now existing or hereafter incurred by FiberMark,
and agrees to pay on demand any and all expenses (including counsel fees and
expenses) which may be paid or incurred by any Lender Party in collecting any or
all of FiberMark Obligations and/or enforcing any rights under this Guaranty or
under FiberMark Obligations.
Section 4.14. Fibermark Guarantors' Guaranty Obligations
Unconditional. Each FiberMark Guarantor hereby jointly and severally guarantees
that the FiberMark Obligations will be paid strictly in accordance with the
terms of the Loan Documents and other agreements to which FiberMark is a party,
regardless of any Law now or hereafter in effect in any jurisdiction affecting
any such terms or the rights of any Lender Party with respect thereto. The
obligations and liabilities of each FiberMark Guarantor under this Guaranty
shall be absolute and unconditional irrespective of: (1) any lack of validity or
enforceability of any of FiberMark Obligations, any Loan Document, or any
agreement or instrument relating thereto; (2) any change in the time, manner or
place of payment of, or in any other term in respect of, all or any of FiberMark
Obligations, or any other amendment or waiver of or consent to any departure
from any Loan Document or any other documents or instruments executed in
connection with or related to FiberMark Obligations; (3) any exchange or release
of, or non-perfection of any Lien on or in, any Collateral, or any release or
amendment or waiver of or consent to any departure from any other guaranty, for
all or any of FiberMark Obligations; or (4) any other circumstances which might
otherwise constitute a defense available to, or a discharge of, FiberMark or any
guarantor in respect of FiberMark Obligations or the FiberMark Guarantors in
respect of this Guaranty.
This FiberMark Guaranty is a continuing guaranty and shall remain in
full force and effect until: (1) the payment in full and indefeasible
satisfaction of all FiberMark Obligations (after the Revolving Credit
Termination Date), and (2) the payment of the other expenses to be paid by
FiberMark pursuant hereto. This FiberMark Guaranty shall continue to be
effective or shall be reinstated, as the case may be, if at any time any
payment, or any part thereof, of any of FiberMark Obligations is rescinded or
must otherwise be returned by any Lender Party upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of FiberMark or any Guarantor or
otherwise, all as though such payment had not been made.
The obligations and liabilities of FiberMark and each FiberMark
Guarantor under this FiberMark Guaranty shall not be conditioned or contingent
upon the pursuit by any Lender or any other Person at any time of any right or
remedy against FiberMark or any FiberMark Guarantor or any other Person which
may be or become liable in respect of all or any part of FiberMark Obligations
or against any Collateral or security or guarantee therefor or right of setoff
with respect thereto.
FiberMark and each FiberMark Guarantor hereby consents that, without
the necessity of any reservation of rights against FiberMark or any FiberMark
Guarantor and without notice to or further assent by
<PAGE>
FiberMark or any FiberMark Guarantor any demand for payment of any of FiberMark
Obligations made by any Lender Party may be rescinded by such Lender Party and
any of FiberMark Obligations continued after such rescission.
Section 4.15. Waivers. To the extent permitted by applicable law,
FiberMark and each FiberMark Guarantor hereby waives: (1) promptness and
diligence; (2) notice of or proof of reliance by any Lender Party upon this
FiberMark Guaranty or acceptance of this FiberMark Guaranty; (3) notice of the
incurrence of any FiberMark Obligations by FiberMark or FiberMark Guaranty
Obligation by any FiberMark Guarantor or the renewal, extension or accrual of
any FiberMark Obligation or FiberMark Guaranty Obligation; (4) notice of any
actions taken by any Lender Party, FiberMark , any FiberMark Guarantor or any
other party under any Loan Document, or any other agreement or instrument
relating to FiberMark Obligations; (5) all other notices, demands and protests,
and all other formalities of every kind in connection with the enforcement of
FiberMark Obligations or of the obligations of FiberMark or any FiberMark
Guarantor hereunder, the omission of or delay in which, but for the provisions
of this Section 4.3, might constitute grounds for relieving FiberMark or any
FiberMark Guarantor of its obligations hereunder; and (6) any requirement that
any Lender Party protect, secure, perfect or insure any Lien on any property
subject thereto or exhaust any right or take any action against FiberMark or any
FiberMark Guarantor or any other Person or any Collateral.
Section 4.16. Subrogation. FiberMark and each FiberMark Guarantor
agrees that it hereby waives and releases any rights which it may acquire by way
of subrogation under this FiberMark Guaranty, whether acquired by any payment
made hereunder, by any setoff or application of funds of FiberMark or any
FiberMark Guarantor by any Lender Party or otherwise.
ARTICLE V. COLLATERAL
Section 5.01. (a) Grant of a Security Interest by FiberMark Office.
As security for the prompt payment in full of all FiberMark Office Obligations,
FiberMark Office hereby pledges and grants to the Agent for the ratable benefit
of the Lenders a continuing general Lien upon and security interest in all of
its:
(1) present and hereafter acquired Inventory;
(2) present and future Accounts; and
(3) the Brattleboro Collateral.
The security interests granted hereunder shall extend and attach to:
(i) All Collateral which is presently in existence and which is
owned by FiberMark Office or in which FiberMark Office has any interest, whether
held by FiberMark Office or others for its account, and, if any Brattleboro
Collateral is Equipment, whether FiberMark Office's interest in such Equipment
is as owner or lessee or conditional vendee;
(ii) All Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either the Agent or FiberMark Office from
FiberMark Office's customers, as well as to all supplies, goods, incidentals,
packaging materials, labels and any other items which contribute to the finished
goods or products manufactured or processed by FiberMark Office or to the sale,
promotion or shipment thereof; and
(iii) All proceeds of any and all of the foregoing.
(b) Grant of a Security Interest by FIberMark. As security for the
prompt payment and performance in full of all of the FiberMark Obligations,
FiberMark hereby pledges and grants to the Agent for the ratable benefit of the
Lenders a continuing general Lien upon and security interest in all of its:
<PAGE>
(1) present and hereafter acquired Inventory; and
(2) present and future Accounts.
The security interests granted hereunder shall extend and attach to:
(i) All Collateral which is presently in existence and which is
owned by FiberMark or in which FiberMark has any interest, whether held by
FiberMark or others for its account;
(ii) All Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either the Agent or FiberMark from
FiberMark's customers, as well as to all supplies, goods, incidentals, packaging
materials, labels and any other items which contribute to the finished goods or
products manufactured or processed by FiberMark or to the sale, promotion or
shipment thereof; and
(iii) All proceeds of any and all of the foregoing.
(c) Grant of a Security Interest by FiberMark Durable. As security
for the prompt payment and performance in full of all of the FiberMark Durable
Obligations, FiberMark Durable hereby pledges and grants to the Agent for the
ratable benefit of the Lenders a continuing general Lien upon and security
interest in all of its:
(1) present and hereafter acquired Inventory; and
(2) present and future Accounts.
The security interests granted hereunder shall extend and attach to:
(i) All Collateral which is presently in existence and which is
owned by FiberMark Durable or in which FiberMark Durable has any interest,
whether held by FiberMark Durable or others for its account;
(ii) All Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either the Agent or FiberMark Durable from
FiberMark Durable's customers, as well as to all supplies, goods, incidentals,
packaging materials, labels and any other items which contribute to the finished
goods or products manufactured or processed by FiberMark Durable or to the sale,
promotion or shipment thereof; and
(iii) All proceeds of any and all of the foregoing.
(d) Grant of a Security Interest by FiberMark Filter. As security
for the prompt payment and performance in full of all of the FiberMark Filter
Obligations, FiberMark Filter hereby pledges and grants to the Agent for the
ratable benefit of the Lenders a continuing general Lien upon and security
interest in all of its:
(1) present and hereafter acquired Inventory; and
(2) present and future Accounts.
The security interests granted hereunder shall extend and attach to:
(i) All Collateral which is presently in existence and which is
owned by FiberMark Filter or in which FiberMark Filter has any interest, whether
held by FiberMark Filter or others for its account;
(ii) All Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either the Agent or FiberMark Filter from
FiberMark Filter's customers, as well as to all supplies, goods, incidentals,
packaging materials, labels and any other items which contribute to the finished
goods or products manufactured or processed by FiberMark Filter or to the sale,
promotion or shipment thereof; and
(iii) All proceeds of any and all of the foregoing.
<PAGE>
Section 5.02. Covenants Regarding Inventory. Each Obligor agrees to
safeguard, protect and hold all Inventory for the Lenders' account and make no
disposition thereof except in the regular course of the business of such Obligor
as herein provided. Until the Agent has given such Obligor notice to the
contrary, as provided for below, any Inventory may be sold and shipped by such
Obligor to its customers in the ordinary course of such Obligor's business, on
open account and on terms currently being extended by such Obligor to its
customers, provided that all proceeds of all sales (including cash, accounts
receivable, checks, notes, instruments for the payment of money and similar
proceeds) are forthwith transferred, endorsed, and turned over and delivered to
the Agent for the ratable benefit of the Lenders in accordance with Section 3.06
of this Financing Agreement. The Agent shall have the right to withdraw this
permission at any time upon the occurrence of an Event of Default and until such
time as such Event of Default is waived, in which event no further disposition
shall be made of the Inventory by such Obligor without the Agent's prior written
approval. Cash sales or sales of Inventory in which a Lien upon, or security
interest in, Inventory is retained by such Obligor shall be made by such Obligor
only with the approval of the Agent, and the proceeds of such sales or sales of
Inventory for cash shall not be commingled with such Obligor's other property,
but shall be segregated, held by such Obligor in trust for the Lenders as the
Lenders' exclusive property, and shall be delivered immediately by such Obligor
to the Agent in the identical form received by such Obligor by deposit to the
Depository Accounts. Upon the sale, exchange, or other disposition of Inventory,
as herein provided, the security interest in such Obligor's Inventory provided
for herein shall, without break in continuity and without further formality or
act, continue in, and attach to, all proceeds, including any instruments for the
payment of money, accounts receivable, contract rights, documents of title,
shipping documents, chattel paper and all other cash and non-cash proceeds of
such sale, exchange or disposition. As to any such sale, exchange or other
disposition, the Agent shall have all of the rights of an unpaid seller,
including stoppage in transit, replevin, rescission and reclamation.
Section 5.03. Covenants Regarding Equipment. The Equipment is and
will only be used by FiberMark Office in its business and will not be held for
sale or lease, or removed from its premises, or otherwise disposed of by
FiberMark Office without the prior written approval of the Agent. FiberMark
Office will not sell, transfer, lease or otherwise dispose of any of the
Equipment constituting a part of the Brattleboro Collateral, or attempt, offer
or contract to do so, except for sales of assets permitted by this Financing
Agreement. Concurrently with any such permitted disposition, the property
acquired by a transferee in such disposition shall automatically be released
from the security interest created by this Financing Agreement (the "Security
Interest"). It is acknowledged and agreed that notwithstanding any release of
property from the Security Interest in accordance with the foregoing provisions
of this Section, the Security Interest shall in any event continue in the
proceeds of the Brattleboro Collateral. The Agent shall promptly execute and
deliver (and, when appropriate, shall cause any separate agent, co-agent or
trustee to execute and deliver) any releases, instruments or documents
reasonably requested by FiberMark Office to accomplish or confirm the release of
the Equipment constituting a part of the Brattleboro Collateral provided by this
Section. Any such release of the Equipment constituting a part of the
Brattleboro Collateral provided by the Agent shall specifically describe that
portion of the Brattleboro Collateral to be released, shall be expressed to be
unconditional and shall be without recourse or warranty (other than a warranty
that the Agent has not assigned its rights and interests to any other Person).
FiberMark Office shall pay all of the Agent's out-of-pocket expenses in
connection with any release of the Brattleboro Collateral.
FiberMark Office agrees at its own cost and expense to keep the
Equipment in as good and substantial repair and condition as the same is now or
at the time the Lien and security interest granted herein shall attach thereto,
reasonable wear and tear excepted, making any and all repairs and replacements
when and where necessary. FiberMark Office also agrees to safeguard, protect and
hold all Equipment for the Lenders' account and make no disposition thereof
unless FiberMark Office first obtains the prior written approval of the Agent.
Any sale, exchange or other disposition of any Equipment shall only be made by
FiberMark Office with the prior written approval of the Agent, and the proceeds
of any such sales shall not be commingled with FiberMark Office's other
property, but shall be segregated, held by FiberMark Office in trust for the
Lenders as the Lenders' exclusive property, and shall be delivered immediately
by FiberMark Office to the Agent in the identical form received by FiberMark
Office by deposit to the Depository Accounts. Upon the sale, exchange, or other
disposition of the Equipment, as herein provided, the security interest provided
for herein shall, without break in continuity and without further formality or
act, continue in, and attach to, all proceeds, including any instruments for the
payment of money,
<PAGE>
accounts receivable, contract rights, documents of title, shipping documents,
chattel paper and all other cash and non-cash proceeds of such sales, exchange
or disposition. As to any such sale, exchange or other disposition, the Agent
shall have all of the rights of an unpaid seller, including stoppage in transit,
replevin, rescission and reclamation. Notwithstanding anything hereinabove
contained to the contrary, FiberMark Office may sell, exchange or otherwise
dispose of obsolete Equipment or Equipment no longer needed in FiberMark
Office's operations, provided, however, that (a) the then book value of the
Equipment so disposed of does not exceed Two Hundred Fifty Thousand Dollars
($250,000) in the aggregate in any Fiscal Year and (b) the proceeds of such
sales or dispositions are delivered to the Agent for the ratable benefit of the
Lenders in accordance with the foregoing provisions of this paragraph, except
that FiberMark Office may retain and use such proceeds to purchase forthwith
replacement Equipment which FiberMark Office determines in its reasonable
business judgment to have a collateral value at least equal to the Equipment so
disposed of or sold, provided, however, that the aforesaid right shall
automatically cease upon the occurrence of an Event of Default which is not
waived.
Section 5.04. Collateral Covenant. Each Obligor hereby covenants
that, except for the Permitted Encumbrances, such Obligor is or will be at the
time additional Collateral is acquired by it, the absolute owner of the
Collateral with full right to pledge, sell, consign, transfer and create a
security interest therein, free and clear of any and all claims or Liens in
favor of others; that such Obligor will at its expense forever warrant and, at
the Lenders' and/or the Agent's request, defend the same from any and all claims
and demands of any other person other than the Permitted Encumbrances. Such
Obligor will not grant, create or permit to exist, any Lien upon or security
interest in the Collateral, or any proceeds thereof, in favor of any other
Person other than the holders of the Permitted Encumbrances.
No Obligor will (a) change the location of its chief executive
office/chief place of business from that specified in Schedule 5.04 or remove
its books and records from the location specified in Schedule 5.04, (b) permit
any of the Inventory or Equipment owned by it to be kept at a location other
than those listed on Schedule 5.04 hereto or (c) change its name (including the
adoption of any new trade name), identity or corporate structure unless it shall
have provided at least thirty (30) days prior written notice to the Agent of any
such change. Each Obligor will from time to time notify the Agent of each
location at which any amount of the Collateral or such books and records are to
be kept including for temporary processing, storage or similar purposes. No
Obligor shall remove any amount of Collateral or such books or record to a
location not set forth on Schedule 5.04 or otherwise keep any amount of
Collateral (other than Real Estate, to the extent described in Schedule 5.04A
hereto) at a location not set forth on Schedule 5.04 unless, not less than
thirty (30) days prior to the day such removal or other change occurs such
Obligor shall give written notice to the Agent of such removal or other change
and the new location of such Collateral or such books and records. No action
requiring notice to the Agent under this paragraph shall be effected until such
filings and other measures required under applicable Law to continue
uninterrupted the first perfected security interest and Lien of the Agent in the
Collateral affected thereby shall have been taken, and until the Agent shall
have received such opinions of counsel with respect thereto as it shall have
reasonably requested. Each Obligor also agrees to advise the Agent promptly, in
sufficient detail, of any material adverse change relating to the type, quantity
or quality of the Collateral or to the security interests granted to the Lenders
or the Agent therein. Each Obligor as to itself, hereby authorizes the Agent to
regard its printed name or rubber stamp signature on assignment schedules or
invoices as the equivalent of a manual signature by one of its authorized
officers or agents.
Section 5.05. Covenants Regarding Accounts. No Obligor will (a)
amend, modify, terminate or waive any provision of any contract, license or
agreement giving rise to an Account of such Obligor in any manner which could
reasonably be expected to materially adversely affect the value of such
contract, license or Account as Collateral, (b) fail to exercise promptly and
diligently each and every material right which it may have under each material
contract, license or agreement giving rise to an Account of such Obligor (other
than any right of termination), except in a manner consistent with the ordinary
and customary conduct of its business or (c) fail to deliver to the Agent upon
its reasonable request a copy of each material demand, notice or document
received by it relating in any way to any material contract, license or
agreement giving rise to an Account of such Obligor.
Other than in the ordinary course of business as generally conducted
by such Obligor over a period of time, no Obligor will grant any extension of
the time of payment of any of the Accounts, compromise, compound
<PAGE>
or settle the same for less than the full amount thereof, release, wholly or
partially, any Person liable for the payment thereof, or allow any credit or
discount whatsoever thereon.
Section 5.06. Covenants Regarding Lease Agreement. FiberMark Office
will not amend or modify any of the terms or provisions of the Lease Agreement,
as in effect on the date hereof.
Section 5.07. Continuing Security Interest. The rights and security
interests granted to the Agent for the ratable benefit of the Lenders hereunder
are to continue in full force and effect, notwithstanding the termination of
this Financing Agreement or the fact that the account maintained in any
Borrower's name on the books of the Agent may from time to time be temporarily
in a credit position, until the final payment in full to the Agent and the
Lenders of all Obligations and the termination of this Financing Agreement. Any
delay, or omission by the Agent to exercise any right hereunder, shall not be
deemed a waiver thereof, or be deemed a waiver of any other right, unless such
waiver be in writing and signed by the Agent. A waiver on any one occasion shall
not be construed as a bar to or waiver of any right or remedy on any future
occasion.
Section 5.08. Actions by Agent. To the extent that the Obligations
are now or hereafter secured by any assets or property other than the Collateral
or by the guarantee, endorsement, assets or property of any other Person, then
the Agent shall have the right in its sole discretion to determine which rights,
security, Liens, security interests or remedies the Agent shall at any time
pursue, foreclose upon, relinquish, subordinate, modify or take any other action
with respect to, without in any way modifying or affecting any of them, or any
of the Agent's or the Lenders' rights hereunder.
Section 5.09. Additional Collateral and Further Assurances. Upon the
request of the Agent, each Obligor will, at the sole expense of such Obligor,
promptly and duly execute and deliver such further instruments and documents and
take such further action as the Agent may reasonably request for the purpose of
obtaining or preserving the full benefits of this Financing Agreement, the
Security Documents and of the rights and powers herein and therein granted for
the benefit of the Agent and the Lenders.
Each Obligor will comply with the requirements of all state and
federal Laws in order to grant to the Agent for the benefit of the Lenders valid
and perfected first security interests and Liens in the Collateral, subject only
to the Permitted Encumbrances. The Agent is hereby authorized by each Obligor to
file any financing statements covering the Collateral whether or not the
Obligor's signature appears thereon. Each Obligor agrees to do whatever the
Agent may request, from time to time, by way of: filing notices of Liens,
financing statements, amendments, renewals and continuations thereof;
cooperating with the Agent; keeping stock records; and performing such further
acts as the Lenders may reasonably require in order to perfect the Liens
contemplated by this Financing Agreement in favor of the Lenders for the benefit
of the Lenders.
Any reserves or balances to the credit of the Borrower and any other
property or assets of an Obligor in the possession of the Agent or any of the
Lenders may be held by such holder as security for any Obligations and applied
in whole or partial satisfaction of such Obligations when due. The Liens and
security interests granted herein and any other Lien or security interest the
Agent or any Lender may have in any other assets of an Obligor shall secure
payment and performance of all now existing and future Obligations. The Agent
may in its discretion charge any or all of the Obligations to the account of an
Obligor when due.
This Financing Agreement and the obligation of FiberMark Office to
perform all of its covenants and obligations hereunder are further secured by a
Mortgage (Brattleboro, Vermont) on the Real Estate. FiberMark Office shall give
to the Agent for the ratable benefit of the Lenders from time to time such
mortgage on the Real Estate as the Agent shall require to obtain a valid first
Lien thereon subject only to those exceptions of title as set forth in future
title insurance policies that are satisfactory to the Lenders.
Section 5.10. Additional Information. Each Obligor will execute and
deliver to the Agent, from time to time, such written statements and schedules
as the Agent may reasonably require, designating, identifying or describing the
Collateral pledged to the Lenders or the Agent hereunder, including, without
limitation, such schedules of Accounts as the Agent may reasonably request to
support or confirm any
<PAGE>
information previously given, and such other appropriate reports designating,
identifying and describing the Accounts as the Agent may reasonably require, and
changes after the date hereof in the descriptions of the specific properties
constituting its owned and leased properties. An Obligor's failure, however, to
promptly give the Agent such statements or schedules shall not affect, diminish,
modify or otherwise limit the Lenders' or the Agent's security interests in the
Collateral.
Section 5.11. Compliance with Fair Labor Standards Act. Each Obligor
shall comply in all material respects with all provisions of the Fair Labor
Standards Act as set forth in Sections 201 through 219 of Title 29 of the United
States Code.
ARTICLE VI. INTEREST, FEES AND EXPENSES.
Section 6.01. Method of Electing Interest Rates. The Revolving
Credit Loans made to the Borrowers shall bear interest at either the Chase
Manhattan Bank Rate or the Libor Rate. Thereafter, the applicable Borrower may
from time to time elect to change or continue the Type borne by each Revolving
Credit Loan, as follows:
(a) if such Revolving Credit Loans are Chase Manhattan Bank Rate
Loans, the applicable Borrower may elect to convert such Revolving Credit Loans
to Libor Rate Loans as of any Business Day;
(b) if such Revolving Credit Loans are Libor Rate Loans, the
applicable Borrower may elect to convert such Revolving Credit Loans to Chase
Manhattan Bank Rate Loans or, or elect to continue such Libor Rate Loans as
Libor Rate Loans for an additional Libor Rate Period, in each case effective on
the last day of the then current Libor Rate Period applicable to such Revolving
Credit Loans.
Each such election shall be made by delivering a notice
substantially in the form of Exhibit C hereto (a "Notice of Interest Rate
Selection") to Agent by (1) 12:00 Noon (New York City time) at least one (1)
Business Day before the conversion of a Libor Rate Loan into a Chase Manhattan
Bank Rate Loan, or (2) 12:00 Noon (New York City time) at least three (3)
Business Days before the conversion of a Chase Manhattan Bank Rate Loan into a
Libor Rate Loan or the continuation of a Libor Rate Loan as a Libor Rate Loan. A
Notice of Loan Interest Rate Selection may, if it so specifies, apply to only a
portion of the aggregate principal amount of the relevant Revolving Credit Loan;
provided that the portion to which such notice applies, and the remaining
portion to which it does not apply, each are sufficient to meet the minimum
amount specified in Section 3.14. [WILL ALL LOANS BE AGGREGATED FOR SUCH
PURPOSES?]
Each Notice of Interest Rate Selection relating to a Chase Manhattan
Bank Rate Loan or Libor Rate Loan shall specify:
(i) the Revolving Credit Loan (or portion thereof) to which such
notice applies;
(ii) the date on which the conversion or continuation selected in
such notice is to be effective, which shall comply with the applicable
clause of the first paragraph of this Section 6.01;
(iii) if the Revolving Credit Loans are to be converted, and if such
new Revolving Credit Loans are Libor Rate Loans, the duration of the
initial Libor Rate Period applicable thereto; and
(iv) if such Revolving Credit Loans are to be continued as Libor
Rate Loans for an additional Libor Rate Period, the duration of such
additional Libor Rate Period.
Each Libor Rate Period specified in a Notice of Interest Rate
Selection shall comply with the provisions of the definition of Libor Rate
Period. No conversion into a Libor Rate Loan and no continuation of a Libor Rate
Loan shall be permitted when a Default or Event of Default has occurred and is
continuing. If the applicable Borrower fails to deliver a timely Notice of
Interest Rate Selection to the Agent for any Libor Rate Loans
<PAGE>
to the Borrower such Revolving Credit Loans shall be converted into Chase
Manhattan Bank Rate Loans on the last day of the then current Libor Rate Period
applicable thereto.
Anything herein to the contrary notwithstanding, at no time shall
there be outstanding more than three (3) different Libor Rate Periods relating
to Libor Rate Loans in the aggregate [for all Borrowers].
Section 6.02. Interest. Each applicable Borrower shall pay interest
on the outstanding unpaid principal amount of its Revolving Credit Loans for
each day from and including the date such Revolving Credit Loan is made until
but excluding the date such Revolving Credit Loan is paid in full, at one of the
following rates per annum:
(1) Chase Manhattan Bank Rate Loan. For a Chase Manhattan Bank Rate
Loan, a rate per annum equal at all times to the sum of the Chase Manhattan Bank
Rate in effect for such day plus the Applicable Margin; and
(2) Libor Rate Loan. For a Libor Rate Loan, a rate per annum equal
at all times during each Libor Rate Period of such Revolving Credit Loan to the
sum of the Libor Rate for such Libor Rate Period plus the Applicable Margin.
All accrued and unpaid interest on the Revolving Credit Loans will
be payable in arrears on each Quarterly Date, regardless of interest rate, and
shall be calculated based on a 360 day year. The Agent shall be entitled to
charge the applicable Borrower's account with the applicable interest rate(s)
until all such Obligations have been paid in full.
The interest rate on Chase Manhattan Bank Rate Loans shall change
when the Chase Manhattan Bank Rate changes. Interest on the Chase Manhattan Bank
Rate Loans and the Libor Rate Loans shall not exceed the maximum amount
permitted under applicable Law. Upon the occurrence of an Event of Default
interest will accrue at the Default Rate of Interest as provided in Section
12.02.
Agent shall determine each interest rate applicable to the Revolving
Credit Loans hereunder. Agent shall give prompt notice to the applicable
Borrower and each Lender of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
Section 6.03. Fees. During the period from the Closing Date to the
Revolving Credit Commitment Termination Date, [FiberMark] agrees to pay to the
Agent for the account of each Lender the Unused Line Fee relating to the
Revolving Credit Commitment to the Borrowers. All Unused Line Fees are payable
in arrears on each Quarterly Payment Date. Upon receipt of any such Unused Line
Fee, the Agent will promptly thereafter cause to be distributed to each Lender
its Pro Rata Share of such Fee.
The Borrowers jointly and severally shall reimburse or pay the
Agent, as the case may be, for (i) all Out-of-Pocket Expenses of the Agent
and/or the Lenders, and (ii) any applicable Documentation Fee.
On April 30, 1997 and each anniversary thereof, [FiberMark] shall
pay to the Agent a Collateral Management Fee (for its own account) in the amount
of Thirty-Five Thousand Dollars ($35,000). All the fees under this paragraph are
"Collateral Management Fees" and shall be fully earned when paid and shall not
be refundable or rebateable by reason of prepayment, acceleration upon an Event
of Default, or any other circumstance and shall survive any termination of this
Financing Agreement.
Each Obligor shall pay the Agent's standard charges for, and the
fees and expenses of, the Agent's personnel used by the Agent for reviewing the
books and records of such Obligor and for verifying, testing, protecting,
safeguarding, preserving or disposing of all or any part of the Collateral,
provided, however, that the foregoing shall not be payable until the occurrence
of an Event of Default if [FiberMark] is paying a Collateral Management Fee.
<PAGE>
Each Borrower hereby authorizes the Agent to charge such Borrower's
accounts with the Agent with the amount of all payments due hereunder as such
payments become due. Each Borrower confirms that any charges which the Agent may
so make to its account as herein provided will be made as an accommodation to
such Borrower and solely at the Agent's discretion.
Section 6.04. Payments and Computations. Each Borrower shall make
each principal and interest payment and pay all fees not later than 12:00 Noon
(New York time) on the day when due in Dollars in immediately available funds in
New York City to Agent at its principal office.
All computations of interest on Libor Rate Loans, Chase Manhattan
Bank Rate Loans and fees, shall be made by Agent on the basis of a year of three
hundred sixty (360) days and paid, in each case, for the actual number of days
elapsed (including the first day but excluding the last day). Each determination
by Agent of an interest rate or fees hereunder shall be conclusive and binding
for all purposes absent manifest error.
Calculation of all amounts payable to the Agent for the ratable
benefit of the Lenders under this Financing Agreement with regard to Libor Rate
Loans shall be made as though the Lenders had actually funded the Libor Rate
Loans through the purchase of deposits in the relevant market and currency, as
the case may be, bearing interest at the rate applicable to such Libor Rate
Loans and having a maturity comparable to the relevant Libor Period, provided,
however, that the Lenders may fund each of the Libor Rate Loans in any manner as
the Agent sees fit and the foregoing assumption shall be used only for
calculation of amounts payable under the Financing Agreement.
Whenever any payment of principal or interest (except on Libor Rate
Loans) or of fees shall be due on a day which is not a Business Day, such
payment shall be made on the next succeeding Business Day. Whenever any payment
of principal or interest on a Libor Rate Loan shall be due on a day which is not
a Business Day, such payment shall be made on the next succeeding Business Day
unless such Business Day falls in another calendar month, in which case the date
for payment thereof shall be the next preceding Business Day. If the date for
any payment of principal is extended by operation of Law or otherwise, interest
thereon shall be payable for such extended time.
Section 6.05. Certain Compensation. Each Borrower hereby agrees to
indemnify the Agent and each Lender and hold the Agent and each Lender harmless
from any loss, cost or expense they may sustain or incur as a consequence of the
failure by such Borrower to complete any borrowing hereunder of a Libor Rate
after notice thereof has been given by such Borrower to the Agent, including,
without limitation, any loss, cost or expense incurred by reason of the
liquidation or re-employment of deposits or other funds acquired by the Agent to
fund such borrowing when the applicable amount of the Revolving Credit Loan, as
a result of such failure, is not made subject to such interest rates on such
date. The Agent shall certify the amount of its and/or the Lenders' loss, cost
or expense to the applicable Borrower, and such certification shall be final and
conclusive absent manifest error.
Without limiting the foregoing, such compensation shall include the
Libor Rate Prepayment Premium.
ARTICLE VII. POWERS.
Section 7.01. Powers. Each Obligor hereby constitutes the Agent or
any person or agent the Agent may designate as its attorney-in-fact, at such
Obligor's cost and expense, to exercise all of the following powers, which being
coupled with an interest, shall be irrevocable until all of the Obligations to
the Agent and the Lenders have been paid in full after the termination of this
Financing Agreement:
(1) To receive, take, endorse, sign, assign and deliver, all in the
name of the Agent, the Lenders, or such Obligor, any and all checks, notes,
drafts, and other documents or instruments relating to the Collateral;
<PAGE>
(1) To receive, open and dispose of all mail addressed to such
Obligor and to notify postal authorities to change the address for delivery
thereof to such address as the Agent may designate;
(2) To request from customers indebted on Accounts at any time, in
the name of the Agent or such Obligor or that of the Agent's designee,
information concerning the amounts owing on the Accounts;
(3) To transmit to customers indebted on Accounts notice of the
Agent's and the Lenders' interest therein and to notify customers indebted on
Accounts of such Obligor to make payment directly to the Agent for such
Oblibor's account; and
(4) To take or bring, in the name of the Agent, the Lenders or such
Obligor, all steps, actions, suits or proceedings deemed by the Agent necessary
or desirable to enforce or effect collection of the Accounts.
Notwithstanding anything hereinabove contained to the contrary, the
powers set forth in (b), (d) and (e) above may only be exercised after the
occurrence of an Event of Default and until such time as such Event of Default
is waived in writing.
ARTICLE VIII. REPRESENTATIONS AND WARRANTIES
Each of the Obligors, individually and jointly, represents and
warrants that:
Section 8.01. Incorporation, Good Standing and Due Qualification.
Each Corporate Obligor is duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its assets and to transact the business in
which it is now engaged or proposed to be engaged, and is duly qualified as a
foreign corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required except to the extent that
its failure to be so qualified could not result in a Material Adverse Change.
FiberMark Office is duly formed, validly existing and in good standing under the
laws of the jurisdiction of its formation, has the limited liability company
power and authority to own its assets and to transact the business in which it
is now engaged or proposed to be engaged, and is duly qualified as a foreign
entity and in good standing under the laws of each other jurisdiction in which
such qualification is required except to the extent that its failure to be so
qualified could not result in a Material Adverse Change.
Section 8.02. Corporate Power and Authority; No Conflicts. The
execution, delivery and performance by such Obligor of the Loan Documents have
been duly authorized by all necessary corporate action and do not and will not:
(a) in the case of each Corporate Obligor require any consent or approval of its
stockholders and in the case of FiberMark Office require any consent or approval
of its [members]; (b) in the case of each Corporate Obligor contravene its
certificate of incorporation or by-laws and in the case of FiberMark Office
contravene its ______________ or ______________; (c) violate any provision of,
or require any filing (other than the filing of the financing statements
contemplated by the Security Documents), registration, consent or approval under
any Law (including, without limitation, Regulation U), order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to such Obligor; (d) result in a breach of or constitute a default
under or require any consent under any indenture or loan or credit agreement or
any other agreement, lease or instrument to which such Obligor is a party or by
which it or its properties may be bound or affected; (e) result in, or require,
the creation or imposition of any Lien (other than as created under the Security
Documents), upon or with respect to any of the properties now owned or hereafter
acquired by such Person.
Section 8.03. Legally Enforceable Agreements. Each Loan Document is
a legal, valid and binding obligation of such Obligor, enforceable against such
Obligor in accordance with its terms, except to the extent that such enforcement
may be limited by applicable bankruptcy, insolvency and other similar laws
affecting creditors' rights generally.
Section 8.04. Litigation. Except as disclosed in Schedule 8.04
hereto, there are no
<PAGE>
actions, suits or proceedings pending or, to the knowledge of any of the
Obligors, as the case may be, threatened, against or affecting such Obligor
before any court, governmental agency or arbitrator, which could, in any one
case or in the aggregate, result in a Material Adverse Change.
Section 8.05. Financial Statements. The consolidated balance sheet
of FiberMark and its Subsidiaries as of December 31, 1995 and December 31, 1996,
the related statements of income, statements of stockholders' equity (deficit)
and statements of cash flows of FiberMark for the Fiscal Years then ended, and
the accompanying footnotes, together with the opinion thereon, dated February
____, 1997, of Coopers & Lybrand LLP, independent certified public accountants,
copies of which have been furnished to the Lenders, are complete and correct and
fairly present the financial condition of FiberMark and its Subsidiaries as at
such dates and the results of the operations of FiberMark and its Subsidiaries
for the periods covered by such statements, all in accordance with GAAP
consistently applied. There are no liabilities of FiberMark and its
Subsidiaries, fixed or contingent, which are material but are not reflected in
the financial statements or in the notes thereto, other than liabilities arising
in the ordinary course of business since December 31, 1996 . No information,
exhibit, or report furnished by FiberMark and its Subsidiaries to the Agent or
any Lender in connection with the negotiation of this Financing Agreement
contained any material misstatement of fact or omitted to state a material fact
or any fact necessary to make the statements contained therein not materially
misleading.
The consolidated unaudited balance sheet of FiberMark and its
Subsidiaries as of September 30, 1997, the related statements of income,
statements of stockholders' equity (deficit) and statements of cash flows of
such entities for the nine-month periods then ended, and the accompanying
footnotes, copies of which have been furnished to the Lenders, are complete and
correct and fairly present the financial condition of FiberMark and its
Subsidiaries, as at such dates and the results of the operations of FiberMark
and its Subsidiaries for the periods covered by such statements, all in
accordance with GAAP consistently applied. There are no liabilities of FiberMark
and its Subsidiaries, fixed or contingent, which are material but not reflected
in the financial statements or in the notes thereto, other than liabilities
arising in the ordinary course of business since September 30, 1997. No
information, exhibit, or report furnished by FiberMark and its Subsidiaries to
the Agent or any Lender in connection with the negotiation of this Financing
Agreement contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statements contained therein not
materially misleading.
(c) No Material Adverse Change. Since December 31, 1996 there has
been no Material Adverse Change with respect to any Obligor.
Section 8.06. Ownership and Liens. No Obligor has any fee interests
in any real property or leasehold interests in real property having an unexpired
term (including any option or renewal periods) in excess of 20 years other than
the interest encumbered by the Mortgage (Brattleboro, Vermont). Each Obligor has
title to, or valid leasehold interests in, all of its properties and assets,
real and personal, including the properties and assets, and leasehold interests
reflected in the financial statements referred to in Section 5.05 (other than
any properties or assets disposed of in the ordinary course of business), and
none of the properties and assets owned by such Obligor and none of its
leasehold interests is subject to any Lien, except Permitted Encumbrances.
Section 8.07. Taxes. Each Obligor has filed all tax returns
(federal, state and local) required to be filed and has paid all taxes,
assessments and governmental charges and levies thereon to be due, including
interest and penalties, except to the extent they are the subject of a Good
Faith Contest.
Section 8.08. ERISA. Each Obligor is substantially in compliance
with all applicable provisions of ERISA and the Code. No Reportable Event has
occurred with respect to any Pension Plan; no notice of intent to terminate a
Pension Plan has been filed nor has any Pension Plan been terminated; no Obligor
nor any other Person, including any fiduciary, has engaged in any prohibited
transaction (as defined in Section 4975 of the Code or Section 406 of ERISA)
which could subject any Obligor, or any entity which any Obligor has an
obligation to indemnify, to any tax or penalty imposed under Section 4975 of the
Code or Section 502 of ERISA; there is no lien outstanding pursuant to Section
4068 of ERISA or Section 412 of the Code or security interest, within the
meaning of Section 401(a)(29) of the Code, given in connection with a Pension
Plan; no
<PAGE>
circumstance exists which constitutes grounds under Section 4042 of ERISA
entitling the PBGC to institute proceedings to terminate, or appoint a trustee
to administer, a Pension Plan, nor has the PBGC instituted any such proceedings;
no Obligor, nor any ERISA Affiliate has completely or partially withdrawn under
Sections 4201 or 4204 of ERISA from a Multiemployer Plan; the minimum funding
requirements under ERISA and the Code have been satisfied with respect to all
Pension Plans and the aggregate unfunded liabilities under all Pension Plans
does not exceed Two Hundred Thousand Dollars ($200,000); no Multiemployer Plan
is in Reorganization or is Insolvent; and no Obligor, nor any ERISA Affiliate
has received notice that indicates the existence of potential or contingent
withdrawal liability under a Multiemployer Plan in excess of One Million Eight
Hundred Thousand Dollars ($1,800,000). No Obligor has any liability for retiree
medical or life insurance benefits other than liability with respect to active
employees covered by the Owensboro, Kentucky location and the total FASB
liability for such group is not material to any Obligor.
Section 8.09. Subsidiaries. FiberMark has no Subsidiaries other than
FiberMark Durable and FiberMark Filter. FiberMark Durable has no Subsidiaries.
FiberMark Filter has not Subsidiaries other than FiberMark Office. [STATUS OF
SPECIALTY HONG KONG AND SPECIALTY JAPAN.]
Section 8.10. Operation of Business. Each Obligor possesses all
licenses, permits, franchises, patents, copyrights, trademarks and trade names,
or rights thereto, to conduct its business substantially as now conducted and as
presently proposed to be conducted except where failure to so possess could not
result in a Material Adverse Change and no Obligor is in violation of any valid
rights of others with respect to any of the foregoing.
Section 8.11. No Default on Outstanding Judgments or Orders. Each
Obligor has satisfied all judgments and no Obligor is in default with respect to
any judgment, writ, injunction, decree, rule or regulation of any court,
arbitrator or federal, state, municipal or other Governmental Authority,
commission, board, bureau, agency or instrumentality, domestic or foreign.
Section 8.12. No Defaults on Other Agreements. No Obligor is a party
to any indenture, loan or credit agreement or any lease or other agreement or
instrument or subject to any certificate of incorporation or corporate
restriction which could result in a Material Adverse Change. No Obligor is in
default in any respect in the performance, observance or fulfillment of any of
the obligations, covenants or conditions contained in any agreement or
instrument.
Section 8.13. Labor Disputes and Acts of God. Neither the business
nor the properties of any Obligor are affected by any fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy or other casualty (whether or not
covered by insurance).
Section 8.14. Governmental Regulation. No Obligor is subject to
regulation under the Public Utility Holding Company Act of 1935, the Investment
Company Act of 1940, the Interstate Commerce Act, the Federal Power Act or any
statute or regulation limiting its ability to incur indebtedness for money
borrowed as contemplated hereby.
Section 8.15. Partnerships. No Obligor is a partner in any
partnership.
Section 8.16. Environmental Protection. Each Obligor has obtained
all Approvals and Permits required under all Environmental Laws and such
Approvals and Permits are in good standing. Each Obligor is in compliance with
all Environmental Laws and the terms and conditions of such Approvals and
Permits, and is also in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in those Laws.
No Environmental Lien has attached to the Brattleboro Collateral.
<PAGE>
None of the Real Estate or any other property owned or leased by any
Obligor is listed or proposed for listing on the National Priorities List
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act, as amended, or listed on the Comprehensive Environmental Response,
Compensation and Liability Information System List or any similar state list of
sites, and FiberMark Office is not aware of any conditions at the Real Estate
which, if known to a Governmental Authority, would qualify such Real Estate for
inclusion on any such list.
Except as disclosed in Schedule 8.16,
(a) No Obligor is subject to any plan, order, writ, decree,
judgment, settlement or injunction issued, entered into, promulgated or approved
under or in connection with any Environmental Laws or any Environmental
Discharges;
(b) No Obligor has received any Environmental Notice;
(c) There have been no Environmental Discharges at, to, or from the
Real Estate or any Obligors other property or facilities or operations, except
such Environmental Discharges as have occurred pursuant to and in full
compliance with all Environmental Laws and Approvals and Permits issued
thereunder;
(d) There are not and, to the knowledge of each Obligor, have never
been any Hazardous Materials present at the Real Property or other properties,
facilities or operations of any Obligor, except such Hazardous Materials as are
and were managed pursuant to and in full compliance with all Environmental Laws
and Approvals and Permits issued thereunder;
(e) No Obligor has any actual or contingent liability in connection
with any Environmental Discharges at any location, including, without
limitation, the Real Property, any site to which an Obligor has transported or
arranged for the transport of Hazardous Substances, or any site at which an
Obligor has disposed of Hazardous Substances; and
(f) No Obligor has any actual or contingent liability in connection
with any property, businesses, or operations previously owned or operated by any
such Obligor for (i) any violation of any Environmental Laws, (ii) any Remedial
Action, or (iii) any Environmental Discharges at any location, including,
without limitation, the Real Property, any property, facilities or operations
previously owned or operated by an Obligor, any site to which an Obligor has
transported or arranged for the transport of Hazardous Substances, or any site
at which an Obligor has disposed of Hazardous Substances.
Section 8.17. Solvency. Each Obligor is Solvent.
Section 8.18. Intellectual Property. Except as set forth on Schedule
8.20 hereto, no Obligor has any trademarks, patents or copyrights or any
applications pending for any trademarks, patents or copyrights.
Section 8.19. License of Intellectual Property. Except as set forth
on Schedule 8.21 hereto, no Obligor holds or has it entered into any agreement
for the use of any license for any trademark, patent, copyright or other
intellectual property rights.
ARTICLE IX. AFFIRMATIVE COVENANTS.
So long as any Revolving Credit Loans are outstanding or the Lenders
have any Revolving Credit Commitments hereunder or any other amount is owing to
any Lender hereunder or under any Loan Documents:
Section 9.01. Reporting Requirements. FiberMark will furnish to each
Lender:
<PAGE>
(a) Annual Reporting Requirements: as soon as practicable, and in
any event within one hundred twenty (120) days after the end of each Fiscal Year
of FiberMark, an audited consolidated balance sheet of FiberMark and its
Subsidiaries as at the end of such Year, and audited consolidated statements of
earnings, stockholders' equity (deficit), and cash flow of FiberMark and its
Subsidiaries for such Year, setting forth in each case, in comparative form the
figures for the previous Fiscal Year, certified without qualification arising
out of the scope of the audit by a nationally recognized firm of independent
public accountants or other independent public accountants satisfactory to the
Required Lenders, and unaudited consolidating balance sheets of FiberMark and
its Subsidiaries as at the end of such Year and unaudited consolidating
statements of earnings, stockholders' equity (deficit) and cash flow of
FiberMark and its Subsidiaries for such Year, setting forth in each case in
comparative form the figures for the previous Fiscal Year. FiberMark shall
deliver to the Agent and each Required Lender no later than thirty (30) days
prior to the start of each new Fiscal Year, annual consolidated and
consolidating cash flow projections of FiberMark and its Subsidiaries, including
a projected consolidated and consolidating balance sheet and statements of
earnings, stockholders' equity (deficit), and cash flow for such Fiscal Year in
form satisfactory to the Required Lenders;
(b) Quarterly Reporting Requirements: as soon as practicable, and in
any event within sixty (60) days, after the end of the first, second and third
fiscal quarters of each Fiscal Year of FiberMark, the unaudited consolidated and
consolidating balance sheets of FiberMark and its Subsidiaries as at the end of
such fiscal quarter and the related unaudited consolidated and consolidating
statements of income, stockholders' equity (deficit), and cash flows, setting
forth in each case, in comparative form the figures of the comparable period for
the previous Fiscal Year, certified as to accuracy by FiberMark (subject to
normal year-end audit adjustments);
(c) Officer's Certificate: each financial statement which FiberMark
is required to submit hereunder must be accompanied by an officer's certificate
signed by the chief financial officer of FiberMark certifying that: (i) the
financial statement(s) fairly and accurately represent(s) the consolidated and
consolidating financial condition of FiberMark and its Subsidiaries at the end
of the particular accounting period, as well as the consolidated and
consolidating operating results of FiberMark and its Subsidiaries during such
accounting period, subject to year-end audit adjustments; and (ii) during the
particular accounting period, (A) there has been no default or condition which,
with the passage of time or notice, or both, would constitute a Default or Event
of Default under this Agreement and such officer has obtained no knowledge of
any Default; provided, however, that if any Executive Officer has knowledge that
any Default or Event of Default has occurred during such period, the existence
of and a detailed description of same shall be set forth in the Officer's
Certificate; and (B) FiberMark has not received any notice of cancellation with
respect to its property insurance policies that have not been replaced;
(d) Management Letter: promptly after receipt thereof, a copy of
each report delivered to FiberMark by the independent public accountants which
certify FiberMark's financial statements in connection with any annual or
interim audit of its books, including any management reports or letters, if any,
addressed to FiberMark or any of their respective officers by such accountants;
(e) Other Information: from time to time, with reasonable
promptness, such other information with respect to each Obligor as Agent or
Lender may from time to time reasonably request;
(f) Accounts Receivable Aging Summaries: within thirty (30) days
after the end of each month, Accounts Receivable aging summaries with respect to
each Obligor and within thirty (30) days after the end of each quarter of each
Fiscal Year of such Obligor, detailed Accounts Receivable aging schedules with
respect to each Obligor, prepared in accordance with GAAP, and, if so requested
by the Agent, within sixty (60) days after the close of each Fiscal Year, an
audit of Accounts Receivable of each Obligor for such Fiscal Year prepared by a
nationally-recognized accounting firm acceptable to the Agent;
(g) Reports: promptly after the sending or filing thereof, copies of
all proxy statements, financial statements and reports which FiberMark sends to
all its stockholders, and copies of all regular, periodic and special reports,
and all registration statements which FiberMark files with the Securities and
Exchange Commission or any agency which may be substituted therefor, or with any
national securities exchange; and
(h) Borrowing Base Certificate: within twenty-five (25) days after
the last day of each month or such lesser period of time as the Agent may
require in its sole discretion, a Borrowing Base Certificate.
<PAGE>
Section 9.02. Notices. FiberMark will, promptly upon obtaining
knowledge of any of the following occurrences and promptly upon the giving or
receipt of any of the following notices, deliver to Agent:
(a) written notice of the occurrence of any Default or Event of
Default, specifically stating that a Default or Event of Default, as the case
may be, has occurred and describing such Default or Event of Default;
(b) written notice of the occurrence of any casualty, damage or loss
to or in respect of the Collateral, in an amount greater than Five Hundred
Thousand Dollars ($500,000), whether or not giving rise to a claim under any
insurance policy, together with copies of any document relating thereto
(including copies of any such claim) in possession or control of FiberMark or
any agent of FiberMark;
(c) written notice of any Material Adverse Change;
(d) written notice of any litigation or proceeding affecting any
Obligor which if adversely determined could result in a Material Adverse Change;
(e) written notice of the assertion of any Lien (other than
Permitted Encumbrances) against the Collateral or the occurrence of any event
that could have a material adverse effect on the value of the Collateral or the
Liens created pursuant to this Agreement or any Security Document;
(f) written notice of any cancellation of any insurance policy
required to be maintained by any Obligor pursuant to Section 9.07 hereof;
(g) written notice of (i) all expenditures (actual or anticipated)
in excess of Five Hundred Thousand Dollars ($500,000) for (A) Remedial Action,
(B) compliance with Environmental Laws or (C) environmental testing and the
impact of said expenses on any Obligor's working capital; and (ii) any
Environmental Notices advising an Obligor of any liability (real or potential),
which liability could result in a Material Adverse Change;
(g) on each January ____, a report describing issues (not previously
disclosed to the Lenders under other provisions of this Section 9.02) which have
arisen during the prior year pertaining to Environmental Laws, Environmental
Discharges, Hazardous Materials, and Remedial Action and the action which is
proposed to be taken or being taken with respect thereto;
(h) if and when an Obligor or any ERISA Affiliate (i) gives or is
required to give notice to the PBGC of any Reportable Event with respect to any
Pension Plan, a copy of any notice of such Reportable Event given or required to
be given to the Pension Benefit Guaranty Corporation; (ii) receives notice of a
complete or partial withdrawal liability under Title IV of ERISA or that any
Multiemployer Plan is in Reorganization, is Insolvent or has been terminated, a
copy of such notice; (iii) receives notice from the Pension Benefit Guaranty
Corporation under Title IV of ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or appoint
a trustee to administer any Pension Plan or Multiemployer Plan, a copy of such
notice; (iv) applies for a waiver of the minimum funding standard under Section
412 of the Code, a copy of such application; (v) gives notice of intent to
terminate any Pension Plan under Section 4041(c) of ERISA a copy of such notice
and other information filed with the PBGC; (vi) gives notice of withdrawal from
any Pension Plan pursuant to Section 4063 of ERISA, a copy of such notice; or
(vii) fails to make any required payment or contribution to any Pension Plan or
Multiemployer Plan or makes any amendment to any Pension Plan which has resulted
or is reasonably likely to result in the imposition of a Lien, an accumulated
funding deficiency (as defined in Section 302 of ERISA or Section 412 of the
Code), whether or not waived, or the posting of a bond or other security, a
certificate of the appropriate financial officer setting forth details as to
such occurrence and action, if any which any Obligor or other ERISA Affiliate is
required or proposes to take;
(i) if and when (i) a transaction prohibited under Section 4975 of
the Code or Section 406 of ERISA occurs resulting in liability to any Obligor or
any entity which any Obligor has an obligation to indemnify, (ii) a Pension Plan
intended to qualify under Section 401(a) or 401(k) of the Code fails to so
qualify or (c) liability is
<PAGE>
imposed to enforce Section 515 of ERISA with respect to any Multiemployer Plan,
a certificate of the appropriate financial officer setting forth details as to
such occurrence and action, if any, which such Obligor or other ERISA Affiliate
is required or proposes to take;
(j) written notice of any change in the location of any Collateral,
other than to locations that, as of the date hereof, are known to the Agent and
for which the Agent has filed financing statements and otherwise perfected its
Liens thereon;
(k) written notice, in sufficient detail, of any material adverse
change relating to the type, quantity or quality of the Collateral or on the
security interests granted to the Agent for the ratable benefit of the Lenders.
Each notice pursuant to this Section 9.02 shall be accompanied by a
statement of FiberMark furnishing such notice setting forth details of the
occurrence referred to therein and stating what action the applicable Obligor
proposes to take with respect thereto.
Section 9.03. Payment of Taxes and Claims. Each Obligor will pay,
when due, all taxes, assessments, claims and other charges (herein "taxes")
lawfully levied or assessed upon such Obligor or the Collateral and if such
taxes remain unpaid after such date fixed for the payment thereof unless such
taxes are the subject of a Good Faith Contest or if any Lien shall be claimed
thereunder (a) for taxes due the United States of America or (b) which in the
Lenders' reasonable opinion might create a valid obligation having priority over
the rights granted to the Lenders herein, the Agent may, on such Obligor's
behalf, pay such taxes, and the amount thereof shall at the Agent's option be
charged to such Obligor's Revolving Credit Loans (or in the case of FiberMark,
to the Revolving Credit Loans of FiberMark Durables) and shall be an Obligation
secured hereby. If the amount of taxes of the Obligors paid by the Agent
pursuant to this Section 9.03 is in excess of Availability, then the Borrower
shall be deemed to be in default of this Section 9.03.
Section 9.04. Maintenance of Existence. Each Corporate Obligor will
preserve and maintain its corporate existence and good standing in the
jurisdiction of its incorporation, and qualify and remain qualified as a foreign
corporation in each jurisdiction in which such qualification is required, except
to the extent that its failure to do so qualify could not result in a material
adverse change. FiberMark Office will preserve and maintain its existence as a
limited liability company and its good standing in the jurisdiction of its
formation, and qualify and remain qualified as a foreign entity in each
jurisdiction in which such qualification is required, except to the extent that
its failure to do so qualify could not result in a material adverse change.
Section 9.05. Conduct of Business. Each Obligor will continue to
engage in an efficient and economical manner in a business similar to the type
of business as conducted by it as of the date hereof.
Section 9.06. Compliance with Laws. Each Obligor will comply with
all Laws, except to the extent that failure to do so could not result in a
Material Adverse Change; provided that such Obligor may contest any acts, rules,
regulations, orders and directions of such bodies or officials in any reasonable
manner which will not, in the Lenders' reasonable opinion, materially and
adversely effect the Lenders' rights or priority in the Collateral.
