<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-21692
ZARING HOMES, INC.
(Exact name of registrant as specified in its charter)
OHIO 31-1071348
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11300 CORNELL PARK DRIVE, SUITE 300, CINCINNATI, OHIO 45242-1825
(Address of principal executive offices) (Zip Code)
513-489-8849
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, without par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for the past 90 days.
YES X NO
--- ---
Number of common shares outstanding as of March 31, 1996: 4,780,150
Total Pages: 13
PAGE 1
<PAGE> 2
ZARING HOMES, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
PART I FINANCIAL INFORMATION
<S> <C>
Item 1 Consolidated Financial Statements
Consolidated Balance Sheets,
March 31, 1996, March 31, 1995 (unaudited),
and December 31, 1995 (audited)................................. 3
Consolidated Statements of Income,
Three Months Ended March 31, 1996 and 1995 (unaudited).......... 5
Consolidated Statement of Shareholders' Equity,
Three Months Ended March 31, 1996 (unaudited)................... 6
Consolidated Statements of Cash Flows,
Three Months Ended March 31, 1996 and 1995 (unaudited).......... 7
Notes to Consolidated Financial Statements (unaudited).............. 8
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 10
PART II OTHER INFORMATION............................................................ 12
SIGNATURES................................................................... 13
</TABLE>
PAGE 2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
ZARING HOMES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Unaudited
March 31, December 31,
------------------- ------------
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
Cash and cash equivalents........................................ $ 4,322 $ 1,317 $ 4,513
Receivables:
Homes sold................................................... -0- 93 -0-
Related parties ............................................. 19 92 -0-
Other........................................................ 165 293 108
Inventories:
Residential housing completed or
under construction........................................ 45,521 32,585 35,628
Land, development costs and finished lots.................... 32,100 47,740 38,532
Property and equipment, net...................................... 1,860 1,885 1,798
Investments in and advances to unconsolidated
joint ventures............................................... 1,374 1,723 1,578
Future tax benefit............................................... 801 801 801
Cash surrender value of life insurance and
other assets................................................. 2,771 1,851 2,480
------- ------- -------
$88,933 $88,380 $85,438
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
PAGE 3
<PAGE> 4
ZARING HOMES, INC.
CONSOLIDATED BALANCE SHEETS - (continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
(Dollars in Thousands)
<TABLE>
<CAPTION>
Unaudited
March 31, December 31,
------------------ ------------
1996 1995 1995
---- ---- ----
LIABILITIES:
<S> <C> <C> <C>
Term notes payable.......................................... $ 5,245 $ 5,245 $ 5,245
Revolving promissory notes.................................. 13,700 19,600 12,500
Subordinated notes payable.................................. 11,816 15,755 11,816
Accounts payable and unbilled amounts due
contractors............................................... 7,900 4,033 6,046
Accrued expenses............................................ 2,169 2,391 2,963
Customer deposits........................................... 3,405 1,218 1,703
Income taxes payable........................................ 477 43 854
------- ------- -------
Total liabilities................................... 44,712 48,285 41,127
------- ------- -------
SHAREHOLDERS' EQUITY:
Common shares, no par value, 18,000,000
shares authorized, 5,035,520 issued and
4,850,159 outstanding at March 31, 1995
and December 31, 1995, and 4,780,150
outstanding at March 31, 1996.................... 25,136 25,136 25,136
Additional paid-in capital.......................... 7,687 7,533 7,533
Retained earnings................................... 13,405 8,811 13,027
------- ------- -------
46,228 41,480 45,696
Less Treasury shares, at cost, 185,361 shares at............
March 31, 1995 and December 31, 1995,
and 255,370 shares at March 31, 1996............. (2,007) (1,385) (1,385)
------- ------- -------
Total shareholders' equity.......................... 44,221 40,095 44,311
------- ------- -------
$88,933 $88,380 $85,438
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
PAGE 4
<PAGE> 5
ZARING HOMES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
--------------------------
1996 1995
---- ----
<S> <C> <C>
REVENUES ................................................... $27,255 $20,230
COST OF SALES............................................... 22,464 16,544
------- -------
Gross profit....................................... 4,791 3,686
OPERATING EXPENSES:
Selling................................................. 2,420 1,674
General and administrative.............................. 1,803 2,013
------- -------
Income (loss) from operations...................... 568 (1)
------- -------
OTHER INCOME:
Investment income ...................................... 5 10
Income from unconsolidated
joint ventures .................................... 43 100
Other, net.............................................. 2 2
------- -------
Total other income................................. 50 112
------- -------
Income before provision for income taxes................ 618 111
Provision for income taxes.............................. 240 47
------- -------
Net income......................................... $ 378 $ 64
======= =======
Earnings per share...................................... $ 0.08 $ 0.01
======= =======
Weighted average shares outstanding..................... 4,774,601 4,850,159
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
PAGE 5
<PAGE> 6
ZARING HOMES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Additional Treasury Shares
Shares Common Paid-In # of Retained
Issued Shares Capital Shares Amount Earnings Total
------ ------ ------- ------ ------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 5,035,520 $25,136 $7,533 185,361 $(1,385) $13,027 $44,311
Purchase of Treasury Shares 135,009 (1,199) (1,199)
Sale of Treasury Shares 154 (65,000) 577 731
Net Income 378 378
--------- ------- ------ ------- ------- ------- -------
Balance, March 31, 1996 5,035,520 $25,136 $7,687 255,370 $(2,007) $13,405 $44,221
========= ======= ====== ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
PAGE 6
<PAGE> 7
ZARING HOMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 378 $ 64
Adjustments to reconcile net income to cash
provided by operating activities --
Depreciation............................................. 247 199
Income from unconsolidated joint ventures................ (43) (100)
Change in assets and liabilities:
Receivables.............................................. (76) 85
Inventories.............................................. (3,461) (6,553)
Cash surrender value of life insurance and other assets.. (291) 70
Accounts payable......................................... 1,854 (1,292)
Accrued expenses......................................... (794) (34)
Income taxes payable..................................... (377) (604)
Customer deposits........................................ 1,702 318
------- -------
Net cash provided (used) by operating activities.... (861) (7,847)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment......................... (309) (331)
Distributions from unconsolidated joint ventures............ 247 477
------- -------
Net cash provided (used) by investing activities.... (62) 146
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on notes payable................................. 4,670 5,235
Repayments on notes payables................................ (3,470) --
Purchase of Treasury Shares................................. (1,199) --
Reissuance of Treasury Shares............................... 731 --
------- -------
Net cash provided by financing activities........... 732 5,235
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................ (191) (2,466)
CASH AND CASH EQUIVALENTS, beginning of period.................. 4,513 3,783
------- -------
CASH AND CASH EQUIVALENTS, end of period........................ $ 4,322 $ 1,317
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest................................................. $ 440 $ 565
Income taxes............................................. $ 617 $ 645
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
PAGE 7
<PAGE> 8
ZARING HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Zaring Homes, Inc. (the Company), an Ohio corporation, whose principal business
is the designing, constructing, marketing, and selling of single-family homes
and the acquisition and development of land for sale as residential building
lots in Cincinnati, Ohio including Northern Kentucky, Nashville, Tennessee,
Indianapolis, Indiana, and Raleigh/Durham, North Carolina.
In December 1995, the Company formed Zaring Holdings, Inc. (Holdings), an Ohio
corporation, a wholly-owned subsidiary, for the purpose of acquiring land and
residential lots in the southeastern United States market. The accounts of
Holdings have been consolidated in the accompanying consolidated financial
statements.
The Company is the majority shareholder in Zaring Homes of Indiana, L.L.C.
(ZHILLC), an Indiana corporation, and exercises control over all decisions as
set forth in the operating agreement. ZHILLC was formed in 1994 for the purpose
of designing, constructing, marketing and selling single-family homes and the
acquisition and development of land for sale as residential building lots in
Indianapolis, Indiana. The accounts of ZHILLC have been consolidated in the
accompanying financial statements.
The accompanying consolidated financial statements have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission for interim financial information. Since such financial statements do
not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements, they should be read in
conjunction with the consolidated financial statements and related footnotes
included in the Form 10-K for the fiscal year ended December 31, 1995 filed with
the Securities and Exchange Commission. The financial statements are unaudited,
but in the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation of the
Company's unaudited consolidated financial statements as of March 31, 1996, and
for the three months ended March 31, 1996 have been included. Operating results
for the three months ended March 31, 1996, are not necessarily indicative of
the results for the entire year.
2. Capitalized Interest
Interest is capitalized on land in the process of development and residential
housing construction costs during the development and construction period. The
following table summarizes the activity with respect to capitalized interest:
<TABLE>
<CAPTION>
Three Months Ended March 31, 1996 1995
- - ---------------------------- ---- ----
(Dollars in Thousands)
<S> <C> <C>
Capitalized interest, beginning of period................... $1,123 $ 751
Interest incurred........................................... 556 707
Interest expensed........................................... (672) (565)
------ -----
Capitalized interest, end of period......................... $1,007 $ 893
====== =====
</TABLE>
PAGE 8
<PAGE> 9
ZARING HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
3. Notes Payable
The subordinated notes payable bear interest at a fixed rate of 7.45% and are
payable in four equal annual installments beginning in June 1995. The term notes
payable bear interest at a fixed rate of 7.95% and are payable in 12 equal
quarterly installments beginning in September 1998.
As of March 31, 1996, the Company had outstanding balances of $13,700 under a
$30 million revolving credit facility, and $3,500 in letters of credit. This
revolving credit facility has a term of three years and enables the Company to
borrow funds at interest rates that range from 140 basis points over the Federal
Fund rate up to the prime rate.
4. Shareholders' Equity
Preferred Shares - The Company is authorized to issue up to 2,000,000
preferred shares of which 1,000,000 are voting. No preferred shares have
been issued.
5. Litigation
On March 31, 1995, a verdict was delivered against the Company in an action
brought by a former employee. The former employee was awarded $250, plus
attorney's fees. The Company, upon advice by counsel, is pursuing all avenues
in the post trial and appellate review process. The Company has reserved the
damages and an estimate of attorney's fees in the accompanying
consolidated financial statements.
PAGE 9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's business and the homebuilding industry are subject to changes in
national and local economic conditions, as well as other factors, including
employment levels, availability of financing, interest rates, consumer
confidence and housing demand. The Company's results of operations for the
periods presented reflect the cyclical nature of the homebuilding industry.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain information
regarding the Company's operations.
<TABLE>
<CAPTION>
(Dollars in thousands, except per share amounts)
Three Months
Ended March 31,
--------------------------------------------------------------
1996 1995
---- ----
Amount % Amount %
------ - ------ -
<S> <C> <C> <C> <C>
Net revenues (1) $27,255 100.0 $20,230 100.0
Cost of sales 22,464 82.4 16,544 81.8
------- ----- ------- -----
Gross profit 4,791 17.6 3,686 18.2
Selling, general and
administrative expenses 4,223 15.5 3,687 18.2
------- ----- ------- -----
Operating income (loss) 568 2.1 (1) --
Other income 50 .2 112 0.5
------- ----- ------- -----
Income before provision
for income taxes 618 2.3 111 0.5
Provision for income taxes 240 0.9 47 0.2
------- ----- ------- -----
Net income $ 378 1.4 $ 64 0.3
======= ===== ======= =====
Earnings Per Share $ 0.08 $ 0.01
======= =======
Weighted average shares
outstanding 4,774,601 4,850,159
========= =========
- - ------------------------
(1) Revenue from a sale is recognized upon the closing of the sale.
</TABLE>
PAGE 10
<PAGE> 11
Three Months Ended March 31, 1996 Compared to March 31, 1995
Net revenues for the three month period ended March 31, 1996 increased by 35% to
$27.3 million from $20.2 million for the comparable period in 1995. The number
of homes closed increased by 29% to 120 homes from 93 homes during the same
period in 1995. The increase in units closed was primarily a result of the
closings from the Raleigh, North Carolina and Indianapolis, Indiana divisions,
closing 27 units for the period ended March 31, 1996 compared to one unit closed
for the period ended March 31, 1995. The Company's revenue increase for the
three months ended March 31, 1996 was also due, in part, to a 4.7% increase in
the average selling prices of homes closed of $225 from $215 for the
same period in 1995.
Net new sales contracts for the three month period ended March 31, 1996
increased by 113% to 304 units from 143 units for the comparable period in 1995.
The largest contributor was the Company's Cincinnati operation, with 49% of the
increase, followed by Nashville with 15%, and Raleigh and Indianapolis combined
accounted for 36% of the total unit increase. The Company's backlog consists of
homes for which the Company has entered into a sales contract, but which it has
not yet closed. The sales backlog on March 31, 1996 was 401 homes, with a total
sales value of $90 million compared to a sales backlog of 174 homes, with a
total value of $37.1 million as of March 31, 1995. The level of backlog is
expected to positively impact revenues in the second quarter of 1996.
Gross profit for the three month period ended March 31, 1996 increased $1.1
million from the same period in 1995. This increase was primarily a result of
increased revenues in the 1996 period. The gross profit percentage decreased to
17.6% for the three month period ended March 31, 1996 compared to 18.2% for the
three month period ended March 31, 1995. The decrease is attributable to a
higher net interest expense incurred during the period and a seasonal increase
in indirect construction expenses.
Selling and administrative expenses increased 13.5% to $4.2 million for the
three month period ended March 31, 1996 from $3.7 million for the comparable
period of 1995. Selling expenses as a percentage of revenue increased .6% for
the three month period ended March 31, 1996 compared to the same period of 1995.
General administrative expenses decreased by approximately $0.2 million for the
period ended March 31, 1996 compared to the same period for 1995. This net
decrease is due primarily to a $350 litigation reserve recorded in the same
period in 1995.
CAPITAL RESOURCES AND LIQUIDITY
Inventories at March 31, 1996 increased to $77.6 million compared to $74.2
million on December 31, 1995. This increase is primarily due to the additional
work in process inventory associated with the increased sales volume within the
Company's Cincinnati and Nashville operations and the construction of models
within the Company's Raleigh and Indianapolis operations. Also contributing to
this increase is the acquisition of finished lots and the development of raw
land for new neighborhoods.
The Company's financing needs depend upon its sales volume and inventory levels.
Historically, the Company has financed its operations through retained earnings
and unsecured lines of credit from financial institutions. None of the Company's
inventories are pledged as collateral to secure any borrowings. As of March 31,
1996, the Company has $16.3 million of unused, unsecured lines of credit
available. The Company believes that it will be able to fund its future
activities through a combination of operating cash flows, existing cash
balances, working capital management and its available credit.
PAGE 11
<PAGE> 12
On May 9, 1996, the Company executed a new credit agreement, which consists of
a $72.5 million revolving credit facility and a $15 million term loan. Ten
million of the revolving credit facility may be used for letters of credit. The
credit agreement bears interest at various options, including prime rate,
Federal Fund rate, and/or Libor (as defined), plus 125 to 162.5 basis points
based upon the Company's debt-to-equity ratio. The revolving credit facility
is a three year commitment expiring July 1, 1999 and the term loan is a five
year commitment expiring April 1, 2001 with principal payments totaling $750
per calender quarter.
PROVISIONS FOR WRITEDOWN TO NET REALIZABLE VALUE
The Company periodically reviews the value of land and inventories and
determines whether any writedowns need to be recorded to reflect declines in
value. No significant writedowns were made during the three month periods ended
March 31, 1996 or 1995. The estimated net realizable value of real estate
inventories represents management's estimate based on present plans and
intentions, selling prices in the ordinary course of business and anticipated
economic and market conditions. Accordingly, the realization of the value of the
Company's real estate inventories is dependent upon future events and conditions
that may cause actual results to differ from amounts presently estimated.
INFLATION
Housing demand, in general, is affected adversely by increases in interest
rates. If mortgage interest rates, material and labor costs increase
significantly, the Company's revenues, gross profit, and net income could be
adversely affected.
PART II - OTHER INFORMATION
Item 1. Litigation
On March 31, 1995, a verdict was delivered against the Company in an action
brought by a former employee. The former employee was awarded $250 plus
attorney's fees. The Company, upon advice by counsel, is pursuing avenues in
the post trial and appellate review process. The Company has reserved the
damages and an estimate of attorney's fees in the accompanying consolidated
financial statements.
The Company is subject to various other claims, lawsuits and administrative
proceedings arising in the ordinary course of business activities which seek
remedies or damages. The Company believes that any liability that may finally be
determined will not have a material effect on its financial position or results
of operation.
Items 2-5 None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.14 Credit Agreement between the Company, Zaring Holdings, Inc.,
Zaring Homes of Indiana, LLC, Zaring Homes Kentucky, LLC
and PNC Bank, Ohio National Association, as Agent,
NationsBank N.A. and The First National Bank of Chicago
as Co-Agents dated as of May 9, 1996
27 Financial Data Schedule
PAGE 12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZARING HOMES, INC.
(Registrant)
Date: By: /s/George E. Casey
--------------------------------------------
George E. Casey
President and Chief Executive Officer
Date: By: /s/Ronald G. Gratz
--------------------------------------------
Ronald G. Gratz
Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
PAGE 13
<PAGE> 14
EXHIBIT INDEX
Exhibits required to be filed by Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
Exhibit Number Description Location
- - -------------- ----------- --------
<S> <C> <C>
10.14 Credit Agreement between the Page_____.
Company, Zaring Holdings, Inc.,
Zaring Homes of Indiana, LLC
Zaring Homes Kentucky, LLC and
PNC Bank, Ohio National Association,
as Agent, NationsBank, N. A. and
The First National Bank of Chicago,
as Co-Agents dated as of May 9, 1996
27 Financial Data Schedule Page_____.
</TABLE>
<PAGE> 1
$72,500,000 REVOLVING CREDIT
$15,000,000 TERM LOAN
CREDIT AGREEMENT
by and among
ZARING HOMES, INC., as Borrower
and
ZARING HOLDINGS, INC.
and
ZARING HOMES OF INDIANA, LLC
and
ZARING HOMES KENTUCKY, LLC, as Guarantors
and
THE BANKS PARTY HERETO
and
PNC BANK, OHIO, NATIONAL ASSOCIATION, as Agent
and
NATIONSBANK, N.A.
and
THE FIRST NATIONAL BANK OF CHICAGO, as Co-Agents
Dated as of May 13, 1996
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
1. CERTAIN DEFINITIONS............................................................................................1
1.1. Certain Definitions.................................................................................1
1.2. Construction.......................................................................................18
1.3. Accounting Principles..............................................................................18
2. REVOLVING CREDIT AND SWING LOAN FACILITIES....................................................................18
2.1. The Commitments....................................................................................18
(a) Revolving Credit Commitments...............................................................18
(b) Swing Loan Commitment......................................................................19
2.2. Nature of the Banks' and the Borrower's Obligations................................................19
2.3. Certain Fees.......................................................................................19
(a) Facility Fees..............................................................................19
(b) Commitment Fees............................................................................19
2.4. Permanent Reductions of Commitments................................................................20
(a) Voluntary Reductions.......................................................................20
(b) Effect of Reductions.......................................................................20
2.5. Loan Requests......................................................................................21
(a) Revolving Credit Loan Requests.............................................................21
(b) Swing Loan Requests........................................................................21
2.6. Making Loans.......................................................................................22
(a) Revolving Credit Loans.....................................................................22
(b) Swing Loans................................................................................22
2.7. Borrowings to Repay Swing Loans....................................................................22
2.8. Notes..............................................................................................23
(a) Revolving Credit Notes.....................................................................23
(b) Swing Note.................................................................................23
2.9. Letter of Credit Subfacility.......................................................................23
(a) Issuance of Letters of Credit..............................................................23
(b) Participations.............................................................................24
(c) Letter of Credit Fees......................................................................24
(d) Disbursements, Reimbursement...............................................................24
(e) Documentation..............................................................................25
(f) Determinations to Honor Drawing Requests...................................................25
(g) Nature of Participation and Reimbursement Obligations......................................25
(h) Indemnity..................................................................................26
(i) Liability for Acts and Omissions...........................................................27
2.10. Extension by Banks of the Revolving Credit Expiration Date........................................28
2.11. Use of Proceeds...................................................................................28
3. TERM LOANS....................................................................................................28
3.1. Term Loan Commitments..............................................................................28
3.2. Nature of Banks' Obligations with Respect to Term Loans............................................28
3.3. Term Loan Facility Fee.............................................................................28
3.4. Term Loan Notes....................................................................................29
3.5. Use of Proceeds....................................................................................29
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
4. INTEREST RATES................................................................................................29
4.1. Interest Rate Options..............................................................................29
(a) Revolving Credit Interest Rate Options.....................................................29
(b) Term Loan Interest Rate Options............................................................30
(c) Interest Rate Margins......................................................................30
(d) Rate Quotations............................................................................31
4.2. Euro-Rate Interest Periods.........................................................................32
4.3. Interest After Default.............................................................................32
4.4. Euro-Rate Unascertainable..........................................................................33
4.5. Selection of Interest Rate Options.................................................................34
5. PAYMENTS......................................................................................................34
5.1. Payments...........................................................................................34
5.2. Pro Rata Treatment of the Banks....................................................................35
5.3. Interest Payment Dates.............................................................................35
5.4. Prepayments........................................................................................35
5.5. Additional Compensation in Certain Circumstances...................................................37
(a) Increased Costs or Reduced Return Resulting from Taxes, Reserves, Capital Adequacy
Requirements, Expenses, etc...........................................................37
(b) Indemnity..................................................................................38
5.6. Settlement Date Procedures.........................................................................38
6. REPRESENTATIONS AND WARRANTIES................................................................................39
6.1. Representations and Warranties.....................................................................39
(a) Organization and Qualification.............................................................39
(b) Capitalization and Ownership...............................................................39
(c) Subsidiaries...............................................................................40
(d) Power and Authority........................................................................40
(e) Validity and Binding Effect................................................................40
(f) No Conflict................................................................................40
(g) Litigation.................................................................................41
(h) Title to Properties........................................................................41
(i) Financial Statements.......................................................................41
(j) Margin Stock...............................................................................42
(k) Full Disclosure............................................................................42
(l) Taxes......................................................................................42
(m) Consents and Approvals.....................................................................42
(n) No Event of Default; Compliance with Instruments...........................................42
(o) Patents, Trademarks, Copyrights, Licenses, Etc.............................................43
(p) Insurance..................................................................................43
(q) Compliance with Laws.......................................................................43
(r) Material Contracts.........................................................................43
(s) Investment Companies.......................................................................44
(t) Plans and Benefit Arrangements.............................................................44
(u) Employment Matters.........................................................................45
(v) Environmental Matters......................................................................45
(w) Senior Debt Status.........................................................................46
(x) Restricted Transactions....................................................................47
6.2. Updates to Schedules...............................................................................47
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
7. CONDITIONS OF LENDING.........................................................................................47
7.1. First Loans........................................................................................47
7.2. Each Additional Loan...............................................................................49
8. COVENANTS.....................................................................................................50
8.1. Affirmative Covenants..............................................................................50
(a) Preservation of Existence, etc.............................................................50
(b) Payment of Liabilities, Including Taxes, etc...............................................50
(c) Maintenance of Insurance...................................................................50
(d) Maintenance of Properties and Leases.......................................................51
(e) Maintenance of Patents, Trademarks, etc....................................................52
(f) Visitation Rights..........................................................................52
(g) Keeping of Records and Books of Account....................................................52
(h) Plans and Benefit Arrangements.............................................................52
(i) Compliance with Laws.......................................................................52
(j) Use of Proceeds............................................................................53
(k) Subordination of Intercompany Loans, Other Loans and Advances to the Borrower..............53
8.2. Negative Covenants.................................................................................53
(a) Indebtedness...............................................................................53
(b) Liens......................................................................................54
(c) Guaranties.................................................................................54
(d) Loans and Investments......................................................................54
(e) Changes in the Senior Notes................................................................54
(f) Liquidations, Mergers, Consolidations, Acquisitions........................................54
(g) Dispositions of Assets or Subsidiaries.....................................................55
(h) Affiliate Transactions.....................................................................55
(i) Subsidiary, Partnerships and Joint Ventures................................................55
(j) Continuation of or Change in Business; Geographic Expansion................................56
(k) Plans and Benefit Arrangements.............................................................56
(l) Fiscal Year................................................................................57
(m) Changes in Organizational Documents........................................................57
(n) Minimum Fixed Charge Coverage Ratio........................................................57
(o) Minimum Tangible Net Worth.................................................................57
(p) Maximum Leverage Ratio.....................................................................57
(q) Speculative Units..........................................................................57
(r) Model Units................................................................................58
(s) Land Ownership or Acquisition..............................................................58
8.3. Reporting Requirements.............................................................................58
(a) Monthly Financial Statements...............................................................58
(b) Quarterly Financial Statements.............................................................58
(c) Annual Financial Statements................................................................59
(d) Quarterly Compliance Certificate of the Loan Parties; Updates to Schedules.................59
(e) Borrowing Base Certificate.................................................................59
(f) Notice of Default..........................................................................60
(g) Notice of Litigation.......................................................................60
(h) Budgets, Forecasts, Deliveries Under the Senior Notes, Other Reports and Information.......60
(i) Notices Regarding Plans and Benefit Arrangements...........................................61
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
9. DEFAULT.......................................................................................................62
9.1. Events of Default..................................................................................62
9.2. Consequences of Event of Default...................................................................65
10. THE AGENT....................................................................................................66
10.1. Appointment.......................................................................................66
10.2. Delegation of Duties..............................................................................67
10.3. Nature of Duties; Independent Credit Investigation................................................67
10.4. Actions in Discretion of Agent; Instructions from the Banks.......................................67
10.5. Reimbursement and Indemnification of Agent by the Borrower........................................68
10.6. Exculpatory Provisions............................................................................68
10.7. Reimbursement and Indemnification of Agent by Banks...............................................69
10.8. Reliance by Agent.................................................................................69
10.9. Notice of Default.................................................................................69
10.10. Notices..........................................................................................69
10.11. Banks in Their Individual Capacities.............................................................70
10.12. Holders of Notes.................................................................................70
10.13. Equalization of Banks............................................................................70
10.14. Successor Agent..................................................................................71
10.15. Agent's Fee......................................................................................71
10.16. Availability of Funds............................................................................71
10.17. Calculations.....................................................................................71
10.18. Beneficiaries....................................................................................72
11. MISCELLANEOUS................................................................................................72
11.1. Modifications, Amendments or Waivers..............................................................72
11.2. No Implied Waivers; Cumulative Remedies; Writing Required.........................................73
11.3. Reimbursement and Indemnification of Banks by the Borrower; Taxes.................................73
11.4. Holidays..........................................................................................74
11.5. Funding by Branch, Subsidiary or Affiliate........................................................74
(a) Notional Funding...........................................................................74
(b) Actual Funding.............................................................................74
11.6. Notices...........................................................................................74
11.7. Severability......................................................................................75
11.8. Governing Law.....................................................................................75
11.9. Prior Understanding...............................................................................75
11.10. Duration; Survival...............................................................................75
11.11. Successors and Assigns...........................................................................76
11.12. Confidentiality..................................................................................77
11.13. Counterparts.....................................................................................77
11.14. Agent's or Bank's Consent........................................................................77
11.15. Exceptions.......................................................................................77
11.16. Consent to Forum; Waiver of Jury Trial...........................................................77
11.17. Tax Withholding Clause...........................................................................78
11.18. Joinder of Guarantors............................................................................78
11.19. Limitation of Liability..........................................................................79
11.20. Co-Agents........................................................................................79
</TABLE>
<PAGE> 6
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
- - ---------
SCHEDULE 1.1(B) - COMMITMENT OF BANKS
SCHEDULE 2.9(a) - ROLLOVER LCS
SCHEDULE 6.1(a) - QUALIFICATIONS TO DO BUSINESS
SCHEDULE 6.1(b) - CAPITALIZATION
SCHEDULE 6.1(c) - SUBSIDIARIES
SCHEDULE 6.1(m) - CONSENTS AND APPROVALS
SCHEDULE 6.1(o) - PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES, ETC.
SCHEDULE 6.1(p) - INSURANCE POLICIES
SCHEDULE 6.1(v) - ENVIRONMENTAL DISCLOSURES
SCHEDULE 6.1(x) - RESTRICTED TRANSACTIONS
EXHIBITS
- - --------
EXHIBIT 1.1(A) - FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1(G)(1) - FORM OF GUARANTOR JOINDER
EXHIBIT 1.1(G)(2) - FORM OF GUARANTY AGREEMENT
EXHIBIT 1.1(I)(1) - FORM OF INTERCOMPANY SUBORDINATION AGREEMENT
EXHIBIT 1.1(I)(2) - FORM OF INTERCOMPANY SUBORDINATION JOINDER
EXHIBIT 1.1(R) - FORM OF REVOLVING CREDIT NOTE
EXHIBIT 1.1(S) - FORM OF SWING NOTE
EXHIBIT 1.1 (T) - FORM OF TERM NOTE
EXHIBIT 2.5(a) - FORM OF REVOLVING CREDIT OR TERM LOAN REQUEST
EXHIBIT 2.5(b) - FORM OF SWING LOAN REQUEST
EXHIBIT 7.1(d) - REQUIREMENTS OF OPINION OF COUNSEL
EXHIBIT 8.3(d) - FORM OF QUARTERLY COMPLIANCE CERTIFICATE
EXHIBIT 8.3(e) - FORM OF BORROWING BASE CERTIFICATE
<PAGE> 7
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of May 13, 1996, and is made
by and among ZARING HOMES, INC., an Ohio corporation (the "Borrower"), ZARING
HOLDINGS, INC., an Ohio corporation, ZARING HOMES OF INDIANA, LLC, an Indiana
limited liability company, ZARING HOMES KENTUCKY, LLC., a Kentucky limited
liability company, the BANKS (as hereinafter defined), PNC BANK, OHIO, NATIONAL
ASSOCIATION, in its capacity as agent for the Banks under this Agreement
(hereinafter referred to in such capacity as the "Agent"), and NATIONSBANK,
N.A., and THE FIRST NATIONAL BANK OF CHICAGO, as Co-Agents.
WITNESSETH:
WHEREAS, the Borrower has requested the Banks to provide a
revolving credit facility to the Borrower in an aggregate principal amount not
to exceed $72,500,000 and a term loan facility in an aggregate principal amount
not to exceed $15,000,000; and
WHEREAS, the revolving credit facility shall be used for
general corporate purposes and the term loan facility shall be used to refinance
existing indebtedness; and
WHEREAS, the Banks are willing to provide such credit upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, covenant and agree as follows:
1. CERTAIN DEFINITIONS
1.1 Certain Definitions.
In addition to words and terms defined elsewhere in this
Agreement, the following words and terms shall have the following meanings,
respectively, unless the context hereof clearly requires otherwise:
ACCOUNTS PAYABLE shall mean, as of any date of determination,
the accounts payable of the Loan Parties determined and consolidated in
accordance with GAAP.
ACTIVE COMMUNITY shall mean, as of any date of determination,
any community of geographically contiguous residential housing units which any
Loan Party is developing for sale or has sold to buyers, PROVIDED that (A) such
Loan Party has acquired or has an option to acquire in fee simple the lots
comprising such community (or the lots comprising the applicable phase of the
Loan Party's planned development of such community if such Loan Party is
developing such lots in separate phases) and either (i) the site improvements
have been
<PAGE> 8
completed on all such lots, or (ii) such Loan Party has (a) to the extent
required, posted bonds and provided any other security required in connection
with the completion of such site improvements and (b) received Regulatory
Approval for the construction of at least one residential unit within such
Active Community (such Regulatory Approval may be subject in some instances to
completion of certain improvements which are a condition to the issuance of a
building permit with respect to such unit) on such date; and (B) such Loan Party
is then actively soliciting for sale (or has sold all of) such lots or the
residential units on such lots with delivery to the buyer or buyers of such
units or lots contemplated within nine (9) months of the contract date.
Active Unit shall mean any residential building owned in fee simple by
a Loan Party which is under development or completed by a Loan Party in an
Active Community with respect to which (i) construction has progressed beyond
completion of such foundation and (ii) only one residential unit is or shall be
contained therein after completion of such building.
Affiliate, as to any person, shall mean any other person (i) which
directly or indirectly controls, is controlled by, or is under common control
with the Borrower, (ii) which beneficially owns or holds 10% or more of any
class of the voting stock of the Borrower, or (iii) 10% or more of the voting
stock (or in the case of a person which is not a corporation, 10% or more of
the equity interest) of which is beneficially owned or held, directly or
indirectly, by the Borrower. Control, as used herein, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a person, whether through the
ownership of voting securities, by contract or otherwise, including the power
to elect a majority of the directors or trustees of a corporation or trust, as
the case may be.
Agent shall mean PNC Bank, Ohio, National Association and its
successors.
Agent's Fee shall have the meaning assigned to that term in Section
10.15 hereof.
Agreement shall mean this Credit Agreement, as the same may be
supplemented, amended, restated or modified from time to time, including all
schedules and exhibits hereto.
Agreement of Sale shall mean a written agreement with a person, which
is not an Affiliate or Subsidiary of the Borrower, for the sale of a
residential housing unit to such person, fully executed by all parties to such
agreement, which shall be in form and substance satisfactory to the Agent,
which shall be accompanied by a cash deposit equal to the lesser of (x) the
customary percentage in any geographic area (but in no event less than two
percent (2%)) of the purchase price of the unit sold, or (y) the difference
between the purchase price set forth in such agreement and the amount of the
mortgage contingency set forth in such agreement, and which shall provide that
(i) the purchase price shall be paid in cash or by title company check,
certified or bank check or attorney trust account check at or before the
closing of the sale, the date of which shall be set forth in the agreement, and
(ii) the deposit may not be refunded except upon a breach by the seller. The
Borrower shall deliver to the Agent the form of Agreement of
-2-
<PAGE> 9
Sale which they propose to use for Agent's review prior to the Closing Date and
from time to time thereafter upon Agent's request. The Borrower shall not modify
such form in any material and adverse respect without the Agent's prior
approval. The Agent may at any time request to review executed Agreements of
Sale. The Borrower shall promptly deliver to the Agent copies of such Agreements
of Sale or make such Agreements of Sale available to the Banks for their review
as the Agent may elect.
Approved Land Inventory shall mean, on any date of determination,
the aggregate book value, determined in accordance with GAAP, of the
acquisition and development costs (excluding capitalized interest) of parcels
of land which are owned in fee simple by the Loan Parties (excluding the
acquisition and development costs of lots under Active Units), provided that
with respect to each such parcel, the applicable Loan Party has received
Regulatory Approval. Any asset which is either Sold Inventory, Model Inventory
or Unsold Building Inventory is excluded from Approved Land Inventory.
Assignment and Assumption Agreement shall mean an Assignment and
Assumption Agreement by and among a Purchasing Bank, the Transferor Bank and
the Agent, as Agent and on behalf of the remaining Banks, substantially in the
form of Exhibit 1.1(A).
Authorized Officer shall mean those persons designated by written
notice to the Agent from the Borrower, authorized on behalf of the Borrower to
execute notices, reports and other documents required hereunder. The Borrower
may amend such list of persons from time to time, provided that the Borrower
gives written notice of such amendment to the Agent.
Banks shall mean the financial institutions named on Schedule 1.1(B)
and their respective successors and assigns as permitted hereunder, each of
which is referred to herein as a Bank.
Base Net Worth shall mean the sum of (i) $40,000,000 plus (ii) 75% of
net income of the Borrower and its Subsidiaries determined and consolidated in
accordance with GAAP for each fiscal quarter in which net income is earned (as
opposed to a net loss) after December 31, 1995 through (and including) the date
of determination plus (iii) 75% of the net cash proceeds received from the sale
of shares of capital stock of the Borrower or any Subsidiary during the period
from December 31, 1995 through (and including) the date of determination minus
(iv) goodwill resulting from any acquisition or acquisitions permitted pursuant
to Section 8.2(f)(ii) not to exceed $5,000,000 in the aggregate, minus (v) 100%
of any dividends paid with respect to the Borrower's preferred stock to the
extent such dividends are actually paid in cash, provided in no event shall
Base Net Worth in any fiscal quarter for which net income is earned (as opposed
to a net loss) be increased by less than 60% of such net income as a result of
any deduction under this clause (v).
Base Rate shall mean the greater of (i) the interest rate per annum
announced from time to time by the Agent at its Principal Office as its then
prime rate, which rate may not be the lowest rate then being charged commercial
borrowers by the Agent, or (ii) the Federal Funds Effective Rate plus one-half
of one percent (1/2%) per annum.
-3-
<PAGE> 10
Base Rate Option shall mean the Revolving Credit Base Rate Option or
the Term Loan Base Rate Option.
Benefit Arrangement shall mean at any time an "employee benefit plan,"
within the meaning of Section 3(3) of ERISA, which is neither a Plan or a
Multiemployer Plan and which is maintained, sponsored or otherwise contributed
to, by any member of the ERISA Group.
Borrower shall mean Zaring Homes, Inc., a corporation organized and
existing under the laws of the State of Ohio.
Borrowing Base shall be determined based on the most recent Borrowing
Base Certificate delivered pursuant to Section 8.3(e) and shall mean the sum of
clauses (A) through (D) minus the sum of clauses (E) through (G), as follows:
(A) 100% of Sold Inventory; plus
(B) 80% of Model Inventory; plus
(C) 70% of Unsold Building Inventory; plus
(D) 50% of the Approved Land Inventory; minus
(E) the principal amount outstanding of the Term Loans; minus
(F) the principal amount outstanding of the Senior Notes; minus
(G) Accounts Payable;
provided, in no event shall clause (D) exceed 45% of the Borrowing Base;
provided, further, that no property subject to a Nonrecourse Purchase Money
Security Interest shall be included in clauses (A) - (D) above.
Borrowing Base Certificate shall have the meaning given to such term in
Section 8.3(e).
Borrowing Date shall mean, with respect to any Loan, the date for the
making thereof or the renewal or conversion thereof to the same or a different
Interest Rate Option, which shall be a Business Day.
Borrowing Tranche shall mean specified portions of Loans outstanding as
follows: (i) with respect to outstanding Loans to which the Euro-Rate Option
applies, each portion of such Loans which become subject to such option under
the same election by Borrower and which have the same Euro-Rate Interest Period
shall constitute one Borrowing Tranche, and (ii) all Loans to which the Base
Rate Option applies shall constitute one Borrowing Tranche.
-4-
<PAGE> 11
Business Day shall mean (i) with respect to matters relating
to the Euro-Rate Option, a day on which banks in the London interbank market are
dealing in U.S. Dollar deposits and on which commercial banks are open for
domestic and international business in Cincinnati, Ohio, and (ii) with respect
to any other matter, a day on which commercial banks are open for business in
Cincinnati, Ohio.
Change of Control shall mean any transaction or group of
transactions after which (i) Allen G. Zaring, III and Anne M. Zaring (together
with their respective executors, administrators or heirs in the event of the
death of either of them) shall directly or indirectly own less than twenty-five
percent (25%) of the Borrower's issued and outstanding common stock, or (ii)
another partnership, limited partnership, syndicate or other group which is
deemed a "person" within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934 owns more of the Borrower's issued and outstanding common
stock than is owned directly or indirectly in the aggregate by Allen G. Zaring,
III and Anne M. Zaring (together with their executors, administrators or heirs
in the event of the death of either of them).
Closing Date shall mean the Business Day on which the first
Loan shall be made, which shall be May 17, 1996. The Closing shall take place at
the offices of Frost & Jacobs in Cincinnati, Ohio, or at such other place as the
parties agree.
Co-Agents shall mean NationsBank, N.A. and The First National
Bank of Chicago and their respective successors.
Commitment Fee shall have the meaning assigned to that term in
Section 2.3.
Commitments shall mean collectively the Revolving Credit
Commitments, the Swing Loan Commitment and the Term Loan Commitments.
Consolidated Cash Flow from Operations shall mean, for any
period of determination, the following with respect to the Borrower and its
Subsidiaries for each item for such period determined and consolidated in
accordance with GAAP: (i) the sum of net income, depreciation, amortization,
other non-cash charges to net income, interest expense and income tax expense,
minus (ii) non-cash credits to net income.
Consolidated Fixed Charges shall mean, for any period of
determination, the sum of interest incurred (capitalized and expensed) and
scheduled principal installments of Indebtedness, in each case of the Borrower
and its Subsidiaries for such period determined and consolidated in accordance
with GAAP.
Consolidated Tangible Net Worth shall mean, as of any date of
determination, total stockholders' equity minus intangible assets, in each case
of the Borrower and its Subsidiaries as of such date determined and consolidated
in accordance with GAAP.
Consolidated Total Liabilities shall mean, for any fiscal
quarter for the fiscal quarter then ended, all Indebtedness and, without
duplication, all other liabilities of the
-5-
<PAGE> 12
Borrower and its Subsidiaries, determined and consolidated in accordance with
GAAP, excluding Indebtedness secured by Nonrecourse Purchase Money Security
Interests not to exceed, in the aggregate at any time, 15% of Consolidated
Tangible Net Worth. The Required Banks may, from time to time, upon the
Borrower's request, but in the exercise of the Required Banks' sole discretion,
agree to exclude from this definition specific performance letters of credit
which are issued on behalf of a Loan Party for the benefit of a municipality,
provided that the Borrower has demonstrated that the applicable development work
subject to such letter of credit is complete and paid for and there will be a
delay in the municipality reducing the letter of credit.
Dollar, Dollars, U.S. Dollars and the symbol $ shall mean
lawful money of the United States of America.
Environmental Complaint shall mean any written complaint
setting forth a cause of action for personal or property damage or natural
resource damage or equitable relief, order, notice of violation, citation,
request for information issued pursuant to any Environmental Laws by an Official
Body, subpoena or other written notice of any type relating to, arising out of,
or issued pursuant to any of the Environmental Laws or any Environmental
Conditions, as the case may be.
Environmental Conditions shall mean any conditions of the
environment, including, without limitation, the workplace, the ocean, natural
resources (including flora or fauna), soil, surface water, ground water, any
actual drinking water supply sources or water sources which could reasonably be
expected to be used to supply drinking water, substrata or the ambient air,
relating to or arising out of, or caused by the use, handling, storage,
treatment, recycling, generation, transportation, release, spilling, leaking,
pumping, emptying, discharging, injecting, escaping, leaching, disposal,
dumping, threatened release or other management or mismanagement of Regulated
Substances resulting from the use of, or operations on, the Property.
Environmental Laws shall mean all federal, state, local and
foreign Laws and regulations, including, without limitation, permits, licenses,
authorizations, bonds, orders, judgments, consent decrees issued, or entered
into, pursuant thereto, relating to pollution or protection of human health or
the environment or employee safety in the workplace or the operation of the
activities of the Borrower and its Subsidiaries.
ERISA shall mean the Employee Retirement Income Security Act
of 1974, as the same may be amended or supplemented from time to time, and any
successor statute of similar import, and the rules and regulations thereunder,
as from time to time in effect.
ERISA Group shall mean, at any time, the Borrower and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control and all other entities which,
together with the Borrower, are treated as a single employer under Section 414
of the Internal Revenue Code.
Euro-Rate shall mean with respect to the Loans comprising any
Borrowing Tranche to which the Euro-Rate Option applies for any Euro-Rate
Interest Period, the interest
-6-
<PAGE> 13
rate per annum determined by the Agent by dividing (the resulting quotient
rounded upward to the nearest 1/16 of 1% per annum) (i) the rate of interest
determined by the Agent in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) to be the average of
the rates of interest per annum for deposits in U.S. Dollars offered by banks in
the London interbank market to major money center banks at approximately 11:00
a.m. London time two (2) Business Days prior to the first day of such Euro-Rate
Interest Period for delivery on the first day of such Euro-Rate Interest Period
in amounts comparable to such Borrowing Tranche and having maturities comparable
to such Euro-Rate Interest Period by (ii) a number equal to 1.00 minus the
Euro-Rate Reserve Percentage. The Euro-Rate may also be expressed by the
following formula:
[average of rates offered to]
Euro-Rate = [major money center banks]
[in the London interbank market]
[as determined by Agent ]
1.00 - Euro-Rate Reserve Percentage
The Euro-Rate shall be adjusted with respect to any Euro-Rate Option outstanding
on the effective date of any change in the Euro-Rate Reserve Percentage as of
such effective date. The Agent shall give prompt notice to the Borrower of the
Euro-Rate as determined or adjusted in accordance herewith, which determination
shall be conclusive absent manifest error.
Euro-Rate Interest Periods shall have the meaning assigned to
that term in Section 4.2.
Euro-Rate Option shall mean the Revolving Credit Euro-Rate
Option or the Term Loan Euro-Rate Option.
Euro-Rate Portion shall mean, collectively, the Revolving
Credit Euro-Rate Portion and the Term Loan Euro-Rate Portion.
Euro-Rate Reserve Percentage shall mean the maximum percentage
(expressed as a decimal rounded upward to the nearest 1/16 of 1%) as determined
by the Agent (which determination shall be conclusive absent manifest error)
which is in effect during any relevant period, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
reserve requirements (including, without limitation, supplemental, marginal and
emergency reserve requirements) with respect to eurocurrency funding (currently
referred to as "Eurocurrency Liabilities") of a member bank in such System.
Event of Default shall mean any of the Events of Default
described in Section 9.1.
Facility Fees shall mean the fees referred to in Section
2.3(a) and 3.3.
Federal Funds Effective Rate for any day shall mean the rate
per annum (based on a year of 360 days and actual days elapsed and rounded
upward to the nearest 1/100 of
-7-
<PAGE> 14
1%) announced by the Federal Reserve Bank of New York (or any successor) on such
day as being the weighted average of the rates on overnight federal funds
transactions arranged by federal funds brokers on the previous trading day, as
computed and announced by such Federal Reserve Bank (or any successor) in
substantially the same manner as such Federal Reserve Bank computes and
announces the weighted average it refers to as the "Federal Funds Effective
Rate" as of the date of this Agreement; provided, if such Federal Reserve Bank
(or its successor) does not announce such rate on any day, the "Federal Funds
Effective Rate" for such day shall be the Federal Funds Effective Rate for the
last day for which such rate was announced.
GAAP shall mean generally accepted accounting principles as
are in effect from time to time, subject to the provisions of Section 1.3
hereof, and applied on a consistent basis (except for changes in application in
which the Borrower's independent certified public accountants concur) both as to
classification of items and amounts.
Governmental Acts shall have the meaning given to such term in
Section 2.9(h).
Guarantor shall mean each of the parties to this Agreement
which is designated as a "Guarantor" on the signature page hereof and each other
Person which joins this Agreement as a Guarantor after the date hereof pursuant
to Section 11.18.
Guarantor Joinder shall mean a joinder by a person as a
Guarantor under this Agreement, the Guaranty Agreement and the other Loan
Documents in the form of Exhibit 1.1(G)(1).
Guaranty of any person shall mean any obligation of such
person guaranteeing or in effect guaranteeing any liability or obligation of any
other person in any manner, whether directly or indirectly, including, without
limiting the generality of the foregoing, any agreement to indemnify or hold
harmless any other person, any performance bond or other suretyship arrangement
and any other form of assurance against loss, except endorsement of negotiable
or other instruments for deposit or collection in the ordinary course of
business.
Guaranty Agreement shall mean the Guaranty and Suretyship
Agreement in substantially the form attached hereto as Exhibit 1.1(G)(2)
executed and delivered by the Guarantors to the Agent for the benefit of the
Banks.
Indebtedness shall mean, as to any person at any time, any and
all indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such person for or in respect of: (i) borrowed money, (ii)
amounts raised under or liabilities in respect of any note purchase or
acceptance credit facility, (iii) reimbursement obligations under any letter of
credit, currency swap agreement, interest rate swap, cap, collar or floor
agreement or other interest rate management device, (iv) any other transaction
(including without limitation forward sale or purchase agreements, capitalized
leases, conditional sales agreements and undrawn and outstanding letters of
credit) having the commercial effect of a borrowing of money entered into
-8-
<PAGE> 15
by such person to finance its operations or capital requirements (but not
including trade payables and accrued expenses incurred in the ordinary course of
business which are not represented by a promissory note or other evidence of
indebtedness and which are not more than thirty (30) days past due), or (v) any
Guaranty of any of the foregoing.
Intercompany Subordination Agreement shall mean an
Intercompany Subordination Agreement among the Loan Parties in the form attached
hereto as Exhibit 1.1(I)(1).
Intercompany Subordination Joinder shall mean a joinder to the
Intercompany Subordination Agreement by each Person who becomes a Guarantor
under this Agreement after the date hereof, such joinder to be substantially in
the form of Exhibit 1.1(I)(2).
Interest Payment Date shall mean each date specified for the
payment of interest in Section 5.3.
Interest Rate Option shall mean Euro-Rate Option or a Base
Rate Option.
Internal Revenue Code shall mean the Internal Revenue Code of
1986, as the same may be amended or supplemented from time to time, and any
successor statute of similar import, and the rules and regulations thereunder,
as from time to time in effect.
Issuing Letter of Credit Bank shall mean, with respect to a
Letter of Credit, the Bank which issued that Letter of Credit pursuant to
Section 2.9.