Section 9.07. Insurance. (a) FiberMark Office will maintain, with
financially sound and reputable companies, acceptable to the Agent, insurance
policies (a) insuring FiberMark Office, the Agent and the Lenders against
Comprehensive General Liability and auto liability, liability for personal
injury and property damage relating to the Brattleboro Collateral and Inventory
and (b) insuring the Brattleboro Collateral and Inventory of FiberMark Office
against all risk of loss by fire, explosion, theft and auto comprehensive/
collision, and such other casualties as may be reasonably satisfactory to the
Agent, such policies to be in such amounts and on such terms as the Agent shall
reasonably require. All policies covering the Brattleboro Collateral and
Inventory are, subject to the rights of any holders of Permitted Encumbrances
holding claims senior to the Lenders, to be made payable to the Agent for the
benefit of the Lenders, in case of loss, under a standard non-contributory
"mortgage", "lender" or "secured party" clause and are to contain such other
provisions as the Lenders may require to fully protect
<PAGE>
the Lenders' interest in the Real Estate and shall protect the Lenders' interest
in the Brattleboro Collateral and Inventory and any payments to be made under
such policies. All original certificates of Insurance, policies or true copies
thereof are to be delivered to the Agent, premium prepaid, with the loss payable
endorsement in the Agent's favor for the benefit of the Lenders, and shall
provide for not less than thirty (30) days prior written notice to the Agent of
the exercise of any right of cancellation.
In addition to the foregoing, FiberMark Office will maintain
Business Interruption and Comprehensive Boiler and Machinery Insurance in form
and amounts and with insurers acceptable to the Agent. In addition, Workman's
Compensation Insurance in amounts required by applicable law and in form
acceptable to the Agent shall be maintained in connection with the Brattleboro
Collateral and Inventory.
(b) Each Corporate Obligor will maintain, with financially sound and
reputable companies, acceptable to the Agent, insurance policies (a) insuring
such Obligor, the Agent and the Lenders against Comprehensive General Liability
and auto liability, liability for personal injury and property damage relating
to the Inventory of such Obligor and (b) insuring the Inventory of such Obligor
against all risk of loss by fire, explosion, theft and auto comprehensive/
collision, and such other casualties as may be reasonably satisfactory to the
Agent, such policies to be in such amounts and on such terms as the Agent shall
reasonably require. All policies covering the Inventory of each such Obligor
are, subject to the rights of any holders of Permitted Encumbrances holding
claims senior to the Lenders, to be made payable to the Agent for the benefit of
the Lenders, in case of loss, under a standard non-contributory "lender" or
"secured party" clause and are to contain such other provisions as the Lenders
may require to fully protect the Lenders' interest in the Inventory of such
Obligor and any payments to be made under such policies. All original
certificates of Insurance, policies or true copies thereof are to be delivered
to the Agent, premium prepaid, with the loss payable endorsement in the Agent's
favor for the benefit of the Lenders, and shall provide for not less than thirty
(30) days prior written notice to the Agent of the exercise of any right of
cancellation.
In addition to the foregoing, each such Obligor will maintain
Business Interruption and Comprehensive Boiler and Machinery Insurance in form
and amounts and with insurers acceptable to the Agent. In addition, Workman's
Compensation Insurance in amounts required by applicable law and in form
acceptable to the Agent shall be maintained in connection with the Inventory of
each such Obligor.
(c) At the request of FiberMark or if any Obligor fails to maintain
such insurance, the Agent may arrange for such insurance, but at the applicable
Obligor's expense and without any responsibility on the Lenders' part for:
obtaining the insurance, the solvency of the insurance companies, the adequacy
of the coverage, or the collection of claims. Upon the occurrence and during the
continuance of an Event of Default, the Agent shall, subject to the rights of
any holders of Permitted Encumbrances holding claims senior to the Lenders, have
the sole right, in the name of the Agent for the benefit of the Lenders or the
applicable Obligor, to file claims under any insurance policies, to receive,
receipt and give acquittance for any payments that may be payable thereunder,
and to execute any and all endorsements, receipts, releases, assignments,
reassignments or other documents that may be necessary to effect the collection,
compromise or settlement of any claims under any such insurance policies.
In the event of any loss or damage by fire or other casualty,
insurance proceeds relating to Inventory shall first reduce all the outstanding
Revolving Credit Loans and then either pay the balance to the Agent to be held
as cash collateral pending repair, restoration or replacement of the insured
property pursuant to the provisions below.
In the event any part of the Brattleboro Collateral is damaged by
fire or other casualty and the insurance proceeds for such damage or other
casualty (the "Proceeds") is less than or equal to One Hundred Thousand Dollars
($100,000), the Agent shall promptly apply such Proceeds to reduce the
outstanding balances of all the Revolving Credit Loans.
As long as no Event of Default shall have occurred and be
continuing, the Brattleboro Collateral Borrower has sufficient business
interruption insurance to replace the lost profits of any of its facilities, and
the Proceeds are in excess of One Hundred Thousand Dollars ($100,000), FiberMark
Office may elect (by delivering written notice to the Agent) to repair or
restore the Brattleboro Collateral to substantially the equivalent condition
prior to such fire or other casualty as set forth herein, or to replace the same
with substantially the equivalent or functionally equivalent Real Estate or
Equipment. If FiberMark Office does not, or cannot, elect to use the Proceeds
<PAGE>
as set forth above, the Agent may, subject to the rights of any holders of
Permitted Encumbrances holding claims senior to the Lenders and the Agent, apply
the Proceeds to the payment of the Obligations in such manner and in such order
as the Agent may reasonably elect.
If the Borrower elects to use the Proceeds for the repair,
replacement or restoration of any Real Estate or Equipment, and there is then no
Event of Default, (a) proceeds on Equipment and Real Estate in excess of One
Hundred Thousand Dollars ($100,000) will be applied to the reduction of the
Revolving Credit Loans, and (b) the Agent may set up a reserve against
Availability for an amount equal to the amount of proceeds so allocated to the
Revolving Credit Loans. The reserves will collectively be reduced
dollar-for-dollar upon receipt of non-cancelable executed purchase orders,
delivery receipts or contracts for the replacement, repair or restoration of
Equipment or the Real Estate and disbursements in connection therewith, such
reduction to be allocated between FiberMark Office's reserve in such proportions
as the Agent shall determine. Prior to the commencement of any restoration,
repair or replacement of Real Estate, FiberMark Office shall provide the Agent
with a restoration plan and a total budget certified by the chief executive
officer and chief financial officer of FiberMark Office, and, if the total
budget exceeds One Million Dollars ($1,000,000), also certified by an
independent third party experienced in construction costing. If there are
insufficient proceeds to cover the cost of restoration as so determined,
FiberMark Office shall be responsible for the amount of any such insufficiency
prior to the commencement of restoration and shall demonstrate evidence of such
before the reserve will be reduced. Completion of restoration shall be evidenced
by a final, unqualified certification of the design architect employed, if any,
but only if the cost of restoration exceeded One Million Dollars ($1,000,000);
an unconditional certificate of occupancy, if applicable; such other
certification as may be required by law; or if none of the above is applicable,
a written good faith determination of completion by the chief executive officer
and chief financial officer of FiberMark Office as the case may be (herein
collectively the "Completion"). Upon Completion, any remaining reserves as
established hereunder will be automatically released.
All policies of insurance required under the provisions of this
Section shall contain (a) an endorsement by the insurer that any loss shall be
payable in accordance with the terms of such policy notwithstanding any act or
negligence of any Obligor that might otherwise give rise to a defense by the
insurer to its payment of such loss, and (b) a waiver by the insured of all
rights of subrogation to any rights of the additional insureds against the
applicable Obligor, and (c) a disclaimer of all rights of setoff, counterclaim
or deduction against the insureds other than the applicable Obligor. The
applicable Obligor shall not take out separate insurance concurrent in form or
contributing in the event of loss with that required by this Agreement unless
the same shall contain a standard non-contributory lender's loss payable
endorsement in scope and form approved by the Required Lenders prior to the
Closing Date with loss payable to the Agent for the benefit of the Lenders as
its interests may appear. All retentions and deductibles under policies where
the Agent is loss payee shall be the sole responsibility of the applicable
Obligor maintaining such policies subject to the Lenders' approval.
Without limiting any of the foregoing, each of the insurance
policies required by this Section 9.07 which is required to name the Agent in
its capacity as agent for each of the Lenders, as an additional insured
thereunder shall provide:
(a) that no cancellation, reduction in amount or material change in
coverage thereof shall be effective until at least thirty (30) days after
receipt by the Agent of written notice thereof;
(b) that the interests of Agent and each of the Lenders will be
insured regardless of any breach by any Obligor or any other Person of any
warranties, declarations or conditions contained therein;
(c) that neither Agent nor any of the Lenders shall have any
obligation or liability for premiums, commissions, assessments or calls in
connection with such insurance.
On or before the Closing Date and prior to each policy expiration
thereafter, each Obligor shall deliver to the Agent an original certificate or
binder signed by the insurer or its duly authorized representative showing the
insurance then maintained by such Obligor pursuant to this Section 9.07, and
stating that such insurance complies with the terms of this Section 9.07,
together with evidence that payment of the premiums on such insurance is
current. Each Obligor shall effect such changes in the form (but not the amount
or types) of the policies required pursuant to this Section 9.07, as may be
required by the Agent, provided such changes (a) are commercially available
<PAGE>
at reasonable rates, which determination shall be made by Agent and (b) the
effect of such changes by FiberMark Office would not result in a violation of
the provisions of the Mortgage (Brattleboro, Vermont).
Section 9.08. Books and Records; Inspection. Each Obligor will
maintain books and records pertaining to the Collateral owned by it in such
detail, form and scope as is consistent in all material respects with current
practices and agrees that the books and records of such Obligor will reflect the
Lenders' interest in such Collateral. Each Obligor agrees that all of its books
and records, including records handled or maintained for such Obligor by any
other company or entity, will be available to the Agent, the Lenders and that
the Agent, the Lenders or their respective agents, accountants and attorneys may
enter upon such Obligor's premises or any other properties on or in which any of
such Obligor's Collateral may be located at any time during normal business
hours upon reasonable notice (provided, that no such notice is required after
the occurrence and during the continuance of an Event of Default), and from time
to time, for the purpose of inspecting the Collateral, and any and all records
pertaining thereto, including, without limitation, copies of agreements with, or
purchase orders from, such Obligor's customers, and copies of invoices to
customers, proof of shipment or delivery and such other documentation and
information relating to said Accounts and other Collateral as the Agent may
reasonably require. Each Obligor hereby further agrees that the Lenders may,
from and after the date hereof, request any information from, and have access to
such Obligor's officers and its independent public accountant, and such Obligor
will cause such officers and direct such accountants to make available to the
Lenders such information.
Section 9.09. ERISA Covenant. Each Obligor will, and will cause each
of its ERISA Affiliates to, maintain all Employee Benefit Plans in compliance in
all material respects with all applicable law, including any reporting
requirements, and make all contributions due under the terms of each Employee
Benefit Plan or as required by law. As soon as possible following the date
hereof (but in no event more than thirty (30) days thereafter) each Obligor
contributing to a Multiemployer Plan shall request from each such Multiemployer
Plan an estimate, in writing, of withdrawal liability (contingent or otherwise)
under such Multiemployer Plan and shall provide a copy of such written
withdrawal liability estimate to the Agent. In addition, within the same time
period each Obligor shall request from the applicable Multiemployer Plans an
estimate, in writing, of the amount of any withdrawal liability to be assessed
in connection with the stock purchase transactions contemplated by the Arcon
Purchase Documents and the merger contemplated by the CPG Merger Documents and
shall provide a copy of such written estimate to the Agent.
Section 9.10. Intercompany Transfer of Funds. Each Obligor will take
such actions as may be necessary in order to enable each other Obligor to pay
its respective Obligations, including but not limited to dividends on its
capital stock, from funds legally available therefor, or the purchase of shares
of capital stock or other equity interest, or the making of loans or advancing
of funds to the applicable Obligor.
Section 9.11. Inventory and Accounts Receivable Analysis of Acquired
Entity. In the event of an acquisition of an Acquired Entity by an Obligor, such
Obligor shall or shall cause the Acquired Entity to afford the Agent the right
to inspect and perform an analysis within thirty days of the acquisition,
satisfactory to the Agent, of the inventory, accounts receivables and personal
property of such Acquired Entity.
Section 9.12. Acquired Entities. Each of the following conditions
shall be satisfied by the Borrower with respect to each Acquired Entity acquired
on or after the date hereof:
(a) the Acquired Entity shall have executed all documentation and
take all steps required pursuant to which such Acquired Entity shall
become a Guarantor under this Agreement and shall agree to be bound by the
terms of this Agreement applicable to a Guarantor; [FOR DISCUSSION.]
(b) the Acquired Entity shall have executed all documentation and
take all steps required to give the Agent a first priority perfected Lien
in all of such Acquired Entity's Inventory and Accounts, which Lien shall
not be subject to any other financing arrangement;
<PAGE>
(c) the Agent shall have received a certificate of the Secretary or
Assistant Secretary of such Acquired Entity attesting to the Certificate
of Incorporation and Bylaws of such Acquired Entity and all amendments
thereto and to all corporate action taken by such Acquired Entity,
including resolutions of its Board of Directors authorizing the execution,
delivery and performance of this Agreement and any other documents
executed in connection therewith; and
(d) the Agent shall have received a favorable opinion of counsel to
such Acquired Entity covering all of the matters covered by (a), (b) and
(c) above, and as to such other matters as the Agent may reasonably
request.
Section 9.13. Compliance with Environmental Laws. (a) Each Obligor
(i) will comply with all Environmental Laws as presently existing or
as adopted or amended in the future, all Approvals and Permits issued
pursuant to such Environmental Laws, and all writs, decrees, judgments,
settlements and orders issued in connection with such Environmental Laws;
(ii) obtain and renew all Approvals and Permits required pursuant to
Environmental Laws;
(iii) conduct any Remedial Action in compliance with Environmental
Laws; provided, however, that an Obligor shall not be required to
undertake any Remedial Action to the extent that its obligation to do so
is being contested in good faith and by proper proceedings, will not
result in any non-compliance with Environmental Laws, and appropriate
reserves are being maintained with respect to such circumstances; and
(iv) notify the Agent of any of the following that is likely to have
a Material Adverse Change:
(A) any Environmental Notice, including one to take or pay for
any Remedial Action with respect to any Hazardous Material at, to,
or from any of Obligor's past, present or future locations or
facilities or Real Estate or at, to or from any other location or
facility; and
(B) any knowledge by any Obligor of an occurrence or condition
at, to or from any of Obligor's past, present or future locations or
facilities or Real Estate, or at, to or from any other location or
facility, that might reasonably result in a violation of
Environmental Law.
(b) Without limitation of the foregoing, within one year of the date
hereof, each Obligor shall have substantially addressed all matters identified
as non-compliance with Environmental Laws and shall have undertaken all Remedial
Actions identified in the August 1996 Environmental Due Diligence Report for
Custom Papers Group Mill Facilities prepared by ENSR Consulting and Engineering
for the Borrower. [STATUS?]
(c) The Borrower will complete or undertake all transactions
pursuant to Section 6.6 of the CPG Merger Agreement and will agree in writing on
an amount to be deposited into the Rochester Environmental Escrow Account (as
defined in the CPG Merger Agreement) to provide the indemnification set forth in
Section 10.2(b)(i)(B) of the CPG Merger Agreement. [STATUS?]
ARTICLE X. NEGATIVE COVENANTS
So long as any Revolving Credit Loans are outstanding, or any Lender
has any Revolving Credit Commitment hereunder or any other amount is owing to
the Lenders hereunder or under any other Loan Documents, no Obligor shall:
Section 10.01. Debt. Create, incur or suffer to exist any
Indebtedness other than (i) Permitted Indebtedness or (ii) other Indebtedness,
so long as after giving effect to the incurrence thereof, the Consolidated Fixed
Charge Coverage Ratio is greater than 2.00 to 1.00.
<PAGE>
Section 10.02. Liens. Create or suffer to exist or permit any Lien
upon or with respect to any of its properties except for Permitted Encumbrances.
Section 10.03. Guaranties. Assume, guarantee, endorse, or otherwise
be or become directly or contingently responsible or liable (including, but not
limited to an agreement to purchase any obligation, stock, assets, goods or
services or to supply or advance any funds, assets, goods or services, or an
agreement to maintain or cause any such Person to maintain a minimum working
capital or net worth or otherwise to assure the creditors of such Person against
loss) for the obligations, stock or dividends of any Person, except guarantees
by endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business and the guaranties of Borrower
Obligations pursuant to Article 4 of this Financing Agreement.
Section 10.04. Sale of Assets. Sell, lease, assign, transfer or
otherwise dispose of (a) its now or hereafter acquired Collateral, except as
otherwise specifically permitted by this Financing Agreement or any other
document relating to the transactions contemplated hereunder or (b) all or
substantially all of its assets, which do not constitute Collateral.
Section 10.05. Prohibition of Fundamental Changes. Enter into any
transaction of merger or consolidation, or change its form of organization or
business, or liquidate or dissolve (or suffer any liquidation or dissolution),
or sell, assign, lease or otherwise dispose of (whether in one transaction or in
a series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to any Person or purchase (whether in one
transaction or in a series of related transactions) all or substantially all of
the assets of any Person.
Section 10.06. Investments. Make any loan or advance to any Person
or purchase or otherwise acquire any capital stock, assets, obligations or other
securities of, make any capital contribution to, or otherwise invest in, or
acquire any interest, in any Person, except: (i) Permitted Investments, (ii)
loans, advances, capital contributions and share purchases permitted by Section
9.07 or Section 9.10 of this Financing Agreement, and (iii) loans, advances and
capital contributions made by any Obligor in another Obligor, including any
loan, advance or capital contribution made by an Obligor in a newly formed
Subsidiary which shall become an Obligor hereunder. Notwithstanding the
foregoing, FiberMark shall be permitted to make loans, advances or capital
contributions to each of Specialty Hong Kong and Specialty Japan to fund their
respective operations, provided (A) the operations of each such entity are
conducted on a basis substantially similar in size, scope and nature to those
conducted by such entity in the twelve-month period ended on the date hereof,
and (B) the aggregate amount of such loans, advances and capital contributions
from FiberMark to all such entities, net of repayments and dividends from such
entities to the Borrower shall not exceed the following amounts for the
indicated periods:
(1) For calendar year 1996, $5,000,000; and
(2) For each calendar year thereafter, the applicable amount for
the preceding calendar year plus $250,000. [DOES THIS NEED TO
BE UPDATED?]
Section 10.07. Transaction with Affiliates. Enter into any
transaction, including, without limitation, any purchase, sale, lease, loan or
exchange of property with any Affiliate of such Obligor unless such transaction
shall be on terms no less favorable to such Obligor than would be obtainable at
the time in a comparable arm's length transaction with an unrelated third party;
provided, that this Section 10.07 shall not apply to (a) customary fees paid by
FiberMark to members of its Board of Directors, (b) any transaction between any
Obligor and any employee of such Person that is approved by such Person's Board
of Directors (provided that such approval shall not be required with respect to
normal compensation arrangements involving any such employee) and (c) loans,
advances, capital contributions and share purchases permitted by Section 9.07 or
Section 9.10 of this Financing Agreement.
Section 10.08. Nature of Business. Change its corporate name,
principal
<PAGE>
place of business or structure, or enter into or engage in any operation or
activity other than activities of the types conducted by each Obligor on the
date hereof or as of the date of the acquisition of an Acquired Entity and
operations and activities substantially similar thereto and logical extensions
thereof.
Section 10.09. Dividends. Declare or pay any dividends; or purchase,
redeem, retire, or otherwise acquire for value any of the capital stock or
securities convertible into capital stock of such Obligor now or hereafter
outstanding; or make any distribution of assets to its stockholders as such,
whether in cash, assets, or in obligations of the Borrower, or allocate or
otherwise set apart any sum for the payment of any dividend or distribution on,
or for the purchase, redemption, or retirement of any shares of its capital
stock, except (i) dividend payments by FiberMark Durable and FiberMark Filter to
FiberMark and distributions by FiberMark Office to FiberMark Filter or (ii)
during any Fiscal Year ending on or after December 31, 1995 FiberMark may
declare and pay dividends on its capital stock or purchase or redeem its capital
stock in an aggregate amount not to exceed thirty-three and one third percent
(33 1/3%) of the total of Consolidated Net Income minus consolidated
Amortization of Deferred Book Gain of FiberMark and its Subsidiaries for the
prior Fiscal Year of FiberMark, provided that at the time of such declaration
and distribution and after giving effect to such dividend (a) there is aggregate
Availability of at least Two Million Five Hundred Thousand Dollars ($2,500,000),
and (b) no Default or Event of Default is outstanding or will occur as a result
thereof.
Section 10.10. Leases. Except for the Lease Agreement, enter into
any Operating Lease if after giving effect thereto the aggregate obligations
with respect to all of the Operating Leases of the Obligors during any Fiscal
Year would exceed Five Hundred Thousand Dollars ($500,000).
Section 10.11. Environmental Compliance. Except in compliance with
applicable Environmental Laws, (a) use any of the Real Estate or other property
of any Obligor or any portion thereof for the handling, processing, storage or
disposal of Hazardous Materials, (b) cause or permit to be located on any of the
property of any Obligor any underground tank or other underground storage
receptacle for Hazardous Materials, (c) generate any Hazardous Materials on any
of the Real Estate or other property of any Obligor, (d) conduct any activity on
the Real Estate or other property of any Obligor or use any property in any
manner so as to cause an Environmental Discharge or (e) otherwise conduct any
activity on the Real Estate or any other property or use any property in any
manner that would lead to any claim under or violate any Environmental Law.
Section 10.12. Fiscal Year. Change its Fiscal Year from a period of
January 1 to December 31.
Section 10.13. Subsidiary Stock Issuance. Permit any Subsidiary of
any Obligor to issue or sell to any Person, other than such Obligor, any of such
Subsidiary's shares, interests, participation or other equivalents (however
designated including stock appreciation rights), warrants or options to acquire
capital stock.
ARTICLE XI. Intentionally Omitted.
ARTICLE XII. EVENTS OF DEFAULT
Section 12.01. Events of Default. Notwithstanding anything
hereinabove to the contrary, the Agent may, and if directed to do so by the
Required Lenders shall, terminate this Financing Agreement immediately upon the
occurrence of any of the following (herein "Events of Default"):
(a) failure of an Obligor to pay any of its Obligations within five
(5) business days of the due date thereof, provided that nothing contained
herein shall prohibit the Agent from charging such amounts to an Obligor's
account on the due date thereof (if the Agent so charges such Obligor's
account, no Event of Default relating to non-payment of Obligations will
be deemed to
<PAGE>
have occurred) and, provided further, that if the Agent chooses not to
charge such amounts to an Obligor's account on the due date thereof, the
Agent shall so notify the Obligor and the Obligor shall have five (5) days
from the date it receives such notice to pay such Obligations;
(b) any representation or warranty of an Obligor contained herein or
in any other Loan Document, or any representation, warranty, statement in
any certificate, financial statement or other document furnished to Agent
or any of the Lenders by or on behalf of an Obligor under any Loan
Document shall, as of the time made, confirmed or furnished, prove to have
been (i) in the case of such representations and warranties which are not
subject to a Material Adverse Change exception, incorrect in any material
respect or (ii) in all cases where such representations and warranty is
subject to such an exception, incorrect;
(c) breach by an Obligor of any warranty, representation or covenant
contained herein (other than those referred to in subparagraph (d) below)
or in any other Loan Document or written agreement entered into in
connection with this Financing Agreement between an Obligor and the
Lenders and/or the Agent or delivered by an Obligor to any of the Lenders
and/or the Agent in connection herewith or the transactions contemplated
hereby, if such breach shall not have been remedied to the Required
Lenders' satisfaction within the earlier to occur of the applicable grace
period in such written agreement or thirty (30) days from the date of such
breach;
(d) breach by an Obligor of any representation, warranty or covenant
contained in Sections 3.05, 3.06, 5.02, 5.03, 5,04, 5.10, 8.06, 8.17,
8.19, 8.20, 9.01(g), 9.03, 9.07 or Article 10 (other than Section 10.11);
(e) if an Obligor shall (i) apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property, (ii)
admit in writing its inability, or be generally unable, to pay its debts
as such debts become due, (iii) make a general assignment for the benefit
of its creditors, (iv) commence any case, proceeding or other action
seeking to have an order for relief entered on its behalf as debtor or to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, liquidation, dissolution or composition of it or
its debts under any law relating to bankruptcy, insolvency,
reorganization, winding up or composition or readjustment of debts, (v)
file an answer or other pleading in any such case, proceeding or other
action admitting the material allegations of any petition, complaint or
similar pleading filed or (vi) take any corporate or other action for the
purpose of effecting any of the foregoing;
(f) if a proceeding or case shall be commenced without the
application or consent of an Obligor in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization, dissolution,
winding-up, or the composition or readjustment of debts of such Person, or
(ii) the appointment of a trustee, receiver, custodian, liquidator or the
like of such Person under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, or a
warrant of attachment, execution or similar process shall be issued
against property of such Person and such proceeding, case, warrant or
process shall continue undismissed, or any order, judgment or decree
approving or ordering any of the foregoing shall be entered, or any order
for relief against such Person shall be entered in an involuntary case
under any law relating to bankruptcy, insolvency, reorganization, winding
up or composition or readjustment of debts;
(g) cessation of the business of an Obligor or the calling of a
meeting of the creditors of such Person for purposes of compromising the
debts and obligations of such Person.
(h) an Obligor shall (a) fail to pay any Indebtedness in excess of
Two Hundred Fifty Thousand Dollars ($250,000) (other than with respect to
this Financing Agreement) of such Obligor, or any interest or premium
thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise); or (b) fail to perform or observe any
term, covenant, or condition on its part to be performed or observed under
any agreement or instrument relating to any such
<PAGE>
Indebtedness, when required to be performed or observed, if the effect of
such failure to perform or observe is to accelerate, or to permit the
acceleration after the giving of notice or passage of time, or both, of
the maturity of such Indebtedness, whether or not such failure to perform
or observe shall be waived by the holder of such Indebtedness, or any such
Indebtedness shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), prior
to the stated maturity thereof;
(i) if a judgment or judgments for the payment of money in excess of
Two Hundred Fifty Thousand Dollars ($250,000) shall be rendered against an
Obligor and the same shall remain in effect and unstayed or bonded pending
appeal for a period of thirty (30) or more consecutive days;
(j) if any Loan Document shall cease, for any reason, to be in full
force and effect or shall be declared null and void, or the validity or
enforceability thereof shall be contested by any party thereto, or any
party thereof shall deny it has any further liability or obligation under
or shall fail to perform its obligations under such Loan Document;
(k) if any of the following events occur or exist with respect to an
Obligor or any ERISA Affiliate: (i) an Obligor or any other Person engages
in a transaction in connection with which a Borrower, or any entity which
a Borrower has an obligation to indemnify, could be subject to liability
for either a civil penalty assessed pursuant to Section 502 of ERISA or a
tax imposed under Section 4975 of the Code; (ii) an accumulated funding
deficiency (as defined in Section 302 of ERISA or Section 412 of the
Code), whether or not waived, exists with respect to any Pension Plan;
(iii) any Reportable Event, as defined in ERISA, with respect to any
Pension Plan; (iv) the giving under Section 4041 of ERISA of a notice of
intent to terminate any Pension Plan or the termination of any Pension
Plan; (v) any event or circumstance that might constitute grounds
entitling the PBGC to institute proceedings under Section 4042 of ERISA
for the termination of, or for the appointment of a trustee to administer,
any Pension Plan, or the institution by the PBGC of any such proceedings;
(vi) the imposition of liability to enforce Section 515 of ERISA; (vii)
the failure of a Pension Plan intended to qualify under Section 401(a) or
401(k) of the Code to so qualify; (viii) complete or partial withdrawal
under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
Reorganization, Insolvency, or termination of any Multiemployer Plan; or
(ix) the imposition of liability in respect of any Pension Plan or
Multiemployer Plan subject to Title IV of ERISA (other than a liability to
the PBGC for insurance premiums under Title IV of ERISA, payment of which
is not yet due); (x) pursuant to Section 4068 of ERISA or Section
401(a)(29) or Section 412 of the Code, a lien arises or security interest
is granted with respect to any Pension Plan; provided, however, that no
Event of Default shall be deemed to exist with respect to any event or
condition described in clause (i) through (ix) above unless such event or
condition, individually or together with all other such events or
conditions, if any, could subject an Obligor to any tax, penalty, or other
liability to an Employee Benefit Plan, the Pension Benefit Guaranty
Corporation, or otherwise (or any combination thereof) which could result
in a Material Adverse Change;
(l) if there shall occur a default which is not cured or waived
within the applicable grace period, if any, under the Mortgage
(Brattleboro, Vermont);
(m) if any time the Agent for the benefit of the Lenders no longer
has a Lien on any of the Collateral; or
(n) FiberMark Office shall fail to pay any amount owing under the
Lease Agreement when due, and such failure shall continue unremedied for a
period of ten (10) days from the date such amount was due.
Section 12.02. Acceleration of Obligations. Upon the occurrence of a
Default and/or an Event of Default, the Agent may (at its option) and shall at
the written direction of the Required Lenders declare that all Revolving Credit
Loans provided for in this Financing Agreement shall be thereafter in the
Agent's sole discretion and the obligation of the Lenders to make Revolving
Credit Loans shall cease unless such Default is cured to the Required Lenders'
satisfaction or such Event of Default is waived. If an
<PAGE>
Event of Default shall occur and be continuing, the Agent may, and if directed
to do so by the Required Lenders shall, upon notice by the Agent to the
Borrowers, (a) declare the Revolving Credit Commitments terminated, whereupon
such Revolving Credit Commitments shall forthwith terminate immediately and any
accrued fees shall forthwith become due and payable and all Obligations, and, as
liquidated damages for loss of a bargain and not as a penalty, a lost
transaction fee shall be due and payable in addition to the accelerated amounts
set forth herein and all other amounts payable under this Financing Agreement
and any other Loan Documents to be, whereupon the same shall become, forthwith
due and payable without presentment, demand or protest of any kind, all of which
are hereby waived by the Borrowers, anything contained in this Agreement to the
contrary notwithstanding, equal to the full outstanding principal amounts of the
Revolving Credit Loans being accelerated multiplied by three percent (3%);
provided, however, that the lost transaction fee shall be paid by the Borrowers
on Chase Manhattan Bank Rate Loans and Libor Rate Loans only if such loans are
accelerated on or prior to the first Anniversary Date; [STILL APPLY?] (b) charge
the Borrowers the Default Rate of Interest on all then outstanding or thereafter
incurred Obligations , provided (i) the Agent has given the Borrowers written
notice of the Event of Default, provided, however, that no notice is required if
the Event of Default is the Event listed in paragraph (e), (f) or (g) of Section
12.01 hereof and (ii) the Borrowers have failed to cure the Event of Default
within ten (10) days after (x) the Agent deposited such notice in the United
States mail or (y) the occurrence of the Event of Default listed in paragraph
(e), (f) or (g) or Section 12.01 hereof; and (c) immediately terminate this
Financing Agreement upon notice to the Borrowers; provided, however, that no
notice of termination is required if the Event of Default is the Event listed in
paragraph (e), (f) or (g) of Section 12.01 hereof. The exercise by the Lenders
of any option or remedy hereunder is not exclusive of any other option or remedy
which may be exercised at any time by the Lenders, acting through the Agent.
Section 12.03. Other Remedies. Immediately upon the occurrence of
any Event of Default and so long as such Event of Default is continuing, the
Agent may to the extent permitted by Law: (a) remove from any premises where
same may be located any and all documents, instruments, files and records, and
any receptacles or cabinets containing same, relating to the Accounts, or the
Agent may use, at the Borrower's expense, such of the Obligor's personnel,
supplies or space at the Obligor's places of business or otherwise, as may be
necessary to properly administer and control the Accounts or the handling of
collections and realizations thereon; (b) bring suit, in the name of the
applicable Obligor, or the Lenders or the Agent, and generally shall have all
other rights respecting said Accounts, including without limitation the right to
accelerate or extend the time of payment, settle, compromise, release in whole
or in part any amounts owing on any Accounts and issue credits in the name of
the applicable Obligor, or the Agent; (c) sell, assign and deliver the
Collateral and any returned, reclaimed or repossessed merchandise, with or
without advertisement, at public or private sale, for cash, on credit or
otherwise, at the Agent's sole option and discretion, and any one or more of the
Lenders or the Agent may bid or become a purchaser at any such sale, free from
any right of redemption, which right is hereby expressly waived by each Obligor;
(d) foreclose the security interests created herein by any available judicial
procedure, or to take possession of any or all of the Inventory or the
Brattleboro Collateral without judicial process, and to enter any premises where
any Inventory and Equipment comprising part of the Brattleboro Collateral may be
located for the purpose of taking possession of or removing the same and (e)
exercise any other rights and remedies provided in Law, in equity, by contract
or otherwise. The Agent shall have the right, without notice or advertisement,
to sell, lease, or otherwise dispose of all or any part of the Collateral
whether in its then condition or after further preparation or processing, in the
name of any Obligor, any one or more of the Lenders or the Agent, or in the name
of such other party as the Agent may designate, either at public or private sale
or at any broker's board, in lots or in bulk, for cash or for credit, with or
without warranties or representations, and upon such other terms and conditions
as the Agent in its sole discretion may deem advisable, and the Agent and any
one or more of the Lenders shall have the right to purchase at any such sale. If
any Inventory and Equipment comprising part of the Brattleboro Collateral shall
require rebuilding, repairing, maintenance or preparation, the Agent shall have
the right, at its option, to do such of the aforesaid as is necessary, for the
purpose of putting the Inventory and Equipment comprising part of the
Brattleboro Collateral in such saleable form as the Agent shall deem
appropriate. FiberMark Office agrees, at the request of the Agent, to assemble
the Inventory and Equipment comprising part of the Brattleboro Collateral and to
make it available to the Agent at premises of FiberMark Office or elsewhere and
to make available to the Agent the premises and facilities of FiberMark Office
for the purpose of the Agent's taking possession of, removing or putting the
Inventory and Equipment comprising part of the Brattleboro Collateral in
saleable form. However, if notice of intended disposition of any Collateral is
required by Law, it is agreed that ten (10) days notice shall constitute
reasonable notification and full compliance with the law. The net cash proceeds
resulting from the
<PAGE>
Agent's exercise of any of the foregoing rights, (after deducting all charges,
costs and expenses, including reasonable attorneys' fees) shall be applied by
the Agent to the payment of the Obligor's Obligations, whether due or to become
due, in such order as the Agent may elect, and the Obligors shall remain liable
to the Agent and the Lenders for any deficiencies, and the Agent and the Lenders
in turn agree to remit to the Obligors or their respective successors or
assigns, any surplus resulting therefrom. The enumeration of the foregoing
rights is not intended to be exhaustive and the exercise of any right shall not
preclude the exercise of any other rights, all of which shall be cumulative. The
Mortgage (Brattleboro, Vermont) shall govern the rights and remedies of the
Agent and the Lenders thereto.
ARTICLE XIII. AGENCY
Section 13.01. The Agent. Each Lender hereby irrevocably designates
and appoints CITBC as the Agent for the Lenders under this Financing Agreement
and any modifications, supplements and amendments thereto and any other Loan
Documents executed in connection therewith and irrevocably authorizes CITBC as
Agent for such Lenders, to take such action on its behalf under the provisions
of the Financing Agreement and all such ancillary documents and to exercise such
powers and perform such duties as are expressly delegated to the Agent by the
terms of the Financing Agreement and all such ancillary documents together with
such other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in this Financing Agreement, the Agent shall
not have any duties or responsibilities, except those expressly set forth
herein, or any fiduciary relationship with any Lender and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into the Financing Agreement and such ancillary documents or otherwise exist
against the Agent.
Section 13.02. Delegation of Duties. The Agent may execute any of
its duties under this Financing Agreement and all ancillary documents by or
through agents or attorneys-in-fact and shall be entitled to the advice of
counsel concerning all matters pertaining to such duties.
Section 13.03. Exculpatory Provisions. Neither the Agent nor any of
its officers, directors, employees, agents, or attorneys-in-fact shall be (a)
liable to any Lender for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with the Financing Agreement and all
ancillary documents (except for its or such Person's own gross negligence or
willful misconduct), or (b) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by an Obligor or
any officer thereof contained in the Financing Agreement and all ancillary
documents or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection with, the
Financing Agreement and all ancillary documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of the Financing
Agreement and all ancillary documents or for any failure of an Obligor to
perform its obligations thereunder. The Agent shall not be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, the Financing Agreement or
any ancillary document or to inspect the properties, books or records of an
Obligor.
Section 13.04. Reliance by Agent. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, facsimile, message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Obligors),
independent accountants and other experts selected by the Agent. The Agent shall
be fully justified in failing or refusing to take any action under the Financing
Agreement and any ancillary document unless it shall first receive such advice
or concurrence of the Required Lenders as it deems appropriate or it shall first
be indemnified to its satisfaction by all of the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under the Financing Agreement
and all ancillary documents in accordance with a request of the Required
Lenders, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all of the Lenders.
<PAGE>
Section 13.05. Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender or a Borrower
describing such Default or Event of Default. In the event that the Agent
receives such a notice, the Agent shall promptly give notice thereof to the
Lenders. The Agent shall take such action with respect to such Default or Event
of Default as shall be reasonably directed by the Required Lenders; provided
that unless and until the Agent shall have received such direction, the Agent
may in the interim (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such Default or Event of Default as it
shall deem advisable and in the best interests of the Lenders.
Section 13.06. Non-Reliance on Agent and other Lenders. Each Lender
expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents or attorneys-in-fact has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Borrower shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon the Agent or any
other Lender and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Obligors and made its own decision to enter into this Financing Agreement. Each
Lender also represents that it will, independently and without reliance upon the
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under the Financing
Agreement and to make such investigation as it deems necessary to inform itself
as to the business, operations, property, financial and other condition or
creditworthiness of the Obligors. The Agent, however, shall provide the Lenders
with copies of all financial statements, projections and business plans which
come into the possession of the Agent or any of its officers, employees, agents
or attorneys-in-fact.
Section 13.07. Indemnification. The Lenders agree to indemnify the
Agent in its capacity as such (to the extent not reimbursed by an Obligor, and
without limiting the obligation of an Obligor to do so), from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time be imposed on, incurred by or asserted against the Agent in any
way relating to or arising out of the Financing Agreement on any ancillary
documents or any documents contemplated by or referred to herein or the
transactions contemplated hereby or any action taken or omitted by the Agent
under or in connection with any of the foregoing; provided that no Lender shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from the Agent's gross negligence or willful
misconduct. The agreements in this paragraph shall survive the payment of the
Obligations.
Section 13.08. The Agent in its Individual Capacity. The Agent may
make loans to, and generally engage in any kind of business with an Obligor as
though the Agent were not the Agent hereunder. With respect to its loans made or
renewed by it or Revolving Credit Loan obligations hereunder as a Lender, the
Agent shall have the same rights and powers, duties and liabilities under the
Financing Agreement as any Lender and may exercise the same as though it were
not the Agent and the terms "Lender" and "Lenders" shall include the Agent in
its individual capacity.
Section 13.09. Successor Agent. The Agent may resign as Agent upon
thirty (30) days' prior notice to the Lenders and such resignation shall be
effective upon the appointment of a successor Agent. Upon receiving notice from
the Agent of the Agent's intention to resign as Agent, the Lenders shall appoint
a successor agent for the Lenders whereupon such successor agent shall succeed
to the rights, powers and duties of the Agent and the term "Agent" shall mean
such successor agent effective upon its appointment, and the former Agent's
rights, powers and duties as Agent shall be terminated, without any other or
further act or deed on the part of such former Agent or any of the parties to
this Financing Agreement. After any retiring Agent's resignation hereunder as
Agent the provisions of this Article 13 shall continue to inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent.
<PAGE>
Section 13.10. Arrangements Requiring Consent of Lenders.
Notwithstanding anything contained in this Financing Agreement to the contrary,
the Agent will not, without the prior written consent of all of the Lenders:
amend the Financing Agreement to (a) increase the Revolving Credit Commitments;
(b) reduce the interest rate; (c) reduce or waive any fees or the repayment of
any Obligations due the Lenders or the Agent; (d) extend the maturity of the
Obligations; or (e) alter or amend (i) this Section 13.10 or (ii) the definition
of Eligible Accounts Receivable and/or Eligible Inventory and the Agent's
criteria for determining compliance therewith. Except as otherwise hereinabove
provided, the Agent will not, without the prior written consent of the Required
Lenders: (a) amend the Financing Agreement or (b) waive any Event of Default
under the Financing Agreement. In all other respects, the Agent is authorized to
take such actions or fail to take such actions if the Agent, in its reasonable
discretion, deems such to be advisable and in the best interest of the Lenders,
including, but not limited to, the making of an Overadvance or the termination
of the Revolving Credit Commitments and/or the Financing Agreement upon the
occurrence of an Event of Default unless it is specifically instructed to the
contrary by the written instructions of the Required Lenders.
Notwithstanding the foregoing, the Agent may (in its sole
discretion) and shall at the written direction of the Required Lenders upon the
occurrence of an Event of Default and upon written notice to the Lenders and the
Borrower, accelerate the Revolving Credit Loans, and the other Obligations of
the Obligors hereunder. In such event, the Revolving Credit Loans shall be
immediately deemed due and payable and each Lender's Revolving Credit Commitment
in the Revolving Credit Loans shall be settled in accordance with this Financing
Agreement based on the Revolving Credit Loans outstanding as of the date of such
written declaration. Thereafter, all collections received for application to the
Revolving Credit Loans as provided in this Financing Agreement shall be applied
first to the costs and expenses of collection and Out-of-Pocket Expenses, if
any, then to the payment of interest on the Revolving Credit Loans, then to the
principal balance of the Revolving Credit Loans. The Lenders acknowledge that an
orderly repayment of the Revolving Credit Loans and/or liquidation of Collateral
may necessitate the making of new Revolving Credit Loans after a declaration of
acceleration by the Agent and/or the Required Lenders and that all of the
Lenders shall participate in such Revolving Credit Loans based on their
respective Revolving Credit Commitments. Such new Revolving Credit Loans shall
be in accordance with a program of orderly liquidation and shall be treated as
costs of collection, Out-of-Pocket Expenses and/or liquidation with respect to
the priority of repayment as provided in this paragraph and as otherwise
applicable.
Notwithstanding the foregoing, the Agent in its sole discretion may:
(a) cure any ambiguity, defect or inconsistency in the terms of this
Financing Agreement;
(b) release collateral in bulk (i) as required pursuant to the
explicit terms of this Financing Agreement or any of the ancillary documents
thereto and (ii) in an amount not to exceed Two Million Dollars ($2,000,000) in
any Fiscal Year provided that at the election of the Agent there is a
corresponding reduction in the Obligations to the Lenders, as applicable and as
set forth in this Financing Agreement;
(c) within the criteria specified in the definition of "Eligible
Accounts Receivable" in Section 1.01 of this Financing Agreement, make
determinations of eligibility of Collateral with such non-material temporary
modification as the Agent may from time to time implement (provided that the
consent of the Lenders to any other modifications thereof shall be implied if
the Agent does not receive notice to the contrary within ten (10) business days
of sending notice of any proposed change to the Lenders); and
(d) establish reserves.
Section 13.11. Recapture of Payments. If the Agent is required at
any time to return to an Obligor or to a trustee, receiver, liquidator,
custodian or other similar official any portion of the payments made by such
Obligor to the Agent as a result of a bankruptcy with respect to such Obligor,
any guarantor or any other person or entity or otherwise, then each Lender
shall, on demand of the Agent, forthwith return to the Agent its Pro Rata Share
of any such payments made to such Lender by the Agent, together with its Pro
Rata Share of interest or penalties, if any, payable by the Lenders. This
provision shall survive the termination of this Financing Agreement.
<PAGE>
ARTICLE XIV. RIGHTS AND OBLIGATIONS OF THE LENDERS AND THE AGENT
Section 14.01. Adjustments Among Lenders. Notwithstanding anything
herein to the contrary contained in this Financing Agreement, prior to the
occurrence of an Event of Default, in the event that any Lender shall obtain
payment in respect of a Revolving Credit Note, or interest thereon or upon or
following on Event of Default, in the event any Lender shall obtain payment in
respect of a Revolving Credit Note, or interest thereon, or receive any
Collateral or proceeds thereof with respect to any Revolving Credit Note,
whether voluntarily or involuntarily, and whether through the exercise of a
right of banker's Lien, set-off or counterclaim against the applicable Borrower
or otherwise, in a greater proportion than any such payment obtained by any
other Lender in respect of the corresponding Revolving Credit Note held by such
Lender, then the Lender so receiving such greater proportionate payment or such
greater proportionate amount of Collateral in the case of an occurrence of an
Event of Default shall purchase for cash from the other Lender or Lenders such
portion of each such other Lender or Lenders' Revolving Credit Loan as
appropriate, as shall be necessary to cause such Lender receiving the
proportionate overpayment to share the excess payment with each Lender or shall
provide the other Lenders with the benefits of any such Collateral, or the
proceeds thereof, as shall be necessary to cause such Lender receiving the
proportionate overpayment to share the excess payment or benefits of such
Collateral or proceeds ratably with each Lender in the case of an occurrence of
an Event of Default. Upon or following an Event of Default payments on any
Revolving Credit Note received by each Lender and receipt of Collateral by each
Lender shall be in the same proportion as the proportion of: (a) the Obligations
owing to such Lender in respect of all Revolving Credit Notes held by such
Lender; to (b) the Obligations owing to all of the Lenders in respect of all of
the Revolving Credit Notes; provided, however, that, with respect to the two
paragraphs above, if all or any portion of such excess payment or benefits is
thereafter recovered from the Lender that received the proportionate
overpayment, such purchase of Obligations or payment of benefits, as the case
may be, shall be rescinded, and the purchase price and benefits returned, to the
extent of such recovery, but without interest.
Section 14.02. Sharing of Payments. The Agent shall, after receipt
of any interest and fees earned under the Financing Agreement, remit to each
Lender: (a) its Pro Rata Share of all fees, provided, however, that no Lender
(other than CITBC in its role as Agent) shall share in (i) the Collateral
Management Fee or Documentation Fee or the fees provided for in Section 6.03 of
this Financing Agreement and (ii) applicable fees, costs, expenses and
Out-of-Pocket Expenses of the Agent which shall be remitted to and retained by
the Agent; and (b) interest computed at the rate and as provided for in Section
6.02 of this Financing Agreement on all outstanding amounts advanced by such
Lender on each Settlement Date, prior to adjustment, that were made subsequent
to the last remittance by the Agent to the Lender of such Borrower's interest.
Section 14.03. Sale of Participations. Each Borrower acknowledges
each Lender may sell participations to one or more banks or other entities in
all or a portion of its rights and obligations under this Financing Agreement
(including, without limitation, all or a portion of its Revolving Credit
Commitment, the Revolving Credit Loans owing to it, and the Revolving Credit
Note(s) held by it); provided, however, that: (a) any such Lender's obligations
under this Financing Agreement (including, without limitation, its Revolving
Credit Commitment hereunder) shall remain unchanged, and (b) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (c) such Lender shall remain the holder of any such Revolving
Credit Note(s) executed to its order hereunder for all purposes of this
Financing Agreement, and (d) each Borrower, the Agent and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Financing Agreement. Each
Borrower further acknowledges that in doing so, the Lenders may grant to such
participants certain rights which would require the participant's consent to
certain waivers, amendments and other actions with respect to the provisions of
this Financing Agreement.
Each Obligor authorizes each Lender to disclose to any participant
or purchasing lender (each, a "Transferee") and any prospective Transferee any
and all financial information in such Lender's possession concerning such
Obligor and their respective affiliates which has been delivered to such Lender
by or on behalf of an Obligor pursuant to this Financing Agreement or which has
been delivered to such Lender by or on behalf of an
<PAGE>
Obligor in connection with such Lender's credit
evaluation of an Obligor and its affiliates prior to entering into this
Financing Agreement.
Section 14.04. Nature of Revolving Credit Commitments. Each Obligor
hereby agrees that each Lender is solely responsible for its portion of the
Revolving Credit Commitments and that neither the Agent nor any Lender shall be
responsible for, nor assume any obligations for the failure of any Lender to
make available its portion of the Revolving Credit Loans. Further, should any
Lender refuse to make available its portion of the Revolving Credit Loans, then
any one or more of the other Lenders may, but without obligation to do so,
increase, unilaterally, its portion of the Revolving Credit Loans in which event
the applicable Borrower is so obligated to that other Lender.
Section 14.05. Sharing of Costs and Expenses. In the event that the
Agent, the Lenders or any one of them is sued or threatened with suit by an
Obligor or any one of them, or by any receiver, trustee, creditor or any
committee of creditors on account of any preference, voidable transfer or lender
liability issue, alleged to have occurred or been received as a result of, or
during the transactions contemplated under this Financing Agreement, then in
such event any money paid in satisfaction or compromise of such suit, action,
claim or demand and any expenses, costs and attorneys' fees paid or incurred in
connection therewith, whether by the Agent, the Lenders or any one of them,
shall be shared proportionately by the Lenders. In addition, any costs,
expenses, fees or disbursements incurred by outside agencies or attorneys
retained by the Agent to effect collection or enforcement of any rights in the
Collateral, including enforcing, preserving or maintaining rights under this
Financing Agreement shall be shared proportionately by the Lenders to the extent
not reimbursed by an Obligor or from the proceeds of Collateral. The provisions
of this paragraph shall not apply to any suits, actions, proceedings or claims
that (a) predate the date of this Financing Agreement or (b) are based on
transactions, actions or omissions that predate the date of this Financing
Agreement.
Section 14.06. Sharing of Payments. Each Borrower hereby agrees
that, in addition to (and without limitation of) any right of set-off, banker's
Lien or counterclaim a Lender may otherwise have, each Lender shall be entitled,
at its option, to offset balances held by it at any of its offices, as the case
may be, against any principal of or interest on its Revolving Credit Loans
payable to such Lender, that is not paid when due (regardless of whether such
balances are then due to the Borrower), in which case such Lender shall promptly
notify such Borrower and the Agent thereof, provided that such Lenders failure
to give such notice shall not affect the validity thereof or create any
liability on the part of such Lender whatsoever. If a Lender shall effect
payment of any principal of or interest on Revolving Credit Loans held by such
Lender under this Financing Agreement through the exercise of any right of
set-off, banker's Lien, counterclaim or similar right, such Lender shall
promptly purchase from the other Lenders participations in the loans and/or
advances held by the other Lenders in such amounts, and make such other
adjustments from time to time as shall be equitable, to the end that all the
Lenders shall share the benefit of such payment pro rata in accordance with the
unpaid principal and interest on the loans and/or advances held by each of them.
To such end, all of the Lenders shall make appropriate adjustments among
themselves (by the resale of participations sold or otherwise) if such payment
is rescinded or must otherwise be restored. Each Borrower agrees that any Lender
so purchasing a participation in the Revolving Credit Loans held by the other
Lenders may exercise all rights of set-off, banker's Lien, counterclaim or
similar rights with respect to such participation as fully as if such Lender
were a direct holder of the Revolving Credit Loans in the amount of such
participation. Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of such Borrower.
Section 14.07. Assignments. Each Lender shall have the right at any
time to assign to one or more commercial banks, commercial finance lenders or
other financial institutions all or a portion of its rights and obligations
under this Financing Agreement including, without limitation, its Revolving
Credit Commitments and Revolving Credit Loans. Upon such assignment and provided
such assignee assumes its portion of each Lender's obligations hereunder, (a)
the assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such assignment,
have the rights and obligations of a Lender hereunder and (b) each Lender shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to such assignment, relinquish their rights and be released from their
obligations under this Financing Agreement. Each Borrower shall, if necessary,
execute any documents
<PAGE>
reasonably required to effectuate the assignments.
In the event any Lender makes any assignment, each such assignment
shall be of a constant, and not a varying, percentage of all of such Lender's
rights and obligations under this Financing Agreement. Upon the execution,
delivery, acceptance and recording, from and after the effective date specified
in an Assignment and Acceptance substantially in the form of Exhibit G hereto
(the "Assignment and Acceptance").
By executing and delivering an Assignment and Acceptance, the Lender
and the assignee thereunder confirm to and agree with each other and the other
parties hereto as follows: (a) other than as provided in such Assignment and
Acceptance, such Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Financing Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Financing Agreement or any other instrument or document furnished pursuant
hereto; (b) such Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of an Obligor or the
performance or observance by an Obligor of any of its obligations under this
Financing Agreement or any other instrument or document furnished pursuant
hereto; (c) such assignee confirms that it has received a copy of this Financing
Agreement, together with copies of such financial statements and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (d) such
assignee will, independently and without reliance upon the Agent, CITBC, or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Financing Agreement; (e) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Financing Agreement as are delegated to the Agent by the
terms hereof, together with such powers as are reasonably incidental thereto;
and (f) such assignee agrees that it will perform in accordance with their terms
all of the obligations which by the terms of this Financing Agreement are
required to be performed by it as a Lender.
Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender, together with all Revolving Credit Notes subject to such
assignment, the Agent shall: (a) accept such Assignment and Acceptance, and (b)
give prompt notice thereof to the Borrower. Within five (5) Business Days after
its receipt of such notice, each Borrower, at its own expense, shall execute and
deliver to the Agent in exchange for each surrendered Revolving Credit Note a
new Revolving Credit Notes to the order of such assignee in an amount equal to
the applicable Revolving Credit Commitment and/or Revolving Credit Loans assumed
by it pursuant to such Assignment and Acceptance and, if such Lender has
retained a Revolving Credit Commitment and/or Revolving Credit Loan hereunder,
new Revolving Credit Notes to the order of such Lender in amounts equal to the
applicable Revolving Credit Commitment retained by it hereunder. Such new
Revolving Credit Notes shall be dated the effective date of such Assignment and
Acceptance and shall otherwise be in substantially the form of Exhibit A.
Section 14.08. Acknowledgements by Agent. The Lenders hereby
irrevocably authorize the Agent, at its option and in its discretion and without
the necessity of any notice from the Agent to the Lenders, (a) to acknowledge
that neither the Agent nor the Lenders have a Lien on any leased property of the
Borrower or any other property in which the Borrower does not own any interest;
(b) to (i) acknowledge a Purchase Money Lien that conforms to the criteria set
forth on the definition of said term in Section 1.01 of this Financing Agreement
and (ii) subordinate to any holder of such Purchase Money Lien any Lien on the
Equipment subject thereto that the Agent and the Lenders have as long as the
applicable Obligor owning such Equipment is indebted to such creditor; (iii) to
release any Lien granted to or held by the Agent upon any Collateral: (A) upon
termination of the Revolving Credit Commitments and this Financing Agreement and
the payment and satisfaction of the Obligations; (B) constituting property sold
or to be sold or disposed of as part of or in connection with any disposition
permitted hereunder; (C) constituting property leased to the applicable Obligor
under a lease which has expired or been terminated in a transaction permitted
under this Financing Agreement or is about to expire and which has not been, and
is not intended by the applicable Obligor to be, renewed or extended; (D)
consisting of an instrument evidencing Indebtedness, which instrument has been
pledged to the Agent for the ratable benefit of the Lenders, if the Indebtedness
evidenced thereby has been paid in full; or (E) if approved, authorized or
ratified in writing by all the Lenders. Upon request by the Agent at any time,
the Lenders will confirm in writing the Agent's authority to release particular
types or items of Collateral pursuant to this Section.
<PAGE>
Section 14.09. Termination of Financing Agreement. The Agent, at the
direction of all of the Lenders, may terminate the Revolving Credit Commitments
and this Financing Agreement on April 30, 2000 or any Anniversary Date of the
Closing Date subsequent to April 30, 2000 by giving the Borrowers at least sixty
(60) days' prior written notice of termination. Notwithstanding the foregoing,
the Agent may terminate the Financing Agreement immediately upon the occurrence
of an Event of Default, provided, however, that if the Event of Default is an
event listed in paragraph (e), (f) or (g) of Section 12.01 hereof, the Agent may
regard this Financing Agreement as terminated and notice to that effect is not
required.
Any of the Lenders may terminate this Financing Agreement on April
30, 2000 or any Anniversary Date of the Closing Date subsequent to April 30,
2000 by giving the Agent and the other Lenders at least ninety (90) days prior
written notice of termination. Within thirty (30) days of receipt of such notice
from any such Lender(s), the Agent shall either: (a) give notice to the
Borrowers of termination of the Revolving Credit Commitment and this Financing
Agreement in accordance with the terms hereof, in which event the obligations of
the Lenders hereunder shall terminate as of the date on which termination of
this Financing Agreement with the Borrowers shall become operative and effective
or (b) if the other Lenders so elect, they shall have the right to purchase the
terminating Lender's Pro Rata Share of its interest hereunder for the full
amount thereof, together with any accrued interest. Termination of this
Financing Agreement by any of the Lenders as herein provided shall not affect
the Lenders' respective rights and obligations under this Financing Agreement
incurred prior to the effective date of termination as set forth in the
preceding sentence. This Financing Agreement, unless terminated as herein
provided, shall continue.
The Borrowers may terminate this Financing Agreement and the
Revolving Credit Commitment, in whole, only on or after all of the obligations
owing to CITEF by FiberMark Office under the Lease Agreement or any loan
agreement shall have been paid in full, and then only upon sixty (60) days'
prior written notice by the Borrowers to the Agent, provided that the Borrowers
pay to the Agent for the ratable benefit of the Lenders immediately on demand
the Libor Rate Prepayment Premium. All Obligations shall become due and payable
as of any termination hereunder or under Article 12 hereof and, pending a final
accounting, the Agent may withhold any balances in the Borrowers' accounts
(unless supplied with an indemnity satisfactory to the Agent) to cover all of
the Obligations, whether absolute or contingent. All of the Agent's and the
Lenders' rights, liens and security interests shall continue after any
termination until all Obligations have been paid and indefeasibly satisfied in
full.
ARTICLE XV. MISCELLANEOUS
Section 15.01. Waivers. Each Obligor hereby waives diligence,
demand, presentment and protest and any notices thereof as well as notice of
nonpayment. No delay or omission of the Agent or any of the Lenders or any
Obligor to exercise any right or remedy hereunder, whether before or after the
happening of any Event of Default, shall impair any such right or shall operate
as a waiver thereof or as a waiver of any such Event of Default. No single or
partial exercise by the Agent or any of the Lenders of any right or remedy
precludes any other or further exercise thereof, or precludes any other right or
remedy.
Section 15.02. Entire Agreement. This Financing Agreement and the
documents executed and delivered in connection therewith constitute the entire
agreement between the Obligors and the Agent and the Lenders; supersede any
prior agreements; subject to the provisions Section 13.10, can be changed only
by a writing signed by the Obligors, the Agent and the Required Lenders; and
shall bind and benefit the Obligors, the Agent and the Lenders and their
respective successors and assigns.
Section 15.03. Usury. In no event shall an Obligor, upon demand by
the Agent for payment of any indebtedness relating hereto, by acceleration of
the maturity thereof, or otherwise, be obligated to pay interest and fees in
excess of the amount permitted by Law. Regardless of any provision herein or in
any agreement made in connection herewith, the Lenders shall never be entitled
to receive, charge or apply, as interest on any indebtedness relating hereto,
any amount in excess of the maximum amount of interest permissible under
applicable Law. If the Agent or any one or more of the Lenders ever receive,
collect or apply any such excess, it shall be deemed a partial repayment of
principal and treated as such; and if principal is paid in full, any remaining
excess shall be refunded to the applicable Obligor. This paragraph shall control
every
<PAGE>
other provision hereof and of any other agreement made in connection herewith.
Section 15.04. Payment of Expenses. All statements, reports,
certificates, opinions and other documents or information required to be
furnished by any Obligor to Agent or any Lender under this Financing Agreement
or any other Loan Document shall be supplied without cost to Agent or any
Lenders. FiberMark shall pay, on demand, (1) all Out-of-Pocket Costs and
Expenses of Agent and Lenders, including, without limitation, the fees and
disbursements of Dewey Ballantine, counsel to Agent and Lenders, incurred in
connection with (a) the negotiation, preparation, execution and delivery of the
Loan Documents, (b) any waiver of amendment of, or supplement or modification
to, the Loan Documents and (c) the review of any of the other agreements,
instruments or documents referred to in this Agreement or relating to the
transactions contemplated hereby including, without limitation, ongoing review
of environmental matters; [(d) all cost associated with the Title Insurance
Policy;] (e) all costs and expenses of the Agent and Lenders (including fees and
disbursements of legal counsel) incident to the successful enforcement,
collection, protection or preservation of any right or claim of Agent or Lenders
under the Loan Documents and (f) all fees and expenses incurred in connection
with the perfection of the Lenders' Liens, all recording fees, mortgage taxes,
serving costs, and all searches; (2) the Collateral Management Fee; (3) the
Documentation Fee; and (4) the Unused Line Fee.
Section 15.05. Indemnity. Each Obligor hereby jointly and severally
agrees to indemnify the Lenders and the Agent and each of their affiliates,
officers, directors, employees, attorneys, consultants and agents (collectively,
"Indemnitees") and agrees to defend and hold the Indemnitees harmless from and
against any and all loss, damage, claim, liability, injury, obligation, penalty,
action, suit, cost, or expense of whatsoever kind or nature, imposed on,
incurred by or asserted against any Indemnitee by reason of (a) any
investigation, litigation or other proceedings (including any threatened
investigation, litigation or other proceedings) relating to or arising in
connection with this Financing Agreement, any other Loan Document or the
transactions contemplated hereby or thereby (but excluding any such losses,
liabilities, claims or damages incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified) and (b) any Environmental
Discharge; any handling, storage, use, disposal, manufacture, treatment,
recycling, remediation, removal, generation, release, discharge, refining or
dumping of any Hazardous Materials; any Remedial Action; or any violation or
alleged violation of Environmental Laws, arising from or in connection with the
past, present or future operations, properties or equipment of any Obligor or
its predecessors in interest. Each Obligor hereby jointly and severally also
agrees to reimburse any Indemnitee for all expenses incurred in connection with
any such investigation, litigation or other proceedings (whether actual or
threatened), or such Environmental Discharge; handling, storage, use, disposal,
manufacture, treatment, recycling, remediation, removal, generation, release,
discharge, refining or dumping of any Hazardous Materials; Remedial Action; or
violation or alleged violation of Environmental Laws including, without
limitation, the fees and disbursements of counsel incurred in connection with
any of the foregoing. Each Obligor further agrees that this indemnification
shall survive termination of this Financing Agreement as well as the payment of
all Obligations or amounts payable hereunder.
Section 15.06. Severability. If any provision hereof or of any other
Agreement made in connection herewith is held to be illegal or unenforceable,
such provision shall be fully severable, and the remaining provisions of the
applicable agreement shall remain in full force and effect and shall not be
affected by such provision's severance. Furthermore, in lieu of any such
provision, there shall be added automatically as a part of the applicable
agreement a legal and enforceable provision as similar in terms to the severed
provision as may be possible.
Section 15.07. Waiver of Jury Trial. EACH OBLIGOR, THE AGENT AND
EACH LENDER EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING OUT OF THIS FINANCING AGREEMENT. EACH OBLIGOR HEREBY
IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF
PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED.
Section 15.08. Notices. Except as otherwise herein provided, any
notice or other communication required hereunder shall be in writing, and shall
be deemed to have been validly served, given or delivered when hand delivered or
sent by telegram or facsimile, or three days after deposit in the United
<PAGE>
State mails, with proper first class postage prepaid and addressed to the party
to be notified as follows:
(a) if to CITBC or the Agent at:
The CIT Group/Business Credit, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attn: Regional Manager
Fax (212) 536-1294
(b) if to any party which becomes a Lender subsequent to the date hereof,
such address as appears beneath such Lender's name on the signature page of the
Assignment and Acceptance such Lender executes in accordance with Paragraph 10
of Section 13 of this Financing Agreement.
(c) if to FiberMark at:
FiberMark, Inc.
P.O. Box 498
Brudies Road
Brattleboro, VT 05302
Attn: Chief Financial Officer
Fax: (802) 257-5973
with a copy to (provided, however, the failure to deliver such copy
will not invalidate any notices delivered to FiberMark nor create
any liability on the part of the Agent or any Lender):
Moffatt, Thomas, Barrett, Rock & Fields
First Security Building
911 West Idaho
P.O. Box 829
Boise, Idaho 83702
(d) if to FiberMark Durable, FiberMark Filter or FiberMark Office at:
c/o FiberMark, Inc.
P.O. Box 498
Brudies Road
Brattleboro, VT 05302
with a copy to (provided, however, the failure to deliver such copy
will not invalidate any notices delivered to any Borrower nor create
any liability on the part of the Agent or any Lender):
Moffatt, Thomas, Barrett, Rock & Fields
Field Security Building
911 West Idaho
P.O. Box 829
Boise, Idaho 83702
or to such other address as any party may designate for itself by like
notice.
Section 15.09. Governing Law. THE VALIDITY, INTERPRETATION AND
ENFORCEMENT OF THIS FINANCING AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
Section 15.10. Confidentiality. The Lenders shall maintain the
confidential
<PAGE>
nature of, and shall not use or disclose, any Obligor's financial information,
confidential information or trade secrets without first obtaining such Obligors
written consent. Nothing in this Section 15.10 shall require the Agent or the
Lenders to obtain the consent of any Obligor before exercising any of their
respective rights under the Loan Documents upon the occurrence of a Default or
Event of Default. The obligations of the Agent and the Lenders shall in no event
apply to: (a) providing information about any Obligor to any financial
institution contemplated in Section 14.03 or 14.07; (b) any situation in which
the Agent or any of the Lenders is required by Law or required by any
Governmental Authority or governmental, regulatory or supervisory authority or
official to disclose information; (c) providing information to counsel to the
Lenders in connection with the transactions contemplated by the Loan Documents;
(d) providing information to independent auditors retained by the Lenders; (e)
any information that is in or becomes part of the public domain otherwise than
through a wrongful act of the Agent or any of the Lenders or any employees or
agents thereof; (f) any information that is in the possession of the Agent or
any of the Lenders prior to receipt thereof from the applicable Obligor or any
other Person known to such Lender to be acting on behalf of such Obligor; (g)
any information that is independently developed by the Agent or any of the
Lenders; and (h) any information that is disclosed to the Agent or any of the
Lenders by a third party that has no obligation of confidentiality with respect
to the information disclosed.
[INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Financing
Agreement to be executed and delivered by their proper and duly authorized
officers as of the date set forth above. This Financing Agreement shall take
effect as of the date set forth above after being accepted below.
FIBERMARK, INC., as Guarantor
By________________________________________________
Name:
Title:
Address for Notices:
P.O. Box 498
Brudies Road
Brattleboro, VT 05302
Attn: Bruce Moore
Chief Financial Officer
Telecopy: (802) 257-5973
FIBERMARK DURABLE SPECIALTIES, INC., as Borrower
and Guarantor
By________________________________________________
Name:
Title:
Address for Notices:
P.O. Box 498
Brudies Road
Brattleboro, VT 05302
Attn: Bruce Moore
Chief Financial Officer
Telecopy: (802) 257-5973
FIBERMARK FILTER AND TECHNICAL PRODUCTS, INC.,
as Borrower and Guarantor
By________________________________________________
Name:
Title:
<PAGE>
Address for Notices:
P.O. Box 498
Brudies Road
Brattleboro, VT 05302
Attn: Bruce Moore
Chief Financial Officer
Telecopy: (802) 257-5973
FIBERMARK OFFICE PRODUCTS, LLC, as Borrower and
Guarantor
By________________________________________________
Name:
Title:
Address for Notices:
P.O. Box 498
Brudies Road
Brattleboro, VT 05302
Attn: Bruce Moore
Chief Financial Officer
Telecopy: (802) 257-5973
THE CIT GROUP/BUSINESS CREDIT, INC.,
as Agent
By________________________________________________
Name: Edward A. Jesser
Title: Vice President
Applicable Lending Office:
New York
Address for Notices:
1211 Avenue of the Americas
New York, New York 10036
Attn:
Telecopy: (212) 536-1293
<PAGE>
THE CIT GROUP/BUSINESS CREDIT, INC.,
as a Lender
By________________________________________________
Name: Edward A. Jesser
Title: Vice President
Applicable Lending Office:
New York
Address for Notices:
1211 Avenue of the Americas
New York, New York 10036
Attn:
Telecopy: (212) 536-1293
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
_________________, 1996
<PAGE>
EXHIBIT G
FORM OF ASSIGNMENT AND ACCEPTANCE
Dated __________, 1996
Reference is hereby made to the Second Amended and Restated
Financing Agreement and Guaranty, dated as of December 31, 1996 (the "Financing
Agreement"), by and among Specialty Paperboard, Inc., a Delaware corporation
(the "Borrower"), Specialty Paperboard/Endura, Inc., a Delaware corporation
("Endura") CPG Investors, Inc., a Delaware corporation ("CPG Investors"), CPG
Holdings, Inc., a Delaware corporation ("CPG Holdings"), CPG-Warren Glen Inc., a
Virginia corporation ("CPG-Warren"), Custom Papers Group Inc., a Virginia
corporation ("Custom"), Arcon Holdings Corp., a Delaware corporation ("Arcon
Holdings"), Arcon Coating Mills Inc., a Delaware corporation ("Arcon Coating"),
the Lenders signatory thereto (collectively, the "Lenders") and The CIT
Group/Business Credit, Inc. in its capacity as agent for the Lenders (in such
capacity, the "Agent"). Capitalized terms used herein that are defined in the
Financing Agreement that are not otherwise defined herein shall have the
respective meanings ascribed thereto in the Financing Agreement.
The CIT Group/Business Credit, Inc., a New York corporation (the
"Assignor") and __________________________ a _____________ corporation, (the
"Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, a ______________
percent (___%) interest in and to all of the Assignor's rights and obligations
under the Financing Agreement as of the Effective Date (as defined below)
(including, without limitation, such percentage interest in the Assignor's
Revolving Credit Commitments as in effect on the Effective Date, as evidenced by
the Revolving Credit Note held by the Assignor, and the Obligations owing to the
Assignor on the Effective Date.
2. The Assignor: (i) represents and warrants that as of the date
hereof, its Revolving Credit Commitments (without giving effect to assignments
thereof that have not yet become effective) are $____________, (ii) represents
and warrants that it is the legal and beneficial owner of the interest being
assigned by it hereunder, and that such interest is free and clear of any
adverse claim; (iii) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Financing Agreement or any other instrument or
document furnished pursuant thereto; and (iv) makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Borrower or the performance or observance by the Borrower of any of its
Obligations under the Financing Agreement or any other instrument or document
furnished pursuant thereto; and (v) attaches the Revolving Credit Note referred
to in Paragraph 1 above and requests that the Agent exchange such note for a new
note as follows: a Revolving Credit Note of the Borrower dated the Effective
Date in the principal amount of $_______________, such Revolving Credit Note
payable to the order of the Assignee; and a Revolving Credit Note of the
Borrower dated the Effective Date in the principal amount of $________ such
Revolving Credit Note payable to the order of the Assignor.
3. The Assignee: (i) confirms that it has received a copy of the
Financing Agreement, together with copies of such financial statements and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance; (ii)
agrees that it will, independently and without reliance upon the Agent, the
Assignor or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Financing Agreement; (iii) appoints and
authorizes the Agent to take such action as its agent on its behalf and to
exercise such powers under the Financing Agreement as are delegated to the Agent
1
<PAGE>
by the terms thereof, together with such powers as are reasonably incidental
thereto; (iv) agrees that it will perform in accordance with their terms all of
the obligation which by the terms of the Financing Agreement are required to be
performed by it as a Lender; and (vi) specifies as its address(es) and telephone
numbers for notice the office(s) set forth beneath its name on the signature
pages hereof.
4. The effective date for this Assignment and Acceptance shall be
__________ (the "Effective Date"). Following the execution of this Assignment
and Acceptance, it will be delivered to the Agent for acceptance by the Agent.
5. Upon such acceptance, as of the Effective Date: (i) the Assignee
shall be a party to the Financing Agreement and, to the extent provided in this
Assignment and Acceptance, have the rights and obligations of a Lender
thereunder and (ii) the Assignor shall, to the extent provide in this Assignment
and Acceptance, relinquish its rights and be released from its obligations under
the Financing Agreement.
6. Upon such acceptance from and after the Effective Date, the Agent
shall make (except as otherwise agreed to by the Agent, the Assignor and the
Assignee) all payments under the Financing Agreement and the Revolving Credit
Note in respect of the interest assigned hereby (including, without limitation,
all payments of principal, interest and fees with respect thereto) to the
Assignee. The Assignor and Assignee shall make all appropriate adjustments in
payments under the Financing Agreement and the notes for periods prior to the
Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
THE CIT GROUP/BUSINESS CREDIT, INC.
By
Title
[NAME OF ASSIGNEE]
By
Title
Address for Notices:
Attention:
Telephone No.:
Telex No.:
Accepted this ___day
of __________, 199
THE CIT GROUP/BUSINESS CREDIT, INC, as Agent
2
<PAGE>
By
Title
3
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS, ACCOUNTING TERMS AND RULES OF.................... 1
CONSTRUCTION 1
SECTION 1.01. DEFINED TERMS............................................... 1
SECTION 1.02. COMPUTATION OF TIME PERIODS................................ 17
SECTION 1.03. ACCOUNTING PRINCIPLES AND TERMS............................ 17
SECTION 1.04. RULES OF CONSTRUCTION...................................... 17
ARTICLE II. CONDITIONS PRECEDENT......................................... 17
SECTION 2.01. CONDITIONS PRECEDENT TO INITIAL REVOLVING CREDIT LOAN...... 17
SECTION 2.02. CONDITIONS PRECEDENT TO EACH REVOLVING CREDIT LOAN......... 19
SECTION 2.03. DEEMED REPRESENTATION...................................... 20
ARTICLE III. AMOUNT AND TERMS OF THE REVOLVING CREDIT LOANS............... 20
SECTION 3.01. REVOLVING CREDIT LOANS..................................... 20
SECTION 3.02. REVOLVING CREDIT NOTE...................................... 20
SECTION 3.03. OVERADVANCES............................................... 20
SECTION 3.04. INFORMATION RELATING TO ACCOUNTS........................... 21
SECTION 3.05. REPRESENTATIONS RELATING TO ACCOUNTS....................... 21
SECTION 3.06. COLLECTION OF ACCOUNTS..................................... 21
SECTION 3.07. NOTICE REGARDING ACCOUNTS.................................. 22
SECTION 3.08. BORROWERS' ACCOUNT......................................... 22
SECTION 3.09. APPLICATION OF PAYMENTS.................................... 22
SECTION 3.10. PREPAYMENTS................................................ 23
SECTION 3.11. FUNDING OF REVOLVING CREDIT LOANS.......................... 23
SECTION 3.12. NOTICE AND MANNER OF BORROWING............................. 23
SECTION 3.13. OBLIGATIONS OF AGENT AND LENDERS........................... 24
SECTION 3.14. MINIMUM AMOUNTS............................................ 24
SECTION 3.15. USE OF PROCEEDS............................................ 24
SECTION 3.16. TAXES...................................................... 25
SECTION 3.17. ADDITIONAL COSTS........................................... 25
SECTION 3.18. LIMITATION ON TYPES OF REVOLVING CREDIT LOANS.............. 26
SECTION 3.19. ILLEGALITY................................................. 26
SECTION 3.20. TREATMENT OF AFFECTED LOANS................................ 27
SECTION 3.21. ADEQUACY................................................... 27
ARTICLE IV. GUARANTY..................................................... 27
SECTION 4.01. FIBERMARK DURABLE GUARANTY................................. 27
SECTION 4.02. FIBERMARK DURABLE GUARANTORS' GUARANTY OBLIGATIONS
UNCONDITIONAL............................................ 27
SECTION 4.03. WAIVERS.................................................... 28
4
<PAGE>
SECTION 4.04. SUBROGATION................................................ 28
SECTION 4.05. FIBERMARK FILTER GUARANTY.................................. 28
SECTION 4.06. FIBERMARK FILTER GUARANTORS' GUARANTY OBLIGATIONS
UNCONDITIONAL. 28
SECTION 4.07. WAIVERS.................................................... 29
SECTION 4.08. SUBROGATION................................................ 29
SECTION 4.09. FIBERMARK OFFICE GUARANTY.................................. 30
SECTION 4.10. FIBERMARK OFFICE GUARANTORS' GUARANTY OBLIGATIONS
UNCONDITIONAL............................................ 30
SECTION 4.11. WAIVERS.................................................... 30
SECTION 4.12. SUBROGATION................................................ 31
SECTION 4.13. FIBERMARK GUARANTY......................................... 31
SECTION 4.14. FIBERMARK GUARANTORS' GUARANTY OBLIGATIONS UNCONDITIONAL... 31
SECTION 4.15. WAIVERS.................................................... 32
SECTION 4.16. SUBROGATION................................................ 32
ARTICLE V. COLLATERAL................................................... 32
SECTION 5.01. (A) GRANT OF A SECURITY INTEREST BY FIBERMARK OFFICE....... 32
SECTION 5.02. COVENANTS REGARDING INVENTORY.............................. 34
SECTION 5.03. COVENANTS REGARDING EQUIPMENT.............................. 34
SECTION 5.04. COLLATERAL COVENANT........................................ 35
SECTION 5.05. COVENANTS REGARDING ACCOUNTS............................... 35
SECTION 5.06. COVENANTS REGARDING LEASE AGREEMENT........................ 36
SECTION 5.07. CONTINUING SECURITY INTEREST............................... 36
SECTION 5.08. ACTIONS BY AGENT........................................... 36
SECTION 5.09. ADDITIONAL COLLATERAL AND FURTHER ASSURANCES............... 36
SECTION 5.10. ADDITIONAL INFORMATION..................................... 36
SECTION 5.11. COMPLIANCE WITH FAIR LABOR STANDARDS ACT................... 37
ARTICLE VI. INTEREST, FEES AND EXPENSES.................................. 37
SECTION 6.01. METHOD OF ELECTING INTEREST RATES.......................... 37
SECTION 6.02. INTEREST................................................... 38
SECTION 6.03. FEES....................................................... 38
SECTION 6.04. PAYMENTS AND COMPUTATIONS.................................. 39
SECTION 6.05. CERTAIN COMPENSATION....................................... 39
ARTICLE VII. POWERS....................................................... 39
SECTION 7.01. POWERS..................................................... 39
ARTICLE VIII. REPRESENTATIONS AND WARRANTIES................................ 40
SECTION 8.01. INCORPORATION, GOOD STANDING AND DUE QUALIFICATION......... 40
SECTION 8.02. CORPORATE POWER AND AUTHORITY; NO CONFLICTS................ 40
SECTION 8.03. LEGALLY ENFORCEABLE AGREEMENTS............................. 40
SECTION 8.04. LITIGATION................................................. 40
SECTION 8.05. FINANCIAL STATEMENTS....................................... 41
SECTION 8.06. OWNERSHIP AND LIENS........................................ 41
5
<PAGE>
SECTION 8.07. TAXES...................................................... 41
SECTION 8.08. ERISA...................................................... 41
SECTION 8.09. SUBSIDIARIES............................................... 42
SECTION 8.10. OPERATION OF BUSINESS...................................... 42
SECTION 8.11. NO DEFAULT ON OUTSTANDING JUDGMENTS OR ORDERS.............. 42
SECTION 8.12. NO DEFAULTS ON OTHER AGREEMENTS............................ 42
SECTION 8.13. LABOR DISPUTES AND ACTS OF GOD............................. 42
SECTION 8.14. GOVERNMENTAL REGULATION.................................... 42
SECTION 8.15. PARTNERSHIPS............................................... 42
SECTION 8.16. ENVIRONMENTAL PROTECTION................................... 42
SECTION 8.17. SOLVENCY................................................... 43
SECTION 8.18. INTELLECTUAL PROPERTY...................................... 43
SECTION 8.19. LICENSE OF INTELLECTUAL PROPERTY........................... 43
ARTICLE IX. AFFIRMATIVE COVENANTS........................................ 43
SECTION 9.01. REPORTING REQUIREMENTS..................................... 43
SECTION 9.02. NOTICES.................................................... 45
SECTION 9.03. PAYMENT OF TAXES AND CLAIMS................................ 46
SECTION 9.04. MAINTENANCE OF EXISTENCE................................... 46
SECTION 9.05. CONDUCT OF BUSINESS........................................ 46
SECTION 9.06. COMPLIANCE WITH LAWS....................................... 46
SECTION 9.07. INSURANCE.................................................. 46
SECTION 9.08. BOOKS AND RECORDS; INSPECTION.............................. 49
SECTION 9.09. ERISA COVENANT............................................. 49
SECTION 9.10. INTERCOMPANY TRANSFER OF FUNDS............................. 49
SECTION 9.11. INVENTORY AND ACCOUNTS RECEIVABLE ANALYSIS OF ACQUIRED
ENTITY................................................... 49
SECTION 9.12. ACQUIRED ENTITIES.......................................... 49
SECTION 9.13. COMPLIANCE WITH ENVIRONMENTAL LAWS......................... 50
ARTICLE X. NEGATIVE COVENANTS........................................... 50
SECTION 10.01. DEBT....................................................... 50
SECTION 10.02. LIENS...................................................... 51
SECTION 10.03. GUARANTIES................................................. 51
SECTION 10.04. SALE OF ASSETS............................................. 51
SECTION 10.05. PROHIBITION OF FUNDAMENTAL CHANGES......................... 51
SECTION 10.06. INVESTMENTS................................................ 51
SECTION 10.07. TRANSACTION WITH AFFILIATES................................ 51
SECTION 10.08. NATURE OF BUSINESS......................................... 51
SECTION 10.09. DIVIDENDS.................................................. 52
SECTION 10.10. LEASES..................................................... 52
SECTION 10.11. ENVIRONMENTAL COMPLIANCE................................... 52
SECTION 10.12. FISCAL YEAR................................................ 52
SECTION 10.13. SUBSIDIARY STOCK ISSUANCE.................................. 52
ARTICLE XI. INTENTIONALLY OMITTED........................................ 52
6
<PAGE>
ARTICLE XII. EVENTS OF DEFAULT............................................ 52
SECTION 12.01. EVENTS OF DEFAULT.......................................... 52
SECTION 12.02. ACCELERATION OF OBLIGATIONS................................ 54
SECTION 12.03. OTHER REMEDIES............................................. 55
ARTICLE XIII. AGENCY........................................................ 56
SECTION 13.01. THE AGENT.................................................. 56
SECTION 13.02. DELEGATION OF DUTIES....................................... 56
SECTION 13.03. EXCULPATORY PROVISIONS..................................... 56
SECTION 13.04. RELIANCE BY AGENT.......................................... 56
SECTION 13.05. NOTICE OF DEFAULT.......................................... 57
SECTION 13.06. NON-RELIANCE ON AGENT AND OTHER LENDERS.................... 57
SECTION 13.07. INDEMNIFICATION............................................ 57
SECTION 13.08. THE AGENT IN ITS INDIVIDUAL CAPACITY....................... 57
SECTION 13.09. SUCCESSOR AGENT............................................ 57
SECTION 13.10. ARRANGEMENTS REQUIRING CONSENT OF LENDERS.................. 58
SECTION 13.11. RECAPTURE OF PAYMENTS...................................... 58
ARTICLE XIV. RIGHTS AND OBLIGATIONS OF THE LENDERS AND THE AGENT........... 59
SECTION 14.01. ADJUSTMENTS AMONG LENDERS.................................. 59
SECTION 14.02. SHARING OF PAYMENTS........................................ 59
SECTION 14.03. SALE OF PARTICIPATIONS..................................... 59
SECTION 14.04. NATURE OF REVOLVING CREDIT COMMITMENTS..................... 60
SECTION 14.05. SHARING OF COSTS AND EXPENSES.............................. 60
SECTION 14.06. SHARING OF PAYMENTS........................................ 60
SECTION 14.07. ASSIGNMENTS................................................ 60
SECTION 14.08. ACKNOWLEDGEMENTS BY AGENT.................................. 61
SECTION 14.09. TERMINATION OF FINANCING AGREEMENT......................... 62
ARTICLE XV. MISCELLANEOUS................................................ 62
SECTION 15.01. WAIVERS.................................................... 62
SECTION 15.02. ENTIRE AGREEMENT........................................... 62
SECTION 15.03. USURY...................................................... 62
SECTION 15.04. PAYMENT OF EXPENSES........................................ 63
SECTION 15.05. INDEMNITY.................................................. 63
SECTION 15.06. SEVERABILITY............................................... 63
SECTION 15.07. WAIVER OF JURY TRIAL....................................... 63
SECTION 15.08. NOTICES.................................................... 63
SECTION 15.09. GOVERNING LAW.............................................. 64
SECTION 15.10. CONFIDENTIALITY............................................ 64
Exhibits
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Revolving Credit Notice of Borrowing
Exhibit C - Form of Notice of Interest Rate Selection
7
<PAGE>
Exhibit D - Form of Mortgage, Assignment of Leases and Rents and Security
Agreement (Brattleboro)
Exhibit E - Form of Solvency Certificate
Exhibit F - Form of Opinion of Counsel to Obligors
Exhibit G - Form of Assignment and Acceptance
Exhibit H - Form of Borrowing Base Certificate
Exhibit I - Form of Security Agreement
Schedules
Schedule 5.04 - List of Inventory and Equipment Locations
Schedule 5.04A - Real Estate
Schedule 8.04 - Litigation
Schedule 9.06 - Environmental Matters
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EXHIBIT 10.31
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SECOND AMENDED AND RESTATED SECURITY AGREEMENT, dated December 31, 1997
("Security Agreement"), made by FiberMark Office Products, LLC, a Vermont
limited liability company ("Lessee") to The CIT Group/Equipment Financing, Inc.
("Lessor").
PRELIMINARY STATEMENTS
1. Reference is made to the Amended and Restated Security Agreement,
dated as of December 31, 1996, made by Specialty Paperboard, Inc., a Delaware
corporation ("Specialty Paperboard") to Lessor (the "December 1996 Agreement").
2. To the extent this Security Agreement amends the December 1996
Agreement, the December 1996 Agreement is amended, and to the extent this
Security Agreement restates the December 1996 Agreement, the December 1996
Agreement is restated.
3. Reference is made to each of (a) the Lease Agreement, dated as of
April 29, 1994, between Specialty Paperboard, as Lessee, and the Lessor, as
Lessor, as supplemented and amended by that certain Lease Supplement No. 1,
dated as of April 29, 1994, that certain First Amendment to Lease Agreement,
dated as of September 29, 1995, that certain Second Amendment to Lease
Agreement, dated as of December 29, 1995, as otherwise amended, modified or
supplemented from time to time, and as assigned and assumed pursuant to the
Assignment and Assumption Agreement--NY, dated December 31, 1997, by and between
FiberMark, Inc. ("FiberMark") and Lessee, (the "Lease Agreement") and (b) the
Third Amended and Restated Financing Agreement and Guaranty, dated December 31,
1997, among FiberMark, FiberMark Durable Specialties, Inc., FiberMark Filter and
Technical Products, Inc., and Lessor, The CIT Group/Business Credit, Inc.
("CITBC"), the other lenders that may, subsequent to the date hereof, purchase
from CITBC a portion of its rights and obligations under such Financing
Agreement pursuant to, and in accordance with the terms and provisions thereof
(CITBC and such other lenders each individually a "Lender" and collectively the
"Lenders"), and CITBC as agent for the Lenders (the "Agent") (as it may
hereafter be amended, modified or supplemented from time to time, being the
"Financing Agreement"). The terms defined in the Lease Agreement and not
otherwise defined in this Security Agreement which are used in this Security
Agreement shall have the meanings set forth in the Lease Agreement. All other
capitalized terms shall have the meanings as set forth in Annex I attached
hereto.
4. As an inducement for the Lessor to maintain its obligations under
the Lease Agreement, Lessee shall have granted the security interests
contemplated by this Security Agreement.
NOW, THEREFORE, in consideration of the mutual obligations contained
in the Lease Agreement and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Lessee hereby agrees as
follows:
ARTICLE XVI. Grant of Security. The Lessee hereby grants to the
Lessor a security interest in and on all of the Lessee's right, title and
interest in and to all of the following, whether now owned or hereafter acquired
or existing (the "Collateral"):
Section 16.01. All present and hereafter acquired machinery,
equipment, furnishings and fixtures, and all additions, substitutions and
replacements thereof, located on the Brattleboro, Vermont property owned by
Lessee, together with
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all attachments, components, parts, equipment and accessories installed thereon
or affixed thereto and all proceeds of whatever sort (any and all such
equipment, parts and accessions being the "Equipment");
Section 16.02. All present and hereafter acquired merchandise,
inventory and goods held for sale or lease or to be furnished under contracts of
service, and all additions, substitutions and replacements thereof, wherever
located, together with all goods and materials used or usable in manufacturing,
processing, packaging or shipping same; in all stages of production- from raw
materials through work-in-process to finished goods - and all proceeds thereof
of whatever sort (any and all such inventory, accessions, products being the
"Inventory");
Section 16.03. All of the now existing and future: (i) right to
payment for goods sold by or services rendered by the Lessee, including all
accounts arising from sales or rendition of services made under any of the
Lessee's trade names or styles, or through any of the Lessee's divisions;
regardless of how such right is evidenced, whether secured or unsecured, or now
existing or hereafter arising (whether or not specifically listed on schedules
furnished to the Lessor) (the "Accounts Receivables"), and any and all
instruments, documents, contract rights, chattel paper, general intangibles,
including, without limitation, all accounts created by or arising from all of
the Lessee's sales of goods or rendition of services to its customers, (ii)
unpaid seller's rights (including rescission, replevin, reclamation and stoppage
in transit) relating to the foregoing or arising therefrom; (iii) rights to any
goods represented by any of the foregoing, including rights to returned or
repossessed goods; (iv) reserves and credit balances arising hereunder; (v)
guarantees or collateral for any of the foregoing; (vi) insurance policies or
rights relating to any of the foregoing; and (vii) cash and non-cash proceeds of
any and all the foregoing;
Section 16.04. The Lessee's fee and/or leasehold interests in the
real property of the Lessee located at Brattleboro, Vermont which has been
encumbered, mortgaged, pledged or assigned to the Lessor or to the Lessor's
designee, pursuant to the Mortgage (Brattleboro, Vermont);
Section 16.05. and all Proceeds of the foregoing.
The security interests granted hereunder shall extend and attach to:
1. All Collateral which is presently in existence and which is owned
by the Lessee or in which the Lessee has any interest, whether held by the
Lessee or others for its account, and, if any Collateral is Equipment, whether
the Lessee's interest in such Equipment is as owner or lessee or conditional
vendee;
2. All Equipment whether the same constitutes personal property or
fixtures, including, but without limiting the generality of the foregoing, all
dies, jigs, tools, benches, tables, accretions, component parts thereof and
additions thereto, as well as all accessories, motors, engines and auxiliary
parts used in connection with or attached to the Equipment; and
3. All Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either the Lessor or the Lessee from the
Lessee's customers, as well as to all supplies, goods, incidentals, packaging
materials, labels and any other items which contribute to the finished goods or
products manufactured or processed by the Lessee,
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or to the sale, promotion or shipment thereof.
ARTICLE XVII. Security for Lease Obligations. The Collateral secures
the prompt and complete payment when due and performance of all the Lease
Obligations.
ARTICLE XVIII. The Lessee Remains Liable. Anything herein to the
contrary notwithstanding, (a) the Lessee shall remain liable under the contracts
and agreements included in the Collateral to the extent set forth therein to
perform all of its duties and obligations thereunder to the same extent as if
this Security Agreement had not been executed, (b) the exercise by the Lessor of
any of the rights hereunder shall not release the Lessee from any of its duties
or obligations under the contracts and agreements included in the Collateral,
and (c) the Lessor shall not have any obligation or liability under the
contracts and agreements included in the Collateral by reason of this Security
Agreement, nor shall the Lessor be obligated to perform any of the obligations
or duties of the Lessee thereunder or to take any action to collect or enforce
any claim for payment assigned hereunder.
ARTICLE XIX. Representations and Warranties. The Lessee represents
and warrants to the Lessor as follows:
Section 19.01. All of the Inventory is located at the places
specified in Schedule I hereto. The chief place of business and chief executive
office of the Lessee and the office where the Lessee keeps its records
concerning Accounts Receivable are located at the address specified on Schedule
I hereto. All originals of all chattel paper which evidence Accounts Receivable
have been delivered to the Lessor. None of the Accounts Receivable are evidenced
by a promissory note or other instrument.
Section 19.02. This Security Agreement has been duly executed and
delivered by the Lessee and constitutes a legal, valid and binding obligation of
the Lessee enforceable in accordance with its terms and will not: (i) require
any consent or approval of its members; (ii) contravene its articles of
organization or operating agreement; (iii) violate any provision of, or require
any filing (other than the filing of the financing statements contemplated by
the Security Documents), registration, consent or approval under any Law
(including, without limitation, Regulation U), order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to such limited liability company; or (iv) result in a breach of
or constitute a default under or require any consent under any indenture or loan
or credit agreement or any other agreement, lease or instrument to which the
Lessee is a party or by which it or its properties may be bound or affected.
Section 19.03. The Lessee owns the Collateral free and clear of any
Lien, except for (i) the security interest created by this Security Agreement
and (ii) Liens granted in connection with or permitted pursuant to the Financing
Agreement. No effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any recording
office, except (i) such as may have been filed in favor of the Lessor relating
to this Security Agreement and (ii) such as may have been filed in favor of the
Agent relating to the Financing Agreement.
Section 19.04. The Lessee conducts no business under any name or
trade name other than its proper limited liability company name.
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Section 19.05. The Lessee has exclusive possession and control of
the Equipment and Inventory.
Section 19.06. As of the date of this Security Agreement, this
Security Agreement creates a continuing Lien in the Collateral, securing the
payment of the Lease Obligations, all other actions necessary or desirable to
perfect and protect such security interest have been duly taken.
Section 19.07. No authorization, approval or other action by, and no
notice to or filing with, any Governmental Authority is required either (i) for
the grant by the Lessee of the security interest granted hereby or for the
execution, delivery or performance of this Security Agreement by the Lessee or
(ii) for the perfection of or the exercise by the Lessor of their respective
rights and remedies hereunder.
Section 19.08. The Taxpayer Identification Number of the Lessee is
_________.
ARTICLE XX. Further Assurances.
Section 20.01. The Lessee agrees that from time to time, at the
expense of the Lessee, the Lessee will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Lessor may request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the
Lessor to exercise and enforce its rights and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing, the Lessee
will: (i) mark conspicuously each document and agreement included in the
Collateral and, at the request of the Lessor, each of its records pertaining to
the Collateral with a legend, in form and substance satisfactory to the Lessor
indicating that such Collateral is subject to the security interest granted
hereby; (ii) if any Account Receivable shall be evidenced by a promissory note
or other instrument or chattel paper deliver such to the Lessor duly endorsed
and accompanied by duly executed instruments of transfer or assignment, all in
form and substance satisfactory to the Lessor; and (iii) execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as the Lessor may
request, in order to perfect and preserve the security interest granted or
purported to be granted hereby.
Section 20.02. The Lessee hereby authorizes the Lessor to file one
or more financing or continuation statements, and amendments thereto, relative
to all or any part of the Collateral without the signature of the Lessee where
permitted by law. A carbon, photographic or other reproduction of this Security
Agreement or any financing statement covering the Collateral or any part thereof
shall be sufficient as a financing statement where permitted by law.
Section 20.03. The Lessee will furnish to the Lessor from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the Lessor may
request, all in reasonable detail.
Section 20.04. The Lessee will defend the Collateral against all
claims and demands of all Persons (other than the Lessor) claiming an interest
therein. The Lessee will pay promptly when due all property and other taxes,
assessments and
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governmental charges or levies imposed upon, and all claims (including claims
for labor, materials and supplies) against, the Collateral, except to the extent
where there is a Good Faith Contest to the validity thereof. In connection with
any such Good Faith Contest the Lessee will, at the request of the Lessor,
promptly provide a bond, cash deposit or other security reasonably satisfactory
to protect the security interest of the Lessor should such Good Faith Contest be
unsuccessful.
Section 20.05. In furtherance of the continuing assignment and
security interest in the Lessee's Accounts, the Lessee will, upon the creation
of Accounts, execute and deliver to the Lessor in such form and manner as the
Lessor may reasonably require, solely for the Lessor's convenience in
maintaining records of collateral, such confirmatory schedules of Accounts as
the Lessor may reasonably request, and such other appropriate reports
designating, identifying and describing the Accounts as the Lessor may
reasonably require. In addition, upon the Lessor's request, the Lessee shall
provide the Lessor with copies of agreements with, or purchase orders from, the
Lessee's customers, and copies of invoices to customers, proof of shipment or
delivery and such other documentation and information relating to said Accounts
and other collateral as the Lessor may reasonably require. Failure to provide
the Lessor with any of the foregoing shall in no way affect, diminish, modify or
otherwise limit the security interests granted herein. The Lessee hereby
authorizes the Lessor to regard its printed name or rubber stamp signature on
assignment schedules or invoices as the equivalent of a manual signature by one
of the Lessee's authorized officers or agents.
Section 20.06. The Lessee hereby represents and warrants that (i)
each Account is based on an actual and bona fide sale and delivery of goods or
rendition of services to customers, made by the Lessee in the ordinary course of
its business; (ii) the goods and inventory being sold and the Accounts created
are the exclusive property of the Lessee and are not and shall not be subject to
any lien, consignment arrangement, encumbrance, security interest or financing
statement whatsoever, other than the Permitted Encumbrances; (iii) the invoices
evidencing such Accounts are in the name of the Lessee; and (iv) the customers
of the Lessee have accepted the goods or services, owe and are obligated to pay
the full amounts stated in the invoices according to their terms, without
dispute, offset, defense, counterclaim or contra, except for disputes and other
matters arising in the ordinary course of business of which the Lessee has
advised the Lessor pursuant to Section 5(h) of this Security Agreement. The
Lessee confirms to the Lessor that any and all taxes or fees relating to its
business, its sales, the Accounts or goods relating thereto, are its sole
responsibility and that same will be paid by the Lessee or when due and than
none of said taxes or fees represent a lien on or claim against the Accounts.
The Lessee also warrants and represents that it is a duly and validly existing
corporation and is qualified in all states and provinces where the failure to so
qualify would have an adverse effect on the business of the Lessee or the
ability of the Lessee to enforce collection of Accounts due from customers
residing in such locations. The Lessee agrees to maintain such books and records
regarding Accounts as the Lessor may reasonably require and agrees that the
books and records of the Lessee will reflect the Lessor's interest in the
Accounts. All of the books and records of the Lessee will be available to the
Lessor at normal business
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hours, including any records handled or maintained for the Lessee by any other
company or entity.
Section 20.07. Until the Lessor has advised the Lessee to the
contrary after the occurrence of an Event of Default, the Lessee may and will
enforce, collect and receive all amounts owing on the Accounts for the Lessor's
benefit and on the Lessor's behalf, but at the Lessee's expense; such privilege
shall terminate automatically upon the institution by or against the Lessee of
any proceeding under any bankruptcy or insolvency law or, at the election of the
Lessor, upon the occurrence of any other Event of Default and until such Event
of Default is waived. Any checks, cash, notes or other instruments or property
received by the Lessee with respect to any Accounts shall be held by the Lessee
in trust for the Lessor, separate from the Lessee's own property and funds, and
immediately turned over to the Lessor with proper assignments or endorsements by
deposit to the Depository Accounts. All amounts received by the Lessor in
payment of Accounts will be credited to the Lessee's accounts upon the Lessor's
receipt of "collected funds" at the Lessor's bank account in New York, New York
on the Business Day of receipt if received no later than 1:00 p.m. (New York
time) or on the next succeeding Business Day if received no later than 1:00 p.m.
(New York time). No checks, drafts or other instrument received by the Lessor
shall constitute final payment to the Lessor unless and until such instruments
have actually been collected.
Section 20.08. The Lessee agrees to notify the Lessor promptly of
any matters materially affecting the value, enforceability or collectibility of
any Account and of all material customer disputes, offsets, defenses,
counterclaims, returns, rejections and all reclaimed or repossessed merchandise
or goods. The Lessee agrees that it shall issue credit memoranda promptly (with
duplicates to the Lessor upon request after the occurrence of an Event of
Default) upon accepting returns or granting allowances, and may continue to do
so until the Lessor has notified the Lessee that an Event of Default has
occurred and that all future credits or allowances are to be made only after the
Lessor's prior written approval. Upon the occurrence of an Event of Default and
until such time as such Event of Default is waived and on notice from Lessor,
the Lessee agrees that all returned, reclaimed or repossessed merchandise or
goods shall be set aside by the Lessee, marked with the Lessor's name and held
by the Lessee for the Lessor's account as owner.
Section 20.09. The Lessee will be credited with all amounts received
by the Lessor from the Lessee or from others for the Lessee's account,
including, as set forth above, all amounts received by the Lessor in payment of
assigned Accounts and such amounts will be applied to payment of the Lease
Obligations. In no event shall prior recourse to any Accounts or other security
granted to or by the Lessee be a prerequisite to the Lessor's right to demand
payment of any Lease Obligation. Further, it is understood that the Lessor shall
have no obligation whatsoever to perform in any respect any of the Lessee's
contracts or obligations relating to the Accounts. After the end of each month,
the Lessor shall promptly send the Lessee a statement showing the accounting for
the charges and other transactions occurring between the Lessor and the Lessee
during that month. The monthly statements shall be deemed
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correct and binding upon the Lessee and shall constitute an account stated
between the Lessee and the Lessor unless the Lessor receives a written statement
of the exceptions within thirty (30) days of the date of the monthly statement.
ARTICLE XXI. As to Equipment and Inventory. The Lessee shall:
Section 21.01. Keep the Equipment and Inventory (other than
Inventory sold in the ordinary course of business) at the places therefor
specified in Schedule I hereto or, upon 30 days' prior written notice to the
Lessor, at such other places in jurisdictions where all action required by
Section 5 shall have been taken with respect to the Inventory;
Section 21.02. Cause the Equipment necessary for the conduct of its
business to be maintained and preserved in the same condition, repair and
working order as when new, ordinary wear and tear excepted, and shall forthwith,
or in the case of any loss or damage to any of the Equipment as quickly as
practicable after the occurrence thereof, make or cause to be made all repairs,
replacements, and other improvements in connection therewith which are necessary
or desirable to such end;
Section 21.03. Safeguard, protect and hold all Inventory for the
Lessor's account and make no disposition thereof except in the regular course of
the business of the Lessee as herein provided. Until the Lessor has given the
Lessee notice to the contrary, as provided for below, any Inventory may be sold
and shipped by the Lessee to its customers in the ordinary course of the
Lessee's business, on open account and on terms currently being extended by the
Lessee to its customers, provided that all proceeds of all sales (including
cash, accounts receivable, checks, notes, instruments for the payment of money
and similar proceeds) are forthwith transferred, endorsed, and turned over and
delivered to the Lessor in accordance with Section 5(g) of this Security
Agreement. The Lessor shall have the right to withdraw this permission at any
time upon the occurrence of an Event of Default and until such time as such
Event of Default is waived, in which event no further disposition shall be made
of the Inventory by the Lessee without the Lessor's prior written approval. Cash
sales or sales of Inventory in which a Lien upon, or security interest in,
Inventory is retained by the Lessee shall be made by the Lessee only with the
approval of the Lessor, and the proceeds of such sales or sales of Inventory for
cash shall not be commingled with the Lessee's other property, but shall be
segregated, held by the Lessee in trust for the Lessor as the Lessor's exclusive
property, and shall be delivered immediately by the Lessee to the Lessor in the
identical form received by the Lessee by deposit to the Depository Accounts.
Upon the sale, exchange, or other disposition of Inventory, as herein provided,
the security interest in the Lessee's Inventory provided for herein shall,
without break in continuity and without further formality or act, continue in,
and attach to, all proceeds, including any instruments for the payment of money,
accounts receivable, contract rights, documents of title, shipping documents,
chattel paper and all other cash and non-cash proceeds of such sale, exchange or
disposition. As to any such sale, exchange or other disposition, the Lessor
shall have all of the rights of an unpaid seller, including stoppage in transit,
replevin, rescission and reclamation;
Section 21.04. Limit use of the Equipment only to the Lessee in its
business and not hold the Equipment for sale or lease (except as provided for in
the
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Lease Agreement), or remove the Equipment from its premises, or otherwise
dispose of the Equipment without the prior written approval of the Lessor. The
Lessee will not sell, transfer, lease or otherwise dispose of any of the
Collateral, or attempt, offer or contract to do so, except for sales of assets
permitted by this Security Agreement and as otherwise permitted under the Lease
Agreement. Concurrently with any such permitted disposition, the property
acquired by a transferee in such disposition shall automatically be released
from the security interest created by this Security Agreement (the "Security
Interest"). It is acknowledged and agreed that notwithstanding any release of
property from the Security Interest in accordance with the foregoing provisions
of this Section, the Security Interest shall in any event continue in the
proceeds of Collateral. The Lessor shall promptly execute and deliver (and, when
appropriate, shall cause any separate agent, co-agent or trustee to execute and
deliver) any releases, instruments or documents reasonably requested by the
Lessee to accomplish or confirm the release of Collateral provided by this
Section. Any such release of Collateral provided by the Lessor shall
specifically describe that portion of the Collateral to be released, shall be
expressed to be unconditional and shall be without recourse or warranty (other
than a warranty that the Lessor has not assigned its rights and interests to any
other Person). The Lessee shall pay all of the Lessor's out-of-pocket expenses
in connection with any release of Collateral.
The Lessee agrees at its own cost and expense to keep the Equipment
in as good and substantial repair and condition as the same is now or at the
time the Lien and security interest granted herein shall attach thereto,
reasonable wear and tear excepted, making any and all repairs and replacements
when and where necessary. The Lessee also agrees to safeguard, protect and hold
all Equipment for the Lessor's account and make no disposition thereof unless
the Lessee first obtains the prior written approval of the Lessor. Any sale,
exchange or other disposition of any Equipment shall only be made by the Lessee
with the prior written approval of the Lessor, and the proceeds of any such
sales shall not be commingled with the Lessee's other property, but shall be
segregated, held by the Lessee in trust for the Lessor as the Lessor's exclusive
property, and shall be delivered immediately by the Lessee to the Lessor in the
identical form received by the Lessee by deposit to the Depository Accounts.
Upon the sale, exchange, or other disposition of the Equipment, as herein
provided, the security interest provided for herein shall, without break in
continuity and without further formality or act, continue in, and attach to, all
proceeds, including any instruments for the payment of money, accounts
receivable, contract rights, documents of title, shipping documents, chattel
paper and all other cash and non-cash proceeds of such sales, exchange or
disposition. As to any such sale, exchange or other disposition, the Lessor
shall have all of the rights of an unpaid seller, including stoppage in transit,
replevin, rescission and reclamation. Notwithstanding anything hereinabove
contained to the contrary, the Lessee may sell, exchange or otherwise dispose of
obsolete Equipment or Equipment no longer needed in the Lessee's operations,
provided, however, that (i) the then book value of the Equipment so disposed of
does not exceed Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate
in any Fiscal Year and (ii) the proceeds of such sales or dispositions are
delivered to the
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Lessor in accordance with the foregoing provisions of this paragraph, except
that the Lessee may retain and use such proceeds to purchase forthwith
replacement Equipment which the Lessee determines in its reasonable business
judgment to have a collateral value at least equal to the Equipment so disposed
of or sold, provided, however, that the aforesaid right shall automatically
cease upon the occurrence of an Event of Default which is not waived;
Section 21.05. Covenant that, except for the Permitted Encumbrances,
and in the case of general intangibles, the rights of third parties from which
such general intangibles are derived, the Lessee is or will be at the time
additional Collateral is acquired by it, the absolute owner of the Collateral
with full right to pledge, sell, consign, transfer and create a security
interest therein, free and clear of any and all claims or Liens in favor of
others other than the Liens in favor of the Agent; that the Lessee will at its
expense forever warrant and, at the Lessor's request, defend the same from any
and all claims and demands of any other person other than the Permitted
Encumbrances. The Lessee will not grant, create or permit to exist, any Lien
upon or security interest in the Collateral, or any proceeds thereof, in favor
of any other Person other than the holders of the Permitted Encumbrances.
The Lessee will not (i) change the location of its chief executive
office/chief place of business from that specified in Schedule I attached
hereto, or remove its books and records from the location specified in Schedule
I, (ii) permit any of the Inventory or Equipment to be kept at a location other
than those listed on such Schedule I hereto or (iii) change its name (including
the adoption of any new trade name), identity or corporate structure unless it
shall have provided at least thirty (30) days prior written notice to the Lessor
of any such change. The Lessee will from time to time notify the Lessor of each
location at which any amount of the Collateral or such books and records are to
be kept including for temporary processing, storage or similar purposes. The
Lessee shall not remove any amount of Collateral or such books or record to a
location not set forth on Schedule I or otherwise keep any amount of Collateral
(other than Real Estate, to the extent described in Schedule II hereto) at a
location not set forth on Schedule I unless, not less than thirty (30) days
prior to the day such removal or other change occurs the Lessee shall give
written notice to the Lessor of such removal or other change and the new
location of such Collateral or such books and records. No action requiring
notice to the Lessor under this paragraph shall be effected until such filings
and other measures required under applicable Law to continue uninterrupted the
perfected security interest and Lien of the Lessor in the Collateral affected
thereby shall have been taken, and until the Lessor shall have received such
opinions of counsel with respect thereto as it shall have reasonably requested.