Labor Contracts shall have the meaning assigned to that term
in Section 6.1(r).
Law or law shall mean any law (including common law),
constitution, statute, treaty, regulation, rule, ordinance, opinion, release,
ruling, order, injunction, writ, decree or award of any Official Body.
Letter of Credit shall have the meaning assigned to that term
in Section 2.9(a).
Letter of Credit Fee shall have the meaning assigned to that
term in Section 2.9(c).
Letter of Credit Outstandings shall mean at any time the sum
of (i) the aggregate undrawn face amount of outstanding Letters of Credit, and
(ii) the aggregate amount of all unpaid and outstanding Reimbursement
Obligations.
Leverage Ratio shall mean the ratio of Consolidated Total
Liabilities to Consolidated Tangible Net Worth.
Lien shall mean any mortgage, deed of trust, pledge, lien,
security interest, charge or other encumbrance or security arrangement of any
nature whatsoever, whether
-9-
<PAGE> 16
voluntarily or involuntarily given, including but not limited to any conditional
sale or title retention arrangement, and any assignment, deposit arrangement or
lease intended as, or having the effect of, security and any filed financing
statement or other notice of any of the foregoing (whether or not a lien or
other encumbrance is created or exists at the time of the filing).
Loan Documents shall mean this Agreement, the Notes, the
Guaranty Agreement, the Intercompany Subordination Agreement, and any other
instruments, certificates, agreements or documents delivered or contemplated to
be delivered hereunder or thereunder or in connection herewith or therewith, as
the same may be supplemented, amended or restated from time to time in
accordance herewith or therewith, and Loan Document shall mean any of the Loan
Documents.
Loan Parties shall mean the Borrower and the Guarantors.
Loan Request shall mean a request for a Revolving Credit Loan,
Swing Loan or Term Loan made in accordance with Section 2.5(a), 2.5(b) or 3.1
or, with respect to a Revolving Credit Loan or Term Loan, a request to select,
convert to or renew a Euro-Rate Option in accordance with Section 4.2.
Loans shall mean collectively, and Loan shall mean separately,
all Revolving Credit Loans, Swing Loans and Term Loans or any Revolving Credit
Loan, Swing Loan or Term Loan.
Material Adverse Change shall mean any set of circumstances or
events which (a) has or could reasonably be expected to have any material
adverse effect whatsoever upon the validity or enforceability of this Agreement
or any other Loan Document, (b) is or could reasonably be expected to be
material and adverse to the business, properties, assets, financial condition,
results of operations or prospects of the Borrower and its Subsidiaries taken as
a whole, (c) impairs materially or could reasonably be expected to impair
materially the ability of the Borrower and its Subsidiaries taken as a whole to
duly and punctually pay or perform their Indebtedness, or (d) impairs materially
or could reasonably be expected to impair materially the ability of the Agent or
any of the Banks, to the extent permitted, to enforce their legal remedies
against the Loan Parties pursuant to this Agreement or any other Loan Document.
Model Inventory shall mean, on any date of determination, the
aggregate book value, determined in accordance with GAAP (excluding capitalized
interest), of Model Units. Any asset which is Sold Inventory, Unsold Building
Inventory or Approved Land Inventory is excluded from Model Inventory.
Model Unit shall mean an Active Unit on which construction has
been completed which is not subject to an Agreement of Sale and which a Loan
Party has designated and is using or plans to use as a model for exhibition.
Money Management Arrangements shall mean the various deposit
accounts, sweep accounts, and other accounts and arrangements between the
Borrower and Agent relating to the management and investment of Borrower's cash
assets.
-10-
<PAGE> 17
Multiemployer Plan shall mean any employee benefit plan which
is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and
to which the Borrower or any member of the ERISA Group is then making or
accruing an obligation to make contributions or, within the preceding five Plan
years, has made or had an obligation to make such contributions.
Multiple Employer Plan shall mean a Plan which has two or more
contributing sponsors (including the Borrower or any member of the ERISA Group),
at least two of whom are not under common control, as such a plan is described
in Sections 4063 and 4064 of ERISA.
Nonrecourse Purchase Money Security Interest shall mean Liens
upon property securing loans to a Loan Party or deferred payments by a Loan
Party for the purchase of such property, provided that the recourse of the
creditor for repayment is limited to such property and does not extend to any
Loan Party.
Notes shall mean collectively, and Note shall mean separately,
the Revolving Credit Notes, the Swing Note and the Term Notes or any Revolving
Credit Note, Swing Note or Term Note.
Official Body shall mean any national, federal, state, local
or other government or political subdivision or any agency, authority, bureau,
central bank, commission, department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
PBGC shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA or any successor.
Partnership Interests shall have the meaning given to such
term in Section 6.1(c).
Permitted Investments shall mean:
(i) direct obligations of the United States of America
or any agency or instrumentality thereof or obligations backed by the full faith
and credit of the United States of America maturing in twelve months or less
from the date of acquisition;
(ii) commercial paper maturing in 180 days or less
rated not lower than A-1 by Standard & Poor's Corporation or P-1 by Moody's
Investors Service on the date of acquisition;
(iii) demand deposits, time deposits or certificates of
deposit maturing within one year in commercial banks whose obligations are rated
A-1, A or the equivalent or better by Standard & Poor's Corporation or Moody's
Investors Service on the date of acquisition; and
-11-
<PAGE> 18
(iv) capital stock of publicly-traded companies not to
exceed $100,000 in the aggregate on a cost-basis.
Permitted Liens shall mean:
(i) Liens for taxes, assessments, or similar charges,
incurred in the ordinary course of business and which are not yet due and
payable;
(ii) Pledges or deposits made in the ordinary course of
business to secure payment of workmen's compensation, or to participate in any
fund in connection with workmen's compensation, unemployment insurance, old-age
pensions or other social security programs;
(iii) Liens of mechanics, materialmen, warehousemen,
carriers, or other like Liens, securing obligations incurred in the ordinary
course of business that are not yet due and payable and Liens of landlords
securing obligations to pay lease payments that are not yet due and payable or
in default;
(iv) Good-faith pledges or deposits made in the
ordinary course of business to secure performance of bids, tenders, contracts
(other than for the repayment of borrowed money) or leases, not in excess of the
aggregate amount due thereunder, or to secure statutory obligations, or surety,
appeal, indemnity, performance or other similar bonds required in the ordinary
course of business;
(v) Encumbrances consisting of zoning restrictions,
easements or other restrictions on the use of real property, none of which
materially impairs the use of such property for the purpose contemplated by the
Loan Party or the value thereof, and none of which is violated in any material
respect by existing structures or land use;
(vi) Liens in favor of lessors or sellers on personal
property being leased or sold under leases or agreements of sale as and to the
extent permitted in Section 8.02(a)(iii);
(vii) Nonrecourse Purchase Money Security Interests,
provided that the aggregate amount of loans and deferred payments secured by
such Nonrecourse Purchase Money Security Interests shall not exceed 15% of
Consolidated Tangible Net Worth; and
(viii) The following, if the validity or amount thereof
is being contested in good faith by appropriate and lawful proceedings
diligently conducted so long as either no action to levy or execute thereon has
been commenced or if such action has commenced it has been stayed and shall
continue to be stayed:
(1) Claims or Liens for taxes, assessments or charges
due and payable and subject to interest or penalty, provided
that the applicable Loan Party maintains such reserves or
other appropriate provisions as shall be required by
-12-
<PAGE> 19
GAAP and pays all such taxes, assessments or charges forthwith
upon the commencement of proceedings to foreclose any such
Lien;
(2) Claims, Liens or encumbrances upon, and defects
of title to, real or personal property, including any
attachment of personal or real property or other legal process
prior to adjudication of a dispute on the merits; or
(3) Claims or Liens of mechanics, materialmen,
warehousemen, carriers, or other statutory nonconsensual
Liens.
Person or person shall mean any individual, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture, government or political subdivision or agency
thereof, or any other entity.
Plan shall mean at any time an employee pension benefit plan
(including a Multiple Employer Plan but not a Multiemployer Plan) which is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Internal Revenue Code and either (i) is maintained by
any member of the ERISA Group for employees of any member of the ERISA Group, or
(ii) has at any time within the preceding five years been maintained by any
entity which was at such time a member of the ERISA Group for employees of any
entity which was at such time a member of the ERISA Group.
PNC shall mean PNC Bank, Ohio, National Association, its
successors and assigns.
Potential Default shall mean any event or condition which with
notice, passage of time or a determination by the Agent or the Required Banks,
or any combination of the foregoing, would constitute an Event of Default.
Principal Office shall mean the main banking office of the
Agent in Cincinnati, Ohio.
Prohibited Transaction shall mean any prohibited transaction
as defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA
for which neither an individual nor a class exemption has been issued by the
United States Department of Labor.
Property shall mean all real property, both owned and leased,
of the Loan Parties.
Purchasing Bank shall mean a Bank which becomes a party to
this Agreement by executing an Assignment and Assumption Agreement.
Quarterly Compliance Certificate shall have the meaning given
to such term in Section 8.3(d).
Ratable Share shall mean the proportion that a Bank's
Commitment bears to the Commitments of all of the Banks.
-13-
<PAGE> 20
Regulated Substances shall mean any substance, including
without limitation any solid, liquid, semisolid, gaseous, thermal, thoriated or
radioactive material, refuse, garbage, wastes, chemicals, petroleum products,
byproducts, coproducts, impurities, dust, scrap, heavy metals, any substance
defined as a "hazardous substance," "pollutant," "pollution," "contaminant,"
"hazardous or toxic substance," "extremely hazardous substance," "toxic
chemical," "toxic waste," "hazardous waste," "industrial waste," "residual
waste," "solid waste," "municipal waste," "mixed waste," "infectious waste,"
"chemotherapeutic waste," "medical waste," "regulated substance" or any related
materials, substances or wastes as now or hereafter defined pursuant to any
Environmental Laws, ordinances, rules, regulations or other directives of any
Official Body, the generation, manufacture, extraction, processing,
distribution, treatment, storage, disposal, transport, recycling, reclamation,
use, reuse, spilling, leaking, dumping, injection, pumping, leaching, emptying,
discharge, escape, release or other management or mismanagement of which is
regulated by the Environmental Laws.
Regulation U shall mean Regulation U, T, G or X as promulgated
by the Board of Governors of the Federal Reserve System, as amended from time to
time.
Regulatory Approval shall mean with respect to any land held
by a Loan Party that all preliminary approvals, permits, licenses or other
authorizations under applicable Laws, including those which relate to zoning,
developmental restrictions and Environmental Laws from required state and local
governmental authorities and agencies or otherwise under Law with respect to the
Loan Party's development plan have been obtained such that there is vested in
such Loan Party the right to develop such real estate for primarily residential
purposes in accordance with the intentions of such Loan Party, subject only to
non-substantive conditions which may remain for final approval of such
development.
Reimbursement Obligations shall have the meaning assigned to
such term in Section 2.9(d)(0).
Reportable Event means a reportable event described in Section
4043 of ERISA and regulations thereunder with respect to a Plan or Multiemployer
Plan.
Restricted Transactions shall mean all of the following with
respect to the Loan Parties in an aggregate amount not to exceed at any time
twenty percent (20%) of Consolidated Tangible Net Worth: (i) loans by any of the
Loan Parties directly or indirectly to any other person (excluding any other
Loan Party), (ii) guaranties by any of the Loan Parties directly or indirectly
of the obligations of any other person (including any other Loan Party), (iii)
investments or contributions by any of the Loan Parties directly or indirectly
in or to the capital of or other payments directly or indirectly to or for the
benefit of any other person (excluding any other Loan Party), provided,
acquisitions permitted pursuant to Section 8.2(f)(ii) shall not constitute
Restricted Transactions, or (iv) other obligations, contingent or otherwise, of
any of the Loan Parties to or for the benefit of any other person (including any
other Loan Party).
Required Banks shall mean (i) if there are no Loans
outstanding, Banks whose Commitments aggregate at least 66-2/3% of the
Commitments of all of the Banks; or
-14-
<PAGE> 21
(ii) if there are Loans outstanding, Banks whose Loans outstanding aggregate at
least 66-2/3% of the total principal amount of the Loans outstanding hereunder.
Revolving Credit Base Rate Margin shall have the meaning
assigned to that term in Section 4.1(c).
Revolving Credit Base Rate Option shall mean the option of the
Borrower to have Revolving Credit Loans bear interest at the rate and under the
terms and conditions set forth in Section 4.1(a)(i).
Revolving Credit Base Rate Portion shall mean the portion of
the Revolving Credit Loans bearing interest at any time under the Revolving
Credit Base Rate Option.
Revolving Credit Commitment shall mean, as to any Bank at any
time, the amount initially set forth opposite its name on Schedule 1.1(B) in the
column labeled "Amount of Commitment for Revolving Credit Loans," and thereafter
on Schedule I to the most recent Assignment and Assumption Agreement, and
Revolving Credit Commitments shall mean the aggregate Revolving Credit
Commitments of all of the Banks.
Revolving Credit Euro-Rate Margin shall have the meaning
specified in Section 4.1(c).
Revolving Credit Euro-Rate Option shall mean the option of the
Borrower to have Revolving Credit Loans bear interest at the rate and under the
terms and conditions set forth in Section 4.1(a)(ii).
Revolving Credit Euro-Rate Portion shall mean the portion of
the Revolving Credit Loans bearing interest at any time under the Revolving
Credit Euro-Rate Option.
Revolving Credit Expiration Date shall mean, with respect to
the Revolving Credit Commitments, July 1, 1999.
Revolving Credit Loans shall mean collectively, and Revolving
Credit Loan shall mean separately, all Revolving Credit Loans or any Revolving
Credit Loan made by the Banks or one of the Banks to the Borrower pursuant to
Sections 2.1(a) and Section 2.6(a).
Revolving Credit Notes shall mean collectively, and Revolving
Credit Note shall mean separately, all the Revolving Credit Notes of the
Borrower in the form of Exhibit 1.1(R) evidencing the Revolving Credit Loans,
together with all amendments, extensions, renewals, replacements, refinancings
or refundings thereof in whole or in part.
Revolving Facility Usage shall mean at any time the sum of the
Revolving Credit Loans and Swing Loans outstanding and the Letter of Credit
Outstandings.
-15-
<PAGE> 22
Rollover LCs shall mean those letters of credit identified on
Schedule 2.9(a) which were issued by an Issuing Letter of Credit Bank prior to
the date hereof upon the application of the Borrower.
Senior Notes shall mean those three (3) term notes, each
bearing interest at the rate of 7.95% per annum and each dated May 18, 1994
issued by the Borrower in favor of PNC, The Fifth Third Bank and The Provident
Bank, respectively, in the respective principal amounts of $2,097,956,
$1,400,386 and $1,746,548.
Side Letter shall mean that certain letter dated February 6,
1996 between PNC Securities Corp. and the Borrower.
Settlement Date shall mean the Thursday of each week (if such
day is a Business Day and if not, the next succeeding Business Day) and any
other Business Day on which the Agent elects to effect settlement pursuant to
Section 5.6.
Sold Inventory shall mean, on any date of determination, the
aggregate book value, determined in accordance with GAAP (excluding capitalized
interest), of all Active Units which are subject to an Agreement of Sale and the
lots (and related site improvements and development costs) under such Active
Units to be sold therewith, provided that with respect to each such Active Unit
and related parcel of land, if any, the applicable Loan Party has received
Regulatory Approval. Any asset which is Model Inventory, Unsold Building
Inventory or Approved Land Inventory is excluded from Sold Inventory.
Speculative Unit shall mean any Active Unit which is (i) not
subject to an Agreement of Sale, and (ii) not a Model Unit.
Subsidiary of any person at any time shall mean (i) any
corporation or trust of more than 50% (by number of shares or number of votes)
of the outstanding capital stock or shares of beneficial interest normally
entitled to vote for the election of one or more directors or trustees
(regardless of any contingency which does or may suspend or dilute the voting
rights) is at such time owned directly or indirectly by such person or one or
more of such person's Subsidiaries, or any partnership of which such person is a
general partner or of which more than 50% of the partnership interests is at the
time directly or indirectly owned by such person or one or more of such person's
Subsidiaries, and (ii) any corporation, trust, partnership or other entity which
is controlled or capable of being controlled by such person or one or more of
such person's Subsidiaries.
Subsidiary Shares shall have the meaning assigned to such term
in Section 6.1(c).
Swing Loan Commitment shall mean PNC's commitment to make
Swing Loans to the Borrower pursuant to Section 2.1(b) in an aggregate principal
amount up to $5,000,000.
-16-
<PAGE> 23
Swing Loan Request shall mean a request for Swing Loans made
in accordance with Section 2.5(b).
Swing Loans shall mean collectively, and Swing Loan shall mean
separately, all swing loans or any swing loan made by PNC to the Borrower
pursuant to Sections 2.1(b) and 2.6(b).
Swing Note shall mean the Swing Note of the Borrower in the
form of Exhibit 1.1(S), evidencing the Swing Loans, together with all
amendments, extensions, renewals, restatements, refinancings or refundings
thereof in whole or in part.
Term Loan Base Rate Margin shall have the meaning specified in
Section 4.1(c).
Term Loan Base Rate Option shall mean the option of the
Borrower to have Term Loans bear interest at the rate and under the terms and
conditions set forth in Section 4.1(b)(i).
Term Loan Base Rate Portion shall mean the portion of the Term
Loans bearing interest at any time under the Term Loan Base Rate Option.
Term Loan Commitment shall mean, as to any Bank at any time,
the amount initially set forth opposite its name on Schedule 1.1(B) in the
column labeled "Amount of Commitment for Term Loans," and thereafter on Schedule
I to the most recent Assignment and Assumption Agreement, and Term Loan
Commitments shall mean the aggregate Term Loan Commitments of all of the Banks.
Term Loan Euro-Rate Option shall mean the option of the
Borrower to have Term Loans bear interest at the rate and under the terms and
conditions set forth in Section 4.1(b)(ii).
Term Loan Euro-Rate Portion shall mean the portion of the Term
Loans bearing interest at any time under the Term Loan Euro-Rate Option.
Term Loan Maturity Date shall mean April 1, 2001.
Term Loans shall mean collectively, and Term Loan shall mean
separately, all term loans or any term loan made by the Banks or one of the
Banks to the Borrower pursuant to Section 3.1.
Term Notes shall mean collectively, and Term Note shall mean
separately, all of the Term Notes of the Borrower in the form of Exhibit 1.1(T)
evidencing the Term Loans, together with all amendments, extensions, renewals,
restatements, replacements, refinancings or refunds thereof in whole or in part.
Transferor Bank shall mean the selling Bank pursuant to an
Assignment and Assumption Agreement.
-17-
<PAGE> 24
Unsold Building Inventory shall mean, on any date of
determination, the aggregate book value, determined in accordance with GAAP
(excluding capitalized interest) of all Active Units which are not subject to an
Agreement of Sale and the lots (and related site improvements and development
costs) under such Active Units to be sold therewith, provided that with respect
to each such Active Unit, the applicable Loan Party has received Regulatory
Approval. Any asset which is Sold Inventory, Model Inventory or Approved Land
Inventory is excluded from Unsold Building Inventory.
1.2 Construction.
Unless the context of this Agreement otherwise clearly
requires, references to the plural include the singular, the singular the plural
and part the whole, "or" has the inclusive meaning represented by the phrase
"and/or," and "including" has the meaning represented by the phrase "including
without limitation." References in this Agreement to "determination" of or by
the Agent or the Banks shall be deemed to include good faith estimates by the
Agent or the Banks (in the case of quantitative determinations) and good faith
beliefs by the Agent or the Banks (in the case of qualitative determinations).
Whenever the Agent or the Banks are granted the right herein to act in its or
their sole discretion, or to grant or withhold consent, such right shall be
exercised in good faith. The words "hereof," "herein," "hereunder" and similar
terms in this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement. The section and other headings contained
in this Agreement and the Table of Contents preceding this Agreement are for
reference purposes only and shall not control or affect the construction of this
Agreement or the interpretation thereof in any respect. Section, subsection,
schedule and exhibit references are to this Agreement unless otherwise
specified.
1.3 Accounting Principles.
Except as otherwise provided in this Agreement, all
computations and determinations as to accounting or financial matters and all
financial statements to be delivered pursuant to this Agreement shall be made
and prepared in accordance with GAAP (including principles of consolidation
where appropriate), and all accounting or financial terms shall have the
meanings ascribed to such terms by GAAP.
2. REVOLVING CREDIT AND SWING LOAN FACILITIES
2.1 The Commitments.
(a) Revolving Credit Commitments.
Subject to the terms and conditions hereof and relying upon
the representations and warranties herein set forth, each Bank severally agrees
to make Revolving Credit Loans to the Borrower at any time or from time to time
on or after the date hereof to, but not including, the Revolving Credit
Expiration Date, provided that, after giving effect to such Revolving Credit
Loans, (i) the aggregate principal amount of each Bank's Revolving Credit Loans
outstanding hereunder shall not exceed, at any one time, such Bank's Revolving
Credit
-18-
<PAGE> 25
Commitment minus such Bank's Ratable Share of the Letter of Credit Outstandings,
and (ii) the aggregate of the Revolving Facility Usage shall not exceed the
Borrowing Base. Within such limits of time and amount and subject to the other
provisions of this Agreement, the Borrower may borrow, repay and reborrow
pursuant to this Section 2.1(a).
(b) Swing Loan Commitment.
Subject to the terms and conditions hereof and relying upon
the representations and warranties herein set forth, and in order to facilitate
loans and repayments between Settlement Dates, PNC may make, at its option,
cancelable at any time for any reason whatsoever, swing loans (the "Swing
Loans") to the Borrower at any time or from time to time after the date hereof
to, but not including, the Revolving Credit Expiration Date in an aggregate
principal amount up to $5,000,000 (the "Swing Loan Commitment"), provided that
the aggregate principal amount of PNC's Swing Loans and the Revolving Credit
Loans of all the Banks at any one time outstanding shall not exceed the
Revolving Credit Commitments of all the Banks. Within such limits of time and
amount and subject to the other provisions of this Agreement, the Borrower may
borrow, repay and reborrow pursuant to this Section 2.1(b).
2.2 Nature of the Banks' and the Borrower's Obligations.
Each Bank shall be obligated to participate in each request
for Revolving Credit Loans pursuant to Section 2.6 in accordance with its
Ratable Share. The aggregate of each Bank's Revolving Credit Loans outstanding
hereunder to the Borrower at any time shall never exceed its Revolving Credit
Commitment minus its Ratable Share of the Letter of Credit Outstandings at such
time. The obligations of each Bank hereunder are several. The failure of any
Bank to perform its obligations hereunder shall not affect the obligations of
the Borrower to any other party, nor shall any other party be liable for the
failure of such Bank to perform its obligations hereunder. The Banks shall have
no obligation to make Revolving Credit Loans hereunder on or after the Revolving
Credit Expiration Date.
2.3 Certain Fees.
(a) Facility Fees.
The Borrower agrees to pay to the Agent for the account of
each Bank, as consideration for such Bank's Revolving Credit Commitment, a
nonrefundable facility fee equal to 0.125% of such Bank's Revolving Credit
Commitment, payable on the Closing Date.
(b) Commitment Fees.
Accruing from the Closing Date until the Revolving Credit
Expiration Date, the Borrower agrees to pay to the Agent for the account of each
Bank, as consideration for such Bank's Revolving Credit Commitment hereunder, a
commitment fee (the "Commitment Fee") equal to a percentage per annum (computed
on the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed) which shall be based upon the Leverage Ratio for the immediately
preceding fiscal quarter, as shown on the Borrower's most recently delivered
-19-
<PAGE> 26
financial statements pursuant to Section 8.3(b) as follows, and subject to
adjustment as set forth in Section 4.1(c)(ii), on the average daily unborrowed
amount of such Bank's Revolving Credit Commitment as the same may be constituted
from time to time (for purposes of this computation, PNC's Swing Loans shall be
deemed to be borrowed amounts under its Revolving Credit Commitment, Letter of
Credit Outstandings shall be deemed to be borrowed amounts under each Bank's
Revolving Credit Commitments in accordance with its Ratable Share, and the
amount of any Revolving Credit Loans that any Bank wrongfully fails to fund
shall not be deemed to be an unborrowed amount under such Bank's Revolving
Credit Commitment):
Leverage Ratio Commitment Fee(%)
-------------- -----------------
Equal to or greater than 1.20 to 1.00 .35%
Equal to or greater than 1.00 to 1.00
but less than 1.20 to 1.00 .25%
Equal to or greater than .80 to 1.00
but less than 1.00 to 1.00 .25%
Less than .80 .15%
All Commitment Fees shall be payable in arrears on the first Business Day of
each July, October, January and April after the date hereof, on the Revolving
Credit Expiration Date and upon any acceleration of the Notes.