The Lessee also agrees to advise the Lessor promptly, in sufficient detail, of
any Material Adverse Change relating to the type, quantity or quality of the
Collateral or to the security interests granted to the Lessor therein. The
Lessee as to itself hereby authorizes the Lessor to regard its printed name or
rubber stamp signature on assignment schedules or invoices as the equivalent of
a manual signature by one of its authorized officers or agents;
Section 21.06. Permit the Lessor or any agent thereof to have access
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to the Inventory and Equipment for purposes of inspection during normal business
hours and upon reasonable notice to the Lessee;
Section 21.07. Promptly notify the Lessor in writing of any material
loss or damage to the Inventory or Equipment;
Section 21.08. Not sell, assign, lease, mortgage, transfer or
otherwise dispose of any interest in the Inventory or Equipment, except as
permitted in the Financing Agreement;
Section 21.09. Not use or permit the Inventory or Equipment to be
used for any unlawful purpose or in violation of any applicable Law or for hire;
and
Section 21.10. Not permit the Equipment to become a part of or to be
affixed to any real property of any Person.
ARTICLE XXII. Insurance.
Section 22.01. The Lessee shall, at its own expense, maintain
insurance with respect to the Equipment and Inventory in such amounts, against
such risks, in such form and with such insurers, as shall be satisfactory to the
Lessor from time to time. Each policy for: (i) liability insurance shall provide
for all losses to be paid on behalf of the Lessor and the Lessee as their
respective interests may appear; and (ii) property damage insurance shall
provide for all losses to be paid directly to the Lessor. Each such policy shall
in addition: (i) name the Lessor as an insured party thereunder (without any
representation or warranty by or obligation upon the Lessor) as their interests
may appear; (ii) contain the agreement by the insurer that any loss thereunder
shall be payable to the Lessor notwithstanding any action, inaction or breach of
representation and warranty by the Lessee; (iii) provide that there shall be no
recourse against the Lessor for payment of premiums or other amounts with
respect thereto; and (iv) provide that at least thirty (30) days' prior written
notice of amendment to, cancellation of or lapse shall be given to the Lessor by
the insurer. The Lessee shall, if so requested by the Lessor, deliver to the
Lessor original or duplicate policies of such insurance and, as often as the
Lessor may request, a report of a reputable insurance broker with respect to
such insurance. Further, the Lessee shall, at the request of the Lessor, duly
execute and deliver instruments of assignment of such insurance policies to
comply with the requirements of Section 5 and cause the respective insurers to
acknowledge notice of such assignment.
Section 22.02. Reimbursement under any liability insurance
maintained by the Lessee pursuant to this Section 7 may be paid directly to the
Person who shall have incurred liability covered by such insurance. In case of
any loss involving damage to Equipment or Inventory when subsection (a) of this
Section 7 is not applicable, the Lessee shall make or cause to be made the
necessary repairs to or replacements of such Equipment or Inventory, and any
proceeds of insurance maintained by the Lessee pursuant to this Section 7 shall
be paid to the Lessee as reimbursement for the costs of such repairs or
replacements.
ARTICLE XXIII. As to Accounts Receivable and Collateral Generally.
Section 23.01. The Lessee shall keep its chief place of business and
chief executive office and the office where it keeps its records concerning the
Accounts Receivable, at the location therefor specified in Schedule I hereto or,
upon 30 days' prior written notice to the Lessor, at such other locations in a
jurisdiction where all action required by Section 5
9
<PAGE>
shall have been taken with respect to Accounts Receivable. The Lessee will hold
and preserve such records and will permit representatives of the Lessor to
inspect and make abstracts from such records.
Section 23.02. The Lessee will not (i) amend, modify, terminate or
waive any provision of any contract, license or agreement giving rise to an
Account in any manner which could reasonably be expected to materially adversely
affect the value of such contract, license or Account as Collateral, (ii) fail
to exercise promptly and diligently each and every material right which it may
have under each material contract, license or agreement giving rise to an
Account (other than any right of termination), except in a manner consistent
with the ordinary and customary conduct of its business or (iii) fail to deliver
to the Lessor upon its reasonable request a copy of each material demand, notice
or document received by it relating in any way to any material contract, license
or agreement giving rise to an Account.
Other than in the ordinary course of business as generally conducted
by the Lessee over a period of time, the Lessee will not grant any extension of
the time of payment of any of the Accounts, compromise, compound or settle the
same for less than the full amount thereof, release, wholly or partially, any
Person liable for the payment thereof, or allow any credit or discount
whatsoever thereon.
Section 23.03. Except as otherwise provided in this subsection (c),
the Lessee shall continue to collect, at its own expense, all amounts due or to
become due to the Lessee under the Accounts Receivable. In connection with such
collections, the Lessee may take (and, at the Lessor's discretion, shall take)
such action as the Lessee or the Lessor may deem necessary or advisable to
enforce collection of the Accounts Receivable; provided, however, that the
Lessor shall have the right at any time, upon the occurrence and during the
continuance of an Event of Default upon written notice to the Lessee of its
intention to do so, to notify the account debtors or obligors under any Accounts
Receivable of the assignment of such Accounts Receivable to the Lessor and to
direct such account debtors or obligors to make payment of all amounts due or to
become due to the Lessee thereunder directly to the Lessor and, upon such
notification and at the expense of the Lessee, to enforce collection of any such
Accounts Receivable, and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as the Lessee might have
done. After receipt by the Lessee of the notice from the Lessor referred to in
the proviso to the preceding sentence and as long as there is an Event of
Default, (i) all amounts and proceeds (including instruments) received by the
Lessee in respect of the Accounts Receivable shall be received in trust for the
benefit of the Lessor, shall be segregated from other funds of the Lessee and
shall be forthwith paid over to the Lessor in the same form as so received (with
any necessary endorsement) to be held as Cash Collateral, or be applied as
provided by Section 14(b), as determined by the Lessor, and (ii) the Lessee
shall not adjust, settle or compromise the amount or payment of any Account
Receivable, or release wholly or partly any account debtor or obligor thereof,
or allow any credit or discount thereon, other than any discount allowed for
prompt payment.
Section 23.04. Upon the release of all Liens granted by Lessee to
the Agent under and pursuant to the Financing Agreement, and provided that no
Event of
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<PAGE>
Default has occurred and is continuing under the Lease Agreement, the Lessor
will release its Lien in all Inventory and Accounts Receivable and all Proceeds
thereof, but the Lessor will retain its Lien in all other Collateral, including
but not limited to, the Equipment and all Proceeds of the Equipment.
Section 23.05. Any delay, or omission by the Lessor to exercise any
right hereunder, shall not be deemed a waiver thereof, or be deemed a waiver of
any other right, unless such waiver be in writing and signed by the Lessor. A
waiver on any one occasion shall not be construed as a bar to or waiver of any
right or remedy on any future occasion.
Section 23.06. To the extent that the Lease Obligations are now or
hereafter secured by any assets or property other than the Collateral or by the
guarantee, endorsement, assets or property of any other Person, then the Lessor
shall have the right in its sole discretion to determine which rights, security,
Liens, security interests or remedies Lessor shall at any time pursue, foreclose
upon, relinquish, subordinate, modify or take any other action with respect to,
without in any way modifying or affecting any of them, or any of the Lessor's
rights hereunder.
Section 23.07. Upon the request of the Lessor, the Lessee will, at
the sole expense of the Lessee, promptly and duly execute and deliver such
further instruments and documents and take such further action as the Lessor may
reasonably request for the purpose of obtaining or preserving the full benefits
of the Lease Agreement and this Security Agreement and of the rights and powers
herein and therein granted for the benefit of the Lessor.
The Lessee will comply with the requirements of all state and
federal Laws in order to grant to the Lessor valid and continuing security
interests and Liens in the Collateral, subject only to the Permitted
Encumbrances. The Lessor is hereby authorized by the Lessee to file any
financing statements covering the Collateral whether or not the Lessee's
signature appears thereon. The Lessee agrees to do whatever the Lessor may
request, from time to time, by way of: filing notices of Liens, financing
statements, amendments, renewals and continuations thereof; cooperating with the
Lessor; keeping stock records; and performing such further acts as the Lessor
may reasonably require in order to perfect the Liens contemplated by this
Security Agreement in favor of the Lessor.
Any reserves or balances to the credit of the Lessee and any other
property or assets of the Lessee in the possession of the Lessor may be held by
such holder as security for any Lease Obligations and applied in whole or
partial satisfaction of such Lease Obligations when due. The Liens and security
interests granted herein and any other Lien or security interest the Lessor may
have in any other assets of the Lessee, shall secure payment and performance of
all now existing and future Lease Obligations. The Lessor may in its discretion
charge any or all of the Lease Obligations to the account of the Lessee when
due. The Lessee shall give to the Lessor and/or shall cause the appropriate
party to give to the Lessor, from time to time such pledge or security
agreements with respect to patents, trademarks, capital stock and general
intangibles of the Lessee, as the Lessor shall require to obtain valid and
continuing Liens thereon and/or collateral assignments thereof.
11
<PAGE>
The Lease Agreement and the obligation of the Lessee to perform all
of its covenants and obligations thereunder are further secured by a mortgage,
deed of trust or assignment on the Real Estate. The Lessee has given to the
Lessor the Mortgage (Brattleboro, Vermont) in order for the Lessor to obtain a
valid and continuing Lien thereon subject only to those exceptions of title as
set forth in future title insurance policies that are satisfactory to the
Lessor.
ARTICLE XXIV. Transfer and Other Liens. The Lessee shall not:
Section 24.01. Sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except as permitted in the Financing
Agreement.
Section 24.02. Create or suffer to exist any Lien upon or with
respect to any of the Collateral except Permitted Encumbrances.
ARTICLE XXV. Lessor Appointed Attorney-in-Fact . The Lessee hereby
irrevocably appoints the Lessor the Lessee's attorney-in-fact, with full
authority in the place and stead of the Lessee and in the name of the Lessee,
the Lessor or otherwise, to, after the occurrence and during the continuance of
an Event of Default, take any action and to execute any instrument which the
Lessor may deem necessary or advisable to accomplish the purposes of this
Security Agreement, including, without limitation:
Section 25.01. to obtain and adjust insurance required to be paid to
the Lessor pursuant to Section 7;
Section 25.02. to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for moneys due and to
become due under or in respect of any of the Collateral;
Section 25.03. to receive, endorse, assign, and collect any and all
checks, notes, drafts and other negotiable and non-negotiable instruments,
documents and chattel paper, in connection with clause (a) or (b) above, and the
Lessee waives notice of presentment, protest and non-payment of any instrument,
document or chattel paper so endorsed or assigned;
Section 25.04. to file any claims or take any action or institute
any proceedings which the Lessor may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of Lessor
with respect to any of the Collateral;
Section 25.05. to sell, transfer, assign or otherwise deal in or
with the Collateral or the proceeds or avails thereof, as full and effectually
as if the Lessor were the absolute owner thereof;
Section 25.06. to receive, open and dispose of all mail addressed to
the Lessee and to notify postal authorities to change the address for delivery
thereof to such address as the Lessor may designate;
Section 25.07. to request from customers indebted on Accounts at any
time, in the name of the Lessor or the Lessee or that of the Lessor's designee,
information concerning the amounts owing on the Accounts;
Section 25.08. to transmit to customers indebted on Accounts notice
of the Lessor's interest therein and to notify customers indebted on Accounts to
make payment directly to the Lessor for the Lessee's account; and
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<PAGE>
Section 25.09. to take or bring, in the name of the Lessor or the
Lessee, all steps, actions, suits or proceedings deemed by the Lessor necessary
or desirable to enforce or effect collection of the Accounts. Notwithstanding
anything hereinabove contained to the contrary, the powers set forth in (f), (h)
and (i) above may only be exercised after the occurrence of an Event of Default
and until such time as such Event of Default is waived in writing.
The Lessee hereby ratifies and approves all acts other than those
which result from the Lessor's gross negligence or willful misconduct, of the
Lessor, as its attorney in-fact, pursuant to this Section 10, and the Lessor, as
its attorney in-fact, will not be liable for any acts of commission or omission,
nor for any error of judgment or mistake of fact or law other than those which
result from the Lessor's gross negligence or willful misconduct. This power,
being coupled with an interest, is irrevocable so long as this Security
Agreement remains in effect.
The Lessee also authorizes the Lessor, at any time and from time to
time, to communicate in its own name with any party to any contract, agreement
or instrument included in the Collateral with regard to the assignment of such
contract, agreement or instrument and other matters relating thereto.
ARTICLE XXVI. Lessor May Perform. If the Lessee fails to perform
any agreement contained herein, the Lessor may itself perform, or cause
performance of, such agreement, and the expenses of the Lessor incurred in
connection therewith shall be payable by the Lessee under Section 14(b).
ARTICLE XXVII. Lessor's Duties. The powers conferred on the Lessor
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Lessor shall not have any duty as to any
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Collateral.
ARTICLE XXVIII. Remedies. If any Event of Default as defined in the
Lease has occurred and is continuing:
Section 28.01. the Lessor may exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default under
the Uniform Commercial Code (the "Code") (whether or not the Code applies to the
affected Collateral) and also may (i) require the Lessee to, and the Lessee
hereby agrees that it will at its expense and upon the request of the Lessor
forthwith, assemble all or part of the Collateral as directed by the Lessor and
make it available to the Lessor at a place to be designated by the Lessor which
is reasonably convenient to both parties and (ii) to enter the premises where
any of the Collateral is located and take and carry away the same, by any of its
representatives, with or without legal process, to the Lessor's place of
storage, and (iii) without notice except as specified below, sell the Collateral
or any part thereof in one or more parcels at public or private sale, at any of
the Lessor's offices or elsewhere, for cash, on credit or for future delivery
and upon such other terms as the Lessor may deem commercially reasonable. The
Lessee agrees that, to the extent notice of sale shall be
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<PAGE>
required by law, at least ten (10) days' notice to the Lessee of the time and
place of any public or private sale is to be made shall constitute reasonable
notification. The Lessor shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Lessor may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place it was so adjourned.
Section 28.02. All cash proceeds received by the Lessor in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral may, in the discretion of the Lessor, be held by the Lessor as
collateral for, and/or then or at any time thereafter applied (after payment of
any amounts payable to the Lessor pursuant to Section 13) in whole or in part by
the Lessor against, all or any part of the Lease Obligations in such order as
the Lessor shall elect. Any surplus of such cash or cash proceeds held by the
Lessor and remaining after payment in full of all the Lease Obligations to the
Lessor shall be paid over to the Lessee. If the proceeds of the sale of the
Collateral are insufficient to pay all the Lease Obligations the Lessee agrees
to pay upon demand any deficiency to the Lessor.
Section 28.03. Immediately upon the occurrence of any Event of
Default and so long as such Event of Default is continuing, the Lessor may to
the extent permitted by Law: (i) remove from any premises where same may be
located any and all documents, instruments, files and records, and any
receptacles or cabinets containing same, relating to the Accounts, or the Lessor
may use, at the Lessee's expense, such of the Lessee's personnel, supplies or
space at the Lessee's places of business or otherwise, as may be necessary to
properly administer and control the Accounts or the handling of collections and
realizations thereon; (ii) bring suit, in the name of the Lessee or the Lessor,
and generally shall have all other rights respecting said Accounts, including
without limitation the right to accelerate or extend the time of payment,
settle, compromise, release in whole or in part any amounts owing on any
Accounts and issue credits in the name of the Lessee or the Lessor; and (iii)
sell, assign and deliver the Collateral and any returned, reclaimed or
repossessed merchandise, with or without advertisement, at public or private
sale, for cash, on credit or otherwise, at the Lessor's sole option and
discretion, and the Lessor may bid or become a purchaser at any such sale, free
from any right of redemption, which right is hereby expressly waived by the
Lessee.
ARTICLE XXIX. Indemnity and Expenses.
Section 29.01. The Lessee agrees to indemnify the Lessor from and
against any and all claims, losses and liabilities growing out of or resulting
from this Security Agreement (including, without limitation, enforcement of this
Security Agreement), except claims, losses or liabilities resulting from the
Lessor's gross negligence or willful misconduct.
Section 29.02. The Lessee will upon demand pay to the Lessor the
amount of any and all expenses, including the fees and out of pocket
disbursements of its counsel and of any experts and agents, which the Lessor may
incur in connection with (i) filing or recording fees incurred in connection
with this Security Agreement, (ii) the custody, preservation, use or operation
of, or the sale of, collection from, or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of the
14
<PAGE>
rights of the Lessor hereunder, or (iv) the failure by the Lessee to perform or
observe any of the provisions hereof. The Lessor shall not be liable to the
Lessee for damages as a result of delays, temporary withdrawals of the Equipment
from service or other causes other than those caused by the Lessor's gross
negligence or willful misconduct.
ARTICLE XXX. Amendments; Etc. No amendment or waiver of any
provision of this Security Agreement nor consent to any departure by the Lessee
herefrom shall in any event be effective unless the same shall be in writing and
signed by the Lessor, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
ARTICLE XXXI. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing and, if to the Lessee,
mailed or delivered by messenger or sent by facsimile, addressed to it at the
address of the Lessee specified in the Lease Agreement; and if to the Lessor,
mailed or delivered by messenger or sent by facsimile to it, addressed to it at
the address of the Lessor specified in the Lease Agreement; or as to any such
party at such other address as shall be designated by such party in a written
notice to the other party complying as to delivery with the terms of this
Section. All such notices and other communications shall, when mailed or
delivered by messenger or sent by facsimile, respectively, be effective when
received in the mails or delivered to the messenger or sent by facsimile,
respectively, addressed as aforesaid.
ARTICLE XXXII. Continuing Security Interest; Transfer of Lease.
This Security Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until payment in full
of the Lease Obligations (after the termination of the Lease Agreement), (ii) be
binding upon the Lessee, its successors and assigns, and (iii) inure to the
benefit of the Lessor and its successors, transferees and assigns. Without
limiting the generality of the foregoing clause (iii), subject to the terms of
the Lease Agreement the Lessor may assign or otherwise transfer all or a portion
of its rights and obligations under the Lease Agreement to any other Person and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to the Lessor herein or otherwise. Upon the payment in full of
the Lease Obligations (after the termination of the Lease Agreement), the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the Lessee. Upon any such termination, the Lessor
will, at the Lessee's expense, execute and deliver to the Lessee such documents
as the Lessee shall reasonably request to evidence such termination.
ARTICLE XXXIII. Governing Law; Terms. This Security Agreement shall
be governed by and construed in accordance with the laws of the State of New
York, except to the extent that the validity or perfection of the security
interest hereunder, or remedies hereunder, in respect of any particular
Collateral are governed by the laws of a jurisdiction other than the State of
New York. Unless otherwise defined herein or in the Lease Agreement, terms used
in Article 9 of the Uniform Commercial Code in the State of New York are used
herein as therein defined.
ARTICLE XXXIV. Miscellaneous. This Security Agreement is in addition
to and not in limitation of any other rights and remedies the Lessor may have by
virtue of any other
15
<PAGE>
instrument or agreement heretofore, contemporaneously herewith or hereafter
executed by the Lessee or by applicable Law or otherwise. If any provision of
this Security Agreement is contrary to applicable Law, such provision shall be
deemed ineffective without invalidating the remaining provisions hereof. If and
to the extent that applicable Law confers any rights in addition to any of the
provisions of this Security Agreement, the affected provision shall be
considered amended to conform thereto. The Lessor shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder. A waiver by the Lessor of any right or remedy hereunder on any one
occasion, shall not be construed as a bar to or waiver of any such right or
remedy which the Lessor would have had on any future occasion nor shall the
Lessor be liable for exercising or failing to exercise any such right or remedy.
Article XXXV. Waiver of Trial by Jury. THE PARTIES TO THIS SECURITY
AGREEMENT ACKNOWLEDGE THAT JURY TRIALS OFTEN ENTAIL ADDITIONAL EXPENSES AND
DELAYS NOT OCCASIONED BY NONJURY TRIALS. THE PARTIES TO THIS SECURITY AGREEMENT
AGREE AND STIPULATE THAT A FAIR TRIAL MAY BE HAD BEFORE A STATE OR FEDERAL JUDGE
IN A COURT LOCATED IN NEW YORK COUNTY BY MEANS OF A BENCH TRIAL WITHOUT A JURY.
IN VIEW OF THE FOREGOING, AND AS A SPECIFICALLY NEGOTIATED PROVISION OF THIS
SECURITY AGREEMENT, EACH PARTY TO THIS SECURITY AGREEMENT HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION ARISING UNDER THIS SECURITY AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT
OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
RELATED HERETO OR THERETO, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS SECURITY
AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
16
<PAGE>
IN WITNESS WHEREOF, the Lessee has caused this Security Agreement to
be duly executed and delivered by its agent thereunto duly authorized as of the
date first above written.
FIBERMARK OFFICE PRODUCTS, LLC
By: FIBERMARK FILTER AND
TECHNICAL PRODUCTS, INC.,
its sole Member
By: _________________________
Name:
Title:
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By: _________________________
Name:
Title:
17
<PAGE>
SCHEDULE I
to Security Agreement
Place of Business and Locations of Collateral
Chief Place of Business
and Chief Executive Office
FiberMark Office Products, LLC
161 Wellington Road
P.O. Box 498
Brattleboro, Vermont 05302
Location of Inventory
FiberMark Office Products, LLC
S-I-1
<PAGE>
SCHEDULE II
to Security Agreement
Real Estate
S-II-1
<PAGE>
ANNEX I
to Security Agreement
Accounts shall mean all of the Lessee's now existing and future: (a)
Accounts Receivable (whether or not specifically listed on schedules furnished
to the Lessor), and any and all instruments, documents, contract rights, chattel
paper, general intangibles, to the extent they are payments due for goods sold
or services rendered including, without limitation, all accounts created by or
arising from all of the Lessee's sales of goods or rendition of services to its
customers, (b) unpaid seller's rights (including rescission, replevin,
reclamation and stoppage in transit) relating to the foregoing or arising
therefrom; (c) rights to any goods represented by any of the foregoing,
including rights to returned or repossessed goods; (d) reserves and credit
balances arising hereunder; (e) guarantees or collateral for any of the
foregoing; (f) insurance policies or rights relating to any of the foregoing;
and (g) cash and non-cash proceeds of any and all the foregoing.
Accounts Receivable means any right to payment for goods sold by or
services rendered by the Lessee, including all accounts arising from sales or
rendition of services made under any of the Lessee's trade names or styles, or
through any of the Lessee's divisions; regardless of how such right is
evidenced, whether secured or unsecured, or now existing or hereafter arising.
Depository Accounts shall mean those accounts owned by, and in the
name of, the Agent and designated by the Agent for the deposit of proceeds of
Collateral.
Good Faith Contest means the contest of an item if: (a) the item is
diligently contested in good faith by appropriate proceedings timely instituted;
(b) adequate reserves are established with respect to the contested item; (c)
during the period of such contest, the enforcement of the contested item is
effectively stayed; and (d) the failure to pay or comply with the contested item
during the period of such contest could not result in a Material Adverse Change.
Indebtedness shall mean at any date:
(a) indebtedness or liability for borrowed money, or for the deferred purchase
price of property or services (including trade obligations);
(b) obligations as lessee under Capital Leases;
(c) reimbursement obligations under letters of credit issued for the account of
any Person;
(d) all reimbursement obligations arising under bankers' or trade acceptances;
(e) all guarantees, endorsements (other than for collection or deposit in the
ordinary course of business), and other contingent obligations to purchase any
of the items included in this definition, to provide funds for payment, to
supply funds to invest in any Person, or otherwise to assure a creditor against
loss;
(f) all obligations secured by any Lien on property owned by such Person,
whether or not the obligations have been assumed; and
(g) all obligations under any agreement providing for a swap, ceiling rates,
ceiling and floor rates, contingent participation or other hedging mechanisms
with respect to
A-I-1
<PAGE>
interest payable on any of the items described in this definition.
Law means any treaty, foreign, federal, state or local statute, law,
rule, regulation, ordinance, order, code, policy, or rule of common law, now or
hereafter in effect, and in each case as amended, and any judicial or
administrative interpretation thereof by a Governmental Authority or otherwise,
including any judicial or administrative order, consent decree or judgment.
Lease Obligations shall mean (i) the payment and performance of each
and every obligation, covenant and agreement of the Lessee now or hereafter
existing, and the observance by the Lessee of every condition contained in the
Lease Agreement, whether for Rent (including without limitation Supplemental
Rent payable to any Person), indemnification, fees, expenses or otherwise, and
notwithstanding that any such obligation, covenant, agreement or condition shall
be contained in an amendment or supplement to the Lease Agreement, or in any
extension or renewal of any thereof or replacement therefore, (ii) the payment
of all sums advanced or incurred in accordance herewith by or on behalf of the
Lessor to protect the Collateral with interest thereon, (iii) the performance of
every obligation, covenant and agreement of the Lessee and the observance by the
Lessee of every condition contained in any agreement now or hereafter executed
by the Lessee and the observance by the Lessee of every condition contained in
any agreement now or hereafter executed by the Lessee which recites that the
obligations thereunder are secured by this Security Agreement and (iv) the
payment of all sums, with interest thereon from the date any such payment is due
to the date of payment thereof, that may become due and payable to or for the
benefit of the Secured Party pursuant to the terms of this Security Agreement;
in each case whether direct or indirect, joint or several, absolute or
contingent, liquidated or unliquidated, now or hereafter existing, renewed or
restructured, whether or not from time to time decreased or extinguished and
later increased, created or incurred, and including all indebtedness of the
Lessee under any instrument now or hereafter evidencing or securing any of the
foregoing.
Material Adverse Change means (a) a material adverse change in the
status of the business, results of operations, condition (financial or
otherwise), prospects, profitability, assets, operations, or property of Lessee,
or (b) any event or occurrence of whatever nature which could have a material
adverse effect on the Lessee's ability to perform its obligations under the
Lease Agreement.
Mortgage (Brattleboro, Vermont) means a Mortgage Deed, Assignment of
Leases and Rents and Security Agreement, dated as of April 29, 1994, from
Specialty Paperboard, as Mortgagor, to CITEF, as Mortgagee, which was recorded
in the Town Clerk's Office of Brattleboro, Vermont (the "Records") on May 4,
1994 in Book 242, Page 703, as modified by that certain Mortgage Modification
Agreement dated as of September 29, 1995, which was recorded in the Records on
October 10, 1995 in Book 250, Page 799, and as otherwise amended, modified or
supplemented from time to time.
Permitted Encumbrances shall mean:
(a) Liens expressly permitted, or consented to, by the Agent;
(b) Liens expressly permitted, or consented to, by the Lessor pursuant to the
Lease Agreement in the event that all Liens granted by Lessee to the Agent under
and pursuant to the Financing Agreement have been released;
(c) Purchase Money Liens;
A-I-2
<PAGE>
(d) Permitted Liens;
(e) Liens granted the Agent by the Lessee or any Guarantor;
(f) Liens granted the Lessor by the Lessee in the event that all Liens granted
by Lessee to the Agent under and pursuant to the Financing Agreement have been
released;
(g) Liens of judgment creditors provided such Liens do not exceed, in the
aggregate, at any time, Two Hundred Fifty Thousand Dollars ($250,000) (other
than Liens bonded or insured to the reasonable satisfaction of the Agent or the
Lessor in the event that all Liens granted by Lessee to the Agent under and
pursuant to the Financing Agreement have been released);
(h) Liens for taxes not yet due and payable or which are the subject of a Good
Faith Contest and which Liens are not x) other than with respect to Real Estate,
senior to the Liens of the Agent or y) for taxes due the United States of
America; provided, however, that in no event shall any Environmental Lien be
deemed to be a Permitted Encumbrance;
(i) Liens granted to the Lessor securing its obligations under the Lease
Agreement; and
(j) Liens granted to the Lessee or any Guarantor on any of its assets other than
(i) the Lessee's Equipment, (ii) each Guarantor's and the Lessee's Accounts and
(iii) each Guarantor's and the Lessee's Inventory.
Permitted Liens shall mean:
i. Liens of local, provincial, or state authorities for franchise or
other like taxes provided the aggregate amounts secured by such Liens
shall not exceed One Hundred Thousand Dollars ($100,000) in the aggregate
outstanding at any one time;
ii. statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other like Liens imposed by Law,
created in the ordinary course of business and for amounts not yet due or
which are the subject of a Good Faith Contest;
iii. deposits made (and the Liens thereon) in the ordinary course of
business (including, without limitation, security deposits for leases,
surety bonds and appeal bonds) in connection with workers' compensation,
unemployment insurance and other types of social security benefits or to
secure the performance of tenders, bids, contracts (other than for the
repayment or guarantee of Indebtedness), statutory obligations and other
similar obligations arising as a result of progress payments under
government contracts; and
iv. easements (including, without limitation, reciprocal easement
agreements and utility agreements), encroachments, minor defects or
irregularities in title, variation and other restrictions, charges or
encumbrances (whether or not recorded) affecting the Real Estate and which
are listed in Schedule B of the title insurance policy delivered to the
Agent pursuant to the Financing Agreement and delivered to the Lessor;
provided, however, that in no event shall any Environmental Lien be deemed
to be a Permitted Lien.
Proceeds shall have the meaning assigned to it in the Uniform
Commercial Code, and in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
Lessor from time to time with respect to any of the Collateral; (ii) any and all
payments (in any form whatsoever) made or due and payable to Lessor from time to
time in connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any
A-I-3
<PAGE>
part of the Collateral by any governmental body, authority, bureau or agency or
any other Person (whether or not acting under color of governmental authority);
(iii) any and all accounts arising out of, any chattel paper evidencing, any
lease of, and any and all other rents or profits or other amounts from time to
time paid or payable in connection with, any of the Collateral; and (iv) any and
all proceeds of any sale, transfer or other disposition of the Collateral.
Purchase Money Liens shall mean Liens on any item of equipment
acquired by the Lessee after the date of the Financing Agreement provided that
(a) each such Lien shall attach only to the property to be acquired, (b) a
description of the property so acquired is furnished to the Agent and the
Lessor, and (c) the debt incurred in connection with such acquisitions shall not
exceed, in the aggregate, Five Hundred Thousand Dollars ($500,000) in any Fiscal
Year.
Real Estate shall mean the Lessee's fee and/or leasehold interests
in the real property located at Brattleboro, Vermont which has been encumbered,
mortgaged, pledged or assigned to the Lessor.
Security Documents means this Security Agreement, the Mortgage
(Brattleboro, Vermont) and any other security agreement granting a Lien on any
assets of the Lessee to secure the Lease Obligations.
A-I-4
<PAGE>
DRAFT 2/1/98
SECOND AMENDED AND RESTATED
SECURITY AGREEMENT
between
FIBERMARK OFFICE PRODUCTS, LLC
and
THE CIT GROUP/EQUIPMENT FINANCING, INC.
Dated: December 31, 1997
<PAGE>
Index
Page
----
PRELIMINARY STATEMENTS 10
SECTION 1. GRANT OF SECURITY 10
SECTION 2. SECURITY FOR LEASE OBLIGATIONS................................ 12
SECTION 3. THE LESSEE REMAINS LIABLE..................................... 12
SECTION 4. REPRESENTATIONS AND WARRANTIES................................ 12
SECTION 5. FURTHER ASSURANCES ........................................... 13
SECTION 6. AS TO EQUIPMENT AND INVENTORY................................. 16
SECTION 7. INSURANCE .................................................... 19
SECTION 8. AS TO ACCOUNTS RECEIVABLE..................................... 20
SECTION 9. TRANSFER AND OTHER LIENS...................................... 22
SECTION 10. LESSOR APPOINTED ATTORNEY-IN-FACT............................. 22
SECTION 11. LESSOR MAY PERFORM ........................................... 23
SECTION 12. LESSOR'S DUTIES .............................................. 23
SECTION 13. REMEDIES...................................................... 23
SECTION 14. INDEMNITY AND EXPENSES........................................ 24
SECTION 15. AMENDMENTS; ETC............................................... 25
SECTION 16. ADDRESSES FOR NOTICES......................................... 25
SECTION 17. CONTINUING SECURITY INTEREST; TRANSFER OF LEASE............... 25
SECTION 18. GOVERNING LAW; TERMS ......................................... 25
SECTION 19. MISCELLANEOUS ................................................ 26
Schedule I.........................................................S-I-1
Schedule II.......................................................S-II-1
Annex I............................................................A-I-1
EXHIBIT 10.32
<PAGE>
SECOND AMENDED AND RESTATED SECURITY AGREEMENT dated, December 31,
1997 ("Security Agreement") made by each of FiberMark, Inc. ("FiberMark"), a
Delaware corporation, FiberMark Durable Specialties, Inc. ("FiberMark Durable"),
a Delaware corporation, and FiberMark Filter and Technical Products, Inc.
("FiberMark Filter"), a Delaware corporation, to The CIT Group/Equipment
Financing, Inc. ("CITEF"). FiberMark, FiberMark Durable and FiberMark Filter are
each referred to herein as a "Guarantor" and collectively as the "Guarantors."
PRELIMINARY STATEMENTS.
1. Reference is made to the Amended and Restated Security Agreement,
dated December 31, 1996, made by each of Specialty Paperboard/Endura Inc., a
Delaware corporation ("Endura"), CPG Investors, Inc., a Delaware corporation
("CPG Investors"), CPG Holdings, Inc., a Delaware corporation ("CPG Holdings"),
CPG-Warren Glen, a Virginia corporation ("CPG Warren"), Custom Papers Group,
Inc., a Virginia corporation ("Custom"), Arcon Holdings Corp. ("Arcon
Holdings"), a ________ corporation, and Arcon Coating Mills, Inc. ("Arcon
Coating"), a ________ corporation, to CITEF (the "December 1996 Agreement").
2. To the extent this Security Agreement amends the December 1996
Agreement, the December 1996 Agreement is amended, and to the extent this
Security Agreement restates the December 1996 Agreement, the December 1996
Agreement is restated.
3. Reference is made to each of (a) the Lease Agreement, dated as of
April 29, 1994, by and between Specialty Paperboard, Inc. ("Specialty
Paperboard"), as Lessee, and CITEF, as Lessor, as supplemented and amended by
that certain Lease Supplement No. 1, dated as of April 29, 1994, that certain
First Amendment to Lease Agreement, dated as of September 29, 1995, that certain
Second Amendment to Lease Agreement, dated as of December 29, 1995, as otherwise
amended, modified or supplemented from time to time, and as assigned and assumed
pursuant to the Assignment and Assumption Agreement--NY, dated as of December
31, 1997, by and between FiberMark and FiberMark Office Products, LLC
("FiberMark Office" or the "Company") (the "Assignment and Assumption
Agreement--NY") (the "Lease Agreement"), (b) the Third Amended and Restated
Financing Agreement and Guaranty, dated December 31, 1997, among FiberMark,
FiberMark Durable, FiberMark Filter and FiberMark Office, and CITEF, The CIT
Group/Business Credit, Inc. ("CITBC"), the other lenders that may, subsequent to
the date hereof, purchase from CITBC a portion of its rights and obligations
under such Financing Agreement pursuant to, and in accordance with the terms and
provisions thereof (CITBC and such other lenders each individually a "Lender"
and collectively the "Lenders"), and CITBC as agent for the Lenders (the
"Agent") (as it may hereafter be amended, modified or supplemented from time to
time, being the "Financing Agreement"), (c) the Amended and Restated Guaranty,
dated December 31, 1997, made by each Guarantor in favor of CITEF (the
"Guaranty"), (d) the Support Agreement, dated as of June 30, 1994, between CITEF
and Specialty Paperboard, as amended by that certain First Amendment to Support
Agreement, dated as of September 29, 1995, as otherwise amended, modified or
supplemented from time to time, and as assigned and assumed pursuant to the
Assignment and Assumption Agreement--NY (the "Support Agreement"), (e) the
Premises Lease, dated as of June 30, 1994, between Specialty Paperboard, as
Premises
<PAGE>
Lessor, and CITEF, as Premises Lessee, as amended by that certain First
Amendment to Premises Lease, dated as of September 29, 1995, as otherwise
amended, modified or supplemented from time to time, and as assigned and assumed
pursuant to the Assignment and Assumption Agreement--VT, dated as of December
31, 1997, by and between FiberMark and FiberMark Office (the "Assignment and
Assumption Agreement--VT") (the "Premises Lease"), and (f) the Premises
Sublease, dated as of June 30, 1994, between CITEF, as Sublessor, and Specialty
Paperboard, as Sublessee, as amended, modified or supplemented from time to
time, and as assigned and assumed pursuant to the Assignment and Assumption
Agreement--VT, whereby FiberMark Office is subleasing the Premises from CITEF.
Capitalized terms used in this Security Agreement and not otherwise defined
herein shall have the meanings set forth in Annex I, attached hereto.
4. Each Guarantor represents that it is financially interested in
the affairs of FiberMark Office and expects to benefit from and derive advantage
from FiberMark Office's lease of certain equipment pursuant to the Lease
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, each Guarantor hereby agrees as
follows:
ARTICLE XXXVI. Grant of Security. Each Guarantor hereby grants to
CITEF a security interest in and on all of such Guarantor's right, title and
interest in and to all of the following whether now owned or hereafter acquired
or existing (the "Collateral"):
Section 36.01. All present and hereafter acquired merchandise,
inventory and goods held for sale or lease or to be furnished under contracts of
service, and all additions, substitutions and replacements thereof, wherever
located, together with all goods and materials used or usable in manufacturing,
processing, packaging or shipping same; in all stages of production- from raw
materials through work-in-process to finished goods - and all proceeds thereof
of whatever sort (any and all such inventory, accessions, products being the
"Inventory");
Section 36.02. All of the now existing and future: (i) right to
payment for goods sold by or services rendered by such Guarantor, including all
accounts arising from sales or rendition of services made under any of such
Guarantor's trade names or styles, or through any of such Guarantor's divisions;
regardless of how such right is evidenced, whether secured or unsecured, or now
existing or hereafter arising (whether or not specifically listed on schedules
furnished to CITEF) (the "Accounts Receivables"), and any and all instruments,
documents, contract rights, chattel paper, general intangibles, including,
without limitation, all accounts created by or arising from all of such
Guarantor's sales of goods or rendition of services to its respective customers,
(ii) unpaid seller's rights (including rescission, replevin, reclamation and
stoppage in transit) relating to the foregoing or arising therefrom; (iii)
rights to any goods represented by any of the foregoing, including rights to
returned or repossessed goods; (iv) reserves and credit balances arising
hereunder; (v) guarantees or collateral for any of the foregoing; (vi) insurance
policies or rights relating to any of the foregoing; and (vii) cash and non-cash
proceeds of any and all the foregoing; and
Section 36.03. all Proceeds of the foregoing. The security interests
granted hereunder shall extend and attach to:
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<PAGE>
a. All Collateral which is presently in existence and which is owned by such
Guarantor or in which the Company has any interest, whether held by the Company
or others for its account; and
b. All Inventory and any portion thereof which may be returned, rejected,
reclaimed or repossessed by either CITEF or any Guarantor from any of the
Guarantor's respective customers, as well as to all supplies, goods,
incidentals, packaging materials, labels and any other items which contribute to
the finished goods or products manufactured or processed by each Guarantor, or
to the sale, promotion or shipment thereof.
ARTICLE XXXVII. Security for Guaranty Obligations. The Collateral
secures the prompt and complete payment when due and performance of all of such
Guarantor's obligations pursuant to the Guaranty (the "Obligations").
ARTICLE XXXVIII. Representations and Warranties. Each Guarantor
represents and warrants to CITEF as follows:
Section 38.01. All of the Inventory is located at the places
specified in Schedule I hereto. The chief place of business and chief executive
office of each Guarantor and the office where each Guarantor keeps its records
concerning Accounts Receivable are located at the address specified on Schedule
I hereto. All originals of all chattel paper which evidence Accounts Receivable
have been delivered to CITEF. None of the Accounts Receivable are evidenced by a
promissory note or other instrument.
Section 38.02. This Security Agreement has been duly executed and
delivered by each Guarantor and constitutes a legal, valid and binding
obligation of such Guarantor enforceable in accordance with its terms and will
not: (i) require any consent or approval of their respective stockholders; (ii)
contravene their respective certificates of incorporation or by-laws; (iii)
violate any provision of, or require any filing (other than the filing of the
financing statements contemplated by the Security Documents), registration,
consent or approval under any Law (including, without limitation, Regulation U),
order, writ, judgment, injunction, decree, determination or award presently in
effect having applicability to such corporation; or (iv) result in a breach of
or constitute a default under or require any consent under any indenture or loan
or credit agreement or any other agreement, lease or instrument to which such
Guarantor is a party or by which it or its properties may be bound or affected.
Section 38.03. Each Guarantor owns the Collateral free and clear of
any Lien, except for (i) the security interest created by this Security
Agreement and (ii) Liens granted in connection with or permitted pursuant to the
Financing Agreement. No effective financing statement or other instrument
similar in effect covering all or any part of the Collateral is on file in any
recording office, except (i) such as may have been filed in favor of CITEF
relating to this Security Agreement and (ii) such as may have been filed in
favor of the Agent relating to the Financing Agreement.
Section 38.04. None of the Guarantors conducts any business under
any name or trade name other than its proper corporate name.
Section 38.05. Each Guarantor has exclusive possession and control
of the Inventory.
Section 38.06. As of the date of this Security Agreement, this
3
<PAGE>
Security Agreement creates a continuing Lien in the Collateral, securing the
payment of the Obligations, all other actions necessary or desirable to perfect
and protect such security interest have been duly taken.
Section 38.07. No authorization, approval or other action by, and no
notice to or filing with, any Governmental Authority is required either (i) for
the grant by each Guarantor of the security interest granted hereby or for the
execution, delivery or performance of this Security Agreement by each Guarantor
or (ii) for the perfection of or the exercise by CITEF of their respective
rights and remedies hereunder.
Section 38.08. The Taxpayer Identification Number of each Guarantor
is set forth on Schedule III hereto. ARTICLE XXXIX. Further Assurances .
Section 39.01. Each Guarantor agrees that from time to time, at the
expense of the Guarantors, each Guarantor will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that CITEF may request, in order to perfect and
protect any security interest granted or purported to be granted hereby or to
enable CITEF to exercise and enforce its rights and remedies hereunder with
respect to any Collateral. Without limiting the generality of the foregoing,
each Guarantor will: (i) mark conspicuously each document and agreement included
in the Collateral and, at the request of CITEF, each of its records pertaining
to the Collateral with a legend, in form and substance satisfactory to CITEF
indicating that such Collateral is subject to the security interest granted
hereby; (ii) if any Account Receivable shall be evidenced by a promissory note
or other instrument or chattel paper deliver such to CITEF duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to CITEF; and (iii) execute and file such financing
or continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as CITEF may request, in order to
perfect and preserve the security interest granted or purported to be granted
hereby.
Section 39.02. The Company hereby authorizes CITEF to file one or
more financing or continuation statements, and amendments thereto, relative to
all or any part of the Collateral without the signature of each Guarantor where
permitted by Law. A carbon, photographic or other reproduction of this Security
Agreement or any financing statement covering the Collateral or any part thereof
shall be sufficient as a financing statement where permitted by Law.
Section 39.03. Each Guarantor will furnish to CITEF from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as CITEF may request,
all in reasonable detail.
Section 39.04. Each Guarantor will defend the Collateral against all
claims and demands of all Persons (other than CITBC, CITEF and Lender) claiming
an interest therein. Each Guarantor will pay promptly when due all property and
other taxes, assessments and governmental charges or levies imposed upon, and
all claims (including claims for labor, materials and supplies) against, the
Collateral, except to the extent where there is a Good Faith Contest to the
validity thereof. In connection with any such Good Faith Contest each Guarantor
will, at the request of CITEF, promptly
4
<PAGE>
provide a bond, cash deposit or other security reasonably satisfactory to
protect the security interest of CITEF should such Good Faith Contest be
unsuccessful.
Section 39.05. In furtherance of the continuing assignment and
security interest in each Guarantor's Accounts, each Guarantor will, upon the
creation of Accounts, execute and deliver to CITEF in such form and manner as
CITEF may reasonably require, solely for CITEF's convenience in maintaining
records of collateral, such confirmatory schedules of Accounts as CITEF may
reasonably request, and such other appropriate reports designating, identifying
and describing the Accounts as CITEF may reasonably require. In addition, upon
CITEF's request, each Guarantor shall provide CITEF with copies of agreements
with, or purchase orders from, each Guarantor's respective customers, and copies
of invoices to customers, proof of shipment or delivery and such other
documentation and information relating to said Accounts and other collateral as
CITEF may reasonably require. Failure to provide CITEF with any of the foregoing
shall in no way affect, diminish, modify or otherwise limit the security
interests granted herein. Each Guarantor hereby authorizes CITEF to regard its
printed name or rubber stamp signature on assignment schedules or invoices as
the equivalent of a manual signature by an authorized officer or agent of each
Guarantor.
Section 39.06. Each Guarantor hereby represents and warrants that
(i) each Account is based on an actual and bona fide sale and delivery of goods
or rendition of services to customers, made by each Guarantor in the ordinary
course of its business; (ii) the goods and inventory being sold and the Accounts
created are the exclusive property of each Guarantor and are not and shall not
be subject to any lien, consignment arrangement, encumbrance, security interest
or financing statement whatsoever, other than the Permitted Encumbrances; (iii)
the invoices evidencing such Accounts are in the name of each Guarantor; and
(iv) the respective customers of each Guarantor have accepted the goods or
services, owe and are obligated to pay the full amounts stated in the invoices
according to their terms, without dispute, offset, defense, counterclaim or
contra, except for disputes and other matters arising in the ordinary course of
business of which each Guarantor has advised CITEF pursuant to Section 4(h) of
this Security Agreement. Each Guarantor confirms to CITEF that any and all taxes
or fees relating to its business, its sales, the Accounts or goods relating
thereto, are its sole responsibility and that same will be paid by each
Guarantor or when due and than none of said taxes or fees represent a lien on or
claim against the Accounts. Each Guarantor also warrants and represents that it
is a duly and validly existing corporation, and is qualified in all states and
provinces where the failure to so qualify would have an adverse effect on the
business of each Guarantor or the ability of each Guarantor to enforce
collection of Accounts due from customers residing in such locations. Each
Guarantor agrees to maintain such books and records regarding Accounts as CITEF
may reasonably require and agrees that the books and records of each Guarantor
will reflect CITEF's interest in the Accounts. All of the books and records of
each Guarantor will be available to CITEF at normal business hours, including
any records handled or maintained for each Guarantor by any other company or
entity.
Section 39.07. Until CITEF has advised any Guarantor to the
5
<PAGE>
contrary after the occurrence of an Event of Default, such Guarantor may and
will enforce, collect and receive all amounts owing on the Accounts for CITEF's
benefit and on CITEF's behalf, but at such Guarantor's expense; such privilege
shall terminate automatically upon the institution by or against such Guarantor
of any proceeding under any bankruptcy or insolvency law or, at the election of
CITEF, upon the occurrence of any other Event of Default and until such Event of
Default is waived. Any checks, cash, notes or other instruments or property
received by such Guarantor with respect to any Accounts shall be held by such
Guarantor in trust for CITEF, separate from such Guarantor's own property and
funds, and immediately turned over to CITEF with proper assignments or
endorsements by deposit to the Depository Accounts. All amounts received by
CITEF in payment of Accounts will be credited to such Guarantor's accounts upon
CITEF's receipt of "collected funds" at CITEF's bank account in New York, New
York on the Business Day of receipt if received no later than 1:00 p.m. (New
York time) or on the next succeeding Business Day if received no later than 1:00
p.m. (New York time). No checks, drafts or other instrument received by CITEF
shall constitute final payment to CITEF unless and until such instruments have
actually been collected.
Section 39.08. Each Guarantor agrees to notify CITEF promptly of any
matters materially affecting the value, enforceability or collectibility of any
Account and of all material customer disputes, offsets, defenses, counterclaims,
returns, rejections and all reclaimed or repossessed merchandise or goods. Each
Guarantor agrees that it shall issue credit memoranda promptly (with duplicates
to CITEF upon request after the occurrence of an Event of Default) upon
accepting returns or granting allowances, and may continue to do so until CITEF
has notified any Guarantor that an Event of Default has occurred and that all
future credits or allowances are to be made only after CITEF's prior written
approval. Upon the occurrence of an Event of Default and until such time as such
Event of Default is waived and on notice from CITEF, such Guarantor agrees that
all returned, reclaimed or repossessed merchandise or goods shall be set aside
by such Guarantor, marked with CITEF's name and held by such Guarantor for
CITEF's account as owner.
Section 39.09. Each Guarantor will be credited with all amounts
received by CITEF from each Guarantor or from others for each Guarantor's
account, including, as set forth above, all amounts received by CITEF in payment
of assigned Accounts and such amounts will be applied to payment of the
Obligations. In no event shall prior recourse to any Accounts or other security
granted to or by each Guarantor be a prerequisite to CITEF's right to demand
payment of any Obligation. Further, it is understood that CITEF shall have no
obligation whatsoever to perform in any respect any of such Guarantor's
contracts or obligations relating to the Accounts. After the end of each month,
CITEF shall promptly send each Guarantor a statement showing the accounting for
the charges and other transactions occurring between CITEF and each Guarantor
during that month. The monthly statements shall be deemed correct and binding
upon each Guarantor and shall constitute an account stated between each
Guarantor and CITEF unless CITEF receives a written statement of the exceptions
within thirty (30) days of the date of the monthly statement.
ARTICLE XL. As to Inventory. Each Guarantor shall:
6
<PAGE>
Section 40.01. Keep their respective Inventory (other than Inventory
sold in the ordinary course of business) at the places therefor specified in
Schedule I hereto or, upon 30 days' prior written notice to CITEF, at such other
places in jurisdictions where all action required by Section 4 shall have been
taken with respect to the Inventory;
Section 40.02. Safeguard, protect and hold all Inventory for CITEF's
account and make no disposition thereof except in the regular course of the
business of such Guarantor as herein provided. Until CITEF has given such
Guarantor notice to the contrary, as provided for below, any Inventory may be
sold and shipped by such Guarantor to its customers in the ordinary course of
such Guarantor's business, on open account and on terms currently being extended
by such Guarantor to its customers, provided that all proceeds of all sales
(including cash, accounts receivable, checks, notes, instruments for the payment
of money and similar proceeds) are forthwith transferred, endorsed, and turned
over and delivered to CITEF in accordance with Section 4(g) of this Security
Agreement. CITEF shall have the right to withdraw this permission at any time
upon the occurrence of an Event of Default and until such time as such Event of
Default is waived, in which event no further disposition shall be made of the
Inventory by such Guarantor without CITEF's prior written approval. Cash sales
or sales of Inventory in which a Lien upon, or security interest in, Inventory
is retained by such Guarantor shall be made by such Guarantor only with the
approval of CITEF, and the proceeds of such sales or sales of Inventory for cash
shall not be commingled with such Guarantor's other property, but shall be
segregated, held by such Guarantor in trust for CITEF as CITEF's exclusive
property, and shall be delivered immediately by such Guarantor to CITEF in the
identical form received by such Guarantor by deposit to the Depository Accounts.
Upon the sale, exchange, or other disposition of Inventory, as herein provided,
the security interest in such Guarantor's Inventory provided for herein shall,
without break in continuity and without further formality or act, continue in,
and attach to, all proceeds, including any instruments for the payment of money,
accounts receivable, contract rights, documents of title, shipping documents,
chattel paper and all other cash and non-cash proceeds of such sale, exchange or
disposition. As to any such sale, exchange or other disposition, CITEF shall
have all of the rights of an unpaid seller, including stoppage in transit,
replevin, rescission and reclamation;
Section 40.03. Covenant that, except for Permitted Encumbrances, as
defined in the Financing Agreement, each Guarantor is or will be at the time
additional Collateral is acquired by it, the absolute owner of the Collateral
with full right to pledge, sell, consign, transfer and create a security
interest therein, free and clear of any and all claims or Liens in favor of
others other than the Liens in favor of the CITBC and CITEF; that each Guarantor
will at its expense forever warrant and, at CITEF's request, defend the same
from any and all claims and demands of any other person other than the Permitted
Encumbrances. Each Guarantor will not grant, create or permit to exist, any Lien
upon or security interest in the Collateral, or any proceeds thereof, in favor
of any other Person other than the holders of the Permitted Encumbrances. None
of the Guarantors will (i) change the location of its chief executive
office/chief place of business from that specified in Schedule I attached
hereto, or remove its
7
<PAGE>
books and records from the location specified in Schedule I, (ii) permit any of
the Inventory to be kept at a location other than those listed on such Schedule
I hereto or (iii) change its name (including the adoption of any new trade
name), identity or corporate structure unless it shall have provided at least
thirty (30) days prior written notice to CITEF of any such change. Each
Guarantor will from time to time notify CITEF of each location at which any
amount of the Collateral or such books and records are to be kept including for
temporary processing, storage or similar purposes. Each Guarantor shall not
remove any amount of Collateral or such books or records to a location not set
forth on Schedule I or otherwise keep any amount of Collateral at a location not
set forth on Schedule I unless, not less than thirty (30) days prior to the day
such removal or other change occurs such Guarantor shall give written notice to
CITEF of such removal or other change and the new location of such Collateral or
such books and records. No action requiring notice to CITEF under this paragraph
shall be effected until such filings and other measures required under
applicable Law to continue uninterrupted the perfected security interest and
Lien of CITEF in the Collateral affected thereby shall have been taken, and
until CITEF shall have received such opinions of counsel with respect thereto as
it shall have reasonably requested. Each Guarantor also agrees to advise CITEF
promptly, in sufficient detail, of any material adverse change relating to the
type, quantity or quality of the Collateral or to the security interests granted
to CITEF therein. Each Guarantor as to itself hereby authorizes CITEF to regard
its printed name or rubber stamp signature on assignment schedules or invoices
as the equivalent of a manual signature by one of its authorized officers or
agents;
Section 40.04. Permit CITEF or any agent thereof to have access to
the Inventory for purposes of inspection during normal business hours and upon
reasonable notice to such Guarantor;
Section 40.05. Promptly notify CITEF in writing of any material loss
or damage to the Inventory;
Section 40.06. Not sell, assign, lease, mortgage, transfer or
otherwise dispose of any interest in the Inventory except as permitted in the
Financing Agreement; and
Section 40.07. Not use or permit the Inventory to be used for any
unlawful purpose or in violation of any applicable Law or for hire.
ARTICLE XLI. Insurance.
Section 41.01. Each Guarantor shall, at its own expense, maintain
insurance with respect to its respective Inventory in such amounts, against such
risks, in such form and with such insurers, as shall be satisfactory to CITEF
from time to time. Each policy for: (i) liability insurance shall provide for
all losses to be paid on behalf of CITEF and such Guarantor as their respective
interests may appear; and (ii) property damage insurance shall provide for all
losses to be paid directly to CITEF. Each such policy shall in addition: (i)
name CITEF as an insured party thereunder (without any representation or
warranty by or obligation upon CITEF) as their interests may appear; (ii)
contain the agreement by the insurer that any loss thereunder shall be payable
to CITEF notwithstanding any action, inaction or breach of representation and
warranty by such Guarantor; (iii) provide that there shall be no
8
<PAGE>
recourse against CITEF for payment of premiums or other amounts with respect
thereto; and (iv) provide that at least thirty (30) days' prior written notice
of amendment to, cancellation of or lapse shall be given to CITEF by the
insurer. Each Guarantor shall, if so requested by CITEF, deliver to CITEF
original or duplicate policies of such insurance and, as often as CITEF may
request, a report of a reputable insurance broker with respect to such
insurance. Further, each Guarantor shall, at the request of CITEF, duly execute
and deliver instruments of assignment of such insurance policies to comply with
the requirements of Section 4 and cause the respective insurers to acknowledge
notice of such assignment.
Section 41.02. Reimbursement under any liability insurance
maintained by each Guarantor pursuant to this Section 6 may be paid directly to
the Person who shall have incurred liability covered by such insurance. In case
of any loss involving damage to Inventory when subsection (a) of this Section 6
is not applicable, each Guarantor shall make or cause to be made the necessary
repairs to or replacements of such Inventory, and any proceeds of insurance
maintained by such Guarantor pursuant to this Section 6 shall be paid to such
Guarantor as reimbursement for the costs of such repairs or replacements.
ARTICLE XLII. As to Accounts Receivable and Collateral Generally.
Section 42.01. Each Guarantor shall keep its chief place of business
and chief executive office and the office where it keeps its records concerning
the Accounts Receivable, at the location therefor specified in Schedule I hereto
or, upon 30 days' prior written notice to CITEF, at such other locations in a
jurisdiction where all action required by Section 4 shall have been taken with
respect to Accounts Receivable. Each Guarantor will hold and preserve such
records and will permit representatives of CITEF to inspect and make abstracts
from such records.
Section 42.02. Each Guarantor will not (i) amend, modify, terminate
or waive any provision of any contract, license or agreement giving rise to an
Account in any manner which could reasonably be expected to materially adversely
affect the value of such contract, license or Account as Collateral, (ii) fail
to exercise promptly and diligently each and every material right which it may
have under each material contract, license or agreement giving rise to an
Account (other than any right of termination), except in a manner consistent
with the ordinary and customary conduct of its business or (iii) fail to deliver
to CITEF upon its reasonable request a copy of each material demand, notice or
document received by it relating in any way to any material contract, license or
agreement giving rise to an Account.
Other than in the ordinary course of business as generally conducted
by each Guarantor over a period of time, each Guarantor will not grant any
extension of the time of payment of any of the Accounts, compromise, compound or
settle the same for less than the full amount thereof, release, wholly or
partially, any Person liable for the payment thereof, or allow any credit or
discount whatsoever thereon.
Section 42.03. Except as otherwise provided in this subsection (c),
each Guarantor shall continue to collect, at its own expense, all amounts due or
to become due to each Guarantor under the Accounts Receivable. In connection
with such collections, each Guarantor may take (and, at CITEF's discretion,
shall take) such
9
<PAGE>
action as such Guarantor or CITEF may deem necessary or advisable to enforce
collection of the Accounts Receivable; provided, however, that CITEF shall have
the right at any time, upon the occurrence and during the continuance of an
Event of Default upon written notice to such Guarantor of its intention to do
so, to notify the account debtors or obligors under any Accounts Receivable of
the assignment of such Accounts Receivable to CITEF and to direct such account
debtors or obligors to make payment of all amounts due or to become due to such
Guarantor thereunder directly to CITEF and, upon such notification and at the
expense of such Guarantor, to enforce collection of any such Accounts
Receivable, and to adjust, settle or compromise the amount or payment thereof,
in the same manner and to the same extent as such Guarantor might have done.
After receipt by such Guarantor of the notice from CITEF referred to in the
proviso to the preceding sentence and as long as there is an Event of Default,
(i) all amounts and proceeds (including instruments) received by such Guarantor
in respect of the Accounts Receivable shall be received in trust for the benefit
of CITEF, shall be segregated from other funds of such Guarantor and shall be
forthwith paid over to CITEF in the same form as so received (with any necessary
endorsement) to be held as cash Collateral, or be applied as provided by Section
13(b), as determined by CITEF, and (ii) no Guarantor shall adjust, settle or
compromise the amount or payment of any Account Receivable, or release wholly or
partly any account debtor or obligor thereof, or allow any credit or discount
thereon, other than any discount allowed for prompt payment.
Section 42.04. Upon the release of all Liens granted by each
Guarantor to the Agent under and pursuant to the Financing Agreement, and
provided that no Event of Default has occurred and is continuing under the Lease
Agreement, CITEF will release its Lien in the Collateral.
Section 42.05. Any delay, or omission by CITEF to exercise any right
hereunder, shall not be deemed a waiver thereof, or be deemed a waiver of any
other right, unless such waiver is in writing and signed by CITEF. A waiver on
any one occasion shall not be construed as a bar to or waiver of any right or
remedy on any future occasion.
Section 42.06. To the extent that the Obligations are now or
hereafter secured by any assets or property other than the Collateral or by the
guarantee, endorsement, assets or property of any other Person, then CITEF shall
have the right in its sole discretion to determine which rights, security,
Liens, security interests or remedies CITEF shall at any time pursue, foreclose
upon, relinquish, subordinate, modify or take any other action with respect to,
without in any way modifying or affecting any of them, or any of CITEF's rights
hereunder.
Section 42.07. Upon the request of CITEF, each Guarantor will, at
the sole expense of each Guarantor, promptly and duly execute and deliver such
further instruments and documents and take such further action as CITEF may
reasonably request for the purpose of obtaining or preserving the full benefits
of the Lease Agreement, the Guaranty and this Security Agreement and of the
rights and powers herein and therein granted for the benefit of CITEF.
Each Guarantor will comply with the requirements of all state and
federal Laws in
10
<PAGE>
order to grant to CITEF valid and continuing security interests and Liens in the
Collateral, subject only to the Permitted Encumbrances. CITEF is hereby
authorized by each Guarantor to file any financing statements covering the
Collateral whether or not each Guarantor's signature appears thereon. Each
Guarantor agrees to do whatever CITEF may request, from time to time, by way of:
filing notices of Liens, financing statements, amendments, renewals and
continuations thereof; cooperating with CITEF; keeping stock records; and
performing such further acts as CITEF may reasonably require in order to perfect
the Liens contemplated by this Security Agreement in favor of CITEF.
Any reserves or balances to the credit of each Guarantor and any
other property or assets of each Guarantor in the possession of CITEF may be
held by such holder as security for any Obligations and applied in whole or
partial satisfaction of such Obligations when due. The Liens and security
interests granted herein and any other Lien or security interest CITEF may have
in any other assets of the Company, shall secure payment and performance of all
now existing and future Obligations. CITEF may in its discretion charge any or
all of the Obligations to the account of each Guarantor when due.
ARTICLE XLIII. Transfer and Other Liens. No Guarantor shall:
Section 43.01. Sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except as permitted in the Financing
Agreement.
Section 43.02. Create or suffer to exist any Lien upon or with
respect to any of the Collateral except Permitted Encumbrances.
ARTICLE XLIV. CITEF Appointed Attorney-in-Fact . Each Guarantor
hereby irrevocably appoints CITEF such Guarantor's attorney-in-fact, with full
authority in the place and stead of the Company and in the name of such
Guarantor, CITEF or otherwise, to, after the occurrence and during the
continuance of an Event of Default, take any action and to execute any
instrument which CITEF may deem necessary or advisable to accomplish the
purposes of this Security Agreement, including, without limitation:
Section 44.01. to obtain and adjust insurance required to be paid to
CITEF pursuant to Section 6;
Section 44.02. to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for moneys due and to
become due under or in respect of any of the Collateral;
Section 44.03. to receive, endorse, assign, and collect any and all
checks, notes, drafts and other negotiable and non-negotiable instruments,
documents and chattel paper, in connection with clause (a) or (b) above, and
such Guarantor waives notice of presentment, protest and non-payment of any
instrument, document or chattel paper so endorsed or assigned;
Section 44.04. to file any claims or take any action or institute
any proceedings which CITEF may deem necessary or desirable for the collection
of any of the Collateral or otherwise to enforce the rights of CITEF with
respect to any of the Collateral;
Section 44.05. to sell, transfer, assign or otherwise deal in or
with
11
<PAGE>
the Collateral or the proceeds or avails thereof, as full and effectually as if
CITEF were the absolute owner thereof;
Section 44.06. to receive, open and dispose of all mail addressed to
such Guarantor and to notify postal authorities to change the address for
delivery thereof to such address as CITEF may designate;
Section 44.07. to request from customers indebted on Accounts at any
time, in the name of CITEF or such Guarantor or that of CITEF's designee,
information concerning the amounts owing on the Accounts;
Section 44.08. to transmit to customers indebted on Accounts notice
of CITEF's interest therein and to notify customers indebted on Accounts to make
payment directly to CITEF for such Guarantor' account; and
Section 44.09. to take or bring, in the name of CITEF or such
Guarantor, all steps, actions, suits or proceedings deemed by CITEF necessary or
desirable to enforce or effect collection of the Accounts.
Notwithstanding anything herein above contained to the contrary, the
powers set forth in (f), (h) and (i) above may only be exercised after the
occurrence of an Event of Default and until such time as such Event of Default
is waived in writing.
Each Guarantor hereby ratifies and approves all acts other than
those which result from CITEF's gross negligence or willful misconduct, of
CITEF, as its attorney in-fact, pursuant to this Section 9, and CITEF, as its
attorney in-fact, will not be liable for any acts of commission or omission, nor
for any error of judgment or mistake of fact or law other than those which
result from CITEF's gross negligence or willful misconduct. This power, being
coupled with an interest, is irrevocable so long as this Security Agreement
remains in effect.
Each Guarantor also authorizes CITEF, at any time and from time to
time, to communicate in its own name with any party to any contract, agreement
or instrument included in the Collateral with regard to the assignment of such
contract, agreement or instrument and other matters relating thereto.
ARTICLE XLV. CITEF May Perform. If any Guarantor fails to perform
any agreement contained herein, CITEF may itself perform, or cause performance
of, such agreement, and the expenses of CITEF incurred in connection therewith
shall be payable by such Guarantor under Section 13(b).
ARTICLE XLVI. CITEF's Duties. The powers conferred on CITEF
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, CITEF shall not have any duty as to any Collateral or
as to the taking of any necessary steps to preserve rights against prior parties
or any other rights pertaining to any Collateral.
ARTICLE XLVII. Remedies. If any Event of Default as defined in the
Lease Agreement has occurred and is continuing:
Section 47.01. CITEF may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on default under the
Uniform Commercial Code (the "Code") (whether or not the Code applies to the
affected Collateral) and also
12
<PAGE>
may (i) require each Guarantor to, and such Guarantor hereby agrees that it will
at its expense and upon the request of CITEF forthwith, assemble all or part of
the Collateral as directed by CITEF and make it available to CITEF at a place to
be designated by CITEF which is reasonably convenient to both parties and (ii)
to enter the premises where any of the Collateral is located and take and carry
away the same, by any of its representatives, with or without legal process, to
CITEF's place of storage, and (iii) without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any of CITEF's offices or elsewhere, for cash, on credit or for
future delivery and upon such other terms as CITEF may deem commercially
reasonable. Each Guarantor agrees that, to the extent notice of sale shall be
required by law, at least ten (10) days' notice to such Guarantor of the time
and place of any public or private sale is to be made shall constitute
reasonable notification. CITEF shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. CITEF may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place it was so adjourned.
Section 47.02. All cash proceeds received by CITEF in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of CITEF, be held by CITEF as collateral for,
and/or then or at any time thereafter applied (after payment of any amounts
payable to CITEF pursuant to Section 13) in whole or in part by CITEF against,
all or any part of the Obligations in such order as CITEF shall elect. Any
surplus of such cash or cash proceeds held by CITEF and remaining after payment
in full of all the Obligations to CITEF shall be paid over to such Guarantor. If
the proceeds of the sale of the Collateral are insufficient to pay all the
Obligations each Guarantor agrees to pay upon demand any deficiency to CITEF.
Section 47.03. Immediately upon the occurrence of any Event of
Default and so long as such Event of Default is continuing, CITEF may to the
extent permitted by Law: (i) remove from any premises where same may be located
any and all documents, instruments, files and records, and any receptacles or
cabinets containing same, relating to the Accounts, or CITEF may use, at such
Guarantor's expense, any of such Guarantor's personnel, supplies or space at
such Guarantor's places of business or otherwise, as may be necessary to
properly administer and control the Accounts or the handling of collections and
realizations thereon; (ii) bring suit, in the name of such Guarantor or CITEF,
and generally shall have all other rights respecting said Accounts, including
without limitation the right to accelerate or extend the time of payment,
settle, compromise, release in whole or in part any amounts owing on any
Accounts and issue credits in the name of such Guarantor or CITEF; and (iii)
sell, assign and deliver the Collateral and any returned, reclaimed or
repossessed merchandise, with or without advertisement, at public or private
sale, for cash, on credit or otherwise, at CITEF's sole option and discretion,
and CITEF may bid or become a purchaser at any such sale, free from any right of
redemption, which right is hereby expressly waived by such Guarantor.
ARTICLE XLVIII. Indemnity and Expenses.
Section 48.01. Each Guarantor jointly and
13
<PAGE>
severally agrees to indemnify CITEF from and against any and all claims, losses
and liabilities growing out of or resulting from this Security Agreement
(including, without limitation, enforcement of this Security Agreement), except
claims, losses or liabilities resulting from CITEF's gross negligence or willful
misconduct.
Section 48.02. Each Guarantor will upon demand pay to CITEF the
amount of any and all expenses, including the fees and out of pocket
disbursements of its counsel and of any experts and agents, which CITEF may
incur in connection with (i) filing or recording fees incurred in connection
with this Security Agreement, (ii) the custody, preservation, use or operation
of, or the sale of, collection from, or other realization upon, any of the
Collateral, (iii) the exercise or enforcement of any of the rights of CITEF
hereunder, or (iv) the failure by any Guarantor to perform or observe any of the
provisions hereof. CITEF shall not be liable to the Company for damages as a
result of delays, temporary withdrawals of the Equipment from service or other
causes other than those caused by CITEF's gross negligence or willful
misconduct.
ARTICLE XLIX. Amendments; Etc. No amendment or waiver of any
provision of this Security Agreement nor consent to any departure by any
Guarantor herefrom shall in any event be effective unless the same shall be in
writing and signed by CITEF, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
ARTICLE L. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing and, if to each
Guarantor, mailed or delivered by messenger or sent by facsimile, addressed to
it 161 Wellington Road, P.O. Box 498, Brattleboro, Vermont 05302; and if to
CITEF, mailed or delivered by messenger or sent by facsimile to it, addressed to
it at the address of CITEF at 1211 Avenue of the Americas, New York, New York
10036, Attention: Senior Credit Officer; or as to any such party at such other
address as shall be designated by such party in a written notice to the other
party complying as to delivery with the terms of this Section. All such notices
and other communications shall, when mailed or delivered by messenger or sent by
facsimile, respectively, be effective when received in the mails or delivered to
the messenger or sent by facsimile, respectively, addressed as aforesaid.
ARTICLE LI. Continuing Security Interest; Transfer of Lease. This
Security Agreement shall create a continuing security interest in the Collateral
and shall (i) remain in full force and effect until payment in full of the
Obligations (after the termination of the Guaranty), (ii) be binding upon each
Guarantor, its successors and assigns, and (iii) inure to the benefit of CITEF
and its successors, transferees and assigns. Without limiting the generality of
the foregoing clause (iii), subject to the terms of the Guaranty CITEF may
assign or otherwise transfer all or a portion of its rights and obligations
under the Guaranty to any other Person and such other Person shall thereupon
become vested with all the benefits in respect thereof granted to CITEF herein
or otherwise. Upon the payment in full of the Obligations (after the termination
of the Guaranty), the security interest granted hereby shall terminate and all
rights to the Collateral shall revert to the respective Guarantor. Upon any such
termination, CITEF will, at such Guarantor's expense, execute and deliver to the
Company such documents as the Company shall reasonably request to evidence such
14
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termination.
ARTICLE LII. Governing Law; Terms. This Security Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
except to the extent that the validity or perfection of the security interest
hereunder, or remedies hereunder, in respect of any particular Collateral are
governed by the laws of a jurisdiction other than the State of New York. Unless
otherwise defined herein, terms used in Article 9 of the Uniform Commercial Code
in the State of New York are used herein as therein defined.
ARTICLE LIII. Miscellaneous. This Security Agreement is in addition
to and not in limitation of any other rights and remedies CITEF may have by
virtue of any other instrument or agreement heretofore, contemporaneously
herewith or hereafter executed by each Guarantor or by applicable Law or
otherwise. If any provision of this Security Agreement is contrary to applicable
Law, such provision shall be deemed ineffective without invalidating the
remaining provisions hereof. If and to the extent that applicable Law confers
any rights in addition to any of the provisions of this Security Agreement, the
affected provision shall be considered amended to conform thereto. CITEF shall
not by any act, delay, omission or otherwise be deemed to have waived any of its
rights or remedies hereunder. A waiver by CITEF of any right or remedy hereunder
on any one occasion, shall not be construed as a bar to or waiver of any such
right or remedy which CITEF would have had on any future occasion nor shall
CITEF be liable for exercising or failing to exercise any such right or remedy
ARTICLE LIV. Waiver of Trial by Jury . THE PARTIES TO THIS SECURITY
AGREEMENT ACKNOWLEDGE THAT JURY TRIALS OFTEN ENTAIL ADDITIONAL EXPENSES AND
DELAYS NOT OCCASIONED BY NONJURY TRIALS. THE PARTIES TO THIS SECURITY AGREEMENT
AGREE AND STIPULATE THAT A FAIR TRIAL MAY BE HAD BEFORE A STATE OR FEDERAL JUDGE
IN A COURT LOCATED IN NEW YORK COUNTY BY MEANS OF A BENCH TRIAL WITHOUT A JURY.
IN VIEW OF THE FOREGOING, AND AS A SPECIFICALLY NEGOTIATED PROVISION OF THIS
SECURITY AGREEMENT, EACH PARTY TO THIS SECURITY AGREEMENT HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION ARISING UNDER THIS SECURITY AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT
OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
RELATED HERETO OR THERETO, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS SECURITY
AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
15
<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Security
Agreement to be duly executed and delivered by its officer thereunto duly
authorized as of the date first above written.
FIBERMARK, INC.
By:_____________________________________
Name:
Title:
FIBERMARK DURABLE SPECIALTIES, INC.
By:_____________________________________
Name:
Title:
FIBERMARK FILTER AND TECHNICAL
PRODUCTS, INC.
By:_____________________________________
Name:
Title:
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By______________________________________
Name:
Title:
16
<PAGE>
SCHEDULE I
to Security Agreement
Place of Business and Locations of Collateral
Chief Place of Business
and Chief Executive Office
FiberMark, Inc.
161 Wellington Road
Brattleboro, VT 05301
FiberMark Durable Specialties, Inc.
161 Wellington Road
Brattleboro, VT 05301
FiberMark Filter and Technical Products, Inc.
___________________________
___________________________
___________________________
Location of Inventory
FiberMark, Inc.
none
FiberMark Durable Specialties, Inc.
Endura Converted Products
45 N. 4th Street
Quakertown, PA 18951
FiberMark Filter and Technical Products, Inc.
Virginia Bonded Warehouse
2500 Deepwater Terminal Road
Richmond, VA 23234
James River Corporation of Virginia
120 Tredegar Street
Richmond, VA 23219
Milco Warehouse - 6900 and 6866
Old Orion Court
Rochester Hills, MI 48306
Fitchburd Mill
44 Old Princeton Road
Fitchburg, MA 01420
S-I-1
<PAGE>
Beaver Falls
Main Street
P.O. Box 130
Beaver Falls, NY 13305
Richmond Mill
140 Tredegar Street
Richmond, VA 23219
Rochester Mill
340 Mill Street
Rochester, MI 48307
S-I-2
<PAGE>
SCHEDULE II
to Security Agreement
SCHEDULE OF
OWNED AND LEASED REAL PROPERTY
[TO BE PROVIDED]
S-II-1
<PAGE>
SCHEDULE III
to Security Agreement
TAXPAYER IDENTIFICATION NUMBER
FIBERMARK, INC.: ____________________
FIBERMARK DURABLE SPECIALTIES, INC.: ____________________
FIBERMARK FILTER AND TECHNICAL PRODUCTS, INC.: ____________________
S-III-1
<PAGE>
ANNEX I
to Security Agreement
Accounts shall mean all of the applicable Guarantor's now existing
and future: (a) Accounts Receivable (whether or not specifically listed on
schedules furnished to CITEF), and any and all instruments, documents, contract
rights, chattel paper, general intangibles, including, without limitation, all
accounts created by or arising from all of each Guarantor's sales of goods or
rendition of services to its customers, (b) unpaid seller's rights (including
rescission, replevin, reclamation and stoppage in transit) relating to the
foregoing or arising therefrom; (c) rights to any goods represented by any of
the foregoing, including rights to returned or repossessed goods; (d) reserves
and credit balances arising hereunder; (e) guarantees or collateral for any of
the foregoing; (f) insurance policies or rights relating to any of the
foregoing; and (g) cash and non-cash proceeds of any and all the foregoing.
Accounts Receivable means any right to payment for goods sold by or
services rendered by each Guarantor, including all accounts arising from sales
or rendition of services made under each Guarantor's trade names or styles, or
through any of each Guarantor's divisions; regardless of how such right is
evidenced, whether secured or unsecured, or now existing or hereafter arising.
Brattleboro Collateral shall mean all of FiberMark Office's present
and future Equipment and Real Estate of FiberMark Office whether now or
hereafter owned by FiberMark Office and located on the Brattleboro, Vermont
property owned by FiberMark Office; and to the extent not otherwise included,
all proceeds and products of any and all of the foregoing.
Depository Accounts shall mean those accounts owned by, and in the
name of, the Agent and designated by the Agent for the deposit of proceeds of
Collateral.
Equipment shall mean all present and hereafter acquired machinery,
equipment, furnishings and fixtures, and all additions, substitutions and
replacements thereof, located the Brattleboro, Vermont property owned by
FiberMark Office, together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto and all proceeds of
whatever sort.
Event of Default means a failure by any Guarantor to fulfill its
obligations under the Guaranty.
Governmental Authority shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
Indebtedness shall mean at any date:
(a) indebtedness or liability for borrowed money, or for the
deferred purchase price of property or services (including trade obligations);
(b) obligations as lessee under Capital Leases;
(c) reimbursement obligations under letters of credit issued for the
account of any Person;
(d) all reimbursement obligations arising under bankers' or trade
acceptances;
(d) all guarantees, endorsements (other than for collection or
deposit in the
A-I-1
<PAGE>
ordinary course of business), and other contingent obligations to purchase any
of the items included in this definition, to provide funds for payment, to
supply funds to invest in any Person, or otherwise to assure a creditor against
loss;
(e) all obligations secured by any Lien on property owned by such
Person, whether or not the obligations have been assumed; and
(f) all obligations under any agreement providing for a swap,
ceiling rates, ceiling and floor rates, contingent participation or other
hedging mechanisms with respect to interest payable on any of the items
described in this definition.
Law means any treaty, foreign, federal, state or local statute, law,
rule, regulation, ordinance, order, code, policy, or rule of common law, now or
hereafter in effect, and in each case as amended, and any judicial or
administrative interpretation thereof by a Governmental Authority or otherwise,
including any judicial or administrative order, consent decree or judgment.
Lien shall mean any mortgage, pledge, lien, security interest,
charge, encumbrance, financing statement, title retention or any other right or
claim of any person, including, without limitation, any environmental lien.
Material Adverse Change means (a) a material adverse change in the
status of the business, results of operations, condition (financial or
otherwise), prospects, profitability, assets, operations, or property of any
Guarantor or the Company, or (b) any event or occurrence of whatever nature
which could have a material adverse effect on any Guarantor's ability to perform
its obligations under the Guaranty or the Company's ability to perform its
obligations under the Lease Agreement.
Permitted Encumbrances shall mean:
(a) Liens expressly permitted, or consented to, by the Agent;
(b) Liens expressly permitted, or consented to, by CITEF pursuant to
the Lease Agreement in the event that all Liens granted by FiberMark Office to
the Agent under and pursuant to the Financing Agreement have been released;
(c) Purchase Money Liens;
(d) Permitted Liens;
(e) Liens granted the Agent by FiberMark Office or any Guarantor;
(f) Liens granted CITEF by FiberMark Office in the event that all
Liens granted by FiberMark Office to the Agent under and pursuant to the
Financing Agreement have been released;
(g) Liens of judgment creditors provided such Liens do not exceed,
in the aggregate, at any time, Two Hundred Fifty Thousand Dollars ($250,000)
(other than Liens bonded or insured to the reasonable satisfaction of the Agent
or CITEF in the event that all Liens granted by FiberMark Office to the Agent
under and pursuant to the Financing Agreement have been released);
(h) Liens for taxes not yet due and payable or which are the subject
of a Good Faith Contest and which Liens are not x) other than with respect to
Real Estate, senior to the Liens of the Agent or y) for taxes due the United
States of America; provided, however, that in no event shall any Environmental
Lien be deemed to be a Permitted Encumbrance; and
(i) Liens granted by FiberMark Office to CITEF securing FiberMark
Office's obligations under the Lease Agreement and Liens granted by each
Guarantor securing
A-I-2
<PAGE>
each Guarantor's guaranty of such obligations; and
(j) Liens granted by FiberMark Office or any Guarantor on any of its
assets other than (i) the Brattleboro Collateral, (ii) each Guarantor's or
FiberMark Office's Accounts and (iii) each Guarantor's and FiberMark Office's
Inventory.
Permitted Liens shall mean:
(i) Liens of local, provincial, or state authorities for franchise
or other like taxes provided the aggregate amounts secured by such Liens shall
not exceed One Hundred Thousand Dollars ($100,000) in the aggregate outstanding
at any one time;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other like Liens imposed by Law,
created in the ordinary course of business and for amounts not yet due or which
are the subject of a Good Faith Contest;
(iii) deposits made (and the Liens thereon) in the ordinary course
of business (including, without limitation, security deposits for leases, surety
bonds and appeal bonds) in connection with workers' compensation, unemployment
insurance and other types of social security benefits or to secure the
performance of tenders, bids, contracts (other than for the repayment or
guarantee of Indebtedness), statutory obligations and other similar obligations
arising as a result of progress payments under government contracts; and
(iv) easements (including, without limitation, reciprocal easement
agreements and utility agreements), encroachments, minor defects or
irregularities in title, variation and other restrictions, charges or
encumbrances (whether or not recorded) affecting the Real Estate and which are
listed in Schedule B of the title insurance policy delivered to the Agent
pursuant to the Financing Agreement and delivered to CITEF; provided, however,
that in no event shall any Environmental Lien be deemed to be a Permitted Lien.
Person shall means an individual, a corporation, a partnership, an
unincorporated organization, an association, a joint stock company, a joint
venture, a trust, an estate, a government or any agency or political subdivision
thereof, or other entity, whether acting in an individual, fiduciary or other
capacity.
Proceeds shall have the meaning assigned to it in the Uniform
Commercial Code, and in any event, shall include, but not be limited to, (i) any
and all proceeds of any insurance, indemnity, warranty or guaranty payable to
CITEF from time to time with respect to any of the Collateral; (ii) any and all
payments (in any form whatsoever) made or due and payable to CITEF from time to
time in connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency or any other Person (whether or not acting under
color of governmental authority); (iii) any and all accounts arising out of, any
chattel paper evidencing, any lease of, and any and all other rents or profits
or other amounts from time to time paid or payable in connection with, any of
the Collateral; and (iv) any and all proceeds of any sale, transfer or other
disposition of the Collateral.
Purchase Money Liens shall mean Liens on any item of equipment
acquired by
A-I-3
<PAGE>
FiberMark Office after the date of the Financing Agreement provided
that (a) each such Lien shall attach only to the property to be acquired, (b) a
description of the property so acquired is furnished to the Agent and CITEF, and
(c) the debt incurred in connection with such acquisitions shall not exceed, in
the aggregate, Five Hundred Thousand Dollars ($500,000) in any Fiscal Year.
Real Estate shall mean the fee and/or leasehold interests in the
real property of FiberMark Office located at Brattleboro, Vermont which has been
encumbered, mortgaged, pledged or assigned to the Agent or to the Agent's
designee for the ratable benefit of the Lenders.
Security Documents means this Security Agreement, the Guaranty and
any other security agreement granting a Lien on any assets of FiberMark Office
to secure the Obligations.
A-I-4
<PAGE>
DRAFT 2/1/98
SECOND AMENDED AND RESTATED
SECURITY AGREEMENT
among
FIBERMARK, INC.
FIBERMARK DURABLE SPECIALTIES, INC.
and
FIBERMARK FILTER AND TECHNICAL PRODUCTS, INC.
and
THE CIT GROUP/EQUIPMENT FINANCING, INC.
Dated: December 31, 1997
<PAGE>
Index
Page
PRELIMINARY STATEMENT.................................................. 1
SECTION 1. GRANT OF SECURITY ........................................ 9
SECTION 2. SECURITY FOR GUARANTY OBLIGATIONS......................... 10
SECTION 3. REPRESENTATIONS AND WARRANTIES............................ 10
SECTION 4. FURTHER ASSURANCES ....................................... 11
SECTION 5. AS TO INVENTORY .......................................... 14
SECTION 6. INSURANCE ................................................ 15
SECTION 7. AS TO ACCOUNTS RECEIVABLE ................................ 16
SECTION 8. TRANSFER AND OTHER LIENS ................................. 18
SECTION 9. CITEF APPOINTED ATTORNEY-IN-FACT ......................... 18
SECTION 10. CITEF MAY PERFORM ........................................ 19
SECTION 11. CITEF'S DUTIES ........................................... 19
SECTION 12. REMEDIES ................................................. 20
SECTION 13. INDEMNITY AND EXPENSES ................................... 21
SECTION 14. AMENDMENTS; ETC. ......................................... 21
SECTION 15. ADDRESSES FOR NOTICES .................................... 21
SECTION 16. CONTINUING SECURITY INTEREST; TRANSFER OF LEASE .......... 21
SECTION 17. GOVERNING LAW; TERMS ..................................... 22
SECTION 18. MISCELLANEOUS ............................................ 22
SECTION 19. WAIVER OF TRIAL BY JURY .................................. 22
SCHEDULE I S-I-1
SCHEDULE II............................................................ S-II-1
SCHEDULE III........................................................... S-III-1
ANNEX I................................................................ A-I-1
L O A N A G R E E M E N T
in the amount of
DM 54,000,000
between
zetaphoenicis Beteiligungs GmbH (the "Borrower")
on the one hand
and
BAYERISCHE VEREINSBANK AKTIENGESELLSCHAFT
(hereinafter referred to as "Arranger", "Lender" or "Facility Agent", as
the case may be)
on the other hand
<PAGE>
2
Table of Contents
Page
Art. 1 Definitions 4
Art. 2 Loan Facility 10
Art. 3 Purpose 10
Art. 4 Conditions Precedent 10
Art. 5 Drawdown 12
Art. 6 Term 13
Art. 7 Repayment 14
Art. 8 Prepayment and Cancellation 15
Art. 9 Interest 16
Art. 10 Interest Periods 16
Art. 11 [reserved]
Art. 12 Default Interest and Indemnification 17
Art. 13 Accounts 18
Art. 14 Payments 18
Art. 15 Illegality 19
Art. 16 Increased Costs 20
Art. 17 Tax Gross-Up and Mitigation 21
Art. 18 Representations and Warranties 21
Art. 19 Covenants 24
Art. 20 Events of Default 27
Art. 21 Rights and Obligations of Facility Agent 30
Art. 22 Fees 34
Art. 23 Expenses 34
<PAGE>
3
Art. 24 Stamp Duties 35
Art. 25 Waivers; Remedies Cumulative 35
Art. 26 Notices 35
Art. 27 Assignments, Transfer, Substitution 36
Art. 28 Currency Indemnity 37
Art. 29 Pro Rata Sharing 37
Art. 30 Set-off 38
Art. 31 Miscellaneous 38
Annexes:
Drawdown Request Annex 1
Notice to Lenders of Advance Due Annex 2
Group Structure Chart Annex 3
Pledge Agreement over Shares of Steinbeis Gessner Annex 4
GmbH
Interest Rate Annex 5
<PAGE>
4
Preamble
WHEREAS, Bayerische Vereinsbank Aktiengesellschaft shall provide the Borrower
with a seven year Loan Facility in the amount of DM 54,000,000 (in words:
Deutsche Marks fifty four million) for the purpose of financing the acquisition
of Steinbeis Gessner GmbH; and
WHEREAS, the Facility will be granted in seven tranches, Provided that all
tranches have to be drawn down by the Borrower on the same day and it being
understood that the tranches will have seven different repayment dates
WHEREAS, the Borrower acknowledges that Bayerische Vereinsbank
Aktiengesellschaft will initially grant the Facility in its capacity as
"Original Lender". The Borrower undertakes to support and assist the Original
Lender in the syndication process. References to the Arranger and the Facility
Agent in this Agreement shall be read as references to the Original Lender until
such date where another bank or financial institution becomes party to this
Agreement pursuant to Art. 27;
The parties agree as follows:
Art. 1
Definitions
In this Agreement the following terms shall have the following meaning:
1.1 "Account" shall mean the account No. 6428487 of the Borrower with
Bayerische Vereinsbank Aktiengesellschaft, Rosenheim Branch, Banking Code
71120077, to which each Lender's Share of the Advance is to be credited by
the Lenders and into which monies owed from time to time by the Borrower
pursuant to this Agreement shall be paid or such other account as shall be
notified to the Borrower and the Lenders by the Facility Agent.
1.2 "Advance" shall mean the amount drawn down by the Borrower under Tranche
1, Tranche 2, Tranche 3, Tranche 4, Tranche 5, Tranche 6 or Tranche 7,
pursuant to the Drawdown Request under this Loan Facility or, depending on
the context and if more than one Advance has been made, the principal sum
outstanding as a result of such drawdowns.
1.3 "Agreement" shall mean this agreement including all its annexes.
1.4 "Arranger" shall mean Bayerische Vereinsbank Aktiengesellschaft.
1.5 "Availability Period" shall mean the period from the date of this
Agreement until January 31, 1998.
1.6 "Borrower" shall mean zetaphoenicis Beteiligungs GmbH.
1.7 "Business Day" shall mean any day on which commercial banks and foreign
exchange markets in Munich and London are open for business.
1.8 "Closing Date" shall mean the date defined as closing date in Article 4.2
of the Purchase Agreement.
<PAGE>
5
1.9 "Deutsche Marks" or "DM" shall mean Deutsche Marks which is at the date of
this Agreement the legal tender in the Federal Republic of Germany.
1.10 "Drawdown Date" shall mean the date specified in the Drawdown Request
pursuant to Art. 5.2 on which the Lenders shall make available the
requested Advance as specified in Art. 5.4.
1.11 "Drawdown Request" shall mean a notice of borrowing substantially in the
form as attached as Annex 1.
1.12 "EBITDA" shall mean, in respect of any period, the consolidated ordinary
earnings ("Ergebnis der gewohnlichen Geschaftstatigkeit" pursuant to ss.
275 Sect. 2, Nr. 14 HGB) of the Group plus interest ("Zinsen und ahnliche
Aufwendungen" pursuant to ss. 275 Sect. 2, Nr. 13 HGB) and depreciation
and amortisation ("Abschreibungen auf immaterielle Vermogensgegenstande
des Anlagevermogens und Sachanlagen sowie auf aktivierte Aufwendungen fur
die Ingangsetzung und Erweiterung des Geschaftsbetriebes" pursuant to ss.
275 Sect. 2, Nr. 7 a HGB) during such period.
1.13 "Encumbrance" shall mean any mortgage, hypothecation, pledge, lien,
charge, assignment, transfer of title or conveyance over any of the
Borrower's present or future assets for the purpose of securing any
Indebtedness of the Borrower or any other member of the Group and any
other security agreement or arrangement.
1.14 "Equity " shall mean, at any time, on a consolidated basis of the Group
the equity determined in accordance with ss. 266 Sect. 3 A. HGB plus any
shareholder loans (being accompanied by a subordination and loan retention
agreement addressed to the Lenders in a form acceptable to the Facility
Agent);
but adjusted by:
(a) deducting any outstanding capital ("Ausstehende Einlagen" pursuant
to ss. 272 Sect. 1, S. 2 HGB)
(b) deducting any amount attributable to a revaluation (write ups) of
assets pursuant to ss. 280 HGB and
(c) deducting any amount attributable to claims any member of the Group
has against the Parent and its subsidiaries not being member of the
Group, as far as those claims are shown in the balance sheets as
"Forderungen gegen verbundene Unternehmen" or, as the case may be,
"Forderungen gegen Unternehmen, mit denen eine
Beteiligungsverhaltnis besteht" pursuant toss.266 Sect. 2 B. II. 2
and 3 HGB as well as "Finanzanlagen" pursuant toss.266 Sect. 2 A.
III. HGB).
1.15 "Equity Ratio" shall mean the ratio of:
(a) the amount equal to the Equity; and
(b) the amount equal to the total assets of the Group on a consolidated
basis ("Bilanzsumme").
1.16 "Event of Default" shall have the meaning as given to it in Art. 20.
<PAGE>
6
1.17 "Facility Agent" shall mean Bayerische Vereinsbank Aktiengesellschaft or
such other bank as may from time to time be appointed in its place
pursuant to the provisions of Art. 21.14.
1.18 "Final Maturity Date" shall mean the seventh anniversary of the Drawdown
Date
1.19 "Group" shall mean the Borrower, thetaphoenicis GmbH and their direct and
indirect material subsidiaries from time to time.
1.20 "Group Structure Chart" shall mean the chart in the form as attached as
Annex 3.
1.21 "Guarantee" means any obligation of a Person to pay the Indebtedness of
another Person, including without limitation:
(a) an obligation to pay or purchase such Indebtedness;
(b) an obligation to lend money or to purchase or subscribe shares or
other securities or to purchase assets or services in order to
provide funds for the payment of such Indebtedness; or
(c) any other agreement to be responsible for such Indebtedness.
1.22 "HGB" shall mean Handelsgesetzbuch, being the German Commercial Code.
1.23 "Increased Costs" shall have the meaning as defined in Art. 16.
1.24 "Indebtedness" ("Verschuldung")shall mean any indebtedness for borrowed
money or any Guarantee or other indemnity in respect of any Indebtedness.
1.25 "Interest Cover Ratio" shall mean the ratio of EBITDA to Total Interest
Expenses.
1.26 "Interest Payment Date" shall mean the last day of an Interest Period or
such other date as provided for in the provisions of Art. 10.2.
1.27 "Interest Period" shall have the meaning given to it in Art. 10.
1.28 "Interest Rate" shall mean the interest rate determined for each Tranche
by the Facility Agent prior to the date of this Agreement by concluding
forward rate agreements; these interest rates are set out in Annex 5 to
this Agreement.
1.29 "Judgement Currency" shall have the meaning given to it in Art. 28.1.
1.30 "Legal Changes" shall have the meaning given to it in Art. 15, unless
otherwise specified in this Agreement.
1.31 "Lender" or "Lenders", as the case may be, shall mean Bayerische
Vereinsbank Aktiengesellschaft and any other bank or financial institution
to which Bayerische Vereinsbank Aktiengesellschaft or any other Lender
shall have assigned or transferred all or any part of its rights, benefits
and obligations under this Agreement in accordance with Art. 27.3., it
being understood that the choice of any lender bank by the Facility Agent
requires the Borrower's approval.
<PAGE>
7
1.32 "Lender's Commitment" shall mean with respect to Bayerische Vereinsbank
Aktiengesellschaft, at the date of signing this Agreement, the amount of
DM 54,000,000, or, from time to time, the Lender's commitment from time to
time plus each amount assigned or transferred to any further Lender in
accordance with Art. 27.3.
1.33 "Lender's Share" shall mean the ratio of a Lender's Commitment to the
aggregate of all Lender's Commitments from time to time.
1.34 "Leverage Ratio" shall mean the ratio of Total Debt to EBITDA.
1.35 "Loan Facility" or "Facility" shall have the meaning given to it in Art.
2.1.
1.36 "Majority Lenders" shall, as long as no Advance has been drawn down, mean
a majority of 66 2/3 % of the Lenders, in relation to the sum total of the
Loan Facility, and, after Advance has been drawn down, a majority of 66
2/3 % of the Lenders, in relation to the total of the outstanding Advance.
As long as Bayerische Vereinsbank Aktiengesellschaft will remain the only
Lender under this Agreement, its decision will substitute the decision by
the Majority Lenders if and when required in this Agreement.
1.37 "Notice of Default" shall have the meaning given to it in Art. 21.6.
1.38 "Original Financial Statement" or "Original Financial Statements" shall
mean, as the case may be, the audited or, if no audit has been made, the
un-audited fiscal year-end statements including the balance sheet, the
profit and loss account and the certified auditor's report, if any, of the
Parent and Steinbeis Gessner GmbH for the fiscal years 1995 and 1996, the
preliminary balance sheet and profit and loss account as of December 15,
1997 of Steinbeis Gessner GmbH and as to the Borrower and thetaphoenicis
Beteiligungs GmbH the opening balance sheets.
1.39 "Original Lender" shall mean Bayerische Vereinsbank Aktiengesellschaft
1.40 "Parent" shall mean FiberMark Inc., Brattleboro, Vermont, United States of
America.
1.41 "Permitted Encumbrances" shall mean
(i) Encumbrances in relation to Indebtedness already in existence at the
date of signing this Agreement; or
(ii) Encumbrances arising by operation of law or in the ordinary course
of business; or
(iii) Encumbrances attaching to assets acquired subsequent to the signing
of this Agreement insofar as the Encumbrance secures the purchase
price of the asset; or
(iv) such other Encumbrances as may be created with the prior written
consent of the Majority Lenders, which consent shall not be
unreasonably withheld.
<PAGE>
8
1.42 "Person" shall mean an individual, corporation, partnership, joint
venture, trust, unincorporated organisation or any other legal entity or a
national state or any agency or political subdivision thereof, whether or
not having a separate legal personality.
1.43 "Purchase Agreement" shall mean the sale and purchase agreement as dated
November 26, 1997 between Steinbeis Holding GmbH and the Borrower.
1.44 "Refunding Bank" shall have the meaning given to it in Art. 29.3.
1.45 "Repayment Dates" shall mean the dates as specified in the
schedule contained in Art. 7.
1.46 "Repayment Amount " shall have the meaning given to it in Art. 7.
1.47 "Taxes" (which term shall include "Taxation") shall mean all current or
future taxes, duties, charges or official fees of any kind, including any
interest, fines or penalties and all payments in relation to such current
or future taxes, duties, charges or official fees of any kind.
1.48 "Total Debt" shall mean on a consolidated basis of the Group the total
amounts of debts arising from bonds ("Anleihen" pursuant to ss. 266 Sect.
3. C. 1 HGB), bank loans including capital expenditure facilities and
working capital facilities ("Verbindlichkeiten gegenuber Kreditinstituten"
pursuant to ss. 266 Sect. 3. C. 2 HGB) and obligations arising under
promissory notes ("Verbindlichkeiten aus der Annahme gezogener Wechsel und
der Ausstellung eigener Wechsel" pursuant to ss. 266 Sect. 3. C. Nr. 5
HGB).
1.49 "Total Interest Expenses" shall mean, in relation to any period, the
aggregate of all interest, fees, commissions and other costs, expenses or
charges accrued due from any member of the Group (other than to the Parent
or any other member of the Group) in respect of Indebtedness of any member
of the Group, including interest on shareholder loans as far as such
interests have been paid to the Parent during such period, less interest
accrued during such period on bank deposits held by any member of the
Group.
1.50 "Tranche 1" shall mean the amount which may be drawn down by the Borrower
as an Advance pursuant to a Drawdown Request and having a term of one
year.
1.51 "Tranche 2" shall mean the amount which may be drawn down by the Borrower
as an Advance pursuant to a Drawdown Request and having a term of two
years.
1.52 "Tranche 3" shall mean the amount which may be drawn down by the Borrower
as an Advance pursuant to a Drawdown Request and having a term of three
years.
1.53 "Tranche 4" shall mean the amount which may be drawn down by the Borrower
as an Advance pursuant to a Drawdown Request and having a term of four
years.
1.54 "Tranche 5" shall mean the amount which may be drawn down by the Borrower
as an Advance pursuant to a Drawdown Request and having a term of five
years.
<PAGE>
9
1.55 "Tranche 6" shall mean the amount which may be drawn down by the Borrower
as an Advance pursuant to a Drawdown Request and having a term of six
years.
1.56 "Tranche 7" shall mean the amount which may be drawn down by the Borrower
as an Advance pursuant to a Drawdown Request and having a term of seven
years.
1.57 "Tranches" shall mean the sum of the Tranche 1, Tranche 2, Tranche 3,
Tranche 4, Tranche 5, Tranche 6, and Tranche 7, and "Tranche" shall mean
each one of them.
1. 58 "VAT" shall mean value added tax.
<PAGE>
10
Art. 2
Loan Facility
2.1 Commitment
Subject to the terms and conditions of this Agreement (including the
preamble), the Lenders shall provide to the Borrower a loan facility
(hereinafter referred to as the " Loan Facility") for an aggregate
principal amount of DM 54,000,000 (in words: Deutsche Marks fifty four
million) and the Lenders agree, in the event of a Drawdown Request
pursuant to Art. 5.2, to contribute during the term of this Agreement as
set out in Art. 6 to the Advances to be provided to the Borrower hereunder
an amount corresponding to its Lender's Share, however, up to an aggregate
maximum principal amount not exceeding its Lender's Commitment.
2.2 Obligations Several
The obligations of each Lender under this Agreement are several. Failure
of a Lender to carry out its obligations pursuant to this Agreement in a
proper manner does not relieve any other party of its obligations under
this Agreement. Save as provided for in Art. 20 below, the same shall
apply in the event that a Lender terminates its participation in this
Agreement in accordance with this Agreement or terminates its Lender's
Commitment in accordance with this Agreement, or where performance of the
obligations undertaken by the Lender pursuant to this Agreement would be
invalid or illegal. No Lender is responsible for the obligations of any
other party under this Agreement. Each Lender shall only be responsible
for its Lender's Share. Joint liability, or joint and several liability of
the Lenders is hereby excluded.
2.3 Rights Several
The obligations of the Borrower to the Facility Agent, the Arranger and
the individual Lenders hereunder are created vis-a-vis each of them as
separate and independent obligations. Each Lender, Facility Agent or
Arranger may separately enforce its rights hereunder. The formation of
jointly owned assets is hereby excluded.
Art. 3
Purpose
The Borrower will use the Loan Facility for financing in part the purchase of
Steinbeis Gessner GmbH, Brannenburg. Neither the Arranger, the Facility Agent
nor the Lenders shall be obliged to concern themselves with such application.
Art. 4
Conditions Precedent
4.1 The obligations of the Facility Agent and each Lender to the Borrower
under this Agreement are subject to the conditions precedent that the
Facility Agent has notified the Borrower and the Lenders that it has
received all of the following in form and substance satisfactory to it:
<PAGE>
11
(a) copy, certified to be a true copy of the articles of association and
such other corporate documents relating to the Borrower and to
thetaphoenicis GmbH as the Facility Agent may reasonably and timely
demand;
(b) extract, certified to be a true extract of the Commercial Register
relating to the Borrower and to thetaphoenicis GmbH, of latest date;
(c) legal opinion of the Borrowers' legal counsel that this Agreement
creates legally binding and enforceable obligations on the part of
the Borrower, in form and substance acceptable to the Arranger;
(d) copy of the Original Financial Statements and the auditor's report
regarding the Original Financial Statements and the preliminary
annual report per December 15, 1997 for Steinbeis Gessner GmbH;
(e) specimen signatures of such agents of the Borrower as shall be
authorised to sign this Agreement, the Drawdown Request and any
notices required to be given by the Borrower pursuant to the
provisions of this Agreement; and
(f) a pledge agreement over shares of Steinbeis Gessner GmbH to be
entered by the Borrower with the Facility Agent securing its
obligations under this Agreement substantially in the form of Annex
4 (hereinafter referred to as the "Pledge Agreement");
(g) evidence that the Parent has provided an amount as equity (including
subordinated shareholder loans) to the Borrower on an account with
Bayerische Vereinsbank AG which is the balance of the purchase price
being payable by the Borrower pursuant to Sect. 3 of the Purchase
Agreement and DM 54,000,000;
(h) and in the event that the equity in accordance with Art. 4.1 (g) of
this Agreement has been provided by the Parent through shareholder
loans, a subordination and loan retention agreement addressed to the
Lenders in a form acceptable to the Facility Agent.
The Facility Agent shall be entitled not to accept any documents presented
under this paragraph if the information contained therein does materially
differ from any information previously obtained from the Borrower.
4.2 The obligations of the Facility Agent and each Lender to allow the
Borrower to make the Advance during the Availability Period are subject to
the further conditions precedent that:
(a) the representations and warranties set out in Art. 18 are correct
and will be correct immediately after the Advance is made; and
(b) no Event of Default set out in Art. 20 (or any event which with the
giving of notice or lapse of time might constitute an Event of
Default) has occurred and is continuing.
<PAGE>
12
Art. 5
Availability and Drawdown
5.1 Availability Period
Subject to the terms and conditions of this Agreement, the Facility may be
drawn down by the Borrower in up to seven (7) drawings, Provided that (i)
all drawings may only be made on one single Drawdown Date, and (ii) that
the total amount of all Advances is not exceeding the amount of the
Facility at any time during the Availability Period. Any amount of the
Facility not drawn down on the last day of the Availability Period shall
automatically be cancelled. Upon such cancellation, each Lender's
Commitment shall be reduced proportionally to each Lender's Share.
5.2 Drawdown Request
The request for the drawdown of an Advance may not be delivered by the
Borrower until the Facility Agent has confirmed to the Borrower that it
has received all of the documents listed in Art. 4.1 (Conditions
Precedent) and that each is in form and substance satisfactory to the
Facility Agent. In any case, a request for the drawdown will not be
regarded as having been duly completed, unless the following conditions
have been satisfied:
The Facility Agent has received, by no later than 1.00 p.m. Munich time on
the third (3rd) Business Day prior to the Drawdown Date the Drawdown
Request substantially in the form of Annex 1 (it being understood that a
separate Drawdown Request has to be presented for each Tranche) and having
the following minimum contents:
the proposed Drawdown Date, which must be a Business Day;
the amount of the Advance; and
the account of the Borrower or such other account as the Borrower
may determine to which the Advance is to be transferred by the
Facility Agent.
The Borrower's Drawdown Request cannot be withdrawn; it binds and obliges
the Borrower to accept the requested Advance.
5.3 Lender's Participations
If the above conditions have been satisfied, the Facility Agent shall by
notice in writing pursuant to the provisions of Annex 2 , notify by no
later than two (2) Business Days prior to the Drawdown Date each of the
Lenders of the amount of this Advance, the Drawdown Date, such Lender's
Share in the amount of the Advance and, in the event that payments shall
not be effected to the Account, any further information on the account to
which the proceeds of the Advance shall be paid.
5.4 Payment of Proceeds
Upon receipt of the written notice referred to in Art. 5.3 each Lender
shall, by no later than 10:00 a.m. Munich time on the Drawdown Date,
credit the Account of the Facility Agent with its participation in the
Advance corresponding to its
<PAGE>
13
Lender's Share and the Facility Agent shall by no later than 12:00 a.m.
Munich time on the Drawdown Date, transfer the amount of the Advance to
such account specified in the Borrower's Drawdown Request.
Art. 6
Term
The term of the seven (7) Tranches of the Facility shall lapse according
to the following schedule;
- ---------------------------------------------------------------------------
Column A Column B
Tranche Term ending on
- ---------------------------------------------------------------------------
Tranche 1 the date 12 months after the
Drawdown Date
- ---------------------------------------------------------------------------
Tranche 2 the date 24 months after the
Drawdown Date
- ---------------------------------------------------------------------------
Tranche 3 the date 36 months after the
Drawdown Date
- ---------------------------------------------------------------------------
Tranche 4 the date 48 months after the
Drawdown Date
- ---------------------------------------------------------------------------
Tranche 5 the date 60 months after the
Drawdown Date
- ---------------------------------------------------------------------------
Tranche 6 the date 72 months after the
Drawdown Date
- ---------------------------------------------------------------------------
Tranche 7 the Final Maturity Date.
- ---------------------------------------------------------------------------
<PAGE>
14
Art. 7
Repayment
The Borrower shall repay each Tranche under the Facility in full on the relevant
Repayment Date for such Tranche as set out in the following schedule:
- ---------------------------------------------------------------------------
Column A Column B
Repayment Date Repayment Amount
- ---------------------------------------------------------------------------
Tranche 1 Repayment Date DM 4,000,000
being the date 12 months after the
Drawdown Date
- ---------------------------------------------------------------------------
Tranche 2 Repayment Date DM 4,000,000
being the date 24 months after the
Drawdown Date
- ---------------------------------------------------------------------------
Tranche 3 Repayment Date DM 4,000,000
being the date 36 months after the
Drawdown Date
- ---------------------------------------------------------------------------
Tranche 4 Repayment Date DM 10,500,000
being the date 48 months after the
Drawdown Date
- ---------------------------------------------------------------------------
Tranche 5 Repayment Date DM 10,500,000
being the date 60 months after the
Drawdown Date
- ---------------------------------------------------------------------------
Tranche 6 Repayment Date DM 10,500,000
being the date 72 months after the
Drawdown Date
- ---------------------------------------------------------------------------
Tranche 7 Repayment Date DM 10,500,000
being the Final Maturity Date
- ---------------------------------------------------------------------------
If the Facility has not been drawn in full by the Borrower, the Repayment will
be reduced pro rata.
The Repayment Amount for each Tranche shall be repaid together with all other
amounts (including interest) as may be due pursuant to the provisions of this
Agreement on the Final Maturity Date and which have not been paid by the
Borrower
<PAGE>
15
prior to the Final Maturity Date. Each Repayment Amount made under this
Agreement shall reduce each Lender's participation accordingly and may not be
reborrowed thereafter.