2.4 Permanent Reductions of Commitments.
(a) Voluntary Reductions.
The Borrower shall be permitted, without premium or penalty,
at any time upon five (5) Business Days' notice to the Agent, to reduce
permanently the Revolving Credit Commitments in an aggregate amount of not less
than $1,000,000 and in integral multiples thereof for amounts in excess of
$1,000,000, and each Bank's Revolving Credit Commitments shall be reduced in
accordance with its Ratable Share; provided, however, the principal amount of
all Revolving Credit Loans outstanding at any time shall not be permitted to
exceed the Revolving Credit Commitments of all the Banks at such time.
(b) Effect of Reductions.
After each such reduction, the Commitment Fee shall be
calculated upon the Revolving Credit Commitments of the Banks as so reduced, and
the amount of the reduction of the Revolving Credit Commitments may not be
reinstated.
-20-
<PAGE> 27
2.5 Loan Requests.
(a) Revolving Credit Loan Requests.
Except as otherwise provided herein, the Borrower may from
time to time prior to the Revolving Credit Expiration Date request the Banks to
make Revolving Credit Loans, or renew or convert the Interest Rate Option
applicable to existing Revolving Credit Loans, by the delivery to the Agent, not
later than 2:00 p.m. Cincinnati time (i) three (3) Business Days prior to the
proposed Borrowing Date with respect to the making of Revolving Credit Loans to
which the Euro-Rate Option applies or the conversion to or the renewal of the
Euro-Rate Option for any Revolving Credit Loans; and (ii) not later than 11:00
a.m. Cincinnati time on the proposed Borrowing Date with respect to the making
of a Revolving Credit Loan to which the Base Rate Option applies or the last day
of the preceding Euro-Rate Interest Period with respect to the conversion to the
Base Rate Option for any Revolving Credit Loan, of a duly completed request
therefor substantially in the form of Exhibit 2.5(a) or a request by telephone
immediately confirmed in writing by letter, facsimile or telex (each, a
"Revolving Credit Loan Request" or "Loan Request"), it being understood that the
Agent may rely on the authority of any person making such a telephonic request
without the necessity of receipt of such written confirmation. Each Revolving
Credit Loan Request shall be irrevocable and shall specify (i) the proposed
Borrowing Date; (ii) the aggregate principal amount of the proposed Revolving
Credit Loans comprising the Borrowing Tranche, which shall be in integral
multiples of $250,000 and not less than $750,000 for Revolving Credit Loans to
which the Euro-Rate Option applies and not less than the lesser of $500,000 or
the maximum amount available under the Revolving Credit Commitments for
Revolving Credit Loans to which the Base Rate Option applies; (iii) whether the
Euro-Rate Option or the Base Rate Option shall apply to the proposed Revolving
Credit Loans comprising the Borrowing Tranche; and (iv) in the case of Revolving
Credit Loans to which the Euro-Rate Option applies, an appropriate Euro-Rate
Interest Period for the proposed Revolving Credit Loans comprising the Borrowing
Tranche. If no such notice is given at least three (3) Business Days prior to
the expiration of any Euro-Rate Interest Period for any Revolving Credit Loan or
portion thereof, the Borrower shall be deemed to have converted such Revolving
Credit Loan or portion thereof to the Base Rate Option commencing upon the last
day of that Euro-Rate Interest Period.
(b) Swing Loan Requests.
Except as otherwise provided herein, the Borrower may from
time to time prior to the Revolving Credit Expiration Date request PNC to make
Swing Loans by delivery to PNC not later than 11:00 a.m. Cincinnati time on the
proposed Borrowing Date of a duly completed request therefor substantially in
the form of Exhibit 2.5(b) or a request by telephone immediately confirmed in
writing by letter, facsimile or telex (each, a "Swing Loan Request" or "Loan
Request"), it being understood that the Agent may rely on the authority of any
person making such a telephonic request without the necessity of receipt of such
written confirmation. Each Swing Loan Request shall be irrevocable and shall
specify the proposed Borrowing Date and the principal amount of such Swing Loan,
which shall not be less than $100,000.
-21-
<PAGE> 28
2.6 Making Loans.
(a) Revolving Credit Loans.
The Agent shall, promptly after receipt by it of a Revolving
Credit Loan Request pursuant to Section 2.5(a), notify the Banks of its receipt
of such Revolving Credit Loan Request specifying: (i) the proposed Borrowing
Date and the time and method of disbursement of such Revolving Credit Loan; (ii)
the amount and type of such Revolving Credit Loan and the applicable Euro-Rate
Interest Period (if any); and (iii) the apportionment among the Banks of the
Revolving Credit Loans as determined by the Agent in accordance with Section
2.2. Each Bank shall remit the principal amount of each Revolving Credit Loan to
the Agent such that the Agent is able to, and the Agent shall, to the extent the
Banks have made funds available to it for such purpose, fund such Revolving
Credit Loan to the Borrower in U.S. Dollars and immediately available funds at
the Principal Office prior to 3:00 p.m. Cincinnati time on the Borrowing Date;
provided that if any Bank fails to remit such funds to the Agent in a timely
manner, the Agent may elect in its sole discretion to fund with its own funds
the Revolving Credit Loan of such Bank on the Borrowing Date; provided, further,
that such funding by the Agent shall not be deemed to increase the Revolving
Credit Commitment of the Agent or to reduce the Revolving Credit Commitment of
such Bank.
(b) Swing Loans.
(1) Swing Loans Pursuant to Swing Loan Requests. So
long as PNC elects to make Swing Loans, PNC shall, after receipt by it of a
Swing Loan Request pursuant to Section 2.5(b), fund such Swing Loan to the
Borrower in U.S. Dollars and immediately available funds at the Principal Office
prior to 5:00 p.m. Cincinnati time on the Borrowing Date; provided that after
PNC receives notice of default as set forth in Section 10.9, PNC shall not make
any Swing Loans under Section 2.6(b)(i) or (ii).
(ii) Swing Loans Pursuant to Money Management
Arrangements. So long as PNC elects to make Swing Loans, on any Business Day in
which there is an aggregate negative balance in respect of the accounts relating
to the Money Management Arrangements, PNC shall, on behalf of the Borrower and
without the requirement that the Borrower deliver a Swing Loan Request pursuant
to Section 2.5(b), make a Swing Loan to the Borrower in an amount equal to the
lesser of (a) the amount of the negative balance or (b) $2,500,000 but in no
event more than the amount, if any, available under the Swing Loan Commitment,
which amount shall be deposited in an account related to the Money Management
Arrangements.
2.7 Borrowings to Repay Swing Loans.
Any aggregate positive balance in the accounts related to the
Money Management Arrangements shall, to the extent available at the end of a
Business Day, be automatically applied to the repayment of the outstanding
balance of the Swing Loans. In addition, PNC may, at its option, exercisable at
any time for any reason whatsoever, demand repayment of the Swing Loans, and
each Bank shall make a Revolving Credit Loan in an amount equal to such Bank's
-22-
<PAGE> 29
Ratable Share of the aggregate principal amount of the outstanding Swing Loans,
plus, if PNC so requests, accrued interest thereon, provided that no Bank shall
be obligated in any event to make Revolving Credit Loans in excess of its
Revolving Credit Commitment. Revolving Credit Loans made pursuant to the
preceding sentence shall bear interest at the Base Rate Option and shall be
deemed to have been properly requested in accordance with Section 2.5(a) without
regard to any of the requirements of that provision. PNC shall provide notice to
the Banks (which may be telephonic or written notice by letter, facsimile or
telex) that such Revolving Credit Loans are to be made under this Section 2.7
and of the apportionment among the Banks, and the Banks shall be unconditionally
obligated to fund such Revolving Credit Loans (whether or not the conditions
specified in Section 7.2 are then satisfied) by the time PNC so requests, which
shall not be earlier than 3:00 p.m. Cincinnati time on the Business Day next
succeeding the date the Banks receive such notice from PNC.
2.8. Notes.
(a) Revolving Credit Notes.
The obligation of the Borrower to repay the aggregate
unpaid principal amount of the Revolving Credit Loans made to it by each Bank,
together with interest thereon, shall be evidenced by a promissory note of the
Borrower dated the Closing Date in the form of Exhibit 1.1(R) payable to the
order of each Bank in a face amount equal to the Revolving Credit Commitment of
such Bank. The Revolving Credit Notes shall be payable in full on the Revolving
Credit Expiration Date or earlier acceleration of the Notes.
(b) Swing Note.
The obligation of the Borrower to repay the unpaid
principal amount of the Swing Loans made to it by PNC, together with interest
thereon, shall be evidenced by a demand promissory note of the Borrower dated
the Closing Date in the form of Exhibit 1.1(S) payable to the order of PNC in a
face amount equal to the Swing Loan Commitment.
2.9. Letter of Credit Subfacility.
(a) Issuance of Letters of Credit.
The Borrower may request the issuance of a letter of
credit (each a "Letter of Credit") on behalf of itself or a Guarantor by
delivering to the applicable Issuing Letter of Credit Bank with a copy to the
Agent a completed application and agreement for letters of credit in such form
as the applicable Issuing Letter of Credit Bank may specify from time to time by
no later than 11:00 a.m. Cincinnati time at least three (3) Business Days, or
such shorter period as may be agreed to by the applicable Issuing Letter of
Credit Bank, in advance of the proposed date of issuance. Subject to the terms
and conditions hereof and in reliance on the agreements of the other Banks set
forth in this Section 2.9, such Issuing Letter of Credit Bank will issue a
Letter of Credit, provided that each Letter of Credit shall (A) have a maximum
maturity of twenty-four (24) months from the date of issuance, (B) in no event
expire later than five (5) Business Days prior to the Revolving Credit
Expiration Date and provided, further, that in no event shall (i) the
-23-
<PAGE> 30
Letter of Credit Outstandings exceed, at any one time, $10,000,000, (ii) the
Revolving Facility Usage exceed, at any one time, the Revolving Credit
Commitments, or (iii) the Revolving Facility Usage exceed the Borrowing Base.
Each of the Rollover LCs listed on Schedule 2.9(a) shall be deemed to have been
issued hereunder on the Closing Date by the applicable Issuing Letter of Credit
Bank and shall be deemed to be a Letter of Credit for all purposes of this
Agreement.
(b) Participations.
Immediately upon issuance of each Letter of Credit, and
without further action, each Bank shall be deemed to, and hereby agrees that it
shall, have irrevocably purchased for such Bank's own account and risk from the
applicable Issuing Letter of Credit Bank an individual participation interest in
such Letter of Credit and drawings thereunder in an amount equal to such Bank's
Ratable Share of the maximum amount which is or at any time may become available
to be drawn thereunder, and each such Bank shall be responsible to reimburse
such Issuing Letter of Credit Bank immediately for its Ratable Share of any
disbursement under any Letter of Credit which has not been reimbursed by the
Borrower in accordance with Section 2.9(d).
(c) Letter of Credit Fees.
The Borrower shall pay to the Agent for the ratable
account of the Banks a fee (the "Letter of Credit Fee") equal to the
then-applicable Revolving Credit Euro-Rate Margin per annum (computed on the
basis of a year of 360 days and actual days elapsed), which fee shall be
computed on the daily average Letter of Credit Outstandings. The Letter of
Credit Fee shall be payable quarterly in arrears commencing with the first
Business Day of each July, October, January and April, following issuance of
each Letter of Credit and on the Revolving Credit Expiration Date and any
earlier acceleration of the Notes. The Borrower shall pay to the applicable
Issuing Letter of Credit Bank for its own account a fronting fee as determined
by such Issuing Letter of Credit Bank and the Borrower. The Borrower shall also
pay to the applicable Issuing Letter of Credit Bank for its sole account the
Issuing Letter of Credit Bank's then-in-effect customary fees and administrative
expenses payable with respect to the Letters of Credit as such Issuing Letter of
Credit Bank may generally charge or incur from time to time in connection with
the issuance, maintenance, modification (if any), assignment or transfer (if
any), negotiation, and administration of Letters of Credit.
(d) Disbursements, Reimbursement.
The Borrower shall be obligated immediately to reimburse
the applicable Issuing Letter of Credit Bank for all amounts which such Issuing
Letter of Credit Bank is required to advance pursuant to the Letters of Credit
(collectively, the "Reimbursement Obligations"). The applicable Issuing Letter
of Credit Bank will promptly notify (A) the Borrower of each demand or
presentment for payment or other drawing under each Letter of Credit issued by
such Issuing Letter of Credit Bank, and (B) the Agent of the amount required to
be paid by such Issuing Letter of Credit Bank pursuant to each such Letter of
Credit. The Agent shall promptly notify each Bank of the amount required to be
paid by such Bank as a result of a
-24-
<PAGE> 31
drawing upon such Letter of Credit if the applicable Issuing Letter of Credit
Bank shall have notified the Agent that the Borrower has not timely reimbursed
such Issuing Letter of Credit Bank for such draw. If such notice is received by
a Bank before 10:00 a.m., Cincinnati time, such Bank shall deliver such Bank's
Ratable Share of such payment in immediately available funds to the Agent on
that Business Day. If such notice is received by a Bank after 10:00 a.m.,
Cincinnati time, such Bank shall before 10:00 a.m., Cincinnati time, on the next
succeeding Business Day deliver to the Agent such Bank's Ratable Share of such
payment as a Revolving Credit Loan from such Bank in immediately available
funds. Upon receipt of each Bank's Ratable Share of such payment, the Agent
shall immediately deliver such Bank's Ratable Share of such payment to the
applicable Issuing Letter of Credit Bank. Such amounts advanced shall become, at
the time the amounts are advanced, Revolving Credit Loans from the Banks. Such
Revolving Credit Loans shall bear interest at the rate applicable under the Base
Rate Option unless the Borrower elects to have a different Interest Rate Option
apply to such Revolving Credit Loans pursuant to and in accordance with the
provisions contained in Section 4.1.
(e) Documentation.
The Borrower agrees to be bound by the terms of each
Issuing Letter of Credit Bank's application and agreement for Letters of Credit
and each Issuing Letter of Credit Bank's written regulations and customary
practices relating to Letters of Credit, though such interpretation may be
different from the Borrower's own. In the event of a conflict between such
application or agreement and this Agreement, this Agreement shall govern. It is
understood and agreed that, except in the case of gross negligence or willful
misconduct, the Issuing Letter of Credit Bank shall not be liable for any error,
negligence and/or mistakes, whether of omission or commission, in following the
Borrower's instructions or those contained in the Letters of Credit or any
modifications, amendments or supplements thereto.
(f) Determinations to Honor Drawing Requests.
In determining whether to honor any request for drawing
under any Letter of Credit by the beneficiary thereof, the applicable Issuing
Letter of Credit Bank shall be responsible only to determine that the documents
and certificates required to be delivered under such Letter of Credit have been
delivered and that they comply on their face with the requirements of such
Letter of Credit.
(g) Nature of Participation and Reimbursement
Obligations.
The obligation of the Banks to participate in Letters of
Credit pursuant to Section 2.9(b) and the obligation of the Banks pursuant to
Section 2.9(d) to fund Revolving Credit Loans upon a draw under a Letter of
Credit and the obligations of the Borrower to reimburse the applicable Issuing
Letter of Credit Bank upon a draw under a Letter of Credit pursuant to Section
2.9 shall be absolute, unconditional and irrevocable and shall be performed
strictly in accordance with the terms of such Sections under all circumstances,
including the following circumstances:
-25-
<PAGE> 32
(i) the failure of the Borrower or any other
Person to comply with the conditions set forth in Sections 2.1, 2.5, 2.6 or 7.2
or as otherwise set forth in this Agreement for the making of a Revolving Credit
Loan, it being acknowledged that such conditions are not required for the making
of a Revolving Credit Loan under Section 2.9(d);
(ii) any lack of validity or enforceability of
any Letter of Credit;
(iii) the existence of any claim, set-off,
defense or other right which the Borrower, any other Loan Party or any Bank may
have at any time against a beneficiary or any transferee of any Letter of Credit
(or any Person for whom any such transferee may be acting), the Agent or other
bank or any other Person or, whether in connection with this Agreement, the
transactions contemplated herein or any unrelated transaction (including any
underlying transaction between the Borrower or Subsidiaries of the Borrower and
the beneficiary for which any Letter of Credit was procured);
(iv) any draft, demand, certificate or other
document presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(v) payment by the applicable Issuing Letter of
Credit Bank under any Letter of Credit against presentation of a demand, draft
or certificate or other document which does not comply with the terms of such
Letter of Credit;
(vi) any adverse change in the business,
operations, properties, assets, condition (financial or otherwise) or prospects
of the Borrower or Subsidiaries of the Borrower;
(vii) any breach of this Agreement or any other
Loan Document by any party thereto;
(viii) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing;
(ix) the fact that an Event of Default or a
Potential Default shall have occurred and be continuing; or
(x) the Revolving Credit Expiration Date shall
have passed or this Agreement or the Revolving Credit Commitments hereunder
shall have been terminated.
(h) Indemnity.
In addition to amounts payable as provided in Section
10.5, the Borrower hereby agrees to protect, indemnify, pay and save harmless
each Issuing Letter of Credit Bank from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs
-26-
<PAGE> 33
of internal counsel) which such Issuing Letter of Credit Bank may incur or be
subject to as a consequence, direct or indirect, of (i) the issuance of any
Letter of Credit, other than as a result of (A) the gross negligence or willful
misconduct of such Issuing Letter of Credit Bank as determined by a final
judgment of a court of competent jurisdiction, or (B) subject to the following
clause (ii), the wrongful dishonor by such Issuing Letter of Credit Bank of a
proper demand for payment made under any Letter of Credit, or (ii) the failure
of such Issuing Letter of Credit Bank to honor a drawing under any such Letter
of Credit as a result of any act or omission, whether rightful or wrongful, of
any present or future de jure or de facto government or governmental authority
(all such acts or omissions herein called "Governmental Acts").
(i) Liability for Acts and Omissions.
As between any Loan Party and each Issuing Letter of
Credit Bank, the Borrower assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit by, the respective beneficiaries of such Letters
of Credit. In furtherance and not in limitation of the foregoing, the applicable
Issuing Letter of Credit Bank shall not be responsible for: (i) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for an issuance of any
such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of such Issuing Letter of Credit Bank, including
any Governmental Acts, and none of the above shall affect or impair, or prevent
the vesting of, any of such Issuing Letter of Credit Bank's rights or powers
hereunder.
In furtherance and extension and not in limitation of
the specific provisions set forth above, any action taken or omitted by the
applicable Issuing Letter of Credit Bank under or in connection with the Letters
of Credit issued by it or any documents and certificates delivered thereunder,
if taken or omitted in good-faith, shall not put such Issuing Letter of Credit
Bank under any resulting liability to the Borrower.
The Banks and any Loan Party may not commence a
proceeding against any Issuing Letter of Credit Bank for wrongful disbursement
under a Letter of Credit as a result of acts or omissions constituting gross
negligence or willful misconduct of such Issuing Letter of Credit Bank, until
the Banks have made and the Borrower has repaid the Revolving Credit Loans
described in Section 2.9(d).
-27-
<PAGE> 34
2.10. Extension by Banks of the Revolving Credit Expiration
Date.
Upon or promptly after delivery by the Borrower of the annual
financial statements to be provided under Section 8.3(c) for the fiscal year
ending December 31, 1996 or any subsequent fiscal year, the Borrower may request
a one-year extension of the Revolving Credit Expiration Date by written notice
to the Banks, and the Banks agree to respond to the Borrower's request for an
extension of sixty (60) days following receipt of the request; provided,
however, that all the Banks must consent to any extension of the Revolving
Credit Expiration Date and the failure of the Banks to respond within such time
period shall not in any manner constitute an extension of the Revolving Credit
Expiration Date.
2.11. Use of Proceeds.
The proceeds of the Revolving Credit Loans shall be used for
lawful purposes in accordance with the second recital clause above.
3. TERM LOANS
3.1. Term Loan Commitments.
Subject to the terms and conditions hereof, and relying upon
the representations and warranties herein set forth, each Bank severally agrees
to make a term loan (the "Term Loan") to the Borrower on the Closing Date in
such principal amount as the Borrower shall request pursuant to a duly completed
loan request therefor substantially in the form of Exhibit 2.5(b) up to but not
exceeding such Bank's Term Loan Commitment.
3.2. Nature of Banks' Obligations with Respect to Term
Loans.
The obligations of each Bank to make Term Loans to the
Borrower shall be in the proportion that such Bank's Term Loan Commitment bears
to the Term Loan Commitments of all Banks to the Borrower, but each Bank's Term
Loan to the Borrower shall never exceed its Term Loan Commitment. The failure of
any Bank to make a Term Loan shall not relieve any other Bank of its obligations
to make a Term Loan nor shall it impose any additional liability to any other
Bank hereunder. The Banks shall have no obligation to make Term Loans hereunder
after the Closing Date. The Term Loan Commitments are not revolving credit
commitments and the Borrower shall not have the right to borrow, repay or
reborrow under Section 3.1.
3.3. Term Loan Facility Fee.
The Borrower agrees to pay to the Agent for the account of
each Bank, as consideration for such Bank's Term Loan Commitment, a
nonrefundable facility fee equal to 0.125% of such Bank's Term Loan Commitment,
payable on the Closing Date.
-28-
<PAGE> 35
3.4. Term Loan Notes.
The obligation of the Borrower to repay the unpaid
principal amount of the Term Loans made to it by each Bank, together
with interest thereon, shall be evidenced by a Term Note dated the
Closing Date in the form of Exhibit 1.1(T) payable to the order of each
Bank in a face amount equal to the Term Loan Commitment of such Bank.
The principal amount as provided therein of the Term Notes shall be
payable quarterly in arrears on the first Business Day of each July,
October, January and April after the date hereof in twenty (20) equal
quarterly installments of $750,000, beginning on July 1, 1996, with a
final installment on the Term Loan Maturity Date or in full, upon the
earlier acceleration of the Notes.
3.5. Use of Proceeds.
The proceeds of the Term Loans shall be used for
lawful purposes in accordance with the second recital clause above.
4. INTEREST RATES
4.1. Interest Rate Options.
The Borrower shall pay interest in respect of the
outstanding unpaid principal amount of the Loans as selected by it from
the Base Rate Option or Euro-Rate Option set forth below applicable to
the Loans, it being understood that subject to the provisions of this
Agreement, the Borrower may select different Interest Rate Options and
different Euro-Rate Interest Periods to apply simultaneously to the
Loans comprising different Borrowing Tranches and may convert to or
renew one or more Interest Rate Options with respect to all or any
portion of the Loans comprising any Borrowing Tranche; provided that
there shall not be at any one time outstanding more than six (6)
Borrowing Tranches in the aggregate among all the Loans accruing
interest at the Euro-Rate Option, and provided, further, that only the
Base Rate Option shall be applicable with respect to the Swing Loans.
The Agent's determination of a rate of interest and any change therein
shall, in the absence of manifest error, be conclusive and binding upon
all parties hereto. If at any time the designated rate applicable to any
Loan made by the Bank exceeds such Bank's highest lawful rate, the rate
of interest on such Bank's Loan shall be limited to such Bank's highest
lawful rate; PROVIDED, that the portion of interest which exceeds the
amount such Bank can lawfully receive and, thus, is not paid to such
Bank shall be due and payable upon the following Interest Payment
Date(s) to the extent lawfully permissible.
(a) Revolving Credit Interest Rate Options.
The Borrower shall have the right to select from
the following Interest Rate Options applicable to the Revolving Credit
Loans:
(i) Revolving Credit Base Rate
Option: A fluctuating rate per annum (computed on the basis of a year
of (i) 365 or 366 days, as the case may be, and actual days elapsed, for
Revolving Credit Loans based on the Agent's prime rate or (ii) 360 days
and
-29-
<PAGE> 36
actual days elapsed for Revolving Credit Loans based on the Federal
Funds Effective Rate) equal to the Base Rate plus the Revolving Credit
Base Rate Margin (as set forth in Section 4.1(c)), such interest rate to
change automatically from time to time effective as of the effective
date of each change in the Base Rate or the Revolving Credit Base Rate
Margin.
(ii) Revolving Credit Euro-Rate
Option: A rate per annum (computed on a basis of a year of 360 days and
actual days elapsed) equal to the Euro-Rate plus the Revolving Credit
Euro-Rate Margin (as set forth in Section 4.1(c)). The Euro-Rate shall
be adjusted automatically with respect to any Euro-Rate Portion
outstanding on the effective date of any change in the Euro-Rate Reserve
Percentage notwithstanding that such effective date occurs during a
Euro-Rate Interest Period. The Agent shall give prompt notice to the
Borrower of the Euro-Rate as determined or adjusted in accordance
herewith, which determination shall be conclusive.