Art. 8
Prepayment and Cancellation
8.1 Voluntary Prepayment
The Borrower may, by giving not less than thirty (30) days prior notice to
the Facility Agent, prepay all Advances outstanding in whole or in part
(being DM 1,000,000 or any larger sum which is an integral multiple of DM
1,000,000) on the last day of an Interest Period in inverse order of
maturity;it being understood that if the Borrower prepays an Advance in
full or in part prior to the Repayment Date for such Tranche as set out in
Art. 7 the Borrower shall indemnify the Lenders for any refinancing damage
related to such prepayment, if any.
In addition to that, if:
(a) the Borrower is required to pay to a Lender any amount under
Art. 16 (Increased Costs); or
(b) the Borrower is required to pay to a Lender any additional amounts
under Art. 17 (Taxes);
then, without prejudice to the obligations of the Borrower under those
provisions and the provisions under Art. 12.4, the Borrower may, whilst
the circumstances continue, serve a notice of prepayment on that Lender
through the Facility Agent. On the date falling thirty (30) Business Days
after the date of service of the notice the Borrower shall prepay that
Lender's Share of the Advance provided that such prepayment is made
together with any amount payable by the Borrower under Art. 12.4 (iii).
8.2 Mandatory Prepayment
If, at any time while the Advance is still outstanding under the
Agreement, the Borrower after the date of this Agreement ceases to be a
majority-owned direct or indirect subsidiary of the Parent, the Borrower
shall prepay the outstanding Advance on the last day of the then current
Interest Period.
8.3 Miscellaneous provisions
(a) Any notice of prepayment under this Agreement is irrevocable. The
Facility Agent shall notify the Lenders promptly of receipt of any
such notice.
(b) All prepayments under this Agreement shall be made together with
accrued interest on the amount prepaid or repaid and all other
amounts due on such date (if any) owing by the Borrower to such
Lender.
(c) No prepayment or cancellation is permitted except in accordance with
the express terms of this Agreement.
<PAGE>
16
(d) No amount prepaid under this Agreement may subsequently be
reborrowed.
Art. 9
Interest
9.1 Interest Rate
Each Advance outstanding shall bear interest payable in arrears at the
Interest Rate which shall be expressed as an annual interest rate.
9.2 Due Dates
Save as otherwise provided herein, accrued interest for each drawing shall
be paid on the January 12, and July 12, of each calendar year until the
Final Repayment Date, the first due date to be July 12, 1998.
9.3 Bank Basis
Interest shall accrue from day to day and be calculated on the basis of
the actual number of days elapsed in the relevant Interest Period divided
by 360.
Art. 10
Interest Periods
10.1 Interest Periods
The period for which each Advance is outstanding shall be divided into
successive periods, each hereinafter referred to as an "Interest Period".
The Interest Periods in relation to each Advance shall be of six months,
and shall commence on the Drawdown Date and subject to Art. 10.2 shall end
on the Interest Payment Date of each Interest Period. Each subsequent
Interest Period shall commence on the last day (24:00) of the previous
Interest Period.
Notwithstanding the foregoing, if an Interest Period would end after a
Repayment Date, such Interest Period shall end on the Final Maturity Date.
10.2 Non-Business Day
In the event that an Interest Payment Date would fall on a day not being a
Business Day, then the following Business Day shall be the Interest
Payment Date and the Interest Period shall be extended accordingly, unless
the Interest Payment Date would therefore fall in the next calendar month,
in which case the Interest Payment Date shall be the immediately preceding
Business Day and the Interest Period shall be shortened accordingly.
Art. 11
[reserved]
<PAGE>
17
Art. 12
Default Interest and Indemnification
12.1 Default
In the event that any outstanding payments pursuant to this Agreement are
not made or are only partly made by their due dates, the Borrower shall in
respect of such outstanding payments and without further notice, be in
default with respect to such payments.
12.2 Default Interest Rate
If any sum due and payable by the Borrower hereunder is not paid on the
due date therefor, the unpaid sum shall bear interest payable in arrears
at the rate which shall be expressed as an annual rate and shall be the
sum of the Interest Rate applicable for that Tranche under which the
amounts have not been paid on their due dates and two per cent (2.0 %).
12.3 First Demand Payment
Any interest which shall have accrued under Art. 12.2 in respect of an
unpaid sum shall be due and payable and shall be paid by the Borrower at
the end of the period by reference to which it is calculated or on such
later dates as the Facility Agent may specify by written notice to the
Borrower.
All payments on damages shall be made by the Borrower without undue delay
upon demand of the Facility Agent.
12.4 Indemnity
The Borrower shall compensate the Lenders for any loss, damage, costs and
outlays (including losses of margin or losses resulting from refinancing
incurred by the Lenders in the provision or maintenance of the Advance for
the relevant Interest Periods) which have been incurred by the Lenders
because:
(i) the Borrower has failed to pay a sum due pursuant to this
Agreement on the due date; or
(ii) an Event of Default described in the provisions of Art. 20 has
occurred.
If the Borrower has made payments on a day which is not an Interest
Payment Date; or the drawdown of an Advance requested by the Borrower
cannot be made because the Borrower has failed to satisfy a condition
precedent or the Borrower refuses to accept the Advance; the Borrower
shall pay to each Lender through the Facility Agent the amount by which
(a) the interest which would have been payable on the amount by the
Borrower hereunder exceeds (b) the amount of interest which would have
been payable in respect of a deposit in Deutsche Marks and equal to the
amount placed by it with a prime bank in London for a period starting on
the third Business Day following the date of the proposed borrowing or of
such receipt, as the case may be, and ending on the last day of the
Interest Period thereof.
<PAGE>
18
Art. 13
Accounts
13.1 Lender's Accounts
Each of the Lenders shall in its books of account, in accordance with
common banking practice, maintain an account for the Borrower from which
the principal sum, the amount of interest and other payments owed by the
Borrower to such Lender pursuant to this Agreement can be determined.
13.2 Control Account
The Facility Agent shall in its books of account maintain a control
account from which can be determined;
(i) the sum total of the outstanding Advance and each Lender's Share
therein; and
(ii) the sum total of principal, interest and other payments owed to the
Lenders pursuant to this Agreement, as well as each Lender's Share
therein; and
(iii) the sum total of payments received from the Borrower and the Share
of each Lender therein.
Whenever an entry is made in the control account, the Facility Agent shall
prepare an account statement for the control account and shall provide
such statement to each Lender and the Borrower without undue delay.
13.3 Accounts as Evidence
For the purposes of judicial, arbitration or other proceedings in relation
to this Agreement the above account statements shall, in the absence of
manifest error, be conclusive and binding between the parties, unless the
Borrower provides proof of the opposite.
Art. 14
Payments
14.1 Funds, Place and Currency
All payments owed by the Borrower pursuant to this Agreement plus VAT, if
applicable, shall be made in Deutsche Marks in immediately available funds
and by no later than 2:00 p.m. (Munich time) on each due date to the
Account.
14.2 No Set-Off, Counterclaim or Retention
All payments to be made shall be made free and clear of Taxes (unless the
Borrower is compelled by law to make payment subject to Taxes), without
any deductions and to the exclusion of any set-off, counterclaim, right of
bailment, retention or lien, restriction or condition; unless such claims
to be set-off by the Borrower are undisputed or confirmed by a court
decision.
<PAGE>
19
14.3 Discharging Effect
The Borrower shall be released from its obligation to make any particular
payment only once the paid sum has been unconditionally credited to the
Account and only in so far as the amount paid is sufficient to satisfy the
Borrower's payment obligations on any date at which payment is due
pursuant to this Agreement.
14.4 Appropriation
In the event that the Borrower makes a payment which is insufficient to
satisfy all of its payment obligations on a date on which such payment is
due pursuant to this Agreement, the Facility Agent has the right in its
reasonable discretion to apply the received sum against such outstanding
claims of the Lenders as the Facility Agent may decide. Any contrary
instruction given by the Borrower shall have no effect.
14.5 Distribution
The Facility Agent shall, without prejudice to other provisions of this
Agreement, distribute without delay the appropriate share of principal,
interest and other payments owed pursuant to this Agreement to the
relevant individual Lender in the same proportions as their respective
participations in the Advance bear to the whole amount of the Advance, as
they are received by the Facility Agent.
Art. 15
Illegality
If any change in or introduction of any law, regulation or treaty, or any change
in the interpretation or application thereof (hereinafter referred to as "Legal
Changes"), shall make it unlawful for any Lender to make available or fund or
maintain its Lender's Commitment or its participation in any outstanding Advance
or to give effect to its obligations as contemplated hereby, the following
provisions shall apply:
15.1 Such Lender may terminate the totality of its Lender's Commitment and its
participation in the outstanding Advance by notice to the Borrower, such
notice to be presented to the Facility Agent who will transmit it to the
Borrower without undue delay, effective as from the date of which
performance becomes unlawful or contrary to any regulation or at the end
of the applicable Interest Periods, whichever is the earlier, such notice
stating exactly which contractual obligations became illegal, the date on
which such illegality will arise and which Legal Changes have given rise
to the illegality. The Facility Agent shall without undue delay upon
receipt of such notice of termination inform all other Lenders.
15.2 The Borrower shall repay or prepay (as the case may be) such Lender's
participation in the outstanding Advance plus accrued interest and any
other sums outstanding pursuant to this Agreement, at the end of the
applicable Interest Periods or, in the event termination is effective
pursuant to Art. 15.1 before the end of an Interest Period, at such
earlier date (unless the Borrower is notified of termination after such
earlier date in which case payment shall be
<PAGE>
20
made within three (3) Business Days of the Borrower's receipt of such
notice). Upon effective termination all obligations of the terminating
Lender pursuant to this Agreement shall end and the sum total of the Loan
Facility shall be reduced by the amount of the terminated Lender's
Commitment.
15.3 If any Lender (through the Facility Agent) gives notice to the Borrower
pursuant to Article 15.1 requiring prepayment, then, but without prejudice
to the obligations of the Borrower to effect such prepayment pursuant to
Article 15.2, the Borrower, the Facility Agent and such Lender shall
forthwith commence negotiations in good faith with a view to agreeing on
terms (which shall not in any way be prejudicial to such Lender ) for
making such Lender's participation in the Advances available from another
jurisdiction or for restructuring its participation in the Advances on a
basis which is not so unlawful, provided that neither the Facility Agent
nor such Lender shall be under any obligation to continue such
negotiations if terms have not been agreed within 30 days after the date
of such Lender's notice.
Art. 16
Increased Costs
If, as a result of Legal Changes (including, for the purposes of this Art. 16,
rules, orders or directives in relation to required reserves, special deposits,
liquidity or capital adequacy requirements, any requirement relating to the
manner in which the Lender is required to allocate financial resources to
provide for the making of or in relation to the Advance or any other form of
banking or monetary controls (whether or not having the force of law)), a Lender
at any time in the future in relation to its Lender's Commitment or its
participation in the outstanding Advance made to the Borrower,
(a) suffers an increase of the cost of making or funding the Advance or of
maintaining its Lender's Commitment hereunder; or
(b) suffers a reduction of any amount payable to it or to the Facility Agent
or of the effective return before taxes on income; or
(c) makes any payment, either directly or through the Facility Agent, or
forgoes any interest or other return on or calculated by reference to any
amount received or receivable by it from the Borrower hereunder;
(collectively referred to as "Increased Costs") then, without prejudice
to the provisions of Art. 17, the following provisions shall apply:
16.1 Such Lender shall have the right, upon giving notice to the Borrower, such
notice to be presented to the Facility Agent who will transmit it to the
Borrower without undue delay, to request payment from the Borrower of a
sum compensating it for its Increased Costs. Such notice shall state the
reasonably determined amount of such Increased Costs, the date upon which
such Increased Costs were or began to be incurred and the Legal Changes
which led to the Increased Costs.
16.2 The Borrower shall no more than ten days after receiving the notice
referred to in Art. 16.1 pay all of the Lender's substantiated Increased
Costs incurred prior to receipt of the said notice.
<PAGE>
21
16.3 The Borrower is entitled to defend any demand for Increased Costs by
showing that these Increased Costs as determined by the Facility Agent
were falsely calculated and/or do not reflect the Legal Changes.
Art. 17
Tax Gross-up
In the event that the Borrower or the Facility Agent is obliged by law to
make any deduction or withholding in respect of Taxes from any payment
under this Agreement for the account of the Arranger, the Facility Agent
or any Lender, the Borrower shall:
(i) pay any such Taxes by their due date and, no less than thirty (30)
days after such payment provide to the Facility Agent the original
or a certified copy of the receipt of the relevant authority; and
(ii) indemnify and keep harmless the Lenders in relation to all such
Taxes; and
(iii) make such additional payments to the Lenders as may be necessary in
order that the net amount remaining after the said deduction or
retention, corresponds with the sum due to be paid.
"Taxes" for the purpose of this paragraph shall, for the avoidance of
doubt, include all taxes levied by a German authority whether on the basis
of income or otherwise.
Art. 18
Representations and Warranties
The Borrower hereby represents and warrants to the Facility Agent, the Arranger
and each of the Lenders that on the date of this Agreement:
(a) Status
The Borrower is a limited liability company under the laws of the Federal
Republic of Germany, duly organised and validly existing under the laws of
the Federal Republic of Germany, has the capacity to sue and be sued in
its own name and has the power to own its property and assets and carry on
its business as it is now being conducted.
(b) Powers and Authority
The Borrower has the authority to enter into and execute this Agreement,
to accept the Loan Facility and to perform its obligations pursuant to
this Agreement, and in this regard all necessary decisions and resolutions
of the Borrower and its shareholders have been taken.
(c) Legal Validity
The obligations of the Borrower created in this Agreement are legally
valid and binding obligations of the Borrower enforceable in accordance
with the terms and conditions of this Agreement; and this Agreement is in
proper form for
<PAGE>
22
enforcement in the courts of the Federal Republic of Germany. The choice
of the law of the Federal Republic of Germany as the law governing this
Agreement constitutes a valid choice of law under the law of the Federal
Republic of Germany and the courts of the Federal Republic of Germany will
observe and give effect to such choice of law.
(d) Non-Conflict
The entry into and the execution and performance of this Agreement does
not conflict, or result in a breach of any terms of any agreement to which
the Borrower is a party or is subject or by which it or any of its
property is bound, and does not violate any law, directive, order, decree,
arbitral award, judgement, or any document to which the Borrower is a
party.
(e) No Default
No event has occurred which constitutes an event of default under or in
respect of any agreement or document to which the Borrower is a party or
by which the Borrower may be bound (including inter alia, this Agreement)
and no event has occurred which, with the giving of notice or lapse of
time might constitute an event of default under or in respect of any such
agreement or document, and all of which events might have a material
adverse effect on the ability of the Borrower to perform or discharge its
obligations.
(f) Consents
Under the laws of the Federal Republic of Germany, no authorisations,
approvals, consents, licences, exemptions, filings, registrations,
notarisations and other matters, official or otherwise, are required by or
advisable for the Borrower in connection with the entry into, performance,
validity and enforceability of this Agreement, other than a shareholder`s
resolution pursuant to the German "law for GmbH".
(g) Financial Statements
The Original Financial Statements are true and convey a fair picture of
the financial position of the Borrower or, as the case may be, the members
of the Group as at that date. The Original Financial Statements were
prepared in accordance with all applicable accounting and auditing
principles, and these principles were applied in the same form and manner
as in previous years, unless otherwise stated in the Original Financial
Statements; without limitation to the foregoing it being understood that
not all Original Financial Statements were prepared by the Borrower or on
its behalf.
(h) Litigation
No arbitration, litigation or other proceedings against the Borrower or
any other member of the Group, the result of which, taken as a whole,
could be substantially detrimental to the financial condition or the
business activities of the Borrower, are to the best of the Borrower's
knowledge, currently in progress or threatened against the Borrower and no
liquidation or similar proceedings are, to the best of the Borrower's
knowledge, currently in progress or threatened against the Borrower.
<PAGE>
23
(i) No Material Adverse Change
The financial condition of the Borrower, the Parent or the Group has not
deteriorated in comparison with the Original Financial Statements in a
manner which has or will have a material adverse effect on the ability of
the Borrower or any member of the Group to perform its obligations
pursuant to this Agreement.
(j) No Encumbrances
Unless permitted by this Agreement, and with the exception of Permitted
Encumbrances, no Encumbrance of any asset or future asset, or the present
or future revenues of the Borrower or any member of the Group exists and
the execution and performance of this Agreement will not result in the
creation of such Encumbrances.
(k) Pari Passu Ranking
The obligations of the Borrower hereunder rank at least pari passu with
all its other present and future obligations; save as with obligations
having priority by law.
(l) Tax Liabilities
The Borrower has complied on a best effort basis with all Taxation laws in
all jurisdictions in which it is subject to Taxation and has paid all
Taxes due and payable by it; no material claims are being asserted against
it with respect to Taxes, all amounts payable by the Borrower hereunder
may be made free and clear of and without deduction for or on account of
any Taxes.
(m) No Winding-up
The Borrower or any member of the Group have not taken any corporate
action nor have any other steps been taken or legal proceedings been
started or threatened against them for their winding-up, dissolution,
administration or re-organisation or for the appointment of a receiver,
administrator, administrative receiver, trustee, liquidator or similar
officer of them or of any or all of their assets or revenues.
(n) Group Structure
The Group Structure is true, complete and accurate.
(o) Repetition
Each of the representations and warranties of this Art. 18 other than the
representations contained in Art. 18 (a), (h), (i), and (n) will be
correct and complied with so long as any sum remains to be lent or remains
payable by the Borrower under this Agreement as if repeated by the
Borrower on the first day of each Interest Period then by reference to the
then existing circumstances.
<PAGE>
24
Art. 19
Covenants
The Borrower hereby covenants in relation to each Lender, and insofar as
applicable, covenants to bring about that:
19.1 Financial information
(a) So long as any amount available under this Agreement is outstanding
or the Loan Facility or any part thereof remains outstanding or any
other sum is payable pursuant to this Agreement, the Borrower will
provide to the Facility Agent in sufficient copies for each of the
Lenders the following statements, prepared according to generally
accepted accounting principles:
(i) as soon as available, but in any event no later than one
hundred and five (105) days after the end of each financial
year, the audited fiscal year-end and financial statements,
including the balance sheet, the profit and loss account and
the certified auditor's report of the Parent, the Group and
any individual member of the Group, and in the event that the
above mentioned documents are not prepared within a period of
one hundred and five (105) days after the end of each
financial year, no later than one hundred and five (105) days
after the end of each financial year, the unaudited fiscal
year-end and financial statements, including the balance sheet
and the profit and loss account of the Parent, the Group and
any individual member of the Group and no later than one
hundred eighty (180) days after the end of each financial
year, the audited fiscal year-end and financial statements,
including the balance sheet and the profit and loss account
and the certified auditor's report of the Parent, the Group
and any individual member of the Group;
(ii) as soon as available, but in any event no later than forty
five (45) days after the end of each calendar quarter,
quarterly management financial statements of the Group and any
individual member of the Group including profit and loss
accounts as well as cash flow calculations together with
comparative information in relation to the management
financial statements previously delivered by the Borrower in a
form agreed with the Facility Agent (Quartalsberichte); and
(iii) as soon as available, but in any event on the date of the
signing of this Agreement, a five years budget on a roll-over
basis including capital expenditures and cash flow
projections, profit and loss accounts and balance sheets of
the Group and any individual member of the Group in a form
agreed with the Facility Agent, and for each following five
year period during the term of this
<PAGE>
25
Agreement the above mentioned statements shall be prepared
until January 15 of the respective calendar year.
The aforementioned financial statements, balance sheets and profit
and loss accounts will be prepared in accordance with the same
principles as the Original Financial Statements or, in the case of a
divergence therefrom, will be accompanied by a statement explaining
each changed accounting principle and its effects. All financial
information shall be presented in their original language, being
German or English.
(b) Forthwith upon receiving a request to that effect, the Borrower will
provide to the Facility Agent such additional financial information
or other information relevant to this Agreement as the Facility
Agent or a Lender through the Facility Agent may from time to time
reasonably request and the Borrower may provide with internal staff
and which presentation will not disturb its ordinary course of
business.
19.2 Other Information
So long as any amount available under this Agreement is outstanding or the
Loan Facility or any part thereof remains outstanding or any other sum is
payable pursuant to this Agreement, the Borrower and/or any other member
of the Group will provide to the Facility Agent in sufficient copies for
each of the Lenders:
(a) promptly, all notices or other documents in relation to the
financial condition or business of the Borrower and/or any other
member of the Group published;
(b) details of any material litigation, arbitration or administrative
proceedings which affect the Borrower and/or any member of the Group
as soon as the same are instituted or, to the knowledge of the
Borrower, threatened.
19.3 Financial Covenants
So long as any amount available under this Agreement is outstanding or the
Loan Facility or any part thereof remains outstanding or any other sum is
payable pursuant to this Agreement the consolidated financial conditions
of the Group, as evidenced by the financial statements prepared on the
same basis as was used for the preparation of the Original Financial
Statements, shall be such that
(i) on June 30 as well as on December 30 in each calendar year, the
Interest Cover Ratio for the preceding twelve months is not less
than 2.5, starting on December 30, 1998 ;
(ii) on June 30 and on December 30 in each calendar year, the Equity
Ratio is not less than 20 %, starting on December 30, 1998; and
(iii) on June 30 and on December 30 in each calendar year, the Leverage
Ratio is not more than 5, starting on December 30, 1998.
In the event that the Borrower will introduce new accounting standards, or
if the Lenders agree to a merger or sale of Group companies as stated in
Art. 19.4,
<PAGE>
26
the Facility Agent will consider with the Lenders whether the Lenders are
prepared to agree to new definitions for the financial covenants and the
ratios as set out in Art. 19.3 above. Furthermore, the Majority Lenders
will, upon request of the Borrower, decide whether they are prepared to
waive any other covenant as set out in Art. 19.
19.4 Further Undertakings
(a) Pari Passu Ranking
The Borrower undertakes for so long as any amount available under this
Agreement is outstanding or the Loan Facility or any part thereof remains
outstanding or any other sum is payable pursuant to this Agreement that
its obligations pursuant to this Agreement will rank at least pari passu
with all other present and future obligations; save for any other
obligations having priority by law.
(b) Negative pledge
The Borrower or any member of the Group will not create any Encumbrance,
except for Permitted Encumbrances, on or over all or any of its present or
future assets or revenues, for the purpose of granting a security in
respect of its Indebtedness, and it will furthermore procure that any
member of the Group will not create any encumbrances which, if created by
the Borrower, would fall under the definition of Encumbrance as stated in
Art. 1.13
(c) Notification of Default
The Facility Agent shall without undue delay be notified of the occurrence
of any Event of Default as described in Art. 20.
(d) Maintenance of Legal Validity
The Borrower shall obtain, comply with the terms of and do all that is
necessary to maintain in full force and effect all authorisations,
approvals, licences and consents required in or by the laws and
regulations of the Federal Republic of Germany to enable the Borrower
lawfully to enter into and perform its obligations under this Agreement
and to ensure the legality, validity, enforceability or admissibility in
evidence in the Federal Republic of Germany of this Agreement.
(e) No Merger and Sale of Group Companies
The Borrower or any member of the Group will not merge or consolidate with
any other company or Person, the result of which would (in the opinion of
the Majority Lenders) materially adversely affect the Borrower. The
Borrower will furthermore not sell or otherwise dispose of any of its
material subsidiaries which would materially adversely affect the
Borrower's ability to perform its obligations hereunder. It is expressly
agreed that the Borrower shall be authorised to convert Steinbeis Gessner
GmbH into a partnership ("Offene Handelsgesellschaft") or a limited
partnership ("Kommanditgesellschaft"), as the
<PAGE>
27
case may be, as well as to possibly merge Steinbeis Gessner
Unterstutzungskasse GmbH (i.G.) with a member of the Group.
(f) Limitation of Expenditure ("Investitionsausgaben")
The Borrower or any member of the Group will not make any payments on
account of capital expenditure which are not part of the capital
expenditure projection or other statements prepared in accordance with
Art. 19.1 (a) (iii) of this Agreement and which exceed in total the amount
of DM 1,000,000 without informing the Facility Agent prior to such
expenditure.
(g) Information on Permitted Encumbrances
The Borrower or any member of the Group shall ensure that the Facility
Agent shall be informed on any such Permitted Encumbrances as soon as they
may be granted in the future in favour of any third party creditor.
(h) Payments within the Group
The Borrower shall endeavour, on a best effort basis, that any excess cash
flow by any of its subsidiaries being part of the Group is not held within
this company, but is transferred to the Borrower if and when appropriate
with respect to the obligations of the Borrower under this Agreement.
(i) Subscription and Use of Equity
The Borrower undertakes to ensure that in the event that the purchase
price payable by it pursuant to Sect. 3 of the Purchase Agreement shall
exceed the aggregate of the amounts of USD 40,000,000 (in words: United
States Dollar forty million) and of DM 5,315,000 (in words: Deutsche Mark
five million three hundred fifteen thousand), such exceeding amount of the
purchase price payable by the Borrower will be funded from equity
(including subordinated shareholder loans) Furthermore, the Borrower
undertakes to ensure that if pursuant to Sect. 3 of the Purchase
Agreement, the final purchase price will be less than the amount as set
out in sentence 1 of this sub-section, the part of the purchase price
repaid by the seller of Steinbeiss Gessner GmbH to the Borrower, if any,
shall be contributed as equity of the Borrower or shareholder loans (being
accompanied by a subordination and loan retention agreement addressed to
the Lenders in a form acceptable to the Facility Agent).
(j) Limitation of Indebtedness
The Borrower nor any other member of the Group undertakes not to create
any other Indebtedness with any bank or other financial institution in the
amount exceeding DM 10,000,000 without the prior written consent of the
Facility Agent.
19.5 Duration
The undertakings in this Art. 19 shall remain in force from and after the
date hereof and so long as any amount is or may be outstanding hereunder.
<PAGE>
28
Art. 20
Events of Default
20.1 Events of Default
Each of the events set out below is an Event of Default (whether or not
caused by any reason whatsoever within the control of the Borrower or of
any other Person):
(a) the Borrower fails to pay any amount payable by it hereunder on the
due date thereof and this failure is not remedied within three (3)
Business Days after written notification by the Facility Agent; or
(b) any representation, warranty, covenant as set out in Art. 19.4 or
statement made in, or in connection with, this Agreement or in any
accounts, certificate, statement or opinion delivered by or on
behalf of the Borrower hereunder or in connection herewith is
incorrect or untrue in any material respect when made or is not
complied with and such default is incapable of remedy, or if capable
of remedy, is not remedied within twenty (20) Business Days after
receipt of written notice from the Facility Agent requesting the
same and has a material adverse effect on the Borrower's payment
obligations under this Agreement; or
(c) the Borrower fails to comply with any covenant (as set out in Art.
19.1 to Art. 19.3) or any other provision of this Agreement and this
failure, if capable of remedy, is not remedied within thirty (30)
Business Days (respectively ninety (90) Business Days for the
covenants as set out in Art. 19.3) after receipt of written notice
from the Facility Agent; or
(d) (i) any other Indebtedness of the Borrower or any other member
of the Group of an aggregate amount of not more than DM
1,000,000 (or its equivalent in any other currency) becomes
prematurely due and payable as a result of a default
thereunder, and is not paid within a period of five (5)
Business Days after its respective due date; or
(ii) any event of default (or event which with giving of notice or
lapse of time may constitute such an event of default) occurs
under any contract or document relating to any such
Indebtedness; or
(iii) any Encumbrance over any assets of the Borrower or any other
member of the Group becomes enforceable which has a material
adverse effect on the ability of the Borrower to perform its
payment obligations under this Agreement; or
(iv) there occurs any material adverse change in the financial
condition of the Borrower or the Group which leads to the
Borrower's incapability to perform its payment obligations
under this Agreement, provided however that the termination
right pursuant to this Art. 20.1.d)(iv) in connection with
Art. 20.2. below may be exercised only if so confirmed by the
Majority Lenders; or
(e) any order (provisional or final) is made by court resolution passed
for the general suspension of payments or dissolution, termination
of existence,
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29
liquidation, winding-up, bankruptcy, insolvency, judicial management
or administration of the Borrower; or
(f) a moratorium in respect of all or any debts of the Borrower
exceeding the amount of DM 1,000,000, or a composition or an
arrangement with creditors of the Borrower or any similar proceeding
or arrangement by which the assets of the Borrower are submitted to
the control of its creditors is ordered or declared; or
(g) a liquidator, trustee, administrator, receiver, arranger or similar
officer is appointed in respect of the Borrower or in respect of all
or a substantial part of its assets; or
(h) the Borrower becomes or is declared insolvent or is unable, or
admits its general inability to pay its debts as they fall due or
becomes insolvent within the terms of any applicable law; or
(i) a distress, execution, attachment or other process affects any asset
of the Borrower which has a material adverse effect on the ability
of the Borrower to perform its obligations under this Agreement; or
(j) the Borrower or any other member of the Group ceases or threatens to
cease, to carry on its present business or disposes, or threatens to
dispose, of a substantial part of its business, property or assets
or a substantial part of its business, property or assets is seized,
nationalised, expropriated or compulsorily acquired, other than
those measures as described in Art. 19.4(e) last sentence; or
(k) any authorisation, approval, consent, licence, exemption, filing,
registration or notarisation or other requirement necessary to
enable the Borrower to comply with any of its material obligations
hereunder, if any, is modified, revoked or withheld or does not
remain in full force and effect; or
(l) at any time it is unlawful for the Borrower to perform any of its
material obligations hereunder; or
(m) at any time any dividend payments (excluding dividend payments which
are used to increase the equity of the Borrower
["Schutt-aus-hol-zuruck-Verfahren"]) or interest payments on
shareholder loans are made by the Borrower which are unreasonable in
respect of the cash flow situation and the earning results of the
Borrower, and which would have a material adverse effect on the
Borrower's ability to perform its obligations under this Agreement;
or
(n) the Borrower ceases to be a majority-owned subsidiary of the Parent.
(o) the Share Pledge Agreement as attached in Annex 4 does not become
legally valid and effective on the Closing Date.
20.2 Acceleration
In the case of any such Event of Default, and at any time thereafter if
any such event shall then be continuing, but not later than thirty (30)
days after the
<PAGE>
30
Facility Agent becomes aware of the occurrence of such an event, the
Facility Agent may, and shall, if so directed by the Majority Lenders, by
written notice to the Borrower:
(a) declare that the obligations of the Lenders hereunder to allow the
Borrower to make an Advance and the Lenders' Commitments shall be
cancelled forthwith whereupon the same shall be so cancelled
forthwith; and/or
(b) declare all outstanding amounts under this Agreement immediately due
and payable whereupon the same shall become immediately due and
payable together with all interest accrued thereon and all other
amounts payable hereunder.
Art. 21
Rights and Obligations of Facility Agent
21.1 Appointment
Bayerische Vereinsbank Aktiengesellschaft is hereby appointed Facility
Agent. Each Lender irrevocably authorises the Facility Agent on such
Lender's behalf to perform such duties and to exercise such rights and
powers under this Agreement as are specifically delegated to the Facility
Agent by the terms of this Agreement, together with such rights and powers
as are reasonably incidental thereto. The Facility Agent, however, must
not commence any legal action or proceedings on behalf of any Lender
without such Lender's prior written approval. The Facility Agent shall
have only those duties and powers which are expressly specified in this
Agreement. The Facility Agent's duties hereunder are solely of a
mechanical and administrative nature.
21.2 Majority Lenders' Directions
In the exercise of any right or power and as to any matter not expressly
provided for by this Agreement, the Facility Agent may act or refrain from
acting in accordance with the instructions of the Majority Lenders and
shall be fully protected in so doing. In the absence of any such
instructions, the Facility Agent may act or refrain from acting as it
shall deem fit. Any such instructions shall be binding on all the Lenders.
21.3 Relationship
(a) The relationship between the Facility Agent and each Lender is that
of principal and Facility Agent only. Nothing herein shall
constitute the Facility Agent a trustee or fiduciary for any Lender,
the Borrower or any other Person.
(b) The Facility Agent shall not in any respect be Facility Agent of the
Borrower by virtue of this Agreement.
(c) The Facility Agent shall not be liable to the Borrower for any
breach by the Arranger or by any Lender of this Agreement or be
liable to any Lender or the Arranger for any breach by the Borrower
hereof.
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31
21.4 Delegation
The Facility Agent may act hereunder through its officers, employees or
agents.
21.5 Documentation
Neither the Facility Agent nor the Arranger nor any of their officers,
employees or agents shall be responsible to any Lender or to each other
for
(a) the valid execution, genuineness, validity, enforceability or
sufficiency of this Agreement or any other document in connection
herewith, or
(b) the collectability of amounts payable hereunder, or
(c) the accuracy of any statements (whether written or oral) made in or
in connection with this Agreement or any other document in
connection herewith.
21.6 Duties
The Facility Agent shall not be required to ascertain or inquire as to the
performance or observance by the Borrower of the terms of this Agreement
or any other document in connection herewith. The Facility Agent shall not
be deemed to have knowledge of the occurrence of any Event of Default (or
event which with lapse of time, notice, determination of materiality or
other condition may constitute such an Event of Default) other than in the
case of a payment default, of which the Facility Agent gained actual
knowledge unless the Facility Agent has received written notice from a
party hereto describing such Event of Default or event and stating that
such notice is a "Notice of Default" or unless the Facility Agent does not
receive a payment from the Borrower hereunder on its due date. If the
Facility Agent receives such a Notice of Default, the Facility Agent shall
promptly give notice thereof to the Lenders.
21.7 Exoneration
Neither the Facility Agent nor any of its officers, employees or agents
shall be liable to any Lender for any action taken or omitted under or in
connection with this Agreement unless caused by its or their gross
negligence or wilful misconduct.
21.8 Reliance
(a) The Facility Agent may rely on any communication or document
believed by it to be genuine and correct.
(b) The Facility Agent may engage, pay for and rely on legal or other
professional advisers selected by it and shall be protected in so
relying.
21.9 Credit Approval
Each of the Lenders severally represents and warrants to the Facility
Agent and the Arranger that it has made its own independent investigation
and assessment of the financial condition and affairs of the Borrower and
its related entities in connection with its participation in this
Agreement and has not relied exclusively
<PAGE>
32
on any information provided to such Lender by the Facility Agent or the
Arranger in connection herewith. Each Lender represents, warrants and
undertakes to the Facility Agent and the Arranger that it shall continue
to make its own independent appraisal of the creditworthiness of the
Borrower and its related entities while the Advance are outstanding or its
Lender's Commitment is in force.
21.10 Information
(a) The Facility Agent shall furnish each Lender with a copy of any
documents received by it under Art. 19.1 and Art. 19.2 (but the
Facility Agent shall not be obliged to review or check the accuracy
or completeness thereof). If requested by a Lender, the Facility
Agent shall furnish to such Lender a copy of all documents received
by it under Art. 4.
(b) Neither the Facility Agent nor the Arranger shall have any duty
(i) either initially or on a continuing basis to provide any
Lender with any credit or other information with respect to
the financial condition or affairs of the Borrower or any
related entities whether coming into its possession or that of
any related entities of the Facility Agent or the Arranger
before the entry into this Agreement or at any time
thereafter;
(ii) unless specifically requested to do so by a Lender, to request
any certificates or other documents from the Borrower
hereunder.
(c) The Facility Agent need not disclose any information relating to the
Borrower if such disclosure would or might in the opinion of the
Facility Agent constitute a breach of any law or any duty of secrecy
or confidence.
21.11 Facility Agent and Arranger Individually
(a) Each of the Facility Agent and the Arranger shall have the same
rights and powers hereunder as any other Lender and may exercise the
same as though it were not the Facility Agent or the Arranger.
(b) The Facility Agent and the Arranger may accept deposits from, lend
money to and generally engage in any kind of banking, trust,
advisory or other business whatsoever with the Borrower and its
related entities and accept and retain any fees payable by the
Borrower or any of its related entities for its own account in
connection therewith without liability to account therefore to any
Lender.
21.12 Indemnity
Each Lender agrees to indemnify the Facility Agent on demand (to the
extent not reimbursed by the Borrower under this Agreement) for any and
all liabilities, losses, damages, penalties, actions, judgements, costs,
expenses or disbursements of any kind whatsoever which may be imposed on,
incurred by or asserted against the Facility Agent in any way relating to
or arising out of its acting as the Facility Agent under this Agreement or
performing its duties
<PAGE>
33
hereunder or any action taken or omitted by the Facility Agent hereunder
(including, without limitation, the charges and expenses referred to in
Art. 23 and all stamp taxes on or in connection with this Agreement to the
extent not reimbursed by the Borrower). Such indemnification by each
Lender shall be pro rata to its Lender's Commitment or (as the case may
be) participation in the Advance. Notwithstanding the foregoing, no Lender
shall be liable for any portion of the foregoing resulting from the
Facility Agent's gross negligence or wilful misconduct.
21.13 Legal Restrictions
The Facility Agent may refrain from doing anything which would or might in
its opinion (i) be contrary to the law of any jurisdiction or any official
directive or (ii) render it liable to any Person or (iii) violate its
banker's duty of secrecy, and may do anything which in its opinion is
necessary to comply with any such law or directive.
21.14 Resignation and Removal
The Facility Agent may, after prior consultation with the Borrower and
subject to the Borrower's consent, resign by giving written notice thereof
to the Lenders and the Borrower. In addition, the Majority Lenders may, by
giving at least 30 days' notice to the Facility Agent, the other Lenders
and the Borrower, as appropriate, remove the Facility Agent. In either
such event the Majority Lenders may appoint a successor to such Facility
Agent. If the Majority Lenders have not, within 60 days after such notice
of resignation or removal, appointed a successor Facility Agent which
shall have accepted such appointment, the retiring or removed Facility
Agent shall have the right to appoint a successor Facility Agent. The
resignation or removal of the retiring or removed Facility Agent and the
appointment of any successor Facility Agent shall both become effective
upon the successor notifying all the parties thereto in writing that it
accepts such appointment, whereupon the successor Facility Agent shall
succeed to the position of the retiring or removed Facility Agent and the
term "Facility Agent" herein shall mean such successor Facility Agent.
This Art. 21.14 shall continue to benefit a retiring or removed Facility
Agent in respect of any action taken or omitted by it hereunder while it
was Facility Agent.
21.15 Recovery of Payments
Unless the Facility Agent shall have received written notice from a Lender
or the Borrower not less than two Business Days prior to the date upon
which such Lender or the Borrower (the "party liable") is to pay an amount
to the Facility Agent for transfer to the Borrower or any Lender
respectively (the "payee") that the party liable does not intend to make
that amount available to the Facility Agent, the Facility Agent may assume
that the party liable has paid such amount to the Facility Agent on the
due date in accordance herewith. In reliance upon such assumption, the
Facility Agent may (but shall not be obliged to) make available a
corresponding sum to the payee(s). In the event that such payment is not
made to the Facility Agent, the payee(s) shall forthwith on demand repay
such sum to the Facility Agent together with interest on such amount until
its repayment at a rate determined by the Facility Agent reflecting its
cost of funds. The provisions of this Art. 21.15 are without prejudice to
any rights the Facility Agent and the payee may have against the party
liable.
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34
21.16 Assignments
The Facility Agent may treat each Lender as a party as entitled to payment
hereunder until it has received written notice from the Lender unless
concerned to the contrary.
21.17 Exemption from Art. 181 German Civil Code
The Facility Agent is hereby granted exemption from the restriction of
Art. 181 of the German Civil Code or any similar restriction of the
applicable laws of any other country.
21.18 Confidentiality
In acting as the Facility Agent for the Lenders, the Facility Agent's
agency division shall be treated as a separate entity from any other of
its divisions or departments, and, notwithstanding the foregoing
provisions of this Art. 21, in the event that the Facility Agent should
act for the Borrower in any capacity in relation to any matter other than
those directly or indirectly related to its capacity as Facility Agent for
the Lenders hereunder, then any information given by the Borrower to the
Facility Agent in such other capacity may be treated as confidential by
the Facility Agent.
Art. 22
Fees
22.1 Commitment Fee
The Borrower shall pay to the Facility Agent for distribution to the
Lenders a Commitment Fee of 0.25 % p.a. on the undisbursed amount of the
Facility from the signing date of this Agreement until the end of the
Availability Period. The Commitment Fee, if any, is payable within five
Business Days after the end of the Availability Period.
22.2 Underwriting Fee
The Borrower shall pay to the Arranger for distribution to the Lenders an
Underwriting Fee in the amount of DM 270,000 payable within five (5)
Business Days after the signing of this Agreement, but in any event not
prior to January 1, 1998.
22.3 Arrangement Fee
The Borrower shall pay to the Arranger for its own account an Arrangement
Fee in an amount to be agreed upon in a side letter of even date payable
within five (5) Business Days after the signing of this Agreement, but in
any event not prior to January 1, 1998.
22.4 VAT
Any fee referred to in this Art. 22 (Fees) is exclusive of any value added
tax or any other Tax which might be chargeable in connection with that
fee. If any
<PAGE>
35
value added tax or other Tax is so chargeable, it shall be paid by the
Borrower at the same time as it pays the relevant fee.
Art. 23
Expenses
23.1 The Borrower shall pay to Vereinsbank in its capacity as Facility Agent
such amount in reimbursement of all costs, charges and expenses incurred
by it in or in connection with the execution of the Pledge Agreement
(including VAT thereon and including, but not limited to, the fees and
expenses of a notary public and travel expenses, if any; "Kosten der
Sicherheitenbestellung", but excluding any legal fees and expenses for
legal advisers). Such amount is payable within five (5) Business Days
after the date hereof.
23.2 The Borrower shall reimburse Vereinsbank in its capacity as Facility Agent
and Arranger and the Lenders for the reasonable charges and expenses
(including value added tax or any similar tax thereon and including the
fees and expenses of legal advisers) incurred by them in connection with
the enforcement of any rights under this Agreement and the Pledge
Agreement.
Art. 24
Stamp Duties
The Borrower shall pay and forthwith on demand indemnify each of the Facility
Agent, the Arranger and the Lenders against any liability it incurs in respect
of any stamp, registration and similar tax which is or becomes payable in
connection with the entry into, performance or enforcement of this Agreement.
Art. 25
Waivers; Remedies Cumulative
No failure to exercise and no delay in exercising on the part of the Facility
Agent or any Lender, any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. No waiver by the Facility Agent, the Arranger
or any Lender shall be effective unless it is in writing. The rights and
remedies of each of the Facility Agent, the Arranger and the Lenders herein
provided are cumulative and not exclusive of any rights or remedies provided by
law.
Art. 26
Notices
26.1 Any correspondence, reports, announcements, consultations, documentation
and communication between the parties to this Agreement shall be in the
German, or in the English language and shall be in writing, by mail, or by
telefax; the latter case requiring confirmation by mail.
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36
26.2 Without prejudice to any future change of address, all correspondence from
the Borrower to the Lenders shall be sent to the Facility Agent at the
following address:
Bayerische Vereinsbank Aktiengesellschaft
Am Tucherpark 1/VTW 1
80536 Munchen
Attention: Mr. Rainer Heuschneider/Dr. A. Mayer
Fax: +49-89-37825278
All correspondence from the Lenders or the Facility Agent to the Borrower
shall be sent to the following address:
zetaphoenicis Beteiligungs GmbH
c/o Steinbeis Gessner GmbH
Weidacher Stra(beta)e 30
83620 Feldkirchen-Westerham
Attention: Dr. Walter Haegler
Fax: +49-8062-703461 (with copy to Mr. Bruce Moore, Fax:
+001-802-2575900)
26.3 Without prejudice to any future change of address or account, all
correspondence from the Facility Agent to the Lenders shall be sent and
all payments from the Facility Agent to the Lenders shall be made to the
addresses and accounts as transferred to the Facility Agent by each
Lender.
Art. 27
Assignments, Transfer, Substitution
27.1 Successors
This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Arranger, the Facility Agent and their
respective substitutes, successors and assignees.
27.2 No Assignments by the Borrower
The Borrower may not assign or transfer all or any of its rights, benefits
and obligations hereunder.
27.3 Assignments by the Lenders
At its own cost any Lender may, prior to a written consent by the
Borrower, such consent not to be unreasonably withheld, at any time assign
and transfer all or any part of its rights, benefits and obligations (to
effect a "Vertragsubernahme") hereunder, provided that an amount of
principal and the amount of interest accrued thereon may not be assigned
or transferred separately.
<PAGE>
37
Unless and until an assignee has agreed with the Facility Agent and the
Lenders in writing that it shall be under the same obligations toward each
of them as it would have been under if it had been a party hereto, neither
the Facility Agent nor any Lender shall be obliged to recognise such
assignee as having the rights against it which such assignee would have
had if it had been a party hereto. For the purposes of this Art. 27.3,
each Lender hereby authorises the Facility Agent to execute on its behalf
any agreement with any assignee pursuant to which such assignee agrees
that it shall be under the same obligations towards each of the Lenders as
it would have been had it been a party hereto.
For each assignment effected pursuant to the above provisions, the
Facility Agent shall receive an assignment registration fee in the amount
of DM 1,000 from the respective assignee, failing whom from the assigning
Lender, which shall become due and payable five Business Days after the
date of the agreement referred to in Art.
27.3 above.
27.4 Change of Lending Office
Each Lender may at any time and at its expense change its lending office,
but such Lender shall give the Facility Agent prior written notice thereof
and until receipt of such notice the Facility Agent may assume that no
such change has occurred.
27.5 Disclosure
Each Lender may disclose to any proposed assignee, transferee or
sub-participant or any proposed substitute therefore, any information
about this Agreement and any information in the possession of such Lender
relating to the Borrower.
27.6 Syndication
The Borrower acknowledges that primary syndication of the Facility may
take place and undertakes to assist and co-operate with the Facility Agent
and the Arranger in syndication by, inter alia, expediting reasonable site
visits of persons who have been invited by the Arranger to participate in
the Facility ("Invitees") and by participating in a reasonable number of
presentations to Invitees.
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38
Art. 28
Currency Indemnity
28.1 Payment made by the Borrower to the Lenders on the basis of any judgement
in a currency (hereinafter referred to as the "Judgement Currency") other
than Deutsche Marks shall only discharge the Borrower's obligation to the
extent of the amount in Deutsche Marks that the Lenders, immediately upon
receipt of such payment, would be able to purchase with the amount so
received on a recognised foreign exchange market. In the event that such
amount in the Judgement Currency is less than the amount due in Deutsche
Marks pursuant to the provisions of this Agreement, then the Borrower
shall be liable to pay the difference; such obligation of the Borrower
being a separate and independent obligation, forming the basis of a
separate cause of action.
28.2 The Borrower waives any rights it may have in any jurisdiction to pay any
amount hereunder in a currency other than that in which it is expressed to
be payable hereunder.
Art. 29
Pro Rata Sharing
29.1 Except for payments to a Lender from the Facility Agent which were
received by the Facility Agent for the account of such Lender in
accordance with this Agreement, if a Lender shall at any time receive
satisfaction by way of payment or foreclosure of any collateral or
security or a declaration of set-off made by such Lender of all or a part
of any amount payable by the Borrower hereunder in a proportion which, in
relation to any amounts received by any other Lender or Lenders,
represents more than its percentage participation for the time being in
the Advance, then such Lender shall promptly purchase from the other
Lenders their respective participations in the Advance including the
claims for payment of interest maintained by those other Lenders as may be
necessary to cause the purchasing Lender to share the amount in excess of
its percentage participation for the time being in the Advance rateably
with the other Lenders. Each of the Lenders hereby agrees to sell and
transfer a participation in its Advance, including the claims for payment
of interest as may be necessary to give effect to this provision.
29.2 Notwithstanding Art. 29.1, no portion of any payment or satisfaction of
all or part of any amount payable to such Lender hereunder received in
connection with or as a result of legal proceedings brought by or in the
name of such Lender shall be payable pursuant to Art. 29.1, to any other
Lender where each other Lender has had an opportunity to join in such
proceedings yet has declined to do so. Each Lender shall give prior
written notice to each other Lender of its intention to institute legal
proceedings in any jurisdiction.
29.3 If at any time any Lender (the "Refunding Bank") shall be required to
refund any amount which has been paid to or received by it on account of
any part of any amount payable by the Borrower hereunder and in respect of
which it has paid an amount to any other Lender pursuant to Art. 29.1,
such other Lender shall against re-transfer of the purchased participation
in the Advance including the claims for payment of interest repay a
proportionate amount of the sum so refunded together with such amount (if
any) as is necessary to reimburse the Refunding Bank the appropriate
portion of any interest it shall have been obliged
<PAGE>
39
to pay when refunding such amount as aforesaid for the period whilst such
other Lender held the amounts to be refunded.
29.4 If a Lender receives satisfaction as set forth in Art. 29.1, it shall give
notice thereof to the Facility Agent. The Facility Agent shall then
calculate the amount to be paid pursuant to Art. 29.1. Such Lender shall
pay this amount within the time period set forth by the Facility Agent to
the Facility Agent which will then distribute the amount among the other
Lenders. Each of the Lenders hereby authorises the Facility Agent to
assign to the Lender receiving such satisfaction and to accept the
assignment of, such participations in the Advance including claims for
payment of interest on their behalf as set forth in Art. 29.1. The
Facility Agent shall confirm the assignments to all Lenders in writing
every time such assignments take place. Art. 29.4 sentences 1 through 3
apply mutatis mutandis in case of a refund pursuant to Art. 29.3.
Art. 30
Set-off
Each Lender may set off any matured obligation owed by the Borrower under this
Agreement (to the extent beneficially owned by that Lender) against any
obligation (whether or not matured) owed by the Lender to the Borrower,
regardless of the place of payment, booking branch or currency of either
obligation. If the obligations are in different currencies, the Lender may
convert either obligation at a market rate of exchange in its usual course of
business for the purpose of set-off.
Art. 31
Miscellaneous
31.1 Amendments
Any alteration or amendment to this Agreement shall be in writing and
requires the consent of the Borrower and of the Majority Lenders provided,
however, that any alteration or amendment to Art. 1.18, 1.36, 2.2, 2.3, 4,
5, 7, 9, 12, 15, 16, 17, 19, 20, 27.2, 29, 31.1 and 31.2 requires the
consent of all Lenders. Verbal agreements shall have no legal effect.
31.2 Governing Law
The form and contents of this Agreement, as well as the rights and
obligations of the Lenders, the Borrower, the Facility Agent and the
Arranger shall be construed according to the laws of the Federal Republic
of Germany in every respect.
31.3 Partial Invalidity
Should any provision of this Agreement be or become wholly or partly,
invalid, then the remaining provisions shall remain valid. Invalid
provisions shall be construed in accordance with the intent of the parties
and the purpose of this Agreement.
31.4 Place of Performance
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40
Place of performance of this Agreement shall be Munich.
31.5 Jurisdiction
The applicable place of jurisdiction for all disputes arising out of or in
connection with this Agreement shall be Munich. The Lenders and the
Facility Agent may however, at their option, commence proceedings before
any other competent court of law in the Federal Republic of Germany and/or
in any other country in which assets of the Borrower are situated. In the
latter case the laws of the Federal Republic of Germany shall, pursuant to
Art. 31.2, also be applicable.
31.6 Annexes
The Annexes 1 through 5 form part of this Agreement.
31.7 Counterparts
This Agreement has been executed in the English language in 3 (three)
counterparts. One copy shall be provided to the Borrower and to each of
the Arranger and Bayerische Vereinsbank Aktiengesellschaft as Lender. Each
executed copy shall have the effect of an original.
<PAGE>
41
January 7, 1998
Bayerische Vereinsbank Aktiengesellschaft
........................................................
(in its capacity as Arranger, Lender and Facility Agent)
January 7, 1998
zetaphoenicis Beteiligungs GmbH
........................................................
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42
Annex 1
Drawdown Request
[zetaphoenicis Beteiligungs GmbH Letterhead]
To: Bayerische Vereinsbank AG
VCF/ALF 2
Federal Republic of Germany
Telefax: + 49-89-37825278
Date: [ ]
Pursuant to Art. 5.2 of the Agreement dated [ o ], 1998 between us and the
Lenders (the "Loan Agreement"), we hereby request the following drawdown under
the Loan Agreement:
(a) Drawdown Date: [o]
(b) Amount of Advance: [o]
(c) Interest Period: [o]
(d) The account to which the
Advance is to be transferred: [o]
We hereby confirm that:
(i) the representations and warranties set out in Art. 18 of the Loan
Agreement are correct at the date hereof; and
(ii) no Event of Default set out in Art. 20 of the Loan Agreement (or any event
which with the giving of notice or lapse of time might constitute an Event
of Default) has occurred and is continuing or might result from the making
of the Advance.
zetaphoenicis Beteiligungs GmbH
---------------------------------
<PAGE>
43
<PAGE>
44
Annex 2
Notice to Lenders of Advance Due
[Bayerische Vereinsbank's Letterhead]
To: [Lender]
Date: [o]
Pursuant to Art. 5.3 of the agreement dated [ o ], 1998 between zetaphoenicis
Beteiligungs GmbH and the Lenders (the " Loan Agreement"), we hereby give notice
of the Borrower's Drawdown Request under the Loan Agreement:
(a) Drawdown Date: [o]
(b) Amount of Advance: [o]
(c) Lender's participation: [o]
(d) Account: [o]
We confirm that all conditions precedent in accordance with Art. 4 of the Loan
Agreement have been fulfilled or complied with by the Borrower.
We request that you transfer the above amount, being your Share of the
Advance to our Account No........... with..............no later than
10:00 a.m. Munich time on the Drawdown Date.
BAYERISCHE VEREINSBANK AG
-------------------------
<PAGE>
45
Annex 3
Group Structure Chart
[Graphic omitted]
<PAGE>
46
Annex 4
Pledge Agreement over Shares of
Steinbeis Gessner GmbH
<PAGE>
47
Annex 5
- --------------------------------------------------------------------------------
Loan Account Tranche Maturity Interest Rate
- --------------------------------------------------------------------------------
6428134 4,0 Mio DM up to the 12.01.1999 5,765 %
- --------------------------------------------------------------------------------
6428142 4,0 Mio DM up to the 12.01.2000 6.125 %
- --------------------------------------------------------------------------------
6428436 4,0 Mio DM up to the 12.01.2001 6,415 %
- --------------------------------------------------------------------------------
6428444 10,5 Mio DM up to the 12.01.2002 6,605 %
- --------------------------------------------------------------------------------
6428452 10,5 Mio DM up to the 12.01.2003 6,775 %
- --------------------------------------------------------------------------------
6428460 10,5 Mio DM up to the 12.01.2004 6,895 %
- --------------------------------------------------------------------------------
6428479 10,5 Mio DM up to the 12.01.2005 7,015 %
- --------------------------------------------------------------------------------
Working Credit Facility
in the amount of
DM 15,000,000
between
Steinbeis Gessner GmbH
- as Borrower -
and
Bayerische Vereinsbank Aktiengesellschaft,
Munich, Federal Republic of Germany
- as Lender -
<PAGE>
Preamble
Whereas, the Borrower has requested the Lender and the Lender has agreed to
provide the Borrower with a Working Credit Facility in the maximum principal
amount of DM 15,000,000 for the purposes set out in Article 4 below;
The parties herewith agree as follows:
1. Definitions:
In this working credit facility agreement (the "Facility Agreement"), unless the
context otherwise requires:
"Advance(s)" means the principal amount(s) drawn down by the Borrower pursuant
to the drawdown request(s) under this Facility Agreement or, as the case may be,
the principal sum outstanding as a result of such drawdown(s);
"Business Day" means a day on which Banks are open for business in Munich
and London;
"Capex Loan Agreement" shall mean the DM 15,000,000 loan agreement for capital
expenditure of the Borrower of even date herewith between the Borrower and the
Lender;
"DM" means the lawful currency for the time being of the Federal Republic
of Germany;
"Drawdown Date(s)" means the date(s) specified in the drawdown request(s)
of the Borrower pursuant to Article 3 below;
"Facility" means the credit to be made available by the Lender to the Borrower
under this Facility Agreement;
"Interest Period" has the meaning ascribed to such term in Article 5.1 below;
"Repayment Date" means the date referred to in Article 6.
2
<PAGE>
All capitalised terms used herein and not otherwise defined herein shall bear
the same meaning herein as ascribed to them in the Capex Loan Agreement, unless
the context otherwise requires.
2. Availability, Conditions Precedent
2.1 The Facility will be made available to the Borrower up to the amount of DM
15,000,000 (Deutsche Marks fifteen million) subject to the condition
precedent that the Lender has received all of the following in form and
substance satisfactory to it:
(a) copy, certified to be a true copy of the articles of association and
such other corporate documents relating to the Borrower as the
Lender may reasonably and timely demand;
(b) extract, certified to be a true extract of the Commercial Register
relating to the Borrower of latest date;
(c) copy of the Original Financial Statements and the auditor's report
regarding the Original Financial Statements and the preliminary
annual report per September 30, 1997 for the Borrower;
(d) specimen signatures of such agents of the Borrower as shall be
authorised to sign this Agreement, the drawdown request and any
notices required to be given by the Borrower pursuant to the
provisions of this Agreement.
The Lender shall be entitled not to accept any documents presented under
this paragraph if the information contained therein does materially differ
from any information previously obtained from the Borrower.
2.2 The obligation of the Lender as set out in Article 2.1 is subject to
the further condition precedent that
3
<PAGE>
(a) the representations and warranties set out in Article 9 are correct as of
the date hereof and will be correct on the Drawdown Date;
(b) no event of default set out in Article 11 (or any event which with the
giving of notice or lapse of time might constitute an event of default)
has occurred and is continuing.
3. Drawdown
Subject to the terms and conditions of this Facility Agreement, the
Facility will be made available to the Borrower up to the amount of DM
15,000,000 in several Advances, which must be drawn down until the
Repayment Date, at the latest. Each drawdown must be preceded by a written
drawdown request to be received by the Lender not less than three Business
Days prior to the intended Drawdown Date, which must be a Business Day,
referring to this Agreement and specifying the intended Drawdown Date and
the amount in which the Facility is to be drawn down, such amount to be in
a minimum amount of DM 500,000 (or, if higher, in amounts being a multiple
of DM 100,000). A drawdown request of the Borrower cannot be withdrawn and
binds and obliges the Borrower to accept the requested Advance.
4. Purpose
The proceeds of the Facility shall be applied by the Borrower for the
financing of working capital purposes and general corporate purposes.
5. Interest
5.1 The Borrower shall pay interest on each Advance outstanding on the basis
of interest periods of a duration of one, three or six months each (the
"Interest Periods"). Accrued interest for each Interest Period shall be
paid on the last day of each Interest Period. The interest rate applicable
for each Interest Period shall be determined pursuant to Article 5.2 by
the Lender on a per annum basis two Business Days prior to the beginning
of each Interest Period. The first Interest Period of each Advance shall
start on the first Drawdown Date. Each succeeding Interest Period shall
commence upon
4
<PAGE>
expiry of the last day of the preceding Interest Period. In the event that
the last day of an Interest Period would fall on a day not being a
Business Day, then such Interest Period shall be extended to the next
following Business Day, unless such day would fall in the next calendar
month, in which case the last day of such Interest Period shall be the
immediately preceding Business Day and such Interest Period shall be
shortened accordingly. The last Interest Period for each Advance
outstanding shall end on the Repayment Date. The Lender shall notify the
Borrower of the duration of each Interest Period promptly after
ascertaining its duration.
5.2 Interest on the Facility shall accrue on a per annum basis from the
Drawdown Date until repayment in full of the Facility at a rate which
shall be the sum of (i) the rate at which the Lender is able to acquire
Deutsche Mark deposits for periods comparable to the Interest Period of
the relevant Advance in the London Inter-Bank Market at or about 11 a.m.
London time and (ii) the margin of 1.75 % (one point seven five per cent)
subject to a margin adjustment as set put in Article 5.3. The interest
rate on the Facility for each Interest Period shall be determined by the
Lender two Business Days prior to the Drawdown Date or, as the case may
be, prior to the beginning of each Interest Period.
5.3 The margin shall be adjusted (upwards or downwards, as appropriate) if
the Lender, after delivery of an account pursuant to Article 10 by the
Borrower to the Lender, shall determine that the Leverage Ratio is for the
twelve months period ending on the last day of the month to which the
Borrower's account relates is below the Leverage Ratio as set out in the
schedule below:
====================================================================
Leverage Ratio Applicable Margin
--------------------------------------------------------------------
3,5 or greater No reduction
--------------------------------------------------------------------
Greater than 2,5 and less than 3,5 1,625
--------------------------------------------------------------------
2,5 or less 1,500
====================================================================
A reduction (if any) in the margin will become effective with the
beginning of the next Interest Period after the date on which the Lender
determines that the margin should be
5
<PAGE>
reduced in accordance with the figures set out in the schedule above, and
a reduction will cease (such ceasure become effective with the beginning
of the next Interest Period) to exist if the (a) the Lender determines
that the Leverage Ratio has for the preceding twelve months period ending
on the last day of the month in which the last Borrower' account have been
received by the Lender, has not reached the amount as set out in the
schedule above for the than margin, or (b) if the Borrower ceases to
deliver accounts to the Lender pursuant to the provision of Art. 10 on
their due dates, and shall revert to 1.75 % p.a. until a further reduction
may occur pursuant to Art. 5.3 above.
5.4 Interest on the Facility shall be calculated on the basis of the actual
days elapsed in the respective Interest Period and a year of 360 days, and
accrued interest for each interest period shall be payable on the last day
of such Interest Period; it being understood that the Lender has no
discretion in making any determination pursuant to this Article 5.
5.5 In the event of default by the Borrower in the payment of the principal
amount of the Facility or interest thereon, the Borrower shall pay
interest on the principal amount from the date of default to the date of
actual payment accruing on a daily basis (i) at an interest rate of 4 %
p.a. above the overnight interest rate quoted to the Lender in the London
Inter-Bank Market for amounts corresponding to the amount in default, such
rate to be determined day by day by the Lender conclusively and binding
upon the Borrower, or (ii) at the interest rate payable according to
Article 5.2 or, as the case may be, 5.3 above plus a margin of 4 % p.a.,
whichever is higher.
5.6 Without prejudice to the foregoing the Borrower shall indemnify the Lender
against any expenses or losses which the Lender may sustain or incur as a
consequence of the default by the Borrower in payment of the principal
amount of the Facility or interest thereon or any other amount payable
hereunder (including all costs incurred by the Lender in respect to the
preservation of its rights hereunder).
6. Repayment
6
<PAGE>
The Borrower shall repay all Advances outstanding in full in one sum on
the day which falls 48 months after the date of this Agreement (the
"Repayment Date").
7. Payments
7.1 All payments to be made by the Borrower hereunder on account of principal,
interest or otherwise shall be made to the credit of an account opened in
the name of the Borrower with the Lender, without set off or any
counterclaim (unless such counterclaim to be set-off by the Borrower is
undisputed or confirmed by a court decision) and free and clear of and
exempt from, and without deduction from or on account of, any present or
future taxes, levies, imposts, duties, deductions, withholdings, or other
charges of whatever nature, imposed, levied, selected, withheld or
assessed by or within the Federal Republic of Germany. If the Borrower is
compelled by any applicable law or treaty to deduct any such taxes or make
any such other deductions, the Borrower shall pay such additional amounts
as may be necessary in order that the payments after such deductions shall
equal the amount which would have been required to be paid hereunder in
the absence of all such deductions. Any payments falling due on a day
which is not a Business Day shall be made on the next Business Day and any
interest shall accrue and be payable up to that day.
7.2 Payments insufficient to cover due payment obligations under this Facility
Agreement will be applied in the following order:
- amounts due, which are not interest and principal;
- interest; and
- principal.
8. Increased Costs
If any applicable treaty, law or regulation or any change, therein or in
the interpretation thereof shall subject the Lender to any tax or other
charge, which affects the cost to the Lender of making or maintaining the
Facility or shall change the basis of taxation of payments to the Lender,
except for changes in the rate of tax on the
7
<PAGE>
overall net income of the Lender or shall impose, modify or deem
applicable any reserve or deposit requirement against assets held by, or
deposits with or for the account of, or advances or facilities by the
Lender or there shall occur any other condition or event in the London
Inter-Bank Market with respect to this Facility Agreement or the Facility,
and the result of any of the foregoing is to increase the cost to the
Lender of making or maintaining the Facility or to reduce the amount of
principal, interest or other payments, received or receivable by the
Lender hereunder, then the Borrower shall pay to the Lender on demand all
additional amounts which will indemnify the Lender for such increased cost
or reduction applicable to succeeding renewals. In the event that there
shall occur any such event, the Lender shall promptly notify the Borrower
in writing of such event and its nature, and shall specify to the Borrower
the increased costs. The Borrower is entitled to defend any demand for
such increased costs by showing that the increased costs as determined by
the Lender were falsely calculated and/or do not reflect the legal changes
as described in sentence 1 above.
9. Representations and Warranties
In consideration of the Lender entering into this Agreement and making and
maintaining the Facility provided for hereunder, the Borrower represents
and warrants to the Lender in the terms and subject to any limitations of
Article 18 of the Capex Loan Agreement, mutatis mutandis, on the date of
this Agreement and on each interest payment date by reference to the facts
and circumstance then subsisting.
10. Undertakings
The Borrower agrees to comply at all times with the provision of Article
19 of the Capex Loan Agreement as if the provisions of Article 19 of the
Capex Loan Agreement had been set out in this Agreement, mutatis mutandis.
11. Events of Default
8
<PAGE>
Article 20.1 of the Capex Loan Agreement shall be deemed to be
incorporated into this Agreement as of set out in this Agreement in full,
mutatis mutandis (each of the events or the circumstances described
therein, an "Event of Default").
If an Event of Default occurs and at any time thereafter if any such event
shall then be continuing, but not later than thirty (30 ) days after the
Lender becomes aware of the occurrence of such an event, then and in any
such event, the Lender's obligation to make or maintain the Facility shall
immediately terminate and if the Facility shall have been drawn down all
amounts outstanding hereunder, including interest and other sums due,
shall on the Lender's written demand become immediately due and payable.
The Borrower shall indemnify the Lender against the actual loss or
expenses, as conclusively certified to it by the Lender, which the Lender
sustains as a direct consequence of any repayments made under this Article
11 on a day which is not the last day of an Interest Period.
12. Fees, Costs and Expenses
12.1 The Borrower shall pay to the Lender a commitment fee of 0.25 % p.a. (in
words: zero point two five per cent per annum) on the undisbursed amount
of the Facility from the signing date of this Facility Agreement until
full disbursement of the Facility or, as the case may be, until the
Repayment Date; the commitment fee to be payable semi-annually in arrears
on January 12 and July 12 of each year, for the first time on July 12,
1998.
12.2 The Borrower shall pay to the Lender an underwriting flat fee in the
amount of DM 75,000, which shall be due and payable not later than five
(5) Business Days after the signing date of this Facility Agreement.
12.3 The Borrower shall reimburse the Lender all costs and expenses incurred by
the Lender in connection with the enforcement of this Facility Agreement,
including (but not limited to) value added taxes and the fees and expenses
of legal advisors of the Lender.
9
<PAGE>
13. Assignment
This Agreement and the rights and obligations hereunder shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto
and their respective successors and assignees. The Borrower may not
assign, however, any of its rights, duties or obligations hereunder
without the Lender's prior written consent. The Lender may at any time
sell, assign, transfer or otherwise dispose of all or part or its rights,
duties and obligations hereunder to any other bank of like standing.
References to the Lender under this Agreement shall be construed to be
references to such bank as if it were an original party hereto.
14. No Waiver
No failure to exercise nor any delay in exercising on our part any right
or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right or remedy prevent any further or
other exercise thereof or the exercise of any other right or remedy. The
rights and remedies herein provided are cumulative and not exclusive of
any right provided by law.
15. Communications
The correspondence between the parties shall be in the English or German
language.
16. General Legal Provisions
16.1 This Facility Agreement shall be governed by and construed in accordance
with the laws of Germany. Place of jurisdiction shall be Munich. The
Lender shall be entitled, however, to assert any legal action against the
Borrower also before any other country, where assets of the Borrower are
located.
10
<PAGE>
16.2 Should any of the provisions of this Facility Agreement be or become
invalid in whole or in part, the other provisions shall remain in force.
The invalid provision shall, according to the intent and purpose of this
Facility Agreement, be deemed to be re-placed by such valid provision,
which in its economic effect comes as close as legally possible to that of
the invalid provision.
11
<PAGE>
January , 1998
Bayerische Vereinsbank Aktiengesellschaft
...........................................
January , 1998
Steinbeis Gessner GmbH
...........................................
12
C A P E X L O A N A G R E E M E N T
in the amount of
DM 15,000,000
between
Steinbeis Gessner GmbH (the "Borrower")
on the one hand
and
BAYERISCHE VEREINSBANK AKTIENGESELLSCHAFT
(hereinafter referred to as "Arranger", "Lender" or
"Facility Agent", as the case may be)
on the other hand
<PAGE>
2
Table of Contents
Page
Art. 1 Definitions 4
Art. 2 Loan Facility 9
Art. 3 Purpose 9
Art. 4 Conditions Precedent 9
Art. 5 Drawdown 10
Art. 6 Term 11
Art. 7 Repayment 11
Art. 8 Prepayment and Cancellation 12
Art. 9 Interest and Applicable Margin 13
Art. 10 Interest Periods 14
Art. 11 Alternative Interest Rate 15
Art. 12 Default Interest and Indemnification 16
Art. 13 Accounts 17
Art. 14 Payments 18
Art. 15 Illegality 18
Art. 16 Increased Costs 19
Art. 17 Tax Gross-Up and Mitigation 20
Art. 18 Representations and Warranties 20
Art. 19 Covenants 23
Art. 20 Events of Default 26
Art. 21 Rights and Obligations of Facility Agent 28
Art. 22 Fees 32
Art. 23 Expenses 33
<PAGE>
3
Art. 24 Stamp Duties 33
Art. 25 Waivers; Remedies Cumulative 33
Art. 26 Notices 33
Art. 27 Assignments, Transfer, Substitution 34
Art. 28 Currency Indemnity 35
Art. 29 Pro Rata Sharing 35
Art. 30 Set-off 36
Art. 31 Miscellaneous 36
Annexes:
Drawdown Request Annex 1
Notice to Lenders of Advance Due Annex 2
Group Structure Chart Annex 3
<PAGE>
4
Preamble
WHEREAS, Bayerische Vereinsbank Aktiengesellschaft shall provide the Borrower
with a Loan Facility in an aggregate amount of DM 15,000,000 (in words: Deutsche
Marks fifteen million) for the purpose of financing capital expenditure; and
WHEREAS, the Facility will be granted in three tranches; and
WHEREAS, the Borrower acknowledges that Bayerische Vereinsbank
Aktiengesellschaft will initially grant the Facility in its capacity as
"Original Lender". The Borrower undertakes to support and assist the Original
Lender in the syndication process. References to the Arranger and the Facility
Agent in this Agreement shall be read as references to the Original Lender until
such date where another bank or financial institution becomes party to this
Agreement pursuant to Art. 27;
The parties agree as follows:
Art. 1
Definitions
In this Agreement the following terms shall have the following meaning:
1.1 "Account" shall mean the account No. 6428487 of the Borrower with
Bayerische Vereinsbank Aktiengesellschaft, Rosenheim Branch, Banking Code
71120077, to which each Lender's Share of the Advance is to be credited by
the Lenders and into which monies owed from time to time by the Borrower
pursuant to this Agreement shall be paid or such other account as shall be
notified to the Borrower and the Lenders by the Facility Agent.
1.2 "Advance" shall mean the amount drawn down by the Borrower under Tranche
1, Tranche 2 or Tranche 3, pursuant to the Drawdown Request under this
Loan Facility or, depending on the context and if more than one Advance
has been made, the principal sum outstanding as a result of such
drawdowns.
1.3 "Agreement" shall mean this agreement including all its annexes.
1.4 "Applicable Margin" shall mean one point seventy five per cent per annum
(1.750 % p.a.) subject to an adjustment of the margin pursuant to the
provision of Art. 9.1.
1.5 "Arranger" shall mean Bayerische Vereinsbank Aktiengesellschaft.
1.6 "Availability Period" shall mean the period from the date of this
Agreement until December 31, 1998 for Tranche 1, December 31, 1999 for
Tranche 2 and December 31, 2000 for Tranche 3.
1.7 "Borrower" shall mean Steinbeis Gessner GmbH.
1.8 "Business Day" shall mean any day on which commercial banks and foreign
exchange markets in Munich and London are open for business.
<PAGE>
5
1.9 "Deutsche Marks" or "DM" shall mean Deutsche Marks or any other currency
which is legal tender in the Federal Republic of Germany at the time a
payment under this Agreement shall be due.
1.10 "Drawdown Date" shall mean the date specified in the Drawdown Request
pursuant to Art. 5.2 on which the Lenders shall make available the
requested Advance as specified in Art. 5.4, it being understood that the
Drawdown Date for Tranche 2 may not be prior to January 1, 1999 and that
the Drawdown Date for Tranche 3 may not be prior to January 1, 2000.
1.11 "Drawdown Request" shall mean a notice of borrowing substantially in the
form as attached as Annex 1 .
1.12 "EBITDA" shall mean, in respect of any period, the consolidated ordinary
earnings ("Ergebnis der gewohnlichen Geschaftstatigkeit" pursuant to ss.
275 Sect. 2, Nr. 14 HGB) of the Group plus interest ("Zinsen und ahnliche
Aufwendungen" pursuant to ss. 275 Sect. 2, Nr. 13 HGB) and depreciation
and amortisation ("Abschreibungen auf immaterielle Vermogensgegenstande
des Anlagevermogens und Sachanlagen sowie auf aktivierte Aufwendungen fur
die Ingangsetzung und Erweiterung des Geschaftsbetriebes" pursuant to ss.
275 Sect. 2, Nr. 7 a HGB) during such period.
1.13 "Encumbrance" shall mean any mortgage, hypothecation, pledge, lien,
charge, assignment, transfer of title or conveyance over any of the
Borrower's present or future assets for the purpose of securing any
Indebtedness of the Borrower or any other member of the Group and any
other security agreement or arrangement.
1.14 "Equity " shall mean, at any time, on a consolidated basis of the Group
the equity determined in accordance with ss. 266 Sect. 3 A. HGB plus any
shareholder loans (being accompanied by a subordination and loan retention
agreement addressed to the Lenders in a form acceptable to the Facility
Agent);
but adjusted by:
(a) deducting any outstanding capital ("Ausstehende Einlagen"
pursuant to ss. 272 Sect. 1, S. 2 HGB)
(b) deducting any amount attributable to a revaluation (write ups) of
assets pursuant to ss. 280 HGB and
(c) deducting any amount attributable to claims any member of
the Group has against the Parents and its subsidiaries not
being member of the Group, as far as those claims are shown
in the balance sheets as "Forderungen gegen verbundene
Unternehmen" or, as the case may be, "Forderungen gegen
Unternehmen, mit denen eine Beteiligungsverhaltnis besteht"
pursuant toss.266 Sect. 2 B. II. 2 and 3 HGB as well as
"Finanzanlagen" pursuant toss.266 Sect. 2 A. III. HGB).
1.15 "Equity Ratio" shall mean the ratio of:
(a) the amount equal to the Equity; and
(b) the amount equal to the total assets of the Group on a consolidated
basis ("Bilanzsumme").
<PAGE>
6
1.16 "Event of Default" shall have the meaning as given to it in Art. 20.
1.17 "Facility Agent" shall mean Bayerische Vereinsbank Aktiengesellschaft or
such other bank as may from time to time be appointed in its place
pursuant to the provisions of Art. 21.14.
1.18 "Final Maturity Date" shall mean December 31, 2003 for Tranche 1, December
31, 2004 for Tranche 2 and December 31, 2005 for Tranche 3.
1.19 "Group" shall mean the Borrower, thetaphoenicis Beteiligungs GmbH,
zetaphoenicis Beteiligungs GmbH and their direct and indirect material
subsidiaries from time to time.
1.20 "Group Structure Chart" shall mean the chart in the form as attached as
Annex 3 .
1.21 "Guarantee" means any obligation of a Person to pay the Indebtedness of
another Person, including without limitation:
(a) an obligation to pay or purchase such Indebtedness;
(b) an obligation to lend money or to purchase or subscribe shares or
other securities or to purchase assets or services in order to
provide funds for the payment of such Indebtedness; or
(c) any other agreement to be responsible for such Indebtedness.
1.22 "HGB" shall mean Handelsgesetzbuch, being the German Commercial Code.
1.23 "Increased Costs" shall have the meaning as defined in Art. 16.
1.24 "Indebtedness" (,,Verschuldung") shall mean any indebtedness for borrowed
money or any Guarantee or other indemnity in respect of any Indebtedness.
1.25 "Interest Cover Ratio" shall mean the ratio of EBITDA to Total Interest
Expenses.
1.26 "Interest Payment Date" shall mean the last day of an Interest Period or
such other date as provided for in the provisions of Art. 10.2.
1.27 "Interest Period" shall have the meaning given to it in Art. 10.
1.28 "Interest Rate" shall mean the sum of LIBOR and the Applicable Margin
pursuant to the provision of Art. 9.1.
1.29 "Interest Rate Determination Day" shall mean the third Business Day
before the commencement of an Interest Period.
1.30 "Judgement Currency" shall have the meaning given to it in Art. 28.1.
1.31 "Legal Changes" shall have the meaning given to it in Art. 15, unless
otherwise specified in this Agreement.
1.32 "Lender" or "Lenders", as the case may be, shall mean Bayerische
Vereinsbank Aktiengesellschaft and any other bank or financial institution
to which
<PAGE>
7
Bayerische Vereinsbank Aktiengesellschaft or any other Lender shall have
assigned or transferred all or any part of its rights, benefits and
obligations under this Agreement in accordance with Art. 27.3. it being
understood that the choice of any lender bank by the Facility Agent
requires the Borrower's approval.
1.33 "Lender's Commitment" shall mean with respect to Bayerische Vereinsbank
Aktiengesellschaft, at the date of signing this Agreement, the amount of
DM 15,000,000, or, from time to time, the Lender's commitment from time to
time plus each amount assigned or transferred to any further Lender in
accordance with Art. 27.3.
1.34 "Lender's Share" shall mean the ratio of a Lender's Commitment to the
aggregate of all Lender's Commitments from time to time.
1.35 "Leverage Ratio" shall mean the ratio of Total Debt to EBITDA.
1.36 "LIBOR" shall be the interest rate published by the Telerate service
(currently Telerate page 3750 or such other page as may replace page
3750), expressed as an annual interest rate, at which deposits in Deutsche
Marks are being quoted by first class banks in the London Interbank
Eurocurrency Market at 11:00 a.m. London time on the Interest Rate
Determination Day for a period corresponding to the relevant Interest
Period.
1.37 "Loan Facility" or "Facility" shall have the meaning given to it in Art.
2.1.
1.38 "Majority Lenders" shall, as long as no Advance has been drawn down, mean
a majority of 66 2/3 % of the Lenders, in relation to the sum total of the
Loan Facility, and, after Advance has been drawn down, a majority of 66
2/3 % of the Lenders, in relation to the total of the outstanding Advance.
As long as Bayerische Vereinsbank Aktiengesellschaft will remain the only
Lender under this Agreement, its decision will substitute the decision by
the Majority Lenders if and when required in this Agreement.
1.39 "Notice of Default" shall have the meaning given to it in Art. 21.6.
1.40 "Original Financial Statement" or "Original Financial Statements" shall
mean, as the case may be, the audited or, if no audit has been made, the
un-audited fiscal year-end statements including the balance sheet, the
profit and loss account and the certified auditor's report, if any, of the
Borrower for the fiscal years 1995 and 1996, the balance sheet and profit
and loss account as of December 15, 1997 of the Borrower and as to
zetaphoenicis Beteiligungs GmbH and thetaphoenicis Beteiligungs GmbH the
opening balance sheets.
1.41 "Original Lender" shall mean Bayerische Vereinsbank Aktiengesellschaft
1.42 "Parents" shall mean zetaphoenicis Beteiligungs GmbH and thetaphoenicis
Beteiligungs GmbH, and "Parent" shall mean each one of them.
1.43 "Permitted Encumbrances" shall mean
(i) Encumbrances in relation to Indebtedness already in existence at the
date of signing this Agreement; or
<PAGE>
8
(ii) Encumbrances arising by operation of law or in the ordinary course
of business; or
(iii) Encumbrances attaching to assets acquired subsequent to the signing
of this Agreement insofar as the Encumbrance secures the purchase
price of the asset; or
(iv) such other Encumbrances as may be created with the prior written
consent of the Majority Lenders, which consent shall not be
unreasonably withheld.
1.44 "Person" shall mean an individual, corporation, partnership, joint
venture, trust, unincorporated organisation or any other legal entity or a
national state or any agency or political subdivision thereof, whether or
not having a separate legal personality.
1.45 "Refunding Bank" shall have the meaning given to it in Art. 29.3.
1.46 "Repayment Amount " shall have the meaning given to it in Art. 7.
1.47 "Repayment Dates" shall mean the dates as specified in the schedule
contained in Art. 7, and "Repayment Date" shall mean each such repayment
date.
1.48 "Taxes" (which term shall include "Taxation") shall mean all current or
future taxes, duties, charges or official fees of any kind, including any
interest, fines or penalties and all payments in relation to such current
or future taxes, duties, charges or official fees of any kind.
1.49 "Total Debt" shall mean on a consolidated basis of the Group the
total amounts of debts arising from bonds ("Anleihen" pursuant to
ss. 266 Sect. 3. C. 1 HGB), bank loans including capital expenditure
facilities and working capital facilities ("Verbindlichkeiten
gegenuber Kreditinstituten" pursuant to ss. 266 Sect. 3. C. 2 HGB)
and obligations arising under promissory notes ("Verbindlichkeiten
aus der Annahme gezogener Wechsel und der Ausstellung eigener
Wechsel" pursuant to ss. 266 Sect. 3. C. Nr. 5 HGB) .
1.50 "Total Interest Expenses" shall mean, in relation to any period, the
aggregate of all interest, fees, commissions and other costs, expenses or
charges accrued due from any member of the Group (other than to the
Parents or any other member of the Group) in respect of Indebtedness of
any member of the Group, including interest on shareholder loans as far as
such interests have been paid to the Parents during such period, less
interest accrued during such period on bank deposits held by any member of
the Group.
1.51 "Tranche 1" shall mean the amount which may be drawn down by the Borrower
as an Advance pursuant to a Drawdown Request and having a term of five
years.
1.52 "Tranche 2" shall mean the amount which may be drawn down by the Borrower
as an Advance pursuant to a Drawdown Request and having a term of five
years.
<PAGE>
9
1.53 "Tranche 3" shall mean the amount which may be drawn down by the Borrower
as an Advance pursuant to a Drawdown Request and having a term of five
years.
1.54 "Tranches" shall mean the sum of the Tranche 1, Tranche 2, and Tranche 3,
and "Tranche" shall mean each one of them.
1.54 "VAT" shall mean value added tax.
Art. 2
Loan Facility
2.1 Commitment
Subject to the terms and conditions of this Agreement (including the
preamble), the Lenders shall provide to the Borrower a loan facility
(hereinafter referred to as the " Loan Facility") for an aggregate
principal amount of DM 15,000,000 (in words: Deutsche Marks fifteen
million) and the Lenders agree, in the event of a Drawdown Request
pursuant to Art. 5.2, to contribute during the term of this Agreement as
set out in Art. 6 to the Advances to be provided to the Borrower hereunder
an amount corresponding to its Lender's Share, however, up to an aggregate
maximum principal amount not exceeding its Lender's Commitment.
2.2 Obligations Several
The obligations of each Lender under this Agreement are several. Failure
of a Lender to carry out its obligations pursuant to this Agreement in a
proper manner does not relieve any other party of its obligations under
this Agreement. Save as provided for in Art. 20 below, the same shall
apply in the event that a Lender terminates its participation in this
Agreement in accordance with this Agreement or terminates its Lender's
Commitment in accordance with this Agreement, or where performance of the
obligations undertaken by the Lender pursuant to this Agreement would be
invalid or illegal. No Lender is responsible for the obligations of any
other party under this Agreement. Each Lender shall only be responsible
for its Lender's Share. Joint liability, or joint and several liability of
the Lenders is hereby excluded.
2.3 Rights Several
The obligations of the Borrower to the Facility Agent, the Arranger and
the individual Lenders hereunder are created vis-a-vis each of them as
separate and independent obligations. Each Lender, Facility Agent or
Arranger may separately enforce its rights hereunder. The formation of
jointly owned assets is hereby excluded.
Art. 3
Purpose
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10
The Borrower will use the Loan Facility for financing capital expenditure.
Neither the Arranger, the Facility Agent nor the Lenders shall be obliged to
concern themselves with such application.
Art. 4
Conditions Precedent
4.1 The obligations of the Facility Agent and each Lender to the Borrower
under this Agreement are subject to the conditions precedent that the
Facility Agent has notified the Borrower and the Lenders that it has
received all of the following in form and substance satisfactory to it:
(a) copy, certified to be a true copy of the articles of association and
such other corporate documents relating to the Borrower and to the
Parents as the Facility Agent may reasonably and timely demand;
(b) extract, certified to be a true extract of the Commercial Register
relating to the Borrower and to the Parents of latest date;
(c) legal opinion of the Borrowers' legal counsel that this Agreement
creates legally binding and enforceable obligations on the part of
the Borrower, in form and substance acceptable to the Arranger;
(d) copy of the Original Financial Statements and the auditor's report
regarding the Original Financial Statements and the preliminary
annual report per December 15, 1997 for the Borrower;
(e) specimen signatures of such agents of the Borrower as shall be
authorised to sign this Agreement, the Drawdown Request and any
notices required to be given by the Borrower pursuant to the
provisions of this Agreement.
The Facility Agent shall be entitled not to accept any documents presented
under this paragraph if the information contained therein does materially
differ from any information previously obtained from the Borrower.
4.2 The obligations of the Facility Agent and each Lender to allow the
Borrower to make the Advance during the Availability Period are subject to
the further conditions precedent that:
(a) the representations and warranties set out in Art. 18 are correct
and will be correct immediately after the Advance is made; and
(b) no Event of Default set out in Art. 20 (or any event which with the
giving of notice or lapse of time might constitute an Event of
Default) has occurred and is continuing.
<PAGE>
11
Art. 5
Availability and Drawdown
5.1 Availability Period
Subject to the terms and conditions of this Agreement, each Tranche of the
Facility may be drawn down by the Borrower in up to two (2) drawings,
provided that the total amount of all Advances is not exceeding the amount
of the Facility at any time during the Availability Period. Any amount of
the Facility not drawn down on the last day of the Availability Period
shall automatically be cancelled. Upon such cancellation, each Lender's
Commitment shall be reduced proportionally to each Lender's Share.
5.2 Drawdown Request
The request for the drawdown of an Advance may not be delivered by the
Borrower until the Facility Agent has confirmed to the Borrower that it
has received all of the documents listed in Art. 4.1 (Conditions
Precedent) and that each is in form and substance satisfactory to the
Facility Agent. In any case, a request for the drawdown will not be
regarded as having been duly completed, unless the following conditions
have been satisfied:
The Facility Agent has received, by no later than 1.00 p.m. Munich time on
the third (3rd) Business Day prior to the Drawdown Date the Drawdown
Request substantially in the form of Annex 1 (it being understood that a
separate Drawdown Request has to be presented for each Tranche) and having
the following minimum contents:
the proposed Drawdown Date, which must be a Business Day;
the amount of the Advance; and
the account of the Borrower or such other account as the Borrower
may determine to which the Advance is to be transferred by the
Facility Agent.
The Borrower's Drawdown Request cannot be withdrawn; it binds and obliges
the Borrower to accept the requested Advance.
5.3 Lender's Participations
If the above conditions have been satisfied, the Facility Agent shall by
notice in writing pursuant to the provisions of Annex 2, notify by no
later than two (2) Business Days prior to the Drawdown Date each of the
Lenders of the amount of this Advance, the Drawdown Date, such Lender's
Share in the amount of the Advance and, in the event that payments shall
not be effected to the Account, any further information on the account to
which the proceeds of the Advance shall be paid.
5.4 Payment of Proceeds
Upon receipt of the written notice referred to in Art. 5.3 each Lender
shall, by no later than 10:00 a.m. Munich time on the Drawdown Date,
credit the Account of the Facility Agent with its participation in the
Advance corresponding to its Lender's Share and the Facility Agent shall
by no later than 12:00 a.m. Munich
<PAGE>
12
time on the Drawdown Date, transfer the amount of the Advance to such
account specified in the Borrower's Drawdown Request.
Art. 6
Term
The term of the three (3) Tranches of the Facility shall lapse on the respective
Final Maturity Dates ascribed to each of the Tranches.
Art. 7
Repayment
The Borrower shall repay each Tranche under the Facility on the relevant
Repayment Dates for such Tranche as set out in the following schedule:
===========================================================================
Repayment Dates Tranche 1 Tranche 2 Tranche 3
- ---------------------------------------------------------------------------
December 30, 1999 1,000,000 --------- ---------
- ---------------------------------------------------------------------------
December 30, 2000 1,000,000 1,000,000 ---------
- ---------------------------------------------------------------------------
December 30, 2001 1,000,000 1,000,000 1,000,000
- ---------------------------------------------------------------------------
December 30, 2002 1,000,000 1,000,000 1,000,000
- ---------------------------------------------------------------------------
December 30, 2003 1,000,000 1,000,000 1,000,000
- ---------------------------------------------------------------------------
December 30, 2004 --------- 1,000,000 1,000,000
- ---------------------------------------------------------------------------
December 30, 2005 --------- --------- 1,000,000
===========================================================================
If the Facility has not been drawn in full by the Borrower, the Repayment will
be reduced pro rata.
Any amounts which have not been paid by the Borrower prior to the Final Maturity
Date shall be repaid together with any amount outstanding under any Tranche and
all other amounts (including interest) as may be due pursuant to the provisions
of this Agreement on the Final Maturity Date . Each Repayment Amount made under
this Agreement shall reduce each Lender's participation accordingly and may not
be reborrowed thereafter.
<PAGE>
13
Art. 8
Prepayment and Cancellation
8.1 Voluntary Prepayment
The Borrower may, by giving not less than thirty (30) days prior notice to
the Facility Agent, prepay all Advances outstanding in whole or in part
(being DM 1,000,000 or any larger sum which is an integral multiple of DM
1,000,000) on the last day of an Interest Period in inverse order of
maturity.
In addition to that, if:
(a) the Borrower is required to pay to a Lender any amount under
Art. 16 (Increased Costs); or
(b) the Borrower is required to pay to a Lender any additional amounts
under Art. 17 (Taxes);
then, without prejudice to the obligations of the Borrower under those
provisions and the provisions under Art. 12.4, the Borrower may, whilst
the circumstances continue, serve a notice of prepayment on that Lender
through the Facility Agent. On the date falling thirty (30) Business Days
after the date of service of the notice the Borrower shall prepay that
Lender's Share of the Advance provided that such prepayment is made
together with any amount payable by the Borrower under Art. 12.4 (iii).
8.2 Mandatory Prepayment
If, at any time while the Advance is still outstanding under the
Agreement, the Borrower after the date of this Agreement ceases to be a
majority-owned direct or indirect subsidiary of the Parents and/or the
Parents cease to be a majority-owned direct or indirect subsidiary of
FiberMark Inc., Brattleboro, Vermont, United States of America, the
Borrower shall prepay the outstanding Advances on the last day of the then
current Interest Period.
8.3 Miscellaneous provisions
(a) Any notice of prepayment under this Agreement is irrevocable. The
Facility Agent shall notify the Lenders promptly of receipt of any
such notice.
(b) All prepayments under this Agreement shall be made together with
accrued interest on the amount prepaid or repaid and all other
amounts due on such date (if any) owing by the Borrower to such
Lender.
(c) No prepayment or cancellation is permitted except in accordance with
the express terms of this Agreement.
(d) No amount prepaid under this Agreement may subsequently be
reborrowed.
<PAGE>
14
Art. 9
Interest and Applicable Margin
9.1 Interest Rate
Each Advance outstanding shall bear interest for the applicable Interest
Period payable in arrears at the Interest Rate which shall be expressed as
an annual Interest Rate and shall be the sum of the Applicable Margin and
LIBOR.
The Applicable margin shall be adjusted (upwards or downwards, as
appropriate) if the Facility Agent, after delivery of an account pursuant
to Art. 19.1.(a)(ii) by the Borrower to the Facility Agent, shall
determine that the Leverage Ratio is for the twelve months period ending
on the last day of the month to which the Borrower's account relates is
below the Leverage Ratio as set out in the schedule below:
====================================================================
Leverage Ratio Applicable Margin
--------------------------------------------------------------------
3,5 or greater no reduction
--------------------------------------------------------------------
Greater than 2,5 and less than 3,5 1,625
--------------------------------------------------------------------
2,5 or less 1,500
====================================================================
A reduction (if any) in the Applicable Margin will become effective with
the beginning of the next Interest Period after the date on which the
Facility Agent determines that the Applicable Margin should be reduced in
accordance with the figures set out in the schedule above, and a reduction
will cease (such ceasure become effective with the beginning of the next
Interest Period) to exist if (a) the Facility Agent determines that the
Leverage Ratio for the preceding twelve months period ending on the last
day of the month in which the last Borrower's account has been received by
the Facility Agent, has not reached the amount as set out in the schedule
above for the then Applicable Margin, or (b) if the Borrower ceases to
deliver accounts to the Facility Agent pursuant to the provision of Art.
19.1 (ii) on their due dates, and shall revert to 1.75 % p.a. until a
further reduction may occur pursuant to Art. 9.1 above.
9.2 Due Dates
Save as otherwise provided herein, accrued interest for each Interest
Period shall be paid on the Interest Payment Date for that Interest
Period.
9.3 Determination of Interest Rate
LIBOR shall be determined by the Facility Agent as the applicable Interest
Rate on the Interest Rate Determination Day of each Interest Period.
9.4 Bank Basis
Interest shall accrue from day to day and be calculated on the basis of
the actual number of days elapsed in the relevant Interest Period divided
by 360.
9.5. Determination
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15
The Facility Agent shall without undue delay inform the Lenders and the
Borrower of the Interest Rate it has determined for each Interest Period
and the interest payable in relation to each Advance. Each determination
of the Interest Rate by the Facility Agent hereunder shall, in the absence
of manifest error, be conclusive and binding on the Borrower and the
Lenders, it being understood that the Facility Agent has no discretion in
making the determinations pursuant to this Article 9.
Art. 10
Interest Periods
10.1 Interest Periods
The period for which each Advance is outstanding shall be divided into
successive periods, each hereinafter referred to as an "Interest Period".
The Interest Periods in relation to each Advance shall be of one, three or
six months, and shall commence on the Drawdown Date and subject to Art.
10.2 shall end on the Interest Payment Date of each Interest Period. Each
subsequent Interest Period shall commence upon expiry of the last day of
the previous Interest Period. The Borrower may select an Interest Period
for an Advance in either the relevant Draw-Down Request for such Advance
or, if the Advance has already been borrowed, a notice to be received by
the Facility Agent not later than 10.00 a.m. (Munich time) on the fourth
Business Day prior to the commencement of that Interest Period. If the
Borrower fails to specify the term of an Interest Period this term shall
be three months. Notwithstanding the foregoing, the first Interest Period
for each Advance other than the first Advance shall end on the same day as
the current Interest Period for any previous Advance. On the last day of
those Interest Periods, those Advances shall be consolidated and treated
as one Advance.
10.2 Non-Business Day
In the event that an Interest Payment Date would fall on a day not being a
Business Day, then the following Business Day shall be the Interest
Payment Date and the Interest Period shall be extended accordingly, unless
the Interest Payment Date would therefore fall in the next calendar month,
in which case the Interest Payment Date shall be the immediately preceding
Business Day and the Interest Period shall be shortened accordingly.
10.3. The Facility Agent shall notify the Borrower and the Lenders of the
duration of each Interest Period promptly ascertaining ist duration.
Art. 11
Alternative Interest Rate
11.1 Market Disturbance
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16
Notwithstanding anything to the contrary herein contained, if at any time
prior to the commencement of an Interest Period:
(a) the Facility Agent shall have determined that LIBOR is not quoted by
the Telerate Service on the Interest Rate Determination Day; or
(b) the Facility Agent shall have received written notification
(i) from Lenders representing at least 30 per cent of the
aggregate amount of the Loan Facility that deposits in
Deutsche Marks and of equal duration to that of such Interest
Period are not readily available in the London Interbank
Eurocurrency Market in sufficient amounts in the ordinary
course of business to fund their participations in such
borrowing during such Interest Period; or
(ii) from Lenders representing at least 30 per cent of the
aggregate amount of the Loan Facility that, by reason of
circumstances effecting the London Interbank Eurocurrency
Market generally, the cost of them of deposits obtained in
such market to fund their participations in such borrowing is
in excess of LIBOR for the relevant Interest Period;
the Facility Agent shall promptly give written notice of such
determination or notification to the Borrower and to each of the Lenders.
11.2. Alternative Interest Rate
In order to enable the Borrower however to continue to draw the Facility,
the Facility Agent shall offer to the Borrower when sending the notice
pursuant to Art. 11.1 that the Advance outstanding for which an Interest
Rate may not be determined pursuant to Art. 9.3. may be extended for
Interest Periods of one month each and at a rate of interest applicable
for that Advance determined by the Facility Agent, to be the arithmetic
mean (rounded upwards, if not already such a multiple, to the nearest
whole multiple of one/sixteenth of one percent) of the rates notified by
five prime banks in the London Eurocurrency Market to the Facility Agent
on the Interest Rate Determination Day of such Interest Period; such
interest rate hereinafter referred to as the "Substitute Basis".
11.3. Review
So long as any Substitute Basis is in force, the Facility Agent, in
consultation with the Borrower, shall from time to time, but not less than
monthly, review whether or not, the circumstances referred to in Art.
11.1. above still prevail with a view to returning to the normal
provisions of this Agreement.
Art. 12
Default Interest and Indemnification
12.1 Default
In the event that any outstanding payments pursuant to this Agreement are
not made or are only partly made by their due dates, the Borrower shall in
respect of
<PAGE>
17
such outstanding payments and without further notice, be in default with
respect to such payments.
12.2 Default Interest Rate
If any sum due and payable by the Borrower hereunder is not paid on the
due date therefor, the period beginning on such due date and ending on the
date upon which the obligation of the Borrower to pay such amount is
discharged shall be divided into successive periods, each of which (other
than the first) shall start on the last day of the preceding such period
and the duration of which shall be selected by the Facility Agent, taking
into consideration when selecting the duration of such periods the
interest of the Borrower.
During each such period relating thereto as mentioned above an unpaid sum
shall bear interest payable in arrears at the rate which shall be
expressed as an annual rate and shall be the sum of the Applicable Margin,
LIBOR and two per cent (2.0%) provided that
a) if for any such period, LIBOR cannot be determined, the rate
applicable to each Lender's portion of such unpaid sum shall be the
rate per annum which is the sum of two per cent (2.0%), the
Applicable Margin and the rate per annum notified to the Facility
Agent by such Lender as soon as practicable after the beginning of
such period as being what expresses as a percentage rate per annum
the cost to such Lender of funding from whatever sources it may
select, it being understood that each Lender is obliged to select
the cheapest source available; and
b) if such unpaid sum is all or part of an Advance which became due and
payable on a day other than the last day of an Interest Period
relating thereto, the first such period applicable hereto shall be
of a duration equal to the unexpired portion of that Interest Period
and the interest rate applicable thereto from time to time during
such period shall be that rate which exceeds by two per cent (2.0%)
the rate which would have been applicable to it had it not so fallen
due.
12.3 First Demand Payment
Any interest which shall have accrued under Art. 12.2 in respect of an
unpaid sum shall be due and payable and shall be paid by the Borrower at
the end of the period by reference to which it is calculated or on such
later dates as the Facility Agent may specify by written notice to the
Borrower.
All payments on damages shall be made by the Borrower without undue delay
upon demand of the Facility Agent.
12.4 Indemnity
The Borrower shall compensate the Lenders for any loss, damage, costs and
outlays (including losses of margin or losses resulting from refinancing
incurred by the Lenders in the provision or maintenance of the Advance for
the relevant Interest Periods) which have been incurred by the Lenders
because:
(i) the Borrower has failed to pay a sum due pursuant to this
Agreement on the due date; or
<PAGE>
18
(ii) an Event of Default described in the provisions of Art. 20 has
occurred.
If the Borrower has made payments on a day which is not an Interest
Payment Date; or the drawdown of an Advance requested by the Borrower
cannot be made because the Borrower has failed to satisfy a condition
precedent or the Borrower refuses to accept the Advance; the Borrower
shall pay to each Lender through the Facility Agent the amount by which
(a) the interest which would have been payable on the amount by the
Borrower hereunder exceeds (b) the amount of interest which would have
been payable in respect of a deposit in Deutsche Marks and equal to the
amount placed by it with a prime bank in London for a period starting on
the third Business Day following the date of the proposed borrowing or of
such receipt, as the case may be, and ending on the last day of the
Interest Period thereof.
Art. 13
Accounts
13.1 Lender's Accounts
Each of the Lenders shall in its books of account, in accordance with
common banking practice, maintain an account for the Borrower from which
the principal sum, the amount of interest and other payments owed by the
Borrower to such Lender pursuant to this Agreement can be determined.
13.2 Control Account
The Facility Agent shall in its books of account maintain a control
account from which can be determined;
(i) the sum total of the outstanding Advance and each Lender's Share
therein; and
(ii) the sum total of principal, interest and other payments owed to the
Lenders pursuant to this Agreement, as well as each Lender's Share
therein; and
(iii) the sum total of payments received from the Borrower and the Share
of each Lender therein.
Whenever an entry is made in the control account, the Facility Agent shall
prepare an account statement for the control account and shall provide
such statement to each Lender and the Borrower without undue delay.
13.3 Accounts as Evidence
For the purposes of judicial, arbitration or other proceedings in relation
to this Agreement the above account statements shall, in the absence of
manifest error, be conclusive and binding between the parties, unless the
Borrower provides proof of the opposite.
Art. 14
Payments
<PAGE>
19
14.1 Funds, Place and Currency
All payments owed by the Borrower pursuant to this Agreement plus VAT, if
applicable, shall be made in Deutsche Marks in immediately available funds
and by no later than 14:00 (Munich time) on each due date to the Account.
14.2 No Set-Off, Counterclaim or Retention
All payments to be made shall be made free and clear of Taxes (unless the
Borrower is compelled by law to make payment subject to Taxes), without
any deductions and to the exclusion of any set-off, counterclaim, right of
bailment, retention or lien, restriction or condition; unless such claims
to be set-off by the Borrower are undisputed or confirmed by a court
decision.
14.3 Discharging Effect
The Borrower shall be released from its obligation to make any particular
payment only once the paid sum has been unconditionally credited to the
Account and only in so far as the amount paid is sufficient to satisfy the
Borrower's particular payment obligations on any date at which payment is
due pursuant to this Agreement.
14.4 Appropriation
In the event that the Borrower makes a payment which is insufficient to
satisfy all of its payment obligations on a date on which such payment is
due pursuant to this Agreement, the Facility Agent has the right in its
reasonable discretion to apply the received sum against such outstanding
claims of the Lenders as the Facility Agent may decide. Any contrary
instruction given by the Borrower shall have no effect.
14.5 Distribution
The Facility Agent shall, without prejudice to other provisions of this
Agreement, distribute without delay the appropriate share of principal,
interest and other payments owed pursuant to this Agreement to the
relevant individual Lender in the same proportions as their respective
participations in the Advance bear to the whole amount of the Advance, as
they are received by the Facility Agent.
Art. 15
Illegality
lf any change in or introduction of any law, regulation or treaty, or any change
in the interpretation or application thereof (hereinafter referred to as "Legal
Changes"), shall make it unlawful for any Lender to make available or fund or
maintain its Lender's Commitment or its participation in any outstanding Advance
or to give effect to its obligations as contemplated hereby, the following
provisions shall apply:
15.1 Such Lender may terminate the totality of its Lender's Commitment and its
participation in the outstanding Advance by notice to the Borrower, such
notice to be presented to the Facility Agent who will transmit it to the
Borrower without undue delay, effective as from the date of which
performance becomes unlawful or contrary to any regulation or at the end
of the applicable Interest Periods, whichever is the earlier, such notice
stating exactly which contractual
<PAGE>
20
obligations became illegal, the date on which such illegality will arise
and which Legal Changes have given rise to the illegality. The Facility
Agent shall without undue delay upon receipt of such notice of termination
inform all other Lenders.
15.2 The Borrower shall repay or prepay (as the case may be) such Lender's
participation in the outstanding Advance plus accrued interest and any
other sums outstanding pursuant to this Agreement, at the end of the
applicable Interest Periods or, in the event termination is effective
pursuant to Art. 15.1 before the end of an Interest Period, at such
earlier date (unless the Borrower is notified of termination after such
earlier date in which case payment shall be made within three (3) Business
Days of the Borrower's receipt of such notice). Upon effective termination
all obligations of the terminating Lender pursuant to this Agreement shall
end and the sum total of the Loan Facility shall be reduced by the amount
of the terminated Lender's Commitment.
15.3 If any Lender (through the Facility Agent) gives notice to the Borrower
pursuant to Article 15.1 requiring prepayment, then, but without prejudice
to the obligations of the Borrower to effect such prepayment pursuant to
Article 15.2, the Borrower, the Facility Agent and such Lender shall
forthwith commence negotiations in good faith with a view to agreeing on
terms (which shall not in any way be prejudicial to such Lender ) for
making such Lender's participation in the Advances available from another
jurisdiction or for restructuring its participation in the Advances on a
basis which is not so unlawful, provided that neither the Facility Agent
nor such Lender shall be under any obligation to continue such
negotiations if terms have not been agreed within 30 days after the date
of such Lender's notice.
Art. 16
Increased Costs
If, as a result of Legal Changes (including, for the purposes of this Art. 16,
rules, orders or directives in relation to required reserves, special deposits,
liquidity or capital adequacy requirements, any requirement relating to the
manner in which the Lender is required to allocate financial resources to
provide for the making of or in relation to the Advance or any other form of
banking or monetary controls (whether or not having the force of law)), a Lender
at any time in the future in relation to its Lender's Commitment or its
participation in the outstanding Advance made to the Borrower,
(a) suffers an increase of the cost of making or funding the Advance or of
maintaining its Lender's Commitment hereunder; or
(b) suffers a reduction of any amount payable to it or to the Facility Agent
or of the effective return before taxes on income; or
(c) makes any payment, either directly or through the Facility Agent, or
forgoes any interest or other return on or calculated by reference to any
amount received or receivable by it from the Borrower hereunder;
(collectively referred to as "Increased Costs") then, without prejudice to the
provisions of Art. 17, the following provisions shall apply:
16.1 Such Lender shall have the right, upon giving notice to the Borrower, such
notice to be presented to the Facility Agent who will transmit it to the
Borrower without undue delay, to request payment from the Borrower of a
sum
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21
compensating it for its Increased Costs. Such notice shall state the
reasonably determined amount of such Increased Costs, the date upon which
such Increased Costs were or began to be incurred and the Legal Changes
which led to the Increased Costs.
16.2 The Borrower shall no more than ten days after receiving the notice
referred to in Art. 16.1 pay all of the Lender's substantiated Increased
Costs incurred prior to receipt of the said notice.
16.3 The Borrower is entitled to defend any demand for Increased Costs by
showing that these Increased Cost as determined by the Facility Agent were
falsely calculated and/or do not reflect the Legal Changes.
Art. 17
Tax Gross-up
In the event that the Borrower or the Facility Agent is obliged by law to
make any deduction or withholding in respect of Taxes from any payment
under this Agreement for the account of the Arranger, the Facility Agent
or any Lender, the Borrower shall:
(i) pay any such Taxes by their due date and, no less than thirty (30)
days after such payment provide to the Facility Agent the original
or a certified copy of the receipt of the relevant authority; and
(ii) indemnify and keep harmless the Lenders in relation to all such
Taxes; and
(iii) make such additional payments to the Lenders as may be necessary in
order that the net amount remaining after the said deduction or
retention, corresponds with the sum due to be paid.
"Taxes" for the purpose of this paragraph shall, for the avoidance of
doubt, include all taxes levied by a German authority whether on the basis
of income or otherwise.
Art. 18
Representations and Warranties
The Borrower hereby represents and warrants to the Facility Agent, the Arranger
and each of the Lenders that on the date of this Agreement:
(a) Status
The Borrower is a limited liability company under the laws of the Federal
Republic of Germany, duly organised and validly existing under the laws of
the Federal Republic of Germany, has the capacity to sue and be sued in
its own name and has the power to own its property and assets and carry on
its business as it is now being conducted.
(b) Powers and Authority
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22
The Borrower has the authority to enter into and execute this Agreement,
to accept the Loan Facility and to perform its obligations pursuant to
this Agreement, and in this regard all necessary decisions and resolutions
of the Borrower and its shareholders have been taken.