(b) Term Loan Interest Rate Options.
The Borrower shall have the right to select from
the following Interest Rate Options applicable to the Term Loans:
(i) Term Loan Base Rate Option: A
fluctuating rate per annum (computed on the basis of a year of (i) 365
or 366 days, as the case may be, and actual days elapsed, for Term Loan
Loans based on the Agent's prime rate, or (ii) 360 days and actual days
elapsed for Term Loan Loans based on the Federal Funds Effective Rate)
equal to the Base Rate plus the Term Loan Base Rate Margin (as set forth
in Section 4.1(c)), such interest rate to change automatically from time
to time effective as of the effective date of each change in the Base
Rate or the Term Loan Base Rate Margin.
(ii) Term Loan Euro-Rate Option: A
rate per annum (computed on a basis of a year of 360 days and actual
days elapsed) equal to the Euro-Rate plus the Term Loan Euro-Rate Margin
(as set forth in Section 4.1(c)). The Euro-Rate shall be adjusted
automatically with respect to any Euro-Rate Portion outstanding on the
effective date of any change in the Euro-Rate Reserve Percentage
notwithstanding that such effective date occurs during a Euro-Rate
Interest Period. The Agent shall give prompt notice to the Borrower of
the Euro-Rate as determined or adjusted in accordance herewith, which
determination shall be conclusive.
(c) Interest Rate Margins.
(i) The base rate margin applicable
to Revolving Credit Loans (the "Revolving Credit Base Rate Margin") on
the Closing Date shall equal zero percent (0%). The base rate margin
applicable to Term Loans (the "Term Loan Base Rate Margin") on the
Closing Date shall equal one hundred twenty-five thousands percent
(0.125%). The Euro-Rate margin applicable to Revolving Credit Loans (the
"Revolving Credit Euro-Rate Margin") on the Closing Date shall equal one
and one-half percent (1.50%). The Euro-Rate margin applicable to Term
Loans (the "Term Loan Euro-Rate Margin") on the Closing Date shall equal
one and six hundred twenty-five thousands percent (1.625%). After the
Closing Date, the Revolving Credit and Term Loan Base Rate Margins and
the Revolving Credit
-30-
<PAGE> 37
and Term Loan Euro-Rate Margins shall be based upon the Leverage Ratio for the
Borrower's immediately preceding fiscal quarter, as shown on the Borrower's most
recently delivered financial statements pursuant to Section 8.3(b) as follows:
<TABLE>
<CAPTION>
Revolving Term Loan Revolving Term Loan
Credit Euro- Euro-Rate Credit Base Base Rate
Rate Margin Margin Rate Margin Margin
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Leverage Ratio
Equal to or greater than 1.20 to 1.625% 1.75% 0.125% 0.25%
1.00
Less than 1.20 to 1.00 but
greater than or equal to
1.00 to 1.00 1.50% 1.625% 0% 0.125%
Less than 1.00 to 1.00 but
greater than .80 to 1.00 1.375% 1.50% 0% 0%
Equal to or less than .80 to 1.25% 1.375% 0% 0%
1.00
</TABLE>
(ii) Except as noted above, in the event the
Leverage Ratio has changed such that a different rate is applicable, the rate
shall be effective as of the first Settlement Date following receipt by the
Agent of the financial statements, notwithstanding that such effective date
occurs during a Euro-Rate Interest Period. In the event the financial statements
of the Borrower with respect to any fiscal quarter or fiscal year are not
delivered as required under Sections 8.3(b) and 8.3(c), any rate reduction then
in effect shall continue until the first Settlement Date following receipt by
the Agent of financial statements reflecting that a different Base Rate Margin,
Euro-Rate Margin or Commitment Fees is applicable as a result of a change in the
Leverage Ratio; PROVIDED, that if such financial statements indicate that the
Euro-Rate Margin, Base Rate Margin or Commitment Fees should have been higher
than the margins or fees which were in effect, as a result of the Borrower's
failure to deliver such financial statements in a timely manner, the Euro-Rate
Margin. the Base Rate Margin and Commitment Fees shall be retroactively adjusted
and the Borrower shall immediately, upon written notice from the Agent, pay to
the Agent, for the ratable benefit of the Banks, the additional interest to
which the Banks are entitled.
(d) Rate Quotations.
The Borrower may call the Agent on or before the date
on which a Loan Request is to be delivered to receive an indication of the rates
then in effect, but it is acknowledged that such indication shall not be binding
on the Agent or the Banks nor affect the rate of interest which thereafter is
actually in effect when the election is made.
-31-
<PAGE> 38
4.2. Euro-Rate Interest Periods.
At any time when the Borrower shall select, convert to or
renew the Euro-Rate Option to apply to any Revolving Credit Loan or Term Loan,
the Borrower shall notify the Agent thereof at least three (3) Business Days
prior to the effective date of such Euro-Rate Option by delivering a Loan
Request. The notice shall select a Euro-Rate interest period during which such
Interest Rate Option shall apply, such periods to be one (1), two (2), three (3)
or six (6) months (the "euro-rate interest periods"); provided that:
(a) any Euro-Rate Interest Period which would
otherwise end on a date which is not a Business Day shall be extended to the
next succeeding Business Day unless such Business Day falls in the next calendar
month, in which case such Euro-Rate Interest Period shall end on the next
preceding Business Day;
(b) any Euro-Rate Interest Period which begins on
the last Business Day of a calendar month for which there is no numerically
corresponding Business Day in the subsequent calendar month during which such
Interest Period is to end shall end on the last Business Day of such subsequent
month;
(c) the Euro-Rate Portion for each Euro-Rate
Interest Period shall be in integral multiples of $250,000 and not less than
$750,000;
(d) the Borrower shall not select, convert to or
renew a Euro-Rate Interest Period for any portion of the Revolving Credit Loans
that would end after the Revolving Credit Expiration Date or any portion of the
Term Loans that would end after the Term Loan Maturity Date; and
(e) in the case of the renewal of the Euro-Rate
Option at the end of a Euro-Rate Interest Period, the first day of the new
Euro-Rate Interest Period shall be the last day of the preceding Euro-Rate
Interest Period, without duplication in payment of interest for such day.
4.3. Interest After Default.
To the extent permitted by Law, upon the occurrence and during
the continuance of an Event of Default, and after expiration of any applicable
grace period, (a) the Letter of Credit Fees applicable pursuant to Section 2.9
shall be increased by 2% per annum until paid in full (before and after
judgment), (b) the rate of interest for each Loan shall thereafter bear interest
at a rate per annum equal to 2% above the applicable Base Rate Option until paid
in full (before and after judgment) and (c) each other obligation hereunder if
not paid when due shall bear interest at a rate per annum equal to the sum of
the rate of interest applicable under the Revolving Credit Base Rate Option plus
an additional 2% per annum from the time such obligation becomes due and payable
until paid in full (before and after judgment), payable on demand. The Borrower
acknowledges that such increased interest rate reflects, among other things, the
fact that such Loans or other amounts have become a substantially greater risk
given their default status and that the Banks are entitled to additional
compensation for such risk.
-32-
<PAGE> 39
4.4. Euro-Rate Unascertainable.
If:
(a) on any date on which a Euro-Rate would otherwise
be determined, the Agent shall have determined (which determination shall be
conclusive absent manifest error) that:
(i) adequate and reasonable means do not
exist for ascertaining such Euro-Rate, or
(ii) a contingency has occurred which
materially and adversely affects the London interbank market,
(b) at any time any Bank shall have determined
(which determination shall be conclusive absent manifest error) that:
(i) the making, maintenance or funding of
any Loan to which the Euro-Rate Option applies has been made impracticable or
unlawful by compliance by such Bank in good faith with any Law or any
interpretation or application thereof by any Official Body or with any request
or directive of any such Official Body (whether or not having the force of Law),
or
(ii) the Euro-Rate Option will not adequately
and fairly reflect the cost to such Bank of the establishment or maintenance of
any Loan, or if any Bank determines after making all reasonable efforts that
deposits of the relevant amount in Dollars for the relevant Euro-Rate Interest
Period for a Loan to which the Euro-Rate Option applies are not available to
such Bank in the London interbank market, then, in the case of any event
specified in subsection (a) above, the Agent shall promptly so notify the Banks
and the Borrower thereof, and in the case of an event specified in subsection
(b) above, such Bank shall promptly so notify the Agent and attach a certificate
to such notice as to the specific circumstances of such notice and the Agent
shall promptly send copies of such notice and certificate to the other Banks and
the Borrower. Upon such date as shall be specified in such notice (which shall
not be earlier than the date such notice is given) the obligation of (A) the
Banks in the case of such notice given by the Agent, or (B) such Bank in the
case of such notice given by such Bank, to allow the Borrower to select, convert
to or renew the Euro-Rate Option shall be suspended until the Agent shall have
later notified the Borrower, or such Bank shall have later notified the Agent,
of the Agent's or such Bank's, as the case may be, determination (which
determination shall be conclusive absent manifest error) that the circumstances
giving rise to such previous determination no longer exist. If at any time the
Agent makes a determination under subsection (a) of this Section 4.4 or any Bank
notifies the Agent of a determination under subsection (b) of this Section 4.4
and, in either case, the Borrower has previously notified the Agent of its
selection of, conversion to or renewal of the Euro-Rate Option and such
Euro-Rate Option has not yet gone into effect, such notification shall be deemed
to provide for selection of, conversion to or renewal of the Base Rate Option
otherwise available with respect to such Loans. If any Bank notifies the Agent
of a determination under subsection (b) of this Section 4.4, the Borrower shall,
subject to the
-33-
<PAGE> 40
Borrower's indemnification obligations under Section 5.5(b), as to any Loan of
the Bank to which the Euro-Rate Option applies, on the date specified in such
notice either convert such Loan to the Base Rate Option otherwise available with
respect to such Loan or prepay such Loan in accordance with Section 5.4. Absent
due notice from the Borrower of conversion or prepayment, such Loan shall
automatically be converted to the Base Rate Option otherwise available with
respect to such Loan upon such specified date.
4.5. Selection of Interest Rate Options.
If the Borrower fails to select a Euro-Rate Interest Period in
accordance with the provisions of Section 4.2 in the case of renewal of the
Euro-Rate Portion, the Borrower shall be deemed to have converted such Loan or
option thereof to the Base Rate Option otherwise available with respect to such
Loans, commencing upon the last day of that Euro-Rate Interest Period. If an
Event of Default shall occur and be continuing, the Agent shall limit the
Borrower to the Base Rate Option hereunder; PROVIDED, HOWEVER, that, unless the
Loans have been accelerated hereunder, such limitation with respect to the
Euro-Rate Portion shall not be effective until the expiration of any applicable
Euro-Rate Interest Period.
5. PAYMENTS
5.1. Payments.
All payments and prepayments to be made in respect of
principal, interest, Commitment Fees, Letter of Credit Fees, Agent's Fees or
other amounts due from the Borrower hereunder (other than the fees and expenses
referenced in Section 2.9(c) which are to be paid to the Issuing Letter of
Credit Bank as provided in such Section) shall be payable prior to 11:00 a.m.,
Cincinnati time (or 3:00 p.m., Cincinnati time, in the event payments are to be
made using the proceeds of Loans to be made on such date), on the date when due
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived by the Borrower, and without set-off, counterclaim or
other deduction of any nature, and an action therefor shall immediately accrue.
Such payments shall be made to the Agent at the Principal Office for the account
of PNC with respect to the Swing Loans and the ratable accounts of the Banks
with respect to the Revolving Credit Loans and Term Loans in U.S. Dollars and in
immediately available funds, and the Agent shall promptly distribute such
amounts to the Banks in immediately available funds, subject to the provisions
of Section 5.6; PROVIDED that in the event payments are received by 11:00 a.m.
Cincinnati time by the Agent with respect to the Revolving Credit Loans on the
Settlement Date and such payments are not distributed to the Banks on the same
day received by the Agent, the Agent shall pay the Banks the Federal Funds
Effective Rate with respect to the amount of such payments for each day held by
the Agent and not distributed to the Banks. The Agent's and each Bank's
statement of account, ledger or other relevant record shall, in the absence of
manifest error, be conclusive as the statement of the amount of principal of and
interest on the Loans and other amounts owing under this Agreement and shall be
deemed an "account stated."
-34-
<PAGE> 41
The Borrower hereby authorizes the Agent to charge any account
designated by the Borrower related to the Money Management Arrangements or any
deposit account maintained by the Borrower, individually or jointly with others,
with PNC for any payment when due under this Agreement or the other Loan
Documents. Payments received will be applied to charges, fees and expenses
(including attorneys' fees), accrued interest and principal in such order as the
Agent may elect in its sole discretion. In the event there are insufficient
balances in the designated accounts related to the Money Management Arrangements
to pay any changes, fees and expenses (including attorneys' fees), accrued
interest and principal, as any of the same shall become due, PNC may advance
funds as provided in Section 2.6(b)(ii) to the extent there is availability
under the Swing Loan Commitment. Otherwise, any such amounts shall be
immediately due and payable by the Borrower.
5.2. Pro Rata Treatment of the Banks.
Each borrowing, and each selection of, conversion to or
renewal of any Interest Rate Option and each payment or prepayment by the
Borrower with respect to principal, interest, Commitment Fees, Letter of Credit
Fees or other fees (except for the Agent's Fees, any Issuing Letter of Credit
Bank's fees and the fees set forth in the second sentence of Section 2.10(c)) or
amounts due from the Borrower hereunder to the Banks with respect to the
Revolving Credit Loans and Term Loans, shall (except as provided in Section
4.4(b), 5.4 or 5.5) be made in proportion to the Revolving Credit Loans and Term
Loans outstanding from each Bank and, if no Revolving Credit Loans or Term Loans
are then outstanding, in proportion to the Ratable Share of each Bank.
5.3. Interest Payment Dates.
Interest on Loans to which the Base Rate Option applies shall
be due and payable in arrears on the first Business Day of each July, October,
January and April after the date hereof, on the Revolving Credit Expiration Date
(with respect to Revolving Credit Loans and Swing Loans), on the Term Loan
Maturity Date (with respect to Term Loans) and upon any earlier acceleration of
the Notes. Interest on the Euro-Rate Portion shall be due and payable on the
last day of each Euro-Rate Interest Period and, if any such Euro-Rate Interest
Period is longer than three (3) months, also on the ninetieth (90th) day of such
Euro-Rate Interest Period, on the Revolving Credit Expiration Date (with respect
to Revolving Credit Loans), on the Term Loan Maturity Date (with respect to Term
Loans) and upon any earlier acceleration of the Notes.
5.4. Prepayments.
(a) The Borrower shall have the right at its option
from time to time to prepay the Loans in whole or part without premium or
penalty (except as provided in sub-section (b) below or in Section 5.5):
(i) at any time with respect to any Swing
Loan or any other Loan to which the Base Rate Option applies;
-35-
<PAGE> 42
(ii) on the last day of the applicable
Euro-Rate Interest Period with respect to Revolving Credit Loans or Term Loans
to which the Euro-Rate Option applies; and
(iii) on the date specified in a notice by any
Bank pursuant to Section 4.4(b) with respect to any Revolving Credit Loan or
Term Loan to which the Euro-Rate Option applies.
Whenever the Borrower desires to prepay any part of the Loans,
it shall provide a prepayment notice to the Agent at least one (1) Business Day
prior to the date of prepayment of Revolving Credit Loans or Term Loans or no
later than 3:00 p.m. Cincinnati time on the date of prepayment of Swing Loans
setting forth the following information:
(x) the date, which shall be a Business
Day, on which the proposed
prepayment is to be made; and
(y) the total principal amount of such
prepayment, which shall not be less
than $100,000 for any Swing Loan or
$1,000,000 for any Revolving Credit
Loan or Term Loan.
All prepayment notices shall be irrevocable. The principal
amount of the Loans to which the Euro-Rate Option applies for which a prepayment
notice is given, together with interest on such principal amount and any related
fees, shall be due and payable on the date specified in such prepayment notice
as the date on which the proposed prepayment is to be made. The principal amount
of the Loans to which the Base Rate Option applies for which a prepayment notice
is given shall be due and payable on the date specified in such prepayment
notice as the date on which the proposed prepayment is made; but interest on
such principal amount and any related fees shall be due and payable on the next
scheduled Interest Payment Date. All prepayments permitted pursuant to this
Section 5.4(a) shall be applied to the unpaid installments of principal of the
Loans in the inverse order of scheduled maturities. Unless otherwise specified
by the Borrower with respect to prepayments of the Euro-Rate Portion permitted
under this Section 5.4(a)(ii) or (iii) above, all prepayments shall be applied
first to the Base Rate Portion and then to the Euro-Rate Portion, subject to
Section 5.5(b).
(b) In the event any Bank (i) gives notice
under Section 4.4(b) or Section 5.5(a), (ii) does not fund Loans because the
making of such Loans would contravene any Law applicable to such Bank pursuant
to Section 7.2, or (iii) becomes subject to the control of an Official Body
(other than normal and customary supervision), then the Borrower shall have the
right at its option, with the consent of the Agent, which shall not be
unreasonably withheld, to prepay the Loans of such Bank in whole together with
all interest accrued thereon, within ninety (90) days after (w) receipt of such
Bank's notice under Section 4.4(b) or 5.5(a), (x) the date such Bank has failed
to fund Loans pursuant to Section 7.2 because the making of such Loans would
contravene Law applicable to such Bank, (y) the date of obtaining the consent
which such Bank has not approved, or (z) the date such Bank became subject to
the control of an Official Body, as applicable; provided that the Borrower shall
also pay to such Bank at the time of such prepayment any amounts required under
Section 5.4(a) and Section 5.5 and any accrued interest
-36-
<PAGE> 43
due on such amount and any related fees; provided, however, that the Revolving
Credit Commitment of such Bank shall be provided by one or more of the remaining
Banks or a replacement bank acceptable to the Agent and the Borrower in the
exercise of their reasonable discretion; provided, further, the remaining Banks
shall have no obligation hereunder to increase their Revolving Credit
Commitments. Notwithstanding the foregoing, the Agent may only be replaced in
accordance with Section 10.14 and the Agent must at all times be a Bank
hereunder.
(c) Whenever the Revolving Facility Usage
exceeds the Borrowing Base, the Borrower shall make, within three (3) Business
Days after the Borrower learns of such excess and whether or not the Agent has
given notice to such effect, a mandatory prepayment of principal equal to the
excess of the Revolving Facility Usage over the Borrowing Base, together with
accrued interest on such principal amount at the default rate set forth in
Section 4.3.
5.5. Additional Compensation in Certain
Circumstances.
(a) Increased Costs or Reduced Return
Resulting from Taxes, Reserves, Capital Adequacy Requirements, Expenses, etc.
If any Law, guideline or interpretation or any
change in any Law, guideline or interpretation or application thereof by any
Official Body charged with the interpretation or administration thereof or
compliance with any request or directive (whether or not having the force of
Law) of any central bank or other Official Body:
(i) subjects any Bank to any tax or
changes the basis of taxation with respect to this Agreement, the Notes, the
Loans or payments by the Borrower of principal, interest, Commitment Fees,
Letter of Credit Fees, Agent's Fees or other amounts due from the Borrower
hereunder or under the Notes (except for taxes on the overall net income of such
Bank),
(ii) imposes, modifies or deems
applicable any reserve, special deposit or similar requirement against credits
or commitments to extend credit extended by, or assets (funded or contingent)
of, deposits with or for the account of, or other acquisitions of funds by, any
Bank, or
(ii) imposes, modifies or deems
applicable any capital adequacy or similar requirement (A) against assets
(funded or contingent) of, or credits or commitments to extend credit extended
by, any Bank, or (B) otherwise applicable to the obligations of any Bank under
this Agreement, and the result of any of the foregoing is to increase the cost
to, reduce the income receivable by, or impose any expense (including loss of
margin) upon any Bank with respect to this Agreement, the Notes or the making,
maintenance or funding of any part of the Loans (or, in the case of any capital
adequacy or similar requirement, to have the effect of reducing the rate of
return on the capital of any Bank or any Bank's parent, taking into
consideration the customary policies of any Bank or any Bank's parent with
respect to capital adequacy) by an amount which such Bank in its sole discretion
deems to be material, such Bank shall from time to time notify in writing the
Borrower and the Agent of the amount determined in good faith (using any
averaging and attribution methods employed in good faith)
-37-
<PAGE> 44
by such Bank (which determination shall be conclusive, absent manifest error) to
be necessary to compensate such Bank for such increase in cost, reduction of
income or additional expense, provided that a Bank shall not give the Borrower
notice hereunder unless the Bank is generally imposing such increased costs on
its similarly situated customers. Such notice shall set forth in reasonable
detail the basis for such determination. Such amount shall be due and payable by
the Borrower to such Bank thirty (30) calendar days after such notice is given.
(b) Indemnity.
In addition to the compensation required by
subsection (a) of this Section 5.5, the Borrower shall indemnify each Bank
against all liabilities, losses or expenses (including loss of margin and any
loss or expense incurred in liquidating or employing deposits from third
parties, including any loss or expense incurred in connection with funds
acquired by a Bank to fund or maintain Loans subject to the Euro-Rate Option)
which such Bank sustains or incurs hereunder, including:
(i) payment, prepayment, conversion
or renewal of any Loan to which the Euro-Rate Option applies on a day other than
the last day of the corresponding Euro-Rate Interest Period (whether or not such
payment, prepayment, conversion or renewal is mandatory, voluntary or automatic
and whether or not such payment or prepayment is then due);
(ii) attempt by the Borrower to
revoke (expressly, by later inconsistent notices or otherwise) in whole or part
any notice relating to Loan Requests under Section 2.6 or voluntary prepayments
under Section 5.4; or
(iii) default by the Borrower in the
performance or observance of any covenant or condition contained in this
Agreement or any other Senior Loan Document, including any failure of the
Borrower to pay when due (by acceleration or otherwise) any principal, interest,
Commitment Fees, Letter of Credit Fees, Agent's Fees or any other amount due
hereunder.
Notwithstanding the foregoing, nothing in the foregoing
Section 5.5(b)(i), (ii) or (iii) shall be construed to permit the Borrower to
engage in any action otherwise prohibited hereunder. If any Bank sustains or
incurs any such loss or expense, it shall from time to time notify the Borrower
of the amount determined in good faith by such Bank (which determination shall
be conclusive absent manifest error and may include such assumptions,
allocations of costs and expenses and averaging or attribution methods as such
Bank shall deem reasonable) to be necessary to indemnify such Bank for such loss
or expense. Such notice shall set forth in writing in reasonable detail the
basis for such determination. Such amount shall be due and payable by the
Borrower to such Bank ten (10) Business Days after such notice is given.
5.6. Settlement Date Procedures.
In order to minimize the transfer of funds between the Banks
and the Agent, the Borrower may borrow, repay and reborrow Swing Loans, and PNC
may make Swing Loans as provided in Section 2.1(b) during the period between
Settlement Dates. Not later than
-38-
<PAGE> 45
12:00 p.m. Cincinnati time on each Settlement Date, the Agent shall notify each
Bank of its Ratable Share of the Loans (including both the Swing Loans made by
the Agent and the Revolving Credit Loans made by the Banks). Prior to 3:00 p.m.
Cincinnati time on such Settlement Date, each Bank shall pay to the Agent the
amount equal to the positive difference, if any, between its Ratable Share of
the Revolving Credit Loans and Swing Loans and its Revolving Credit Loans, and
the Agent shall pay to each Bank its Ratable Share of all payments made by the
Borrower to the Agent with respect to the Revolving Credit Loans. The Agent
shall also effect settlement in accordance with the foregoing sentence on the
proposed Borrowing Dates for Revolving Credit Loans and may at its option effect
settlement on any other Business Day. These settlement procedures are
established solely as a matter of administrative convenience, and nothing
contained in this Section 5.6 shall relieve the Banks of their obligations to
fund Revolving Credit Loans on dates other than a Settlement Date pursuant to
Section 2.8. The Agent may at any time at its option for any reason whatsoever
require each Bank to pay immediately to the Agent such Bank's Ratable Share of
the outstanding Revolving Credit Loans and Swing Loan (provided the principal
amount of such Bank's Revolving Credit Loans shall not exceed its Revolving
Credit Commitment), and each Bank may at any time require the Agent to pay
immediately to such Bank its Ratable Share of all payments made by the Borrower
to the Agent with respect to the Revolving Credit Loans.
6. REPRESENTATIONS AND WARRANTIES
6.1. Representations and Warranties.
The Loan Parties jointly and severally represent and warrant
to the Agent and each of the Banks as follows:
(a) Organization and Qualification.
Each of the Loan Parties is a corporation or
partnership, duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. Each Loan Party has the lawful power
to own or lease its properties and to engage in the business it presently
conducts or proposes to conduct. Each Loan Party is duly licensed or qualified
and in good standing in each jurisdiction listed on Schedule 6.1(a) hereto.
Schedule 6.1(a) lists all of the jurisdictions where the property owned or
leased by it or the nature of the business transacted by it or both make such
licensing or qualification necessary.
(b) Capitalization and Ownership.
The authorized capital stock of the Borrower consists
of 18,000,000 shares of common stock and 2,000,000 shares of preferred stock. As
of the Closing Date, there were 5,035,520 shares of common stock issued,
4,780,150 shares of common stock outstanding and 0 shares of preferred stock
issued and outstanding. Allen G. Zaring, III and Anne M. Zaring, directly or
indirectly, own the issued and outstanding shares of common stock of the
Borrower set forth on Schedule 6.1(b). There are no options, warrants or other
rights outstanding to purchase any such shares except as indicated on Schedule
6.1(b).
-39-
<PAGE> 46
(c) Subsidiaries.
Schedule 6.1(c) states the name of each of the
Borrower's Subsidiaries, its jurisdiction of incorporation, its authorized
capital stock, the issued and outstanding shares (referred to herein as the
"Subsidiary Shares") and the owners thereof if it is a corporation and its
outstanding partnership interests (the "Partnership Interest") if it is a
partnership. The Borrower and each Subsidiary of the Borrower has good and
marketable title to all of the Subsidiary Shares and Partnership Interests it
purports to own, free and clear in each case of any Lien. All Subsidiary Shares
and Partnership Interests have been validly issued and all Subsidiary Shares are
fully paid and nonassessable. All capital contributions in connection with the
issuance of the Partnership Interests have been made or paid, as the case may
be. There are no options, warrants or other rights outstanding to purchase any
such Subsidiary Shares or Partnership Interests except as indicated on Schedule
6.1(c).
(d) Power and Authority.
Each Loan Party has full corporate or partnership or
other power to enter into, execute, deliver and carry out this Agreement and the
other Loan Documents to which it is a party, to incur the Indebtedness
contemplated by the Loan Documents and to perform its obligations under the Loan
Documents to which it is a party and all such actions have been duly authorized
by all necessary proceedings on its part.
(e) Validity and Binding Effect.
This Agreement on the date hereof has been, and each
other Loan Document to which it is a party on the date on which it is required
to be executed and delivered pursuant hereto shall have been, duly and validly
executed and delivered by the Loan Parties. This Agreement and each of the other
Loan Documents delivered by the Loan Parties pursuant to the provisions hereof
will constitute legal, valid and binding obligations of each of the Loan
Parties, enforceable against each of the Loan Parties in accordance with their
respective terms, except to the extent that enforceability of any of the
foregoing Loan Documents may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforceability of
creditors' rights generally or limiting the right of specific performance.
(f) No Conflict.
Neither the execution and delivery of this Agreement
or the other Loan Documents by the Loan Parties nor the consummation of the
transactions herein or therein contemplated or compliance with the terms and
provisions hereof or thereof by them will conflict with, constitute a default
under or result in any breach of (i) the terms and conditions of the certificate
of incorporation, bylaws or other organizational documents of any of the Loan
Parties, or (ii) of any Law or of any material agreement or instrument or order,
writ, judgment, injunction or decree to which any of the Loan Parties is a party
or by which it is bound or to which it is subject, or result in the creation or
enforcement of any Lien, charge or encumbrance whatsoever upon any property (now
or hereafter acquired) of any of the Loan Parties.
-40-
<PAGE> 47
(g) Litigation.
There are no actions, suits, proceedings or
investigations pending or, to the knowledge of any of the Loan Parties,
threatened against any of the Loan Parties at law or equity before any Official
Body which individually or in the aggregate could reasonably be expected to
result in any Material Adverse Change. None of the Loan Parties is in violation
of any order, writ, injunction or any decree of any Official Body which may
result in any Material Adverse Change.
(h) Title to Properties.
Each of the Loan Parties has good and marketable
title to or valid leasehold interest in all properties, assets and other rights
which it purports to own or lease or which are reflected as owned or leased on
its books and records, free and clear of all Liens and encumbrances except
Permitted Liens, and subject to the terms and conditions of the applicable
leases. All leases of property are in full force and effect. Promptly upon
request by the Agent, the Borrower will provide to the Agent and the Banks a
list of all real property owned or leased by each of the Loan Parties.
(i) Financial Statements.
(A) Historical Statements. The Borrower
has delivered to the Agent copies of its audited year-end financial statements
for and as of the end of the five (5) fiscal years ended December 31, 1991-1995
(collectively, the "Historical Statements"). The Historical Statements were
compiled from the books and records maintained by the Borrower's management, are
correct and complete in all material respects and fairly represent the
consolidated financial condition of the Borrower as of their dates and the
results of operations for the fiscal periods then ended and have been prepared
in accordance with GAAP consistently applied.
(B) Financial Projections. The Borrower
has delivered to the Agent financial projections of the Borrower for the five
(5) fiscal years ending December 31, 1996-2000 derived from various assumptions
of the Borrower's management (the "Financial Projections"). The Financial
Projections represent a reasonable range of possible results (predicted to be
within such range and not at an exact numerical level) in light of the history
of the business, present and foreseeable conditions and the intentions of the
Borrower's management. The Financial Projections accurately reflect the
liabilities of the Borrower upon consummation of the transactions contemplated
hereby as of the Closing Date.
(C) Accuracy of Financial Statements.
The Borrower has no material liabilities, contingent or otherwise, or forward or
long-term material commitments that are not disclosed in the Historical
Statements or in the notes thereto, and except as disclosed therein there are no
unrealized or anticipated losses from any commitments of the Borrower which may
cause a Material Adverse Change. Since December 31, 1995, no Material Adverse
Change has occurred.
-41-
<PAGE> 48
(j) Margin Stock.
None of the Loan Parties engages or intends to engage
principally, or as one of its important activities, in the business of extending
credit for the purpose, immediately, incidentally or ultimately, of purchasing
or carrying margin stock (within the meaning of Regulation U). No part of the
proceeds of any Loan has been or will be used, immediately, incidentally or
ultimately, to purchase or carry any margin stock or to extend credit to others
for the purpose of purchasing or carrying any margin stock or to refund
Indebtedness originally incurred for such purpose, or for any purpose which
entails a violation of or which is inconsistent with the provisions of the
regulations of the Board of Governors of the Federal Reserve System. None of the
Loan Parties holds or intends to hold margin stock in such amounts that more
than 25% of the reasonable value of the assets of such Loan Party are or will be
represented by margin stock.
(k) Full Disclosure.
Neither this Agreement nor any other Loan Document,
nor any certificate, statement, agreement or other documents furnished to the
Agent or any Bank by the Loan Parties in connection herewith or therewith,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements of the Loan Parties contained
herein and therein, in light of the circumstances under which they were made,
not misleading.
(l) Taxes.
All federal, state, local and other tax returns
required to have been filed with respect to each Loan Party have been filed, and
payment or adequate provision has been made for the payment of all taxes, fees,
assessments and other governmental charges which have or may become due pursuant
to said returns or to assessments received, except to the extent that such
taxes, fees, assessments and other charges are being contested in good faith by
appropriate proceedings diligently conducted and for which such reserves or
other appropriate provisions, if any, as shall be required by GAAP shall have
been made. There are no agreements or waivers extending the statutory period of
limitations applicable to any federal income tax return of any Loan Party for
any period.
(m) Consents and Approvals.
No consent, approval, exemption, order or
authorization of, or a registration or filing with any Official Body or any
other person is required by any Law or any agreement in connection with the
execution, delivery and carrying out of this Agreement and the other Loan
Documents by the Loan Parties, except as listed on Schedule 6.1(m) attached
hereto, all of which shall have been obtained or made on or prior to the Closing
Date.
(n) No Event of Default; Compliance with
Instruments.
No event has occurred and is continuing and no
condition exists or will exist after giving effect to the borrowings to be made
on the Closing Date under the Loan
-42-
<PAGE> 49
Documents which constitutes an Event of Default or Potential Default. None of
the Loan Parties is in violation of (i) any term of its certificate of
incorporation, bylaws, or other organizational documents, or (ii) any material
agreement or instrument to which it is a party or by which it or any of its
properties may be subject or bound where such violation would constitute a
Material Adverse Change.
(o) Patents, Trademarks, Copyrights,
Licenses, Etc.
Each Loan Party owns or possesses all the material
patents, trademarks, service marks, trade names, copyrights, licenses,
registrations, franchises, permits and rights necessary to own and operate its
properties and to carry on its business as presently conducted and planned to be
conducted by such Loan Party, without known conflict with the rights of others.
All material patents, trademarks, service marks, trade names, copyrights,
licenses, registrations, franchises and permits of each Loan Party are listed
and described on Schedule 6.1(o) hereto.
(p) Insurance.
Schedule 6.1(p) hereto lists all insurance policies
and other bonds to which any of the Loan Parties is a party, all of which are
valid and in full force and effect. No notice has been given or claim made and
no grounds exist to cancel or avoid any of such policies or bonds or to reduce
the coverage provided thereby. Such policies and bonds provide coverage in
amounts sufficient to insure the assets and risks of each of the Loan Parties in
accordance with prudent business practice in the industry of such Loan Parties.
(q) Compliance with Laws.
Each of the Loan Parties is in compliance in all
material respects with all applicable Laws (other than Environmental Laws which
are specifically addressed in subsection (v)) in all jurisdictions in which such
Loan Party is presently or will be doing business except where the failure to do
so would not constitute a Material Adverse Change.
(r) Material Contracts.
Promptly upon request by the Agent, the Borrower will
provide to the Agent and the Banks a list of all material contracts relating to
the business operations of the Loan Parties, including, without limitation, all
employee benefit plans, employment agreements, collective bargaining agreements
and labor contracts (the "Labor Contracts"). Each material contract to which a
Loan Party is a party is valid, binding and enforceable upon each of the Loan
Parties and other persons which is a party thereto in accordance with its
respective terms, and there is no default thereunder, to any of the Loan
Parties' knowledge, with respect to parties other than the Loan Parties except
to the extent that any such default does not impair the practical realization by
the Loan Parties of the benefits from such contract.
-43-
<PAGE> 50
(s) Investment Companies.
None of the Loan Parties is an "investment company"
registered or required to be registered under the Investment Company Act of 1940
as such terms are defined in the Investment Company Act of 1940 and shall not
become such an "investment company".
(t) Plans and Benefit Arrangements.
(i) The Borrower and each member of
the ERISA Group are in compliance in all material respects with any applicable
provisions of ERISA with respect to all Benefit Arrangements, Plans and
Multiemployer Plans. There has been no Prohibited Transaction with respect to
any Benefit Arrangement or any Plan or, to the best knowledge of the Borrower,
with respect to any Multiemployer Plan or Multiple Employer Plan, which could
result in any material liability of the Borrower or any other member of the
ERISA Group. The Borrower and all members of the ERISA Group have made when due
any and all payments required to be made under any agreement relating to a
Multiemployer Plan or a Multiple Employer Plan or any Law pertaining thereto.
With respect to each Plan and Multiemployer Plan, the Borrower and each member
of the ERISA Group (i) have fulfilled in all material respects their obligations
under the minimum funding standards of ERISA, (ii) have not incurred any
liability to the PBGC, and (iii) have not had asserted against them any penalty
for failure to fulfill the minimum funding requirements of ERISA.
(ii) To the best of the Borrower's
knowledge, each Multiemployer Plan and Multiple Employer Plan is able to pay
benefits thereunder when due.
(iii) Neither the Borrower nor any
other member of the ERISA Group has instituted or intends to institute
proceedings to terminate any Plan.
(iv) No event requiring notice to the
PBGC under Section 302(f)(4)(A) of ERISA has occurred or is reasonably expected
to occur with respect to any Plan, and no amendment with respect to which
security is required under Section 307 of ERISA has been made or is reasonably
expected to be made to any Plan.
(v) The aggregate actuarial present
value of all benefit liabilities (whether or not vested) under each Plan,
determined on a plan termination basis, as disclosed in, and as of the date of,
the most recent actuarial report for such Plan, does not exceed the aggregate
fair market value of the assets of such Plan.
(vi) Neither the Borrower nor any
other member of the ERISA Group has incurred or reasonably expects to incur any
material withdrawal liability under ERISA to any Multiemployer Plan or Multiple
Employer Plan. Neither the Borrower nor any other member of the ERISA Group has
been notified by any Multiemployer Plan or Multiple Employer Plan that such
Multiemployer Plan or Multiple Employer Plan has been terminated within the
meaning of Title IV of ERISA and, to the best knowledge of the Borrower, no
Multiemployer Plan or Multiple Employer Plan is reasonably expected to be
reorganized or terminated, within the meaning of Title IV of ERISA.
-44-
<PAGE> 51
(vii) To the extent that any Benefit
Arrangement is insured, the Borrower and all members of the ERISA Group have
paid when due all premiums required to be paid for all periods through and
including the Closing Date. To the extent that any Benefit Arrangement is funded
other than with insurance, the Borrower and all members of the ERISA Group have
made when due all contributions required to be paid for all periods through and
including the Closing Date.
(viii) All Plans, Benefit Arrangements
and Multiemployer Plans have been administered in accordance with their terms
and applicable Law in all material respects.
(u) Employment Matters.
Each of the Loan Parties is in compliance with the
Labor Contracts and all applicable federal, state and local labor and employment
Laws, including, but not limited to, those related to equal employment
opportunity and affirmative action, labor relations, minimum wage, overtime,
child labor, medical insurance continuation, worker adjustment and relocation
notices, immigration controls and worker and unemployment compensation, where
the failure to comply would constitute a Material Adverse Change. There are no
outstanding grievances, arbitration awards or appeals therefrom arising out of
the Labor Contracts or current or threatened strikes, picketing, handbilling or
other work stoppages or slowdowns at facilities of any Loan Party which in any
case would constitute a Material Adverse Change. The Borrower has delivered to
the Agent true and correct copies of each of the Labor Contracts.
(v) Environmental Matters.
Except as disclosed on Schedule 6.1(v) hereto:
(i) None of the Loan Parties has
received any Environmental Complaint from any Official Body or private person
alleging that any Loan Party or any prior or subsequent owner of the Property is
a potentially responsible party under the Comprehensive Environmental Response,
Cleanup and Liability Act, 42 U.S.C. ss. 9601, et seq., and each Loan Party has
no reason to believe that such an Environmental Complaint might be received.
There are no pending or, to any Loan Party's knowledge, threatened Environmental
Complaints relating to any Loan Party or, to any Loan Party's knowledge, any
prior or subsequent owner of the Property pertaining to, or arising out of, any
Environmental Conditions, except for Environmental Complaints which are not
reasonably likely to result in a Material Adverse Change.
(ii) Except for conditions,
violations or failures which individually and in the aggregate are not
reasonably likely to result in a Material Adverse Change, to the knowledge of
the Loan Parties there are no circumstances at, on or under the Property that
constitute a breach of or non-compliance with any of the Environmental Laws, and
there are no past or present Environmental Conditions at, on or under the
Property or, to any Loan Party's knowledge, at, on or under adjacent property,
that prevent compliance with the Environmental Laws at the Property.
-45-
<PAGE> 52
(iii) Neither the Property nor
any structures, improvements, equipment, fixtures, activities or facilities
thereon or thereunder contain or use Regulated Substances except in compliance
with Environmental Laws. There are no processes, facilities, operations,
equipment or any other activities at, on or under the Property, or, to any Loan
Party's knowledge, at, on or under adjacent property, that currently result in
the release or threatened release of Regulated Substances onto the Property,
except to the extent that such releases or threatened releases are not a breach
of or otherwise not a violation of the Environmental Laws, or are not likely to
result in a Material Adverse Change.
(iv) There are no aboveground
storage tanks, underground storage tanks or underground piping associated with
such tanks, used for the management of Regulated Substances at, on or under the
Property that (a) do not have, to the extent required by Environmental Laws, a
full operational secondary containment system in place, and (b) are not
otherwise in compliance with all Environmental Laws. There are no abandoned
underground storage tanks or underground piping associated with such tanks,
previously used for the management of Regulated Substances at, on or under the
Property that have not either been closed in place in accordance with
Environmental Laws or removed in compliance with all applicable Environmental
Laws and no contamination associated with the use of such tanks exists on the
Property that is not in compliance with Environmental Laws.
(v) Each Loan Party has all
material permits, licenses, authorizations, plans and approvals necessary under
the Environmental Laws for the conduct of the business of such Loan Party as
presently conducted. Each Loan Party has submitted all material notices, reports
and other filings required by the Environmental Laws to be submitted to an
Official Body which pertain to past and current operations on the Property.
(vi) Except for violations
which individually and in the aggregate are not likely to result in a Material
Adverse Change, all present, and to the knowledge of the Loan Parties, past
on-site generation, storage, processing, treatment, recycling, reclamation,
disposal or other use or management of Regulated Substances at, on, or to the
knowledge of the Loan Parties, under the Property and all off-site
transportation, storage, processing, treatment, recycling, reclamation, disposal
or other use or management of Regulated substances has been done in accordance
with the Environmental Laws.
(w) Senior Debt Status.
The obligations of each Loan Party under this
Agreement, the Notes and the Guaranty Agreement, as applicable, to the Banks or
Agent do rank and will rank at least pari passu in priority of payment and all
other rights to all other Indebtedness of such Loan Party except Indebtedness of
any Loan Party secured by Permitted Liens. There is no lien upon or with respect
to any of the properties or income of any Loan Party which secures Indebtedness
or other obligations or any Person except for Permitted Liens.
-46-
<PAGE> 53
(x) Restricted Transactions.
Schedule 6.1(x) sets forth, as of the Closing Date,
all Restricted Transactions including a brief description and the amount of each
Restricted Transaction.
6.2. Updates to Schedules.
Should any of the information or disclosures provided on any
of the Schedules attached hereto become outdated or incorrect in any material
respect, the Borrower shall promptly provide the Agent in writing with such
revisions or updates to such Schedule as may be necessary or appropriate to
update or correct the same; provided, unless any such Schedules have become
outdated or incorrect in any material and adverse respect, the Borrower may
provide such revisions or updates on a quarterly basis at the same time as the
Borrower delivers its quarterly compliance certificate in accordance with
Section 8.3(d); provided, further, that no Schedule that has become outdated or
incorrect in any material and adverse respect shall be deemed to have been
amended, modified or superseded by any such correction or update, nor shall any
breach of warranty or representation resulting from the inaccuracy or
incompleteness of any such Schedule be deemed to have been cured thereby.
7. CONDITIONS OF LENDING
The obligation of the Agent and each Bank to make Loans or
issue Letters of Credit hereunder is subject to the performance by each of the
Loan Parties of its obligations to be performed hereunder at or prior to the
making of any such Loans and to the satisfaction of the following further
conditions:
7.1. First Loans.
On the Closing Date:
(a) The representations and
warranties of each of the Loan Parties contained in Article 6 hereof shall be
true and accurate on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of such date (except
representations and warranties which relate solely to an earlier date or time,
which representations and warranties shall be true and correct on and as of the
specific dates or times referred to therein), and each of the Loan Parties shall
have performed and complied with all covenants and conditions hereof; no Event
of Default or Potential Default under this Agreement shall have occurred and be
continuing or shall exist; and there shall be delivered to the Agent for the
benefit of each Bank a certificate of the Loan Parties, dated the Closing Date
and signed by the Chief Executive Officer, President or Chief Financial Officer
of each of the Loan Parties, to each such effect.
(b) There shall be delivered to the
Agent for the benefit of each Bank a certificate dated the Closing Date and
signed by the Secretary or an Assistant Secretary of each of the Loan Parties,
certifying as appropriate as to:
-47-
<PAGE> 54
(i) all corporate or
partnership action taken by such Loan Party in connection with this Agreement
and the other Loan Documents;
(ii) the names of the officer
or officers authorized to sign this Agreement and the other Loan Documents and
the true signatures of such officer or officers and specifying the Authorized
Officers permitted to act on behalf of each Loan Party for purposes of this
Agreement and the true signatures of such officers, on which the Agent and each
Bank may conclusively rely; and
(iii) copies of its
organizational documents, including its certificate of incorporation, bylaws or
certificate of partnership or partnership agreement, as applicable, as in effect
on the Closing Date certified by the appropriate state official where such
documents are filed in a state office, together with certificates from the
appropriate state officials as to the continued existence and good standing of
each Loan Party in each state where organized or qualified to do business.
(c) The Notes, the Guaranty
Agreement and the Intercompany Subordination Agreement shall have been duly
executed and delivered to the Agent for the benefit of the Banks.
(d) There shall be delivered to the
Agent for the benefit of each Bank a written opinion of Frost & Jacobs, counsel
for the Loan Parties (who may rely on the opinions of such other counsel as may
be acceptable to the Agent), dated the Closing Date and in form and substance
satisfactory to the Agent and its counsel:
(i) as to the matters set
forth in Exhibit 7.1(d)(i) hereto; and
(ii) as to such other
matters incident to the transactions contemplated herein as the Agent may
reasonably request.
(e) All legal details and
proceedings in connection with the transactions contemplated by the Agreement
and the other Loan Documents shall be in form and substance satisfactory to the
Agent and counsel for the Agent, and the Agent shall have received all such
other counterpart originals or certified or other copies of such documents and
proceedings in connection with such transactions, in form and substance
reasonably satisfactory to the Agent and said counsel, as the Agent or said
counsel may reasonably request.
(f) The Borrower shall pay, or cause
to be paid, to the Agent for itself or for the account of the Banks, as
applicable, to the extent not previously paid, the Facility Fees, any other fees
payable on or before the Closing Date, as set forth in the Side Letter, and all
other costs and expenses accrued through the Closing Date for which the Agent
and the Banks are entitled to be reimbursed.
(g) All material consents, including
without limitation, the consent of the holders of the Senior Notes, required to
effectuate the transactions contemplated hereby as set forth on Schedule 6.1(m)
shall have been obtained.
-48-
<PAGE> 55
(h) There shall be no Material
Adverse Change in the Historical Statements or the Financial Projections (as
defined in Section 6.1(i)) since their respective dates; since December 31, 1995
no Material Adverse Change in any of the Loan Parties shall have occurred; prior
to the Closing Date, there shall be no material change in the management of the
Loan Parties; and there shall be delivered, to the Agent for the benefit of each
Bank, a certificate dated the Closing Date and signed by the Chief Executive
Officer, President or Chief Financial Officer of the Loan Parties to each such
effect.
(i) The making of the Loans shall
not contravene any Law applicable to the Loan Parties or any of the Banks.
(j) No action, proceeding,
investigation, regulation or legislation shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body to enjoin,
restrain or prohibit, or to obtain damages in respect of this Agreement or the
consummation of the transactions contemplated hereby.
(k) The Loan Parties shall deliver
evidence acceptable to the Agent that adequate insurance in compliance with
Section 8.1(c) is in full force and effect and that all premiums then due
thereon have been paid, with additional insured and lender loss payable
endorsements in form and substance satisfactory to the Agent and its counsel
naming the Agent as additional insured and lender loss payee.
(l) Borrower shall have delivered to
the Agent the results of a lien search acceptable to the Agent evidencing that
no Liens exist on the assets and properties of the Loan Parties except for
Permitted Liens.
(m) Borrower shall have delivered to
the Agent for the benefit of the Banks a Borrowing Base Certificate and a
Quarterly Compliance Certificate, each dated on or shortly before the Closing
Date, but in no event earlier than the end of the calendar month which preceded
the Closing Date, certified by the Chief Executive Officer, President or Chief
Financial Officer of the Borrower in a form acceptable to the Agent.
7.2. Each Additional Loan.
At the time of making any Loans or issuing Letters of Credit
other than Loans made or Letters of Credit issued on the Closing Date hereunder
and after giving effect to the proposed borrowings: the representations and
warranties of the Loan Parties contained in Article 7 hereof shall be true on
and as of the date of such additional Loan or Letter of Credit with the same
effect as though such representations and warranties had been made on and as of
such date (except representations and warranties which expressly relate solely
to an earlier date or time, which representations and warranties shall be true
and correct on and as of the specific dates or times referred to therein) and
the Loan Parties shall have performed and complied with all covenants and
conditions hereof; no Event of Default or Potential Default shall have occurred
and be continuing or shall exist; the making of the Loan or the issuance of such
Letter of Credit shall not contravene any Law applicable to the Loan Parties or
any of the Banks; and the
-49-
<PAGE> 56
Borrower shall have delivered to the Agent and, if applicable, the Issuing
Letter of Credit Bank, a duly executed and completed Loan Request or request for
Letters of Credit, as applicable.