(c) Legal Validity
The obligations of the Borrower created in this Agreement are legally
valid and binding obligations of the Borrower enforceable in accordance
with the terms and conditions of this Agreement; and this Agreement is in
proper form for enforcement in the courts of the Federal Republic of
Germany. The choice of the law of the Federal Republic of Germany as the
law governing this Agreement constitutes a valid choice of law under the
law of the Federal Republic of Germany and the courts of the Federal
Republic of Germany will observe and give effect to such choice of law.
(d) Non-Conflict
The entry into and the execution and performance of this Agreement does
not conflict, or result in a breach of any terms of any agreement to which
the Borrower is a party or is subject or by which it or any of its
property is bound, and does not violate any law, directive, order, decree,
arbitral award, judgement, or any document to which the Borrower is a
party.
(e) No Default
No event has occurred which constitutes an event of default under or in
respect of any agreement or document to which the Borrower is a party or
by which the Borrower may be bound (including inter alia, this Agreement)
and no event has occurred which, with the giving of notice or lapse of
time might constitute an event of default under or in respect of any such
agreement or document and all of which events might have a material
adverse effect on the ability of the Borrower to perform or discharge its
obligations.
(f) Consents
Under the laws of the Federal Republic of Germany, no authorisations,
approvals, consents, licences, exemptions, filings, registrations,
notarisations and other matters, official or otherwise, are required by or
advisable for the Borrower in connection with the entry into, performance,
validity and enforceability of this Agreement.
(g) Financial Statements
The Original Financial Statements are true and convey a fair picture of
the financial position of the Borrower or, as the case may be, the members
of the Group as at that date. The Original Financial Statements were
prepared in accordance with all applicable accounting and auditing
principles, and these principles were applied in the same form and manner
as in previous years, unless otherwise stated in the Original Financial
Statements; without limitation to the foregoing it being understood that
not all Original Financial Statements were prepared by the Borrower or on
its behalf.
(h) Litigation
<PAGE>
23
No arbitration, litigation or other proceedings against the Borrower or
any other member of the Group, the result of which, taken as a whole,
could be substantially detrimental to the financial condition or the
business activities of the Borrower, are to the best of the Borrower's
knowledge, currently in progress or threatened against the Borrower and no
liquidation or similar proceedings are, to the best of the Borrower's
knowledge, currently in progress or threatened against the Borrower.
(i) No Material Adverse Change
The financial condition of the Borrower, the Parents or the Group has not
deteriorated in comparison with the Original Financial Statements in a
manner which has or will have a material adverse effect on the ability of
the Borrower or any member of the Group to perform its obligations
pursuant to this Agreement.
(j) No Encumbrances
Unless permitted by this Agreement, and with the exception of Permitted
Encumbrances, no Encumbrance of any asset or future asset, or the present
or future revenues of the Borrower or any member of the Group exists and
the execution and performance of this Agreement will not result in the
creation of such Encumbrances.
(k) Pari Passu Ranking
The obligations of the Borrower hereunder rank at least pari passu with
all its other present and future obligations; save as with obligations
having priority by law.
(l) Tax Liabilities
The Borrower has complied on a best effort basis with all Taxation laws in
all jurisdictions in which it is subject to Taxation and has paid all
Taxes due and payable by it; no material claims are being asserted against
it with respect to Taxes, all amounts payable by the Borrower hereunder
may be made free and clear of and without deduction for or on account of
any Taxes.
(m) No Winding-up
The Borrower or any member of the Group have not taken any corporate
action nor have any other steps been taken or legal proceedings been
started or threatened against them for their winding-up, dissolution,
administration or re-organisation or for the appointment of a receiver,
administrator, administrative receiver, trustee, liquidator or similar
officer of them or of any or all of their assets or revenues.
(n) Group Structure
The Group Structure is true, complete and accurate.
(o) Repetition
Each of the representations and warranties of this Art. 18 other than the
representations contained in Art. 18 (a), (h), (i), and (n) will be
correct and complied with so long as any sum remains to be lent or remains
payable by the
<PAGE>
24
Borrower under this Agreement as if repeated by the Borrower on the first
day of each Interest Period then by reference to the then existing
circumstances.
Art. 19
Covenants
The Borrower hereby covenants in relation to each Lender, and insofar as
applicable, covenants to bring about that:
19.1 Financial information
(a) So long as any amount available under this Agreement is outstanding
or the Loan Facility or any part thereof remains outstanding or any
other sum is payable pursuant to this Agreement, the Borrower will
provide to the Facility Agent in sufficient copies for each of the
Lenders the following statements, prepared according to generally
accepted accounting principles:
(i) as soon as available, but in any event no later than one
hundred and five (105) days after the end of each financial
year, the audited fiscal year-end and financial statements,
including the balance sheet, the profit and loss account and
the certified auditor's report of the Parents, the Group and
any individual member of the Group, and in the event that the
above mentioned documents are not prepared within a period of
one hundred and five (105) days after the end of each
financial year, no later than one hundred and five (105) days
after the end of each financial year, the unaudited fiscal
year-end and financial statements, including the balance sheet
and the profit and loss account of the Parents, the Group and
any individual member of the Group and no later than one
hundred eighty (180) days after the end of each financial
year, the audited fiscal year-end and financial statements,
including the balance sheet and the profit and loss account
and the certified auditor's report of the Parents, the Group
and any individual member of the Group;
(ii) as soon as available, but in any event no later than forty
five (45) days after the end of each calendar quarter,
quarterly management financial statements of the Group and any
individual member of the Group including profit and loss
accounts as well as cash flow calculations together with
comparative information in relation to the management
financial statements previously delivered by the Borrower in a
form agreed with the Facility Agent (Quartalsberichte); and
(iii) as soon as available, but in any event on the date of the
signing of this Agreement, a five years budget on a roll-over
basis including capital expenditures and cash flow
projections, profit and loss accounts and balance sheets of
the Group and any individual member of the Group in a form
agreed with the Facility Agent, and for each following five
year period during the term of this Agreement the above
mentioned statements shall be prepared until January 15 of the
respective calendar year.
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25
The aforementioned financial statements, balance sheets and profit
and loss accounts will be prepared in accordance with the same
principles as the Original Financial Statements or, in the case of a
divergence therefrom, will be accompanied by a statement explaining
each changed accounting principle and its effects. All financial
information shall be presented in their original language, being
German or English.
(b) Forthwith upon receiving a request to that effect, the Borrower will
provide to the Facility Agent such additional financial information
or other information relevant to this Agreement as the Facility
Agent or a Lender through the Facility Agent may from time to time
reasonably request and the Borrower may provide with internal staff
and which presentation will not disturb its ordinary course of
business.
19.2 Other Information
So long as any amount available under this Agreement is outstanding or the
Loan Facility or any part thereof remains outstanding or any other sum is
payable pursuant to this Agreement, the Borrower and/or any other member
of the Group will provide to the Facility Agent in sufficient copies for
each of the Lenders:
(a) promptly, all notices or other documents in relation to the
financial condition or business of the Borrower and/or any other
member of the Group published;
(b) details of any material litigation, arbitration or administrative
proceedings which affect the Borrower and/or any member of the Group
as soon as the same are instituted or, to the knowledge of the
Borrower, threatened.
19.3 Financial Covenants
So long as any amount available under this Agreement is outstanding or the
Loan Facility or any part thereof remains outstanding or any other sum is
payable pursuant to this Agreement the consolidated financial conditions
of the Group, as evidenced by the financial statements prepared on the
same basis as was used for the preparation of the Original Financial
Statements, shall be such that
(i) on June 30 as well as on December 30 in each calendar year, the
Interest Cover Ratio for the preceding twelve months is not less
than 2.5, starting on December 30, 1998; and
(ii) on June 30 and on December 30 in each calendar year, the Equity
Ratio is not less than 20 %, starting on December 30, 1998; and
(iii) on June 30 and on December 30 in each calendar year, the Leverage
Ratio is not more than 5, starting on December 30, 1998.
In the event that the Borrower will introduce new accounting standards, or
if the Lenders agree to a merger or sale of Group companies as stated in
Art. 19.4, the Facility Agent will consider with the Lenders whether the
Lenders are prepared to agree to new definitions for the financial
covenants and the ratios as set out in Art. 19.3 above. Furthermore, the
Majority Lenders will, upon request
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26
of the Borrower, decide whether they are prepared to waive any other
covenant as set out in Art. 19.
19.4 Further Undertakings
(a) Pari Passu Ranking
The Borrower undertakes for so long as any amount available under this
Agreement is outstanding or the Loan Facility or any part thereof remains
outstanding or any other sum is payable pursuant to this Agreement that
its obligations pursuant to this Agreement will rank at least pari passu
with all other present and future obligations; save for any other
obligations having priority by law.
(b) Negative pledge
The Borrower or any member of the Group will not create any Encumbrance,
except for Permitted Encumbrances, on or over all or any of its present or
future assets or revenues, for the purpose of granting a security in
respect of its Indebtedness, and it will furthermore procure that any
member of the Group will not create any encumbrances which, if created by
the Borrower, would fall under the definition of Encumbrance as stated in
Art. 1.
(c) Notification of Default
The Facility Agent shall without undue delay be notified of the occurrence
of any Event of Default as described in Art. 20.
(d) Maintenance of Legal Validity
The Borrower shall obtain, comply with the terms of and do all that is
necessary to maintain in full force and effect all authorisations,
approvals, licences and consents required in or by the laws and
regulations of the Federal Republic of Germany to enable the Borrower
lawfully to enter into and perform its obligations under this Agreement
and to ensure the legality, validity, enforceability or admissibility in
evidence in the Federal Republic of Germany of this Agreement.
(e) No Merger and Sale of Group Companies
The Borrower or any member of the Group will not merge or consolidate with
any other company or Person, the result of which would (in the opinion of
the Majority Lenders) materially adversely affect the Borrower. The
Borrower will furthermore not sell or otherwise dispose of any of its
material subsidiaries which would materially adversely affect the
Borrower's ability to perform its obligations hereunder. It is expressly
agreed that the Parents shall be authorised to convert the Borrower into a
partnership ("Offene Handelsgesellschaft") or a limited partnership
("Kommanditgesellschaft"), as the case may be, as well as to possibly
merge Steinbeis Gessner Unterstutzungskasse GmbH (i.G.) with a member of
the Group.
(f) Limitation of Expenditure ("Investitionsausgaben")
The Borrower or any member of the Group will not make any payments on
account of capital expenditure which are not part of the capital
expenditure projection or other statements prepared in accordance with
Art. 19.1 (a) (iii) of
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27
this Agreement and which exceed in total the amount of DM 1,000,000
without informing the Facility Agent prior to such expenditure.
(g) Information on Permitted Encumbrances
The Borrower or any member of the Group shall ensure that the Facility
Agent shall be informed on any such Permitted Encumbrances as soon as they
may be granted in the future in favour of any third party creditor.
(h) Payments within the Group
The Borrower shall endeavour, on a best effort basis, that any excess cash
flow by any of its subsidiaries being part of the Group is not held within
this company, but is transferred to the Borrower if and when appropriate
with respect to the obligations of the Borrower under this Agreement.
(i) Limitation of Indebtedness
The Borrower nor any other member of the Group undertakes not to create
any other Indebtedness with any bank or other financial institution in the
amount exceeding DM 10,000,000 without the prior written consent of the
Facility Agent.
19.5 Duration
The undertakings in this Art. 19 shall remain in force from and after the
date hereof and so long as any amount is or may be outstanding hereunder.
Art. 20
Events of Default
20.1 Events of Default
Each of the events set out below is an Event of Default (whether or not
caused by any reason whatsoever within the control of the Borrower or of
any other Person):
(a) the Borrower fails to pay any amount payable by it hereunder on the
due date thereof and this failure is not remedied within three (3)
Business Days after written notification by the Facility Agent; or
(b) any representation, warranty, covenant as set out in Art. 19.4 or
statement made in, or in connection with, this Agreement or in any
accounts, certificate, statement or opinion delivered by or on
behalf of the Borrower hereunder or in connection herewith is
incorrect or untrue in any material respect when made or is not
complied with and such default is incapable of remedy, or if capable
of remedy, is not remedied within twenty (20) Business Days after
receipt of written notice from the Facility Agent requesting the
same and has a material adverse effect on the Borrower's payment
obligations under this Agreement; or
(c) the Borrower fails to comply with any covenant (as set out in Art.
19.1 to Art. 19.3) or any other provision of this Agreement and this
failure, if capable of remedy, is not remedied within thirty (30)
Business Days
<PAGE>
28
(respectively ninety (90) Business Days for the covenants as set out
in Art. 19.3) after receipt of written notice from the Facility
Agent; or
(d) (i) any other Indebtedness of the Borrower or any other member
of the Group of an aggregate amount of not more than DM
1,000,000 (or its equivalent in any other currency) becomes
prematurely due and payable as a result of a default
thereunder, and is not paid within a period of five (5)
Business Days after its respective due date; or
(ii) any event of default (or event which with giving of notice or
lapse of time may constitute such an event of default) occurs
under any contract or document relating to any such
Indebtedness; or
(iii) any Encumbrance over any assets of the Borrower or any other
member of the Group becomes enforceable which has a material
adverse effect on the ability of the Borrower to perform its
payment obligations under this Agreement; or
(iv) there occurs any material adverse change in the financial
condition of the Borrower or the Group which leads to the
Borrower's incapability to perform its payment obligations
under this Agreement, provided however that the determination
right pursuant to this Art. 20.1 (d)(iv) in connection with
Art. 20. 2. below may be exercised only if so confirmed by the
Majority Lenders; or
(e) any order (provisional or final) is made by court resolution passed
for the general suspension of payments or dissolution, termination
of existence, liquidation, winding-up, bankruptcy, insolvency,
judicial management or administration of the Borrower; or
(f) a moratorium in respect of all or any debts of the Borrower
exceeding the amount of DM 1,000,000, or a composition or an
arrangement with creditors of the Borrower or any similar proceeding
or arrangement by which the assets of the Borrower are submitted to
the control of its creditors is ordered or declared; or
(g) a liquidator, trustee, administrator, receiver, arranger or similar
officer is appointed in respect of the Borrower or in respect of all
or a substantial part of its assets; or
(h) the Borrower becomes or is declared insolvent or is unable, or
admits its general inability to pay its debts as they fall due or
becomes insolvent within the terms of any applicable law; or
(i) a distress, execution, attachment or other process affects any asset
of the Borrower which has a material adverse effect on the ability
of the Borrower to perform its obligations under this Agreement; or
(j) the Borrower or any other member of the Group ceases or threatens to
cease, to carry on its present business or disposes, or threatens to
dispose, of a substantial part of its business, property or assets
or a substantial part of its business, property or assets is seized,
<PAGE>
29
nationalised, expropriated or compulsorily acquired, other than
those measures as described in Art. 19.4.(e) last sentence; or
(k) any authorisation, approval, consent, licence, exemption, filing,
registration or notarisation or other requirement necessary to
enable the Borrower to comply with any of its material obligations
hereunder, if any, is modified, revoked or withheld or does not
remain in full force and effect; or
(l) at any time it is unlawful for the Borrower to perform any of its
material obligations hereunder; or
(m) at any time any dividend payments (excluding dividend payments which
are used to increase the equity of the Borrower
["Schutt-aus-hol-zuruck-Verfahren"]) or interest payments on
shareholder loans are made by the Borrower which are unreasonable in
respect of the cash flow situation and the earning results of the
Borrower, and which would have a material adverse effect on the
Borrower's ability to perform its obligations under this Agreement;
or
(n) the Borrower ceases to be a majority-owned subsidiary of the
Parents.
20.2 Acceleration
In the case of any such Event of Default, and at any time thereafter if
any such event shall then be continuing, but not later than thirty (30 )
days after the Facility Agent becomes aware of the occurrence of such an
event, the Facility Agent may, and shall, if so directed by the Majority
Lenders, by written notice to the Borrower:
(a) declare that the obligations of the Lenders hereunder to allow the
Borrower to make an Advance and the Lenders' Commitments shall be
cancelled forthwith whereupon the same shall be so cancelled
forthwith; and/or
(b) declare all outstanding amounts under this Agreement immediately due
and payable whereupon the same shall become immediately due and
payable together with all interest accrued thereon and all other
amounts payable hereunder.
Art. 21
Rights and Obligations of Facility Agent
21.1 Appointment
Bayerische Vereinsbank Aktiengesellschaft is hereby appointed Facility
Agent. Each Lender irrevocably authorises the Facility Agent on such
Lender's behalf to perform such duties and to exercise such rights and
powers under this Agreement as are specifically delegated to the Facility
Agent by the terms of this Agreement, together with such rights and powers
as are reasonably incidental thereto. The Facility Agent, however, must
not commence any legal action or proceedings on behalf of any Lender
without such Lender's prior written approval. The Facility Agent shall
have only those duties and powers which are
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30
expressly specified in this Agreement. The Facility Agent's duties
hereunder are solely of a mechanical and administrative nature.
21.2 Majority Lenders' Directions
In the exercise of any right or power and as to any matter not expressly
provided for by this Agreement, the Facility Agent may act or refrain from
acting in accordance with the instructions of the Majority Lenders and
shall be fully protected in so doing. In the absence of any such
instructions, the Facility Agent may act or refrain from acting as it
shall deem fit. Any such instructions shall be binding on all the Lenders.
21.3 Relationship
(a) The relationship between the Facility Agent and each Lender is that
of principal and Facility Agent only. Nothing herein shall
constitute the Facility Agent a trustee or fiduciary for any Lender,
the Borrower or any other Person.
(b) The Facility Agent shall not in any respect be Facility Agent of the
Borrower by virtue of this Agreement.
(c) The Facility Agent shall not be liable to the Borrower for any
breach by the Arranger or by any Lender of this Agreement or be
liable to any Lender or the Arranger for any breach by the Borrower
hereof.
21.4 Delegation
The Facility Agent may act hereunder through its officers, employees or
agents.
21.5 Documentation
Neither the Facility Agent nor the Arranger nor any of their officers,
employees or agents shall be responsible to any Lender or to each other
for
(a) the valid execution, genuineness, validity, enforceability or
sufficiency of this Agreement or any other document in connection
herewith, or
(b) the collectability of amounts payable hereunder, or
(c) the accuracy of any statements (whether written or oral) made in or
in connection with this Agreement or any other document in
connection herewith.
21.6 Duties
The Facility Agent shall not be required to ascertain or inquire as to the
performance or observance by the Borrower of the terms of this Agreement
or any other document in connection herewith. The Facility Agent shall not
be deemed to have knowledge of the occurrence of any Event of Default (or
event which with lapse of time, notice, determination of materiality or
other condition may constitute such an Event of Default) other than in the
case of a payment default, of which the Facility Agent gained actual
knowledge unless the Facility Agent has received written notice from a
party hereto describing such Event of Default or event and stating that
such notice is a "Notice of Default" or unless
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31
the Facility Agent does not receive a payment from the Borrower hereunder
on its due date. If the Facility Agent receives such a Notice of Default,
the Facility Agent shall promptly give notice thereof to the Lenders.
21.7 Exoneration
Neither the Facility Agent nor any of its officers, employees or agents
shall be liable to any Lender for any action taken or omitted under or in
connection with this Agreement unless caused by its or their gross
negligence or wilful misconduct.
21.8 Reliance
(a) The Facility Agent may rely on any communication or document
believed by it to be genuine and correct.
(b) The Facility Agent may engage, pay for and rely on legal or other
professional advisers selected by it and shall be protected in so
relying.
21.9 Credit Approval
Each of the Lenders severally represents and warrants to the Facility
Agent and the Arranger that it has made its own independent investigation
and assessment of the financial condition and affairs of the Borrower and
its related entities in connection with its participation in this
Agreement and has not relied exclusively on any information provided to
such Lender by the Facility Agent or the Arranger in connection herewith.
Each Lender represents, warrants and undertakes to the Facility Agent and
the Arranger that it shall continue to make its own independent appraisal
of the creditworthiness of the Borrower and its related entities while the
Advance are outstanding or its Lender's Commitment is in force.
21.10 Information
(a) The Facility Agent shall furnish each Lender with a copy of any
documents received by it under Art. 19.1 and Art. 19.2 (but the
Facility Agent shall not be obliged to review or check the accuracy
or completeness thereof). If requested by a Lender, the Facility
Agent shall furnish to such Lender a copy of all documents received
by it under Art. 4.
(b) Neither the Facility Agent nor the Arranger shall have any duty
(i) either initially or on a continuing basis to provide any
Lender with any credit or other information with respect to
the financial condition or affairs of the Borrower or any
related entities whether coming into its possession or that of
any related entities of the Facility Agent or the Arranger
before the entry into this Agreement or at any time
thereafter;
(ii) unless specifically requested to do so by a Lender, to request
any certificates or other documents from the Borrower
hereunder.
(c) The Facility Agent need not disclose any information relating to the
Borrower if such disclosure would or might in the opinion of the
Facility
<PAGE>
32
Agent constitute a breach of any law or any duty of secrecy or
confidence.
21.11 Facility Agent and Arranger Individually
(a) Each of the Facility Agent and the Arranger shall have the same
rights and powers hereunder as any other Lender and may exercise the
same as though it were not the Facility Agent or the Arranger.
(b) The Facility Agent and the Arranger may accept deposits from, lend
money to and generally engage in any kind of banking, trust,
advisory or other business whatsoever with the Borrower and its
related entities and accept and retain any fees payable by the
Borrower or any of its related entities for its own account in
connection therewith without liability to account therefore to any
Lender.
21.12 Indemnity
Each Lender agrees to indemnify the Facility Agent on demand (to the
extent not reimbursed by the Borrower under this Agreement) for any and
all liabilities, losses, damages, penalties, actions, judgements, costs,
expenses or disbursements of any kind whatsoever which may be imposed on,
incurred by or asserted against the Facility Agent in any way relating to
or arising out of its acting as the Facility Agent under this Agreement or
performing its duties hereunder or any action taken or omitted by the
Facility Agent hereunder (including, without limitation, the charges and
expenses referred to in Art. 23 and all stamp taxes on or in connection
with this Agreement to the extent not reimbursed by the Borrower). Such
indemnification by each Lender shall be pro rata to its Lender's
Commitment or (as the case may be) participation in the Advance.
Notwithstanding the foregoing, no Lender shall be liable for any portion
of the foregoing resulting from the Facility Agent's gross negligence or
wilful misconduct.
21.13 Legal Restrictions
The Facility Agent may refrain from doing anything which would or might in
its opinion (i) be contrary to the law of any jurisdiction or any official
directive or (ii) render it liable to any Person or (iii) violate its
banker's duty of secrecy, and may do anything which in its opinion is
necessary to comply with any such law or directive.
21.14 Resignation and Removal
The Facility Agent may, after prior consultation with the Borrower and
subject to the Borrower's consent, resign by giving written notice thereof
to the Lenders and the Borrower. In addition, the Majority Lenders may, by
giving at least 30 days' notice to the Facility Agent, the other Lenders
and the Borrower, as appropriate, remove the Facility Agent. In either
such event the Majority Lenders may appoint a successor to such Facility
Agent. If the Majority Lenders have not, within 60 days after such notice
of resignation or removal, appointed a successor Facility Agent which
shall have accepted such appointment, the retiring or removed Facility
Agent shall have the right to appoint a successor Facility Agent. The
resignation or removal of the retiring or removed Facility Agent and the
appointment of any successor Facility Agent shall both become effective
upon the successor notifying all the parties thereto in writing that it
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33
accepts such appointment, whereupon the successor Facility Agent shall
succeed to the position of the retiring or removed Facility Agent and the
term "Facility Agent" herein shall mean such successor Facility Agent.
This Art. 21.14 shall continue to benefit a retiring or removed Facility
Agent in respect of any action taken or omitted by it hereunder while it
was Facility Agent.
21.15 Recovery of Payments
Unless the Facility Agent shall have received written notice from a Lender
or the Borrower not less than two Business Days prior to the date upon
which such Lender or the Borrower (the "party liable") is to pay an amount
to the Facility Agent for transfer to the Borrower or any Lender
respectively (the "payee") that the party liable does not intend to make
that amount available to the Facility Agent, the Facility Agent may assume
that the party liable has paid such amount to the Facility Agent on the
due date in accordance herewith. In reliance upon such assumption, the
Facility Agent may (but shall not be obliged to) make available a
corresponding sum to the payee(s). In the event that such payment is not
made to the Facility Agent, the payee(s) shall forthwith on demand repay
such sum to the Facility Agent together with interest on such amount until
its repayment at a rate determined by the Facility Agent reflecting its
cost of funds. The provisions of this Art. 21.15 are without prejudice to
any rights the Facility Agent and the payee may have against the party
liable.
21.16 Assignments
The Facility Agent may treat each Lender as a party as entitled to payment
hereunder until it has received written notice from the Lender unless
concerned to the contrary.
21.17 Exemption from Art. 181 German Civil Code
The Facility Agent is hereby granted exemption from the restriction of
Art. 181 of the German Civil Code or any similar restriction of the
applicable laws of any other country.
21.18 Confidentiality
In acting as the Facility Agent for the Lenders, the Facility Agent's
agency division shall be treated as a separate entity from any other of
its divisions or departments, and, notwithstanding the foregoing
provisions of this Art. 21, in the event that the Facility Agent should
act for the Borrower in any capacity in relation to any matter other than
those directly or indirectly related to its capacity as Facility Agent for
the Lenders hereunder, then any information given by the Borrower to the
Facility Agent in such other capacity may be treated as confidential by
the Facility Agent.
Art. 22
Fees
22.1 Commitment Fee
The Borrower shall pay to the Facility Agent for distribution to the
Lenders a Commitment Fee of 0.25 % p.a. on the undisbursed amount of the
Facility from
<PAGE>
34
the signing date of this Agreement until the end of the Availability
Period. The Commitment Fee, if any, is payable within five Business Days
after the end of the Availability Period.
22.2 Underwriting Fee
The Borrower shall pay to the Arranger for distribution to the Lenders an
Underwriting Fee in the amount of DM 37,500 payable within five (5)
Business Days after the signing of this Agreement, but in any event not
prior to January 1, 1998.
22.3 Arrangement Fee
The Borrower shall pay to the Arranger for its own account an Arrangement
Fee in an amount to be agreed upon in a side letter of even date payable
within five (5) Business Days after the signing of this Agreement, but in
any event not prior to January 1, 1998.
22.4 VAT
Any fee referred to in this Art. 22 (Fees) is exclusive of any value added
tax or any other Tax which might be chargeable in connection with that
fee. If any value added tax or other Tax is so chargeable, it shall be
paid by the Borrower at the same time as it pays the relevant fee.
Art. 23
Expenses
The Borrower shall reimburse Vereinsbank in its capacity as Facility Agent
and Arranger and the Lenders for the reasonable charges and expenses
(including value added tax or any similar tax thereon and including the
fees and expenses of legal advisers) incurred by them in connection with
the enforcement of any rights under this Agreement.
Art. 24
Stamp Duties
The Borrower shall pay and forthwith on demand indemnify each of the Facility
Agent, the Arranger and the Lenders against any liability it incurs in respect
of any stamp, registration and similar tax which is or becomes payable in
connection with the entry into, performance or enforcement of this Agreement.
Art. 25
Waivers; Remedies Cumulative
No failure to exercise and no delay in exercising on the part of the Facility
Agent or any Lender, any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. No waiver by the Facility Agent, the Arranger
or any Lender shall be effective unless it is in writing. The rights and
remedies of each of the Facility Agent, the Arranger and the
<PAGE>
35
Lenders herein provided are cumulative and not exclusive of any rights or
remedies provided by law.
Art. 26
Notices
26.1 Any correspondence, reports, announcements, consultations, documentation
and communication between the parties to this Agreement shall be in the
German, or in the English language and shall be in writing, by mail, or by
telefax; the latter case requiring confirmation by mail.
26.2 Without prejudice to any future change of address, all correspondence from
the Borrower to the Lenders shall be sent to the Facility Agent at the
following address:
Bayerische Vereinsbank Aktiengesellschaft
Am Tucherpark 1/VTW 1
80536 Munchen
Attention: Rainer Heuschneider
Fax: +49-89-37825278
All correspondence from the Lenders or the Facility Agent to the Borrower
shall be sent to the following address:
Steinbeis Gessner GmbH
Weidacher Stra(beta)e 30
83620 Feldkirchen-Westerham
Attention: Dr. Walter Haegler
Fax: +49-8062-703461 (with copy to Mr. Bruce Moore, Fax:
+001-802-2575900)
26.3 Without prejudice to any future change of address or account, all
correspondence from the Facility Agent to the Lenders shall be sent and
all payments from the Facility Agent to the Lenders shall be made to the
addresses and accounts as transferred to the Facility Agent by each
Lender.
Art. 27
Assignments, Transfer, Substitution
27.1 Successors
This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Arranger, the Facility Agent and their
respective substitutes, successors and assignees.
27.2 No Assignments by the Borrower
The Borrower may not assign or transfer all or any of its rights, benefits
and obligations hereunder.
27.3 Assignments by the Lenders
At its own cost any Lender may, prior to a written consent by the
Borrower, such consent not to be unreasonably withheld, at any time assign
and transfer all or
<PAGE>
36
any part of its rights, benefits and obligations (to effect a
"Vertragsubernahme") hereunder, provided that an amount of principal and
the amount of interest accrued thereon may not be assigned or transferred
separately.
Unless and until an assignee has agreed with the Facility Agent and the
Lenders in writing that it shall be under the same obligations toward each
of them as it would have been under if it had been a party hereto, neither
the Facility Agent nor any Lender shall be obliged to recognise such
assignee as having the rights against it which such assignee would have
had if it had been a party hereto. For the purposes of this Art. 27.3,
each Lender hereby authorises the Facility Agent to execute on its behalf
any agreement with any assignee pursuant to which such assignee agrees
that it shall be under the same obligations towards each of the Lenders as
it would have been had it been a party hereto.
For each assignment effected pursuant to the above provisions, the
Facility Agent shall receive an assignment registration fee in the amount
of DM 1,000 from the respective assignee, failing whom from the assigning
Lender, which shall become due and payable five Business Days after the
date of the agreement referred to in Art. 27.3 above.
27.4 Change of Lending Office
Each Lender may at any time and at its expense change its lending office,
but such Lender shall give the Facility Agent prior written notice thereof
and until receipt of such notice the Facility Agent may assume that no
such change has occurred.
27.5 Disclosure
Each Lender may disclose to any proposed assignee, transferee or
sub-participant or any proposed substitute therefore, any information
about this Agreement and any information in the possession of such Lender
relating to the Borrower.
27.6 Syndication
The Borrower acknowledges that primary syndication of the Facility may
take place and undertakes to assist and co-operate with the Facility Agent
and the Arranger in syndication by, inter alia, expediting reasonable site
visits of persons who have been invited by the Arranger to participate in
the Facility ("Invitees") and by participating in a reasonable number of
presentations to Invitees.
Art. 28
Currency Indemnity
28.1 Payment made by the Borrower to the Lenders on the basis of any judgement
in a currency (hereinafter referred to as the "Judgement Currency") other
than Deutsche Marks shall only discharge the Borrower's obligation to the
extent of the amount in Deutsche Marks that the Lenders, immediately upon
receipt of such payment, would be able to purchase with the amount so
received on a recognised foreign exchange market. In the event that such
amount in the Judgement Currency is less than the amount due in Deutsche
Marks pursuant to the provisions of this Agreement, then the Borrower
shall be liable to pay the
<PAGE>
37
difference; such obligation of the Borrower being a separate and
independent obligation, forming the basis of a separate cause of action.
28.2 The Borrower waives any rights it may have in any jurisdiction to pay any
amount hereunder in a currency other than that in which it is expressed to
be payable hereunder.
Art. 29
Pro Rata Sharing
29.1 Except for payments to a Lender from the Facility Agent which were
received by the Facility Agent for the account of such Lender in
accordance with this Agreement, if a Lender shall at any time receive
satisfaction by way of payment or foreclosure of any collateral or
security or a declaration of set-off made by such Lender of all or a part
of any amount payable by the Borrower hereunder in a proportion which, in
relation to any amounts received by any other Lender or Lenders,
represents more than its percentage participation for the time being in
the Advance, then such Lender shall promptly purchase from the other
Lenders their respective participations in the Advance including the
claims for payment of interest maintained by those other Lenders as may be
necessary to cause the purchasing Lender to share the amount in excess of
its percentage participation for the time being in the Advance rateably
with the other Lenders. Each of the Lenders hereby agrees to sell and
transfer a participation in its Advance, including the claims for payment
of interest as may be necessary to give effect to this provision.
29.2 Notwithstanding Art. 29.1, no portion of any payment or satisfaction of
all or part of any amount payable to such Lender hereunder received in
connection with or as a result of legal proceedings brought by or in the
name of such Lender shall be payable pursuant to Art. 29.1, to any other
Lender where each other Lender has had an opportunity to join in such
proceedings yet has declined to do so. Each Lender shall give prior
written notice to each other Lender of its intention to institute legal
proceedings in any jurisdiction.
29.3 If at any time any Lender (the "Refunding Bank") shall be required to
refund any amount which has been paid to or received by it on account of
any part of any amount payable by the Borrower hereunder and in respect of
which it has paid an amount to any other Lender pursuant to Art. 29.1,
such other Lender shall against re-transfer of the purchased participation
in the Advance including the claims for payment of interest repay a
proportionate amount of the sum so refunded together with such amount (if
any) as is necessary to reimburse the Refunding Bank the appropriate
portion of any interest it shall have been obliged to pay when refunding
such amount as aforesaid for the period whilst such other Lender held the
amounts to be refunded.
29.4 If a Lender receives satisfaction as set forth in Art. 29.1, it shall give
notice thereof to the Facility Agent. The Facility Agent shall then
calculate the amount to be paid pursuant to Art. 29.1. Such Lender shall
pay this amount within the time period set forth by the Facility Agent to
the Facility Agent which will then distribute the amount among the other
Lenders. Each of the Lenders hereby authorises the Facility Agent to
assign to the Lender receiving such satisfaction and to accept the
assignment of, such participations in the Advance including claims for
payment of interest on their behalf as set forth in Art. 29.1. The
Facility Agent shall confirm the assignments to all Lenders in writing
every time
<PAGE>
38
such assignments take place. Art. 29.4 sentences 1 through 3 apply mutatis
mutandis in case of a refund pursuant to Art. 29.3.
Art. 30
Set-off
Each Lender may set off any matured obligation owed by the Borrower under this
Agreement (to the extent beneficially owned by that Lender) against any
obligation (whether or not matured) owed by the Lender to the Borrower,
regardless of the place of payment, booking branch or currency of either
obligation. If the obligations are in different currencies, the Lender may
convert either obligation at a market rate of exchange in its usual course of
business for the purpose of set-off.
Art. 31
Miscellaneous
31.1 Amendments
Any alteration or amendment to this Agreement shall be in writing and
requires the consent of the Borrower and of the Majority Lenders provided,
however, that any alteration or amendment to Art. 1.18, 1.38, 2.2, 2.3, 4,
5, 7, 9, 11, 12, 15, 16, 17, 19, 20, 27.2, 29, 31.1 and 31.2 requires the
consent of all Lenders. Verbal agreements shall have no legal effect.
31.2 Governing Law
The form and contents of this Agreement, as well as the rights and
obligations of the Lenders, the Borrower, the Facility Agent and the
Arranger shall be construed according to the laws of the Federal Republic
of Germany in every respect.
31.3 Partial Invalidity
Should any provision of this Agreement be or become wholly or partly,
invalid, then the remaining provisions shall remain valid. Invalid
provisions shall be construed in accordance with the intent of the parties
and the purpose of this Agreement.
31.4 Place of Performance
Place of performance of this Agreement shall be Munich.
31.5 Jurisdiction
The applicable place of jurisdiction for all disputes arising out of or in
connection with this Agreement shall be Munich. The Lenders and the
Facility Agent may however, at their option, commence proceedings before
any other competent court of law in the Federal Republic of Germany and/or
in any other country in which assets of the Borrower are situated. In the
latter case the laws of the Federal Republic of Germany shall, pursuant to
Art. 31.2, also be applicable.
31.6 Annexes
<PAGE>
39
The Annexes 1 through 3 form part of this Agreement.
31.7 Counterparts
This Agreement has been executed in the English language in 3
(three) counterparts. One copy shall be provided to the Borrower
and to each of the Arranger and Bayerische Vereinsbank
Aktiengesellschaft as Lender. Each executed copy shall have the
effect of an original.
<PAGE>
40
January , 1998
Bayerische Vereinsbank Aktiengesellschaft
.......................................................
(in its capacity as Arranger, Lender and Facility Agent)
January , 1998
Steinbeis Gessner GmbH
.......................................................
<PAGE>
41
Annex 1
Drawdown Request
[Steinbeis Gessner GmbH Letterhead]
To: Bayerische Vereinsbank AG
.........................
Federal Republic of Germany
Telefax:
Date: [ ]
Pursuant to Art. 5.2 of the Agreement dated January [ o ], 1998 between us and
the Lenders (the "Capex Loan Agreement"), we hereby request the following
drawdown under the Capex Loan Agreement:
(a) Drawdown Date: [o]
(b) Amount of Advance: [o]
(c) Interest Period: [o]
(d) The account to which the
Advance is to be transferred: [o]
We hereby confirm that:
(i) the representations and warranties set out in Art. 18 of the
Capex Loan Agreement are correct at the date hereof; and
(ii) no Event of Default set out in Art. 20 of the Capex Loan Agreement (or any
event which with the giving of notice or lapse of time might constitute an
Event of Default) has occurred and is continuing or might result from the
making of the Advance.
Steinbeis Gessner GmbH
----------------------
<PAGE>
42
Annex 2
Notice to Lenders of Advance Due
[Bayerische Vereinsbank's Letterhead]
To: [Lender]
Date: [o]
Pursuant to Art. 5.3 of the agreement dated January [o], 1998 between Steinbeis
Gessner GmbH and the Lenders (the "Capex Loan Agreement"), we hereby give notice
of the Borrower's Drawdown Request under the Capex Loan Agreement:
(a) Drawdown Date: [o]
(b) Amount of Advance: [o]
(c) Lender's participation: [o]
(d) Account: [o]
We confirm that all conditions precedent in accordance with Art. 4 of the Capex
Loan Agreement have been fulfilled or complied with by the Borrower.
We request that you transfer the above amount, being your Share of the
Advance to our Account No........... with..............no later than
10:00 a.m. Munich time on the Drawdown Date.
BAYERISCHE VEREINSBANK AG
-------------------------
<PAGE>
43
Annex 2
Group Structure Chart
[Graphic omitted]
FIBERMARK, INC.
AMENDED AND RESTATED NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
ADOPTED ON FEBRUARY 18, 1998
R E C I T A L S :
A. FiberMark, Inc. (the "Company") adopted on February 28, 1994, the
1994 Directors Stock Option Plan (the "Plan") to provide a means to retain the
services of persons serving as Non-employee Directors of the Company (as
hereinafter defined) and to provide incentives for such Directors to exert
maximum efforts for the success of the Company.
B. On May 9, 1996, the stockholders of the Company approved the
Company's Amended 1994 Directors Stock Option Plan to add additional shares to
be awarded to Directors with accelerated vesting based on the Company achieving
certain stock price levels.
C. Pursuant to Section 11 of the Plan, the Board of Directors (the
"Board") has authority to amend and restate the Plan and the Board desires to
amend and restate the Plan to add additional shares to be awarded pursuant to
the FiberMark, Inc. Amended and Restated Non-Employee Directors Stock Option
Plan (the "Directors Plan") subject to stockholder approval.
NOW, THEREFORE, the Directors Plan is as follows:
1. PURPOSE.
(a) The purpose of the Directors Plan is to provide a means by which each
director of the Company who is not otherwise employed on a full-time basis by
the Company (each such person being hereafter referred to as a "Non-employee
Director") will be given an opportunity to purchase stock of the Company.
(b) The Company, by means of the Directors Plan, seeks to retain the
services of persons now serving as Non-employee Directors of the Company, to
secure and retain the services of persons capable of serving in such capacity,
and to provide incentives for such persons to exert maximum efforts for the
success of the Company.
2. ADMINISTRATION.
(a) The Directors Plan shall be administered by the Board of Directors of
the Company (the "Board") unless and until the Board delegates administration to
a committee, as provided in subparagraph 2(b). The Board or any committee to
which the Board delegates
<PAGE>
administration of the Directors Plan shall have full power and authority to
interpret and implement the Directors Plan, and its decisions are binding and
conclusive.
(b) The Board may delegate administration of the Directors Plan to a
committee composed of not fewer than two (2) members of the Board (the
"Committee"). If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Directors Plan, the powers
theretofore possessed by the Board, subject, however, to such resolutions, not
inconsistent with the provisions of the Directors Plan, as may be adopted from
time to time by the Board. The Board may abolish the Committee at any time and
revest in the Board the administration of the Directors Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
the Directors Plan shall not exceed in the aggregate four hundred twenty five
thousand (425,000) shares of the Company's common stock ("Stock"). If any option
granted under the Directors Plan shall for any reason expire or otherwise
terminate without having been exercised in full, the Stock not purchased under
such option shall again become available for the Directors Plan.
(b) The Stock subject to the Directors Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
4. ELIGIBILITY.
Options shall be granted only to Non-employee Directors of the Company.
5. GRANTS.
Subject to the maximum number of shares reserved under the Directors Plan:
Base Grants.
(a) On May 5, 1998, each person who is then a Non-employee Director of the
Company shall be granted an option to purchase 7,500 shares of Stock of the
Company subject to the vesting and other provisions set forth in the Directors
Plan.
(b) Each person who is, after May 5, 1998, elected by the stockholders of
the Company for the first time to be a Non-employee Director shall, upon the
date of his initial election to be a Non-employee Director by the Board or
stockholders of the Company, be granted an option to purchase seven thousand
five hundred (7,500) shares of Stock of the Company on the terms and conditions
set forth herein.
Performance Grants.
<PAGE>
(c) On May 5, 1998, each person who is then a Non-employee Director shall
be granted an option to purchase fifteen thousand (15,000) shares of Stock of
the Company on the terms and conditions set forth herein.
(d) Each person who is, after May 5, 1998, elected by the stockholders of
the Company for the first time to be a Non-employee Director shall, upon the
date of his initial election be a Non-employee Director by the Board or
stockholders of the Company, be granted an option to purchase fifteen thousand
(15,000) shares of Stock of the Company on the terms and conditions set forth
herein.
6. OPTION PROVISIONS.
Each option shall be subject to the following terms and conditions:
(a) Term.
The term of each option commences on the date it is granted and, unless
sooner terminated as set forth herein, expires on the date ("Expiration Date")
ten (10) years from the date of grant. If the optionee's service as a director
of the Company terminates for any reason or for no reason, the option shall
terminate on the earlier of the Expiration Date or the date twelve (12) months
following the date of termination of service; provided, however, that if such
termination of service is due to the optionee's death, the option shall
terminate on the earlier of the Expiration Date or twenty-four (24) months
following the date of the optionee's death. In any and all circumstances, an
option may be exercised following termination of the optionee's service as a
Director of the Company only as to that number of shares as to which it was
exercisable on the date of termination of such service under the provisions of
subparagraph 6(e).
(b) Exercise Price.
The exercise price of each option shall be one hundred percent
(100%) of the Fair Market Value of the Stock subject to such option on the date
such option is granted and shall be stated in the stock option issued to the
director. "Fair Market Value" means, as of any date, the value of the common
stock of the Company determined as follows:
(1) If the Stock is listed on any established stock exchange or a
national market system, including without limitation the New York Stock Exchange
("NYSE"), the Fair Market Value of a share of common stock shall be the closing
sales price for such Stock (or the mean between the closing representative bid
and the asked price, if no sales were reported) as quoted on such system or
exchange (or the exchange with the greatest volume of trading in Stock) on the
last market trading day prior to the day of determination, as reported in The
Wall Street Journal or such other sources as the Board deems reliable;
(2) If the Stock is quoted on the NYSE or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a share of Stock shall be the mean between the closing bid and
asked prices for the common stock on the last
<PAGE>
market trading day prior to the day of determination, as reported in the Wall
Street Journal or such other source as the Board deems reliable; or
(3) In the absence of an established market for the Stock, the Fair
Market Value shall be determined in good faith by the Board.
(c) Payment of Exercise Price.
The optionee may elect to make payment of the option exercise price
under one of the following alternatives:
(1) Payment of the exercise price in cash or check at the time
of exercise; or
(2) Provided that at the time of the exercise the Company's
common stock is publicly traded and quoted regularly in The Wall Street Journal,
payment by delivery of shares of common stock of the Company already owned by
the optionee, held for the period required to avoid a charge to the Company's
reported earnings, and owned free and clear of any liens, claims, encumbrances
or security interest, which common stock shall be valued at fair market value on
the date preceding the date of exercise in accordance with such terms or
conditions as may be established; or
(3) Payment by a combination of the methods of payment
specified in subparagraph 6(c)(1) and 6(c)(2) above.
Notwithstanding the foregoing, an option may be exercised pursuant to a
program, if any established by the Company, under Regulation T as promulgated by
the Federal Reserve Board which results in the receipt of cash (or check) by the
Company prior to the issuance of shares of the Company's common stock.
(d) Transferability.
An option shall not be transferable except by will or by the laws of
descent and distribution, and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person or by his guardian or
legal representative. The person to whom the Option is granted may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionee, shall
thereafter be entitled to exercise the Option.
(e) Option Vesting.
Base Grant.
<PAGE>
(1) Any option granted pursuant to Section 5a or 5b of this
Directors Plan (the "Base Grant") shall become exercisable at a rate of twenty
percent (20%) per year for five (5) years, commencing on the earlier of the
first anniversary of the date of grant of the option or the following annual
meeting of the Company and continuing thereafter annually to vest at such
earlier date. In order for an optionee's shares to vest, the optionee must have,
during the entire period prior to such vesting date, continuously served as a
Non-employee Director of the Company, whereupon such option shall become
exercisable in accordance with its terms with respect to that portion of the
shares represented by that installment. The Board or the Committee reserves the
right to accelerate vesting of options granted as a Base Grant when, in its
discretion, acceleration of the option is prudent under the circumstances.
Performance Grant.
(2) One hundred percent (100%) of the shares subject to an option granted
under the Performance Grants of this Directors Plan (Section 5(c) or 5(d)) shall
vest and the options shall become exercisable eight (8) years from the option
grant date if the Optionee is still serving as a director of the Company on such
date. Notwithstanding the foregoing, the time of vesting of each such option
shall be accelerated to the extent and upon the occurrence of the events
described below:
a. Fifty percent (50%) of the shares subject to each such option
shall become exercisable either:
(i) at such time as there is an established public market for
the Stock and the per share fair market value of the Company's stock reaches a
level of at least Thirty Dollars ($30) for a period of at least twenty (20)
consecutive trading days, as reported on any established stock exchange or
national market system identified in Section 6(b)(1) or (2) of the Director
Plan; or
(ii) in the event of a merger or consolidation of the Company
in which the stockholders prior to such event do not hold at least a majority
ownership of the surviving or acquiring corporation following such event, or of
the sale of substantially all of the assets or a similar arrangement where the
shares of the Company are assigned a value (or reasonably can be determined to
have a value) of Thirty Dollars ($30) or more for purposes of such merger,
consolidation or asset sale.
b. An additional twenty-five percent (25%) of the shares subject to
each such option shall become exercisable at such time as there is an
established public market for the Stock and the per share fair market value of
the Company's stock (as described in subparagraph 6e(2)(a)(i) above) reaches
Thirty-four Dollars ($34) for at least twenty (20) consecutive trading days or
is valued at $34 per share in a merger, consolidation or asset sale (as
described in subparagraph 6(e)(2)(a)(ii) above).
c. The remaining twenty-five percent (25%) of the shares of Stock
subject to each such option shall become exercisable at such time as there is an
established public market for the Stock and the per share fair market value of
the Company's stock (as described in
<PAGE>
subparagraph 6(e)(2)(a)(i) above) reaches Thirty-eight Dollars ($38) for at
least twenty (20) consecutive trading days or is valued at $38 per share in a
merger, consolidation or asset sale (as described in subparagraph 6(e)(2)(a)(ii)
above).
(f) The Company may require any optionee, or any person to whom an option
is transferred under subparagraph 6(d), as a condition of exercising any such
option: (i) to give written assurances satisfactory to the Company as to the
optionee's knowledge and experience in financial and business matters; and (ii)
to give written assurances satisfactory to the Company stating that such person
is acquiring the Stock subject to the option for such person's own account and
not with any present intention of selling or otherwise distributing the Stock.
(g) The Company is not required to issue Stock to the holder of an option
until the Company has determined to its satisfaction that the person exercising
an option is entitled to do so.
(h) Notwithstanding anything to the contrary contained herein, an option
may not be exercised unless the shares issuable upon exercise of such option are
then registered under the Securities Act of 1933 as amended (the "Securities
Act") or, if such shares are not then so registered, the Company has determined
that such exercise and issuance would be exempt from the registration
requirements of the Securities Act.
(i) The Company reserves the right to impose ownership or transfer
restrictions on any shares purchased by exercise of an option and to require
such shares to bear a restrictive legend to comply with the Securities Act.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the Directors Plan, the
Company shall keep available at all times the number of shares of Stock required
to satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Directors Plan such authority as may be
required to issue and sell shares of Stock upon exercise of the options granted
under the Directors Plan; provided, however, that this undertaking shall not
require the Company to register under the Securities Act either the Directors
Plan, any option granted under the Directors Plan, or any Stock issued or
issuable pursuant to any such option. If, after reasonable efforts, the Company
is unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of Stock under the Directors Plan, the Company shall be relieved from any
liability for failure to issue and sell Stock upon exercise of such options.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of Stock pursuant to options granted under the
Directors Plan shall constitute general funds of the Company.
<PAGE>
9. MISCELLANEOUS.
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
(b) Throughout the term of any option granted pursuant to the Directors
Plan, the Company shall make available to the holder of such option, not later
than one hundred twenty (120) days after the close of each of the Company's
fiscal years during the option term, upon request, such financial and other
information regarding the Company as comprises the annual report to the
stockholders of the Company provided for in the Bylaws of the Company and such
other information regarding the Company as the holder of such option may
reasonably request.
(c) Nothing in the Directors Plan or in any instrument executed pursuant
thereto shall confer upon any Non-employee Director any right to continue in the
service of the Company or shall affect any right of the Company, its Board or
stockholders to terminate the service of any Non-employee Director with or
without cause.
(d) No Non-employee Director, individually or as a member of a group, and
no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Directors Plan except as to such shares of Stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
(e) In connection with each option granted pursuant to the Directors Plan,
it shall be a condition precedent to the Company's obligation to issue or
transfer shares to a Non-employee Director, or to evidence the removal of any
restrictions on transfer, that such Non-employee Director make arrangements
satisfactory to the Company to insure that the amount of any federal or other
withholding tax required to be withheld with respect to such sale or transfer,
or such removal or lapse, is made available to the Company for timely payment of
such tax.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the Stock subject to the Directors Plan, or
subject to any option granted under the Directors Plan (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise), the
Directors Plan and outstanding options will be appropriately adjusted in the
class(es), kind and maximum number of shares subject to the Directors Plan and
the class(es), kind and number of shares and price per share of Stock subject to
outstanding options as determined by the Board in its discretion.
(b) In the event of: (1) a merger or consolidation in which the Company is
not the surviving corporation; (2) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or
<PAGE>
otherwise; or (3) any other capital reorganization in which more than fifty
percent (50%) of the shares of the Company entitled to vote are exchanged, any
surviving corporation, other than the Company, shall assume any options
outstanding under the Directors Plan or shall substitute similar options for
those outstanding under the Directors Plan or, if the Company is the surviving
corporation, such options shall continue in full force and effect. The Board is
granted the discretion to immediately vest the options granted in such a change
of control situation.
11. AMENDMENT OF THE DIRECTORS PLAN.
(a) The Board at any time, and from time to time, may amend the Directors
Plan, provided, however, except as provided in paragraph 10 relating to
adjustments upon changes in Stock, no amendment shall be effective unless
approved by the stockholders of the Company where the amendment will:
(i) Increase the number of shares which may be issued under the
Directors Plan;
(ii) Decrease the exercise price of an option granted; or
(iii) Extend the term of options granted; or
(iv) Modify the requirements as to eligibility for participation in
the Directors Plan (to the extent such modification requires stockholder
approval in order for the Directors Plan to comply with the requirements of Rule
16b-3); or
(v) Modify the Directors Plan in any other way if such modification
requires stockholder approval in order for the Directors Plan to comply with the
requirements of Rule 16b-3.
(b) Rights and obligations under any option granted before any amendment
of the Directors Plan shall not be impaired by such amendment unless (i) the
Company requests the consent of the person to whom the option was granted and
(ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE DIRECTORS PLAN.
(a) The Board may suspend or terminate the Directors Plan at any time.
Unless sooner terminated, the Directors Plan shall terminate on February 18,
2008. No options may be granted under the Directors Plan while the Directors
Plan is suspended or after it is terminated.
(b) Rights and obligations under any option granted while the Directors
Plan is in effect shall not be altered or impaired by suspension or termination
of the Directors Plan, except with the written consent of the person to whom the
option was granted.
<PAGE>
13. EFFECTIVE DATE OF DIRECTORS PLAN; CONDITIONS OF EXERCISE.
(a) The Directors Plan shall become effective upon adoption by the Board
of Directors, subject to the condition subsequent that the Directors Plan is
approved by the stockholders of the Company at the annual meeting scheduled for
May 5, 1998.
(b) No option granted under the Directors Plan shall be exercised or
exercisable unless and until the condition of subparagraph 13(a) above has been
met.
EXHIBIT 21
<PAGE>
EXHIBIT 21
List of Subsidiaries
FiberMark Durable Specialties, Inc.
FiberMark Filter and Technical Products, Inc.
FiberMark Japan K.K.
FiberMark (Hong Kong) Limited
FiberMark Office Products, LLC
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
FiberMark, Inc.
We consent to the incorporation by reference in the Registration Statement (No.
33-40527) on Form S-3 and Form S-8 (File No. 33-81702) of our report dated
February 6, 1998, with respect to the consolidated balance sheets of FiberMark,
Inc. as of December 31, 1997 and 1996, and the related consolidated statements
of income, stockholders' equity, and cash flows for the two years then ended,
and all related schedules, which report appears in the December 31, 1997, annual
report on Form 10-K of FiberMark, Inc.
KPMG Peat Marwick LLP
Burlington, Vermont
March 26, 1998
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement of FiberMark, Inc. on Form S-3, to be filed on or about March
25, 1998, of our report dated January 26, 1996, on our audits of the
financial statements of FiberMark, Inc. (formerly Specialty Paperboard,
Inc.) as of December 31, 1995. We also consent to the reference to our
firm under the caption "Experts."
Boston, Massachusetts Coopers & Lybrand L.L.P.
March 25, 1998