8. COVENANTS
8.1. Affirmative Covenants.
The Loan Parties, jointly and severally, covenant and agree
that until payment in full of the Loans and interest thereon, termination or
expiration of all of the Letters of Credit, satisfaction of all of the Loan
Parties' other obligations hereunder and termination of the Revolving Credit
Commitments, the Loan Parties shall comply at all times with the following
affirmative covenants:
(a) Preservation of Existence, etc.
Each of the Loan Parties shall maintain its corporate
or partnership existence and its license or qualification and good standing in
each jurisdiction in which its ownership or lease of property or the nature of
its business makes such license or qualification necessary.
(b) Payment of Liabilities, Including Taxes, etc.
Each of the Loan Parties shall duly pay and discharge
all liabilities to which it is subject or which are asserted against it,
promptly as and when the same shall become due and payable, including all taxes,
assessments and governmental charges upon it or any of its properties, assets,
income or profits, prior to the date on which penalties attach thereto, except
to the extent that such liabilities, including taxes, assessments or charges,
are being contested in good faith and by appropriate and lawful proceedings
diligently conducted and for which such reserve or other appropriate provisions,
if any, as shall be required by GAAP shall have been made, but only to the
extent that failure to discharge any such liabilities would not result in any
additional liability which would adversely affect to a material extent the
financial condition of any Loan Party, provided that each Loan Party will pay
all such liabilities forthwith upon the commencement of proceedings to foreclose
any Lien which may have attached as security therefor.
(c) Maintenance of Insurance.
Each Loan Party shall insure its properties and
assets against loss or damage by fire and such other insurable hazards as such
assets are commonly insured (including fire, extended coverage, property damage,
worker's compensation, public liability and business interruption insurance) and
against other risks (including errors and omissions) in such amounts as similar
properties and assets are insured by prudent companies in similar circumstances
carrying on similar businesses, and with reputable and financially sound
insurers, including self-insurance to the extent customary, all as reasonably
determined by the Agent. At the request of the Agent, the Loan Parties shall
deliver (x) on the Closing Date and annually thereafter an
-50-
<PAGE> 57
original certificate of insurance signed by the Loan Parties' independent
insurance broker describing and certifying as to the existence of the insurance
on the Collateral required to be maintained by this Agreement and the other Loan
Documents, together with a copy of the endorsement described in the next
sentence attached to such certificate and (y) from time to time a summary
schedule indicating all insurance then in force with respect to each of the Loan
Parties. Such policies of insurance shall contain special endorsements, in form
and substance acceptable to the Agent, which shall (i) specify the Agent as an
additional insured and lender loss payee as its interests may appear, with the
understanding that any obligation imposed upon the insured (including the
liability to pay premiums) shall be the sole obligation of the applicable Loan
Parties and not that of the insured, (ii) provide that the interest of the Banks
shall be insured regardless of any breach or violation by the applicable Loan
Parties of any warranties, declarations or conditions contained in such policies
or any action or inaction of the applicable Loan Parties or others insured under
such policies, (iii) provide a waiver of any right of the insurers to set-off or
counterclaim or any other deduction, whether by attachment or otherwise, (iv)
provide that any and all rights of subrogation which the insurers may have or
acquire shall be, at all times and in all respects, junior and subordinate to
the prior payment in full of the Indebtedness hereunder and that no insurer
shall exercise or assert any right of subrogation until such time as the
Indebtedness hereunder has been paid in full and the Revolving Credit
Commitments have terminated, (v) provide, except in the case of public liability
insurance and workmen's compensation insurance, that all insurance proceeds for
losses of less than $2,000,000 shall be adjusted with and payable to the
applicable Loan Parties and that all insurance proceeds for losses of $2,000,000
or more shall be adjusted with and payable to the Agent, (vi) include effective
waivers by the insurer of all claims for insurance premiums against the Agent,
(vii) provide that no cancellation of such policies for any reason (including
non-payment of premium) nor any change therein shall be effective until at least
thirty (30) days after receipt by the Agent of written notice of such
cancellation or change, (viii) be primary without right of contribution of any
other insurance carried by or on behalf of any additional insureds, and (ix)
provide that inasmuch as the policy covers more than one insured, all terms,
conditions, insuring agreements and endorsements (except limits of liability)
shall operate as if there were a separate policy covering each insured. The
applicable Loan Parties shall notify the Agent promptly of any occurrence
causing a material loss or decline in value of its properties and the estimated
(or actual, if available) amount of such loss or decline. Any monies received by
the Agent constituting insurance proceeds may, at the option of the Agent, (i)
be applied by the Agent to the payment of the Loans in such manner as the Agent
may reasonably determine, or (ii) be disbursed to the applicable Loan Parties on
such terms as are deemed appropriate by the Agent for the repair, restoration
and/or replacement of property in respect of which such proceeds were received.
(d) Maintenance of Properties and Leases.
Each Loan Party shall maintain in good repair, working
order and condition (ordinary wear and tear excepted) in accordance with the
general practice of other businesses of similar character and size, all of those
properties useful or necessary to its business, and from time to time, such Loan
Party will make or cause to be made all appropriate repairs, renewals or
replacements thereof.
-51-
<PAGE> 58
(e) Maintenance of Patents, Trademarks, etc.
Each Loan Party shall maintain in full force and
effect all patents, trademarks, trade names, copyrights, licenses, franchises,
permits and other authorizations necessary for the ownership and operation of
its properties and business if the failure so to maintain the same would
constitute a Material Adverse Change.
(f) Visitation Rights.
Each Loan Party shall permit any of the officers or
authorized employees or representatives of the Agent or any of the Banks to
visit and inspect any of its properties and to examine and make excerpts from
its books and records and discuss its business affairs, finances and accounts
with its officers, all in such detail and at such times and as often as any of
the Banks may reasonably request, provided that each Bank shall provide the
Borrower and the Agent with reasonable notice prior to any visit or inspection.
(g) Keeping of Records and Books of Account.
Each Loan Party shall maintain and keep proper books
of record and account which enable the Loan Parties to issue financial
statements in accordance with GAAP and as otherwise required by applicable Laws
of any Official Body having jurisdiction over the Loan Parties, and in which
full, true and correct entries shall be made in all material respects of all its
dealings and business and financial affairs.
(h) Plans and Benefit Arrangements.
The Borrower shall, and shall cause each member of
the ERISA Group to, comply with ERISA, the Internal Revenue Code and other
applicable Laws applicable to Plans and Benefit Arrangements except where such
failure, alone or in conjunction with any other failure, would not result in a
Material Adverse Change. Without limiting the generality of the foregoing, the
Borrower shall cause all of its Plans and all Plans maintained by any member of
the ERISA Group to be funded in accordance with the minimum funding requirements
of ERISA and shall make, and cause each member of the ERISA Group to make, in a
timely manner, all contributions due to Plans, Benefit Arrangements and
Multiemployer Plans.
(i) Compliance with Laws.
Each Loan Party shall comply with all applicable
Laws, including all Environmental Laws, in all respects, provided that it shall
not be deemed to be a violation of this Section 8.1(i) if any failure to comply
with any Law would not result in fines, penalties, remediation costs, other
similar liabilities or injunctive relief which in the aggregate would constitute
a Material Adverse Change.
-52-
<PAGE> 59
(j) Use of Proceeds.
The Borrower will use the proceeds of the Loans only
for lawful purposes in accordance with Sections 2.11 and 3.5 hereof as
applicable, and such uses shall not contravene any applicable Law or any other
provision hereof.
(k) Subordination of Intercompany Loans,
Other Loans and Advances to the Borrower.
The Loan Parties shall cause any intercompany
Indebtedness, loans or advances owed by any of the Loan Parties to any other
Loan Party to be subordinated pursuant to the terms of the Intercompany
Subordination Agreement.
8.2. Negative Covenants.
The Loan Parties, jointly and severally, covenant and agree
that until payment in full of the Loans and interest thereon, termination or
expiration of all of the Letters of Credit, satisfaction of all of the Loan
Parties' other obligations hereunder and termination of the Revolving Credit
Commitments, the Loan Parties shall comply with the following negative
covenants:
(a) Indebtedness.
Each of the Loan Parties shall not at any time
create, incur, assume or suffer to exist any Indebtedness, except:
(i) Indebtedness under the Loan
Documents;
(ii) Unsecured leases of equipment in the
ordinary course of business;
(iii) Indebtedness under capitalized
leases or secured by purchase money security interests (other than Nonrecourse
Purchase Money Security Interests) which shall not exceed 2% of Consolidated
Tangible Net Worth in the aggregate at any time;
(iv) Indebtedness secured by Nonre
course Purchase Money Security Interests not exceeding 15% of Consolidated
Tangible Net Worth in the aggregate at any time;
(v) Indebtedness under the Senior Notes;
(vi) Indebtedness constituting a
Restricted Transaction; and
(vii) Indebtedness of a Loan Party to
another Loan Party.
-53-
<PAGE> 60
(b) Liens.
Each of the Loan Parties shall not at any time
create, incur, assume or suffer to exist any Lien on any of its property or
assets, tangible or intangible, now owned or hereafter acquired, or agree or
become liable to do so, except Permitted Liens.
(c) Guaranties.
Each of the Loan Parties shall not at any time,
directly or indirectly, become or be liable in respect of any Guaranty, or
assume, guarantee, become surety for, endorse or otherwise agree, become or
remain directly or contingently liable upon or with respect to any obligation or
liability of any other person, except for Guaranties under the Loan Documents or
Guaranties constituting a Restricted Transaction.
(d) Loans and Investments.
Each of the Loan Parties shall not at any time make
or suffer to remain outstanding any loan or advance to, or purchase, acquire or
own any stock, bonds, notes or securities of, or any partnership interest
(whether general or limited) in, or any other investment or interest in, or make
any capital contribution to, any other person, or agree, become or remain liable
to do any of the foregoing, except:
(i) trade credit extended on usual
and customary terms in the ordinary course of business;
(ii) advances to employees to meet
expenses incurred by such employees in the ordinary course of business;
(iii) Permitted Investments;
(iv) loans, advances and investments
constituting a Restricted Transaction; and
(v) loans, advances and investments
in other Loan Parties.
(e) Changes in the Senior Notes.
The Borrower shall not amend or modify any provisions
of the Senior Notes or any related documents without the consent of the Required
Banks.
(f) Liquidations, Mergers, Consolidations,
Acquisitions.
Each of the Loan Parties shall not dissolve,
liquidate or wind-up its affairs, or become a party to any merger or
consolidation, or acquire by purchase, lease or otherwise all or substantially
all of the assets or capital stock of any other person, provided that (i) any
Loan Party other than the Borrower may consolidate or merge into another Loan
Party, and (ii) the Loan Parties may acquire all or substantially all of the
assets or all of the capital stock of other
-54-
<PAGE> 61
persons engaged in the same business as the business of the Loan Parties, so
long as after giving effect to such acquisition, no Event of Default or
Potential Default shall exist or be continuing, and prior to the consummation of
such acquisition, the Borrower shall have provided to the Agent and the Banks
pro forma financial statements for the Borrower and its Subsidiaries, after
giving effect to such acquisition, demonstrating such compliance; provided, that
the purchase price (including liabilities assumed) for any such acquisition
shall not exceed $6,000,000 for any single transaction or $12,000,000 in the
aggregate during the term of this Agreement.
(g) Dispositions of Assets or Subsidiaries.
Each of the Loan Parties shall not sell, convey,
assign, lease, abandon or otherwise transfer or dispose of, voluntarily or
involuntarily, any of its properties or assets, tangible or intangible
(including but not limited to sale, assignment, discount or other disposition of
accounts, contract rights, chattel paper, equipment or general intangibles with
or without recourse or of capital stock, shares of beneficial interest or
partnership interests of a Subsidiary), except:
(i) transactions involving the sale of land
and building inventory in the ordinary course of business;
(ii) any sale, transfer, lease, or
abandonment or other disposition of assets in the ordinary course of business
which are no longer necessary or required in the conduct of the Loan Party's
business; and
(iii) any sale, transfer or lease of assets in
the ordinary course of business which are replaced by substitute assets
acquired.
(h) Affiliate Transactions.
Each of the Loan Parties shall not enter into or
carry out any transaction (including, without limitation, purchasing property or
services from or selling property or services with any Affiliate or other
person) unless such transaction is not otherwise prohibited by this Agreement,
is entered into in the ordinary course of business upon fair and reasonable
arm's-length terms and conditions which are fully disclosed to the Agent and is
in accordance with all applicable Law.
(i) Subsidiary, Partnerships and Joint Ventures.
Each of the Loan Parties shall not own or create
directly or indirectly any Subsidiaries other than Subsidiaries which join this
Agreement as Guarantors pursuant to Section 11.18. Notwithstanding the
foregoing, a Subsidiary to be created and named "Zaring Builders Inc." or a
substantially similar name shall not be required to join this Agreement as a
Guarantor provided that the Loan Parties shall not loan or advance (as a capital
contribution or otherwise) in excess of $2,500,000 in such Subsidiary. None of
the Loan Parties shall become or agree to become a general or limited partner in
any general or limited partnership or a joint venturer in any joint venture
except for limited partnerships and joint ventures which constitute
-55-
<PAGE> 62
Restricted Transactions; provided if any Loan Party makes a loan or advance in
excess of $500,000 to any such limited partnership or joint venture, then such
limited partnership or joint venture shall join this Agreement as Guarantors
pursuant to Section 11.18.
(j) Continuation of or Change in Business;
Geographic Expansion.
Each of the Loan Parties shall not engage in any
business other than the development of residential homes, provision of title
insurance, ownership of commercial real estate incidental to residential real
estate development (to the extent such ownership is permitted hereunder) in each
instance as such business has been conducted and operated by the Loan Parties
during the present fiscal year, and the Borrower shall not permit any material
change in such business. The Loan Parties shall not, without the consent of the
Required Banks which consent shall not be unreasonably withheld, acquire land,
develop homes or conduct business in any states other than Ohio, Kentucky,
Indiana, Tennessee, North Carolina and South Carolina.
(k) Plans and Benefit Arrangements.
Each of the Loan Parties shall not:
(i) fail to satisfy the minimum funding
requirements of ERISA and the Internal Revenue Code with respect to any Plan;
(ii) request a minimum funding waiver from
the Internal Revenue Service with respect to any Plan;
(iii) engage in a Prohibited Transaction with
any Plan, Benefit Arrangement or Multiemployer Plan which, alone or in
conjunction with any other circumstances or set of circumstances resulting in
liability under ERISA, would constitute a Material Adverse Change;
(iv) permit the aggregate actuarial present
value of all benefit liabilities (whether or not vested) under each Plan,
determined on a plan termination basis, as disclosed in the most recent
actuarial report completed with respect to such Plan, to exceed, as of any
actuarial valuation date, the fair market value of the assets of such Plan;
(v) fail to make when due any contribution
to any Multiemployer Plan that the Borrower or any member of the ERISA Group may
be required to make under any agreement relating to such Multiemployer Plan, or
any Law pertaining thereto;
(vi) withdraw (completely or partially) from
any Multiemployer Plan or withdraw (or be deemed under Section 4062(e) of ERISA
to withdraw) from any Multiple Employer Plan, where any such withdrawal is
likely to result in a material liability of Borrower or any member of the ERISA
Group;
-56-
<PAGE> 63
(vii) terminate, or institute
proceedings to terminate, any Plan, where such termination is likely to result
in a material liability to the Borrower or any member of the ERISA Group;
(viii) make any amendment to any Plan
with respect to which security is required under Section 307 of ERISA; or
(ix) fail to give any and all
notices and make all disclosures and governmental filings required under ERISA
or the Internal Revenue Code, where such failure is likely to result in a
Material Adverse Change.
(l) Fiscal Year.
None of the Loan Parties shall change its fiscal year
from the twelve-month period beginning January 1 and ending December 31.
(m) Changes in Organizational Documents.
Each of the Loan Parties shall not amend in any
respect its certificate of incorporation (including any provisions or
resolutions relating to capital stock), without providing at least fifteen (15)
calendar days' prior written notice to the Agent and the Banks and, in the event
such change would be adverse to the Banks as determined by the Agent in its sole
discretion, obtaining the prior written consent of the Required Banks.
(n) Minimum Fixed Charge Coverage Ratio.
The Borrower shall not permit the ratio of
Consolidated Cash Flow from Operations to Consolidated Fixed Charges to be less
than 1.2 to 1.0. Such ratio shall be calculated as of the end of each fiscal
quarter for the four (4) fiscal quarters then ended.
(o) Minimum Tangible Net Worth.
The Borrower shall not at any time permit
Consolidated Tangible Net Worth to be less than the Base Net Worth.
(p) Maximum Leverage Ratio.
The Borrower shall not permit the Leverage Ratio to
exceed 1.75 to 1.00 as of the end of each fiscal quarter for the fiscal quarter
then ended.
(q) Speculative Units.
The Loan Parties shall not at any time permit (i) the
number of Speculative Units in any Active Community to exceed eight (8) or (ii)
the number of Speculative Units in all Active Communities to exceed 30% of the
aggregate number of Active Units sold during the previous twelve (12) month
period.
-57-
<PAGE> 64
(r) Model Units.
The Loan Parties shall not at any time permit (i)
the number of Model Units in any Active Community to exceed four (4) in each
distinctive price point as determined by the Borrower and acceptable to the
Agent, but in no event more than eight (8) in the aggregate and (ii) the number
of Model Units in all Active Communities of a Loan Party to exceed one hundred
fifty percent (150%) of the number of such Active Communities.
(s) Land Ownership or Acquisition.
The Loan Parties shall not acquire, own, purchase,
lease or otherwise invest in, directly or indirectly, any land or other real
estate other than:
(i) real estate held or acquired by a Loan
Party for construction and sale of Active Units, provided that Regulatory
Approval has been received therefor;
(ii) real estate which does not fall under
clause (i) above in an amount not to exceed $2,000,000 in the aggregate at any
time.
8.3. Reporting Requirements.
The Loan Parties jointly and severally covenant and agree
that until payment in full of the Loans and interest thereon, termination or
expiration of all Letters of Credit, satisfaction of all of the Loan Parties'
other obligations hereunder and termination of the Revolving Credit
Commitments, the Loan Parties will furnish or cause to be furnished to the
Agent and each of the Banks:
(a) Monthly Financial Statements.
As soon as available and in any event within thirty
(30) calendar days after the end of each calendar month, the Borrower's
consolidating balance sheet at the end of such month and consolidating income
statement for the month then ended and for the year to date, certified (subject
to normal year-end adjustments) by the Chief Executive Officer, President or
Chief Financial Officer of the Borrower.
(b) Quarterly Financial Statements.
As soon as available and in any event within
forty-five (45) calendar days after the end of each of the first three (3)
fiscal quarters in each fiscal year, financial statements of the Borrower,
consisting of (i) a consolidated balance sheet at the end of such fiscal
quarter; (ii) related consolidated statements of income together with
comparisons to the prior year for the fiscal quarter then ended and the fiscal
year through that date; and (iii) the consolidated statements of retained
earnings and cash flow (in comparative form) for the fiscal year through that
date, all in reasonable detail and certified (subject to normal year-end audit
adjustments) by the Chief Executive Officer, President or Chief Financial
Officer of the Borrower as having been prepared in accordance with GAAP,
consistently applied, and setting forth in comparative form
58
<PAGE> 65
the respective financial statements for the corresponding date and period in
the previous fiscal year.
(c) Annual Financial Statements.
As soon as available and in any event within ninety
(90) days after the end of each fiscal year of the Borrower, financial
statements of the Borrower consisting of a consolidating and consolidated
balance sheet as of the end of such fiscal year, and related consolidating and
consolidated statements of income, retained earnings and cash flows for the
fiscal year then ended, all in reasonable detail and setting forth in
comparative form the financial statements as of the end of and for the
preceding fiscal year, and certified by independent certified public
accountants of nationally recognized standing satisfactory to the Agent. The
certificate or report of accountants shall be free of qualifications (other
than any consistency qualification that may result from a change in the method
used to prepare the financial statements as to which such accountants concur)
and shall not indicate the occurrence or existence of any event, condition or
contingency which would materially impair the prospect of payment or
performance of any covenant, agreement or duty of any Loan Party under any of
the Loan Documents.
(d) Quarterly Compliance Certificate of the
Loan Parties; Updates to Schedules.
Concurrently with the financial statements of the
Borrower furnished to the Agent and to the Banks pursuant to Sections 8.3(b)
and 8.3(c) hereof, a certificate of the Loan Parties signed by the Chief
Executive Officer, President or Chief Financial Officer of the Loan Parties, in
the form of EXHIBIT 8.3(d) hereto (the "QUARTERLY COMPLIANCE CERTIFICATE"), to
the effect that, except as described pursuant to Section 8.3(f) below, (i) the
representations and warranties of the Loan Parties contained in Article 6
hereof are true on and as of the date of such certificate with the same effect
as though such representations and warranties had been made on and as of such
date (except representations and warranties which expressly relate solely to an
earlier date or time) and the Loan Parties have performed and complied with all
covenants and conditions hereof, (ii) no Event of Default or Potential Default
exists and is continuing on the date of such certificate and (iii) containing
calculations in sufficient detail to demonstrate compliance as of the date of
the financial statements with all financial covenants contained in Section 8.2
hereof. The Loan Parties shall deliver together with such Quarterly Compliance
Certificate the updated Schedules to the Agreement referred to in Section 6.2.
(e) Borrowing Base Certificate.
Within twenty (20) calendar days after the end of
each calendar month, a certificate computing the Borrowing Base and
demonstrating compliance with the covenants set forth in Sections 8.2 (q), (r)
and (s) as of the end of the preceding calendar month in the form of EXHIBIT
8.3(e) (the "BORROWING BASE CERTIFICATE"), appropriately completed, executed
and delivered by an Authorized Officer together with any supporting information
which the Agent may from time to time request.
59
<PAGE> 66
(f) Notice of Default.
Promptly after any officer of any of the Loan
Parties has learned of the occurrence of an Event of Default or Potential
Default, a certificate signed by the Chief Executive Officer, President or
Chief Financial Officer of such Loan Party setting forth the details of such
Event of Default or Potential Default and the action which the Loan Party
proposes to take with respect thereto.
(g) Notice of Litigation.
Promptly after the commencement thereof, notice of
all actions, suits, proceedings or investigations before or by any Official
Body or any other person against any of the Loan Parties (other than
proceedings in the ordinary course of business in connection with obtaining
Regulatory Approval provided that the conduct of those proceedings does not
otherwise violate the provisions of this Agreement), involve a claim or series
of claims in excess of $500,000 or which if adversely determined would
constitute a Material Adverse Change with respect to any of the Loan Parties.
(h) Budgets, Forecasts, Deliveries Under the
Senior Notes, Other Reports and Information.
Promptly upon their becoming available to the
applicable Loan Party:
(i) the preliminary annual budget and
any preliminary forecasts or projections of such Loan Party, to be supplied not
later than thirty (30) days prior to commencement of the fiscal year to which
any of the foregoing may be applicable with final budget and forecasts to be
due ninety (90) days after the commencement of such fiscal year,
(ii) any reports, including management
letters submitted to such Loan Party by independent accountants in connection
with any annual, interim or special audit,
(iii) any reports, notices or proxy
statements generally distributed by such Loan Party to its stockholders on a
date no later than the date supplied to the stockholders,
(iv) regular or periodic reports,
including Forms 10-K, 10-Q and 8-K, registration statements and prospectuses,
filed by such Loan Party with the Securities and Exchange Commission,
(v) copies of notices, reports and
other information sent by any of the Loan Parties to the holders of the Senior
Notes under the Senior Notes or any related documents at the same time such
Loan Party sends the same to such holders,
-60-
<PAGE> 67
(vi) a copy of any order in any
proceeding to which any Loan Party is a party issued by any Official Body which
could result in a Material Adverse Change, and
(vii) such other reports and information
as the Banks may from time to time reasonably request.
(i) Notices Regarding Plans and Benefit
Arrangements.
(i) Promptly upon becoming aware of
the occurrence thereof, notice (including the nature of the event and, when
known, any action taken or threatened by the Internal Revenue Service or the
PBGC with respect thereto) of:
(A) any Reportable Event
with respect to the Borrower or any member of the ERISA Group (regardless of
whether the obligation to report said Reportable Event to the PBGC has been
waived),
(B) any Prohibited
Transaction which could subject the Borrower or any member of the ERISA Group
to a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Internal Revenue Code in connection with any
Plan, Benefit Arrangement or any trust created thereunder,
(C) any assertion of
material withdrawal liability with respect to any Multiemployer Plan,
(D) any partial or
complete withdrawal from a Multiemployer Plan by the Borrower or any member of
the ERISA Group under Title IV of ERISA (or assertion thereof), where such
withdrawal is likely to result in material withdrawal liability,
(E) any cessation of
operations (by the Borrower or any member of the ERISA Group) at a facility in
the circumstances described in Section 4063(e) of ERISA,
(F) withdrawal by the
Borrower or any member of the ERISA Group from a Multiple Employer Plan,
(G) a failure by the
Borrower or any member of the ERISA Group to make a payment to a Plan required
to avoid imposition of a lien under Section 302(f) of ERISA,
(H) the adoption of an
amendment to a Plan requiring the provision of security to such Plan pursuant
to Section 307 of ERISA, or
(I) any change in the
actuarial assumptions or funding methods used for any Plan, where the effect of
such change is to materially increase or materially reduce the unfunded benefit
liability or obligation to make periodic contributions.
-61-
<PAGE> 68
(ii) Promptly after receipt thereof,
copies of (a) all notices received by the Borrower or any member of the ERISA
Group of the PBGC's intent to terminate any Plan administered or maintained by
the Borrower or any member of the ERISA Group, or to have a trustee appointed
to administer any such Plan; and (b) at the request of the Agent or any Bank
each annual report (IRS Form 5500 series) and all accompanying schedules, the
most recent actuarial reports, the most recent financial information concerning
the financial status of each Plan administered or maintained by the Borrower or
any member of the ERISA Group, and schedules showing the amounts contributed to
each such Plan by or on behalf of the Borrower or any member of the ERISA Group
in which any of their personnel participate or from which such personnel may
derive a benefit, and each Schedule B (Actuarial Information) to the annual
report filed by the Borrower or any member of the ERISA Group with the Internal
Revenue Service with respect to each such Plan.
(iii) Promptly upon the filing thereof,
copies of any Form 5310, or any successor or equivalent form to Form 5310,
filed with the PBGC in connection with the termination of any Plan.
9. DEFAULT
9.1 Events of Default.
An Event of Default shall mean the occurrence or existence of
any one or more of the following events or conditions (whatever the reason
therefor and whether voluntary, involuntary or effected by operation of Law):
(a) The Borrower shall fail to pay any
principal of any Loan (including scheduled installments, mandatory prepayments
or the payment due at maturity) or shall fail to pay any interest on any Loan
or any other amount owing hereunder or under the other Loan Documents after
such principal, interest or other amount becomes due in accordance with the
terms hereof or thereof;
(b) Any representation or warranty made at any
time by any of the Loan Parties herein or by any of the Loan Parties in any
other Loan Document or in any certificate, other instrument or statement
furnished pursuant to the provisions hereof or thereof, shall prove to have
been false or misleading in any material respect as of the time it was made or
furnished;
(c) Any of the Loan Parties shall default in
the observance or performance of any covenant contained in Section 8.1(f) or
Section 8.2 and, with respect to a default under Section 8.2(q), such default
shall continue unremedied for a period of thirty (30) days;
(d) Any of the Loan Parties shall default in
the observance or performance of any other covenant, condition or provision
hereof or of any other Loan Document, and such default shall continue
unremedied for a period of ten (10) Business Days
-62-
<PAGE> 69
after any officer of any Loan Party becomes aware of the occurrence thereof
(such grace period to be applicable only in the event such default can be
remedied by corrective action of the Loan Parties as determined by the Agent in
its reasonable discretion);
(e) A default or event of default shall occur
at any time under the Senior Notes or any related documents or under the terms
of any other agreement involving borrowed money or the extension of credit or
any other Indebtedness under which any Loan Party may be obligated as borrower
or guarantor (except for nonrecourse Indebtedness secured by Nonrecourse
Purchase Money Security Interests permitted hereunder) in excess of $500,000 in
the aggregate outstanding at any time, and such breach, default or event of
default consists of the failure to pay (beyond any period of grace permitted
with respect thereto, whether waived or not) any Indebtedness when due (whether
at stated maturity, by acceleration or otherwise) or if such breach or default
permits or causes the acceleration of any Indebtedness (whether or not such
right shall have been waived) or the termination of any commitment to lend;
(f) Any final judgments or orders for the
payment of money (not adequately covered by insurance) in excess of $500,000 in
the aggregate outstanding at any time shall be entered against any Loan Party
by a court having jurisdiction in the premises which judgment is not paid or
discharged, vacated, bonded or stayed pending appeal within a period of thirty
(30) days from the date of entry;
(g) Any of the Loan Documents shall cease to
be legal, valid and binding agreements enforceable against the Loan Parties in
accordance with the respective terms thereof or shall in any way be terminated
(except in accordance with its terms) or become or be declared ineffective or
inoperative or shall in any way be challenged or contested or cease to give or
provide the respective rights, titles, interests, remedies, powers or
privileges intended to be created thereby;
(h) There shall occur any material uninsured
damage to or loss, theft or destruction of any assets of the Loan Parties or
any of the Loan Parties' assets are attached, seized, levied upon or subjected
to a writ or distress warrant; or such come within the possession of any
receiver, trustee, custodian or assignee for the benefit of creditors and the
same is not cured within thirty (30) days thereafter;
(i) A notice of lien or assessment in excess
of $500,000 is filed of record with respect to all or any part of any of the
Loan Parties' assets by the United States, or any department, agency or
instrumentality thereof, or by any state, county, municipal or other
governmental agency, including, without limitation, the Pension Benefit
Guaranty Corporation, or if any taxes or debts owing at any time or times
hereafter to any one of these becomes payable and the same is not paid within
thirty (30) days after the same becomes payable;
(j) Any Loan Party ceases to be solvent or
admits in writing its inability to pay its debts as they mature;
(k) Any of the following occurs: (i) any
Reportable Event, which the Agent determines in good faith constitutes grounds
for the termination of any Plan by the PBGC
-63-
<PAGE> 70
or the appointment of a trustee to administer or liquidate any Plan, shall
have occurred and be continuing; (ii) proceedings shall have been instituted
or other action taken to terminate any Plan, or a termination notice shall
have been filed with respect to any Plan; (iii) a trustee shall be appointed
to administer or liquidate any Plan; (iv) the PBGC shall give notice of its
intent to institute proceedings to terminate any Plan or Plans or to appoint
a trustee to administer or liquidate any Plan; and, in the case of the
occurrence of (i), (ii), (iii) or (iv) above, the Agent determines in good
faith that the amount of Borrower's liability is likely to exceed 10% of its
Consolidated Tangible Net Worth; (v) the Borrower or any member of the ERISA
Group shall fail to make any contributions when due to a Plan or a
Multiemployer Plan; (vi) the Borrower or any member of the ERISA Group shall
make any amendment to a Plan with respect to which security is required under
Section 307 of ERISA; (vii) the Borrower or any member of the ERISA Group shall
withdraw completely or partially from a Multiemployer Plan; (viii) the Borrower
or any member of the ERISA Group shall withdraw (or shall be deemed under
Section 4062(e) of ERISA to withdraw) from a Multiple Employer Plan; or (ix)
any applicable Law is adopted, changed or interpreted by any Official Body with
respect to or otherwise affecting one or more Plans, Multiemployer Plans or
Benefit Arrangements and, with respect to any of the events specified in (v),
(vi), (vii), (viii) or (ix), the Agent determines in good faith that any such
occurrence would be reasonably likely to result in a Material Adverse Change;
(l) Any Loan Party ceases to conduct its
business as contemplated or the Borrower is enjoined, restrained or in any way
prevented by court order from conducting all or any material part of its
business and such injunction, restraint or other preventive order is not
dismissed within thirty (30) days after the entry thereof;
(m) A Change of Control occurs;
(n) A proceeding shall have been instituted in
a court having jurisdiction in the premises seeking a decree or order for
relief in respect of any Loan Party in an involuntary case under any applicable
bankruptcy, insolvency, reorganization or other similar law now or hereafter in
effect, or a receiver, liquidator, assignee, custodian, trustee, sequestrator,
conservator (or similar official) of any Loan Party for any substantial part of
its property, or for the winding-up or liquidation of its affairs, and such
proceeding shall remain undismissed or unstayed and in effect for a period of
thirty (30) consecutive days or such court shall enter a decree or order
granting any of the relief sought in such proceeding; or
(o) Any Loan Party shall commence a voluntary
case under any applicable bankruptcy, insolvency, reorganization or other
similar law now or hereafter in effect, shall consent to the entry of an order
for relief in an involuntary case under any such law, or shall consent to the
appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator, conservator (or other similar official) of
itself or for any substantial part of its property or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due or shall take any action in furtherance of any of the
foregoing.
-64-
<PAGE> 71
9.2. Consequences of Event of Default.
(a) If an Event of Default specified under
subsections (a) through (m) of Section 9.1 hereof shall occur and be
continuing, the Agent and the Banks shall be under no further obligation to
make Loans or issue Letters of Credit hereunder, and the Agent may, and upon
the request of the Required Banks, shall (i) by written notice to the Borrower,
declare the unpaid principal amount of the Notes then outstanding and all
interest accrued thereon, any unpaid fees and all other Indebtedness of the
Borrower to the Banks hereunder and thereunder to be forthwith due and payable,
and the same shall thereupon become and be immediately due and payable to the
Agent for the benefit of each Bank without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived, and (ii)
require the Borrower to, and the Borrower shall thereupon, deposit in a
non-interest bearing account with the Agent, as cash collateral for its
obligations under the Loan Documents, an amount equal to the maximum amount
currently or at any time thereafter available to be drawn on all outstanding
Letters of Credit, and the Borrower hereby pledges to the Agent and the Banks,
and grants to the Agent and the Banks a security interest in, all such cash as
security for such obligations. Upon the curing of all existing Events of
Default to the satisfaction of the Required Banks, the Agent shall return such
cash collateral to the Borrower; and
(b) If an Event of Default specified under
subsections (n) or (o) of Section 9.1 hereof shall occur, the Banks shall be
under no further obligations to make Loans hereunder and the unpaid principal
amount of the Notes then outstanding and all interest accrued thereon, any
unpaid fees and all other Indebtedness of the Borrower to the Banks hereunder
and thereunder shall be immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived
and the Agent may, and upon the request of the Required Banks, shall require
the Borrower to provide cash collateral as set forth in Section 9.2(a)(ii); and
(c) If an Event of Default shall occur and be
continuing, any Bank to whom any obligation is owed by any Loan Party hereunder
or under any other Loan Document or any participant of such Bank which has
agreed in writing to be bound by the provisions of Section 10.13 hereof, and
any branch, subsidiary or affiliate of such Bank or participant anywhere in the
world shall have the right, in addition to all other rights and remedies
available to it, without notice to Borrower or such Loan Party, to set-off
against and apply to the then unpaid balance of all the Loans and all other
obligations of the Borrower and the other Loan Parties hereunder or under any
other Loan Document any debt owing to, and any other funds held in any manner
for the account of, the Borrower or such other Loan Party by such Bank or
participant or by such branch, subsidiary or affiliate, including, without
limitation, all funds in all deposit accounts (whether time or demand, general
or special, provisionally credited or finally credited, or otherwise) now or
hereafter maintained by the Borrower or such other Loan Party for its own
account (but not including funds held in custodian or trust accounts or payroll
withholding tax accounts) with such Bank or participant or such branch,
subsidiary or affiliate. Such right shall exist whether or not any Bank or the
Agent shall have made any demand under this Agreement or any other Loan
Document, whether or not such debt owing to or funds held for the account of
the Borrower or such other Loan Party is or are matured or unmatured and
-65-
<PAGE> 72
regardless of the existence or adequacy of any security, right or remedy
available to any Bank or the Agent; and
(d) If an Event of Default shall occur and be
continuing, and whether or not the Agent shall have accelerated the maturity of
Loans of the Borrower pursuant to any of the foregoing provisions of this
Section 9.2, the Agent or any Bank, if owed any amount with respect to the
Notes, may proceed to protect and enforce its rights by suit in equity, action
at law and/or other appropriate proceeding, whether for the specific
performance of any covenant or agreement contained in this Agreement or the
Notes, including as permitted by applicable Law the obtaining of the ex parte
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of the Agent or such Bank; and
(e) From and after the date on which the Agent
has taken any action pursuant to this Section 9.2 and until all obligations of
the Loan Parties have been paid in full, any and all proceeds received by the
Agent, or any part thereof, or the exercise of any other remedy by the Agent,
shall be applied as follows:
(i) first, to reimburse the Agent and
the Banks for out-of-pocket costs, expenses and disbursements, including
without limitation reasonable attorneys' fees and legal expenses, incurred by
the Agent or the Banks in connection with collection of any obligations of any
of the Loan Parties under any of the Loan Documents;
(ii) second, to the repayment of all
Indebtedness then due and unpaid of the Loan Parties to the Banks incurred
under this Agreement or any of the Loan Documents, whether of principal,
interest, fees, expenses or otherwise, in such manner as the Agent may
determine in its discretion; and
(iii) the balance, if any, as required
by Law.
(f) In addition to all of the rights and
remedies contained in this Agreement or in any of the other Loan Documents, the
Agent shall have all of the rights and remedies under applicable Law, all of
which rights and remedies shall be cumulative and non-exclusive, to the extent
permitted by Law. The Agent may, and upon the request of the Required Banks
shall, exercise all post-default rights granted to the Agent and the Banks
under the Loan Documents or applicable Law.
10. THE AGENT
10.1 Appointment.
Each Bank hereby irrevocably designates, appoints and
authorizes PNC to act as Agent for such Bank under this Agreement to execute
and deliver or accept on behalf of each of the Banks the other Loan Documents.
Each Bank hereby irrevocably authorizes, and each holder of any Note by the
acceptance of a Note shall be deemed irrevocably to authorize, the Agent to
-66-
<PAGE> 73
take such action on its behalf under the provisions of this Agreement and the
other Loan Documents and any other instruments and agreements referred to
herein, and to exercise such powers and to perform such duties hereunder as are
specifically delegated to or required of the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto. PNC agrees to
act as the Agent on behalf of the Banks to the extent provided in this
Agreement.
10.2 Delegation of Duties.
The Agent may perform any of its duties hereunder by or
through agents or employees (provided such delegation does not constitute a
relinquishment of its duties as Agent) and, subject to Sections 10.5 and 10.6
hereof, shall be entitled to engage and pay for the advice or services of any
attorneys, accountants or other experts concerning all matters pertaining to
its duties hereunder and to rely upon any advice so obtained.
10.3 Nature of Duties; Independent Credit Investigation.
The Agent shall have no duties or responsibilities except
those expressly set forth in this Agreement and no implied covenants,
functions, responsibilities, duties, obligations, or liabilities shall be read
into this Agreement or otherwise exist. The duties of the Agent shall be
mechanical and administrative in nature; the Agent shall not have, by reason of
this Agreement, a fiduciary or trust relationship in respect of any Bank; and
nothing in this Agreement, expressed or implied, is intended to or shall be so
construed as to impose upon the Agent any obligations in respect of this
Agreement except as expressly set forth herein. Each Bank expressly
acknowledges (i) that the Agent has not made any representations or warranties
to it and that no act by the Agent hereafter taken, including any review of the
affairs of any of the Loan Parties, shall be deemed to constitute any
representation or warranty by the Agent to any Bank; (ii) that it has made and
will continue to make, without reliance upon the Agent, its own independent
investigation of the financial condition and affairs and its own appraisal of
the creditworthiness of each of the Loan Parties in connection with this
Agreement and the making and continuance of the Loans hereunder; and (iii)
except as expressly provided herein, that the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Bank
with any credit or other information with respect thereto, whether coming into
its possession before the making of any Loan or at any time or times
thereafter.
10.4 Actions in Discretion of Agent; Instructions from
the Banks.
The Agent agrees, upon the written request of the Required
Banks, to take or refrain from taking any action of the type specified as being
within the Agent's rights, powers or discretion herein, provided that the Agent
shall not be required to take any action which exposes the Agent to personal
liability or which is contrary to this Agreement or any other Loan Document or
applicable Law. In the absence of a request by the Required Banks, the Agent
shall have authority, in its sole discretion, to take or not to take any such
action, unless this Agreement specifically requires the consent of the Required
Banks or all of the Banks. Any action taken or failure to act pursuant to such
instructions or discretion shall be binding on the Banks, subject to Section
10.6 hereof. Subject to the provisions of Section 10.6, no Bank shall have any
right of action whatsoever against the Agent as a result of the Agent acting or
refraining from acting
-67-
<PAGE> 74
hereunder in accordance with the instructions of the Required Banks, or in the
absence of such instructions, in the absolute discretion of the Agent.
10.5 Reimbursement and Indemnification of Agent by the
Borrower.
The Borrower unconditionally agrees to pay or reimburse the
Agent and save the Agent harmless against (a) liability for the payment of all
reasonable out-of-pocket costs, expenses and disbursements, including but not
limited to fees and expenses of counsel (subject to the letter dated February
7, 1996 from Buchanan Ingersoll Professional Corporation to PNC with respect to
the fees and expenses the Agent's counsel in connection with the initial
closing under this Agreement), appraisers and environmental consultants,
incurred by the Agent (i) in connection with the development, negotiation,
preparation, printing, execution, administration, syndication, interpretation
and performance of this Agreement and the other Loan Documents, (ii) relating
to any requested amendments, waivers or consents pursuant to the provisions
hereof, (iii) in connection with the enforcement of this Agreement or any other
Loan Document or collection of amounts due hereunder or thereunder or the proof
and allowability of any claim arising under this Agreement or any other Loan
Document, whether in bankruptcy or receivership proceedings or otherwise, and
(iv) in any workout, restructuring or in connection with the protection,
preservation, exercise or enforcement of any of the terms hereof or of any
rights hereunder or under any other Loan Document or in connection with any
foreclosure, collection or bankruptcy proceedings, and (b) all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against the Agent, in its capacity as such, in any
way relating to or arising out of this Agreement or any other Loan Documents or
any action taken or omitted by the Agent hereunder or thereunder, provided that
the Borrower shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements if the same results from the Agent's gross negligence
or willful misconduct, or if the Borrower was not given notice of the subject
claim and the opportunity to participate in the defense thereof, at its
expense, or if the same results from a compromise or settlement agreement
entered into without the consent of the Borrower. In addition, the Borrower
agrees to reimburse and pay all reasonable out-of-pocket expenses of the
Agent's regular employees and agents engaged periodically to perform audits of
the Loan Parties' books, records and business properties.
10.6 Exculpatory Provisions.
Neither the Agent nor any of its directors, officers,
employees, agents, attorneys or affiliates shall (a) be liable to any Bank or
any Loan Party for any action taken or omitted to be taken by it or them
hereunder, or in connection herewith, including without limitation pursuant to
any Loan Document, unless caused by its or their own gross negligence or
willful misconduct, (b) be responsible in any manner to any of the Banks for
the effectiveness, enforceability, genuineness, validity or the due execution
of this Agreement or any other Loan Documents or for any recital,
representation, warranty, document, certificate, report or statement herein or
made or furnished under or in connection with this Agreement or any other Loan
Documents, or (c) be under any obligation to any of the Banks to ascertain or
to inquire as to the
-68-
<PAGE> 75
performance or observance of any of the terms, covenants or conditions hereof
or thereof on the part of the Loan Parties, or the financial condition of the
Loan Parties, or the existence or possible existence of any Event of Default or
Potential Default. Neither the Agent nor any Bank nor any of their respective
directors, officers, employees, agents, attorneys or affiliates shall be liable
to any of the Loan Parties for consequential damages resulting from any breach
of contract, tort or other wrong in connection with the negotiation,
documentation, administration or collection of the Loans or any of the Loan
Documents.
10.7. Reimbursement and Indemnification of Agent by
Banks.
Each Bank agrees to reimburse and indemnify the Agent (to the
extent not reimbursed by the Borrower and without limiting the obligation of
the Borrower to do so) in proportion to its Ratable Share from and against all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against the Agent, in its capacity
as such, in any way relating to or arising out of this Agreement or any other
Loan Documents or any action taken or omitted by the Agent hereunder or
thereunder, provided that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements (a) if the same results from the
Agent's gross negligence or willful misconduct, or (b) if such Bank was not
given notice of the subject claim and the opportunity to participate in the
defense thereof, at its expense, or (c) if the same results from a compromise
and settlement agreement entered into without the consent of such Bank.
10.8. Reliance by Agent.
The Agent shall be entitled to rely upon any writing,
telegram, telex or teletype message, resolution, notice, consent, certificate,
letter, cablegram, statement, order or other document or conversation by
telephone or otherwise believed by it to be genuine and correct and to have
been signed, sent or made by the proper person or persons, and upon the advice
and opinions of counsel and other professional advisers selected by the Agent.
The Agent shall be fully justified in failing or refusing to take any action
hereunder unless it shall first be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action.
10.9. Notice of Default.
The Agent shall not be deemed to have knowledge or notice of
the occurrence of any Potential Default or Event of Default unless the Agent
has received written notice from a Bank or the Borrower referring to this
Agreement, describing such Potential Default or Event of Default and stating
that such notice is a "notice of default."
10.10. Notices.
The Agent shall promptly send to each Bank a copy of all
notices received from the Borrower pursuant to the provisions of this Agreement
or the other Loan Documents
-69-
<PAGE> 76
promptly upon receipt thereof. The Agent shall promptly notify the Borrower and
the other Banks of each change in the Base Rate and the effective date thereof.
10.11. Banks in Their Individual Capacities.
With respect to its Revolving Credit Commitments, the Letters
of Credit and advances in respect of drawings thereunder and the Revolving
Credit Loans made by it, the Agent shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not the
Agent, and the term "Banks" shall, unless the context otherwise indicates,
include the Agent in its individual capacity. PNC and its affiliates and each
of the Banks and their respective affiliates may, without liability to account,
except as prohibited herein, make loans to, accept deposits from, discount
drafts for, act as trustee under indentures of, and generally engage in any
kind of banking or trust business with, the Borrower and its affiliates, in the
case of the Agent, as though it were not acting as Agent hereunder and in the
case of each Bank, as though such Bank were not a Bank hereunder.
10.12 Holders of Notes.
The Agent may deem and treat any payee of any Note as the
owner thereof for all purposes hereof unless and until written notice of the
assignment or transfer thereof shall have been filed with the Agent. Any
request, authority or consent of any person who, at the time of making such
request or giving such authority or consent, is the holder of any Note shall be
conclusive and binding on any subsequent holder, transferee or assignee of such
Note or of any Note or Notes issued in exchange therefor.
10.13. Equalization of Banks.
The Banks and the holders of any participations in any Notes
agree among themselves that, with respect to all amounts received by any Bank
or any such holder for application on any obligation hereunder or under any
Note or under any such participation, whether received by voluntary payment, by
realization upon security, by the exercise of the right of set-off or banker's
lien, by counterclaim or by any other non-pro rata source, equitable adjustment
will be made in the manner stated in the following sentence so that, in effect,
all such excess amounts will be shared ratably among the Banks and such holders
in proportion to their interests in payments under the Notes, except as
otherwise provided in Sections 4.4(b), 5.4(b) or 5.5 hereof. The Banks, or any
such holder receiving any such amount, shall purchase for cash from each of the
other Banks an interest in such Bank's Loans in such amount as shall result in
a ratable participation by the Banks and each such holder in the aggregate
unpaid amount under the Notes, provided that if all or any portion of such
excess amount is thereafter recovered from the Bank or the holder making such
purchase, such purchase shall be rescinded and the purchase price restored to
the extent of such recovery, together with interest or other amounts, if any,
required by law (including court order) to be paid by the Bank or the holder
making such purchase.
-70-
<PAGE> 77
10.14. Successor Agent.
The Agent may resign as Agent upon not less than thirty (30)
days' prior written notice to the Borrower and the Banks. If the Agent shall
resign under this Agreement, then either (a) the Required Banks shall appoint
from among the Banks a successor agent for the Banks and such successor shall
be subject to the consent of the Borrower, which shall not be unreasonably
withheld, or (b) if a successor agent shall not be so appointed and approved
within the thirty (30) day period following the Agent's notice to the Banks of
its resignation, then the Agent shall appoint, with the consent of the
Borrower, such consent not to be unreasonably withheld, a successor agent who
shall serve as Agent until such time as the Required Banks appoint a successor
agent. Upon its appointment pursuant to either clause (a) or (b) above, 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 Agreement. After the resignation of any
Agent hereunder, the provisions of this Article 10 shall inure to the benefit
of such former Agent and such former Agent shall not by reason of such
resignation be deemed to be released from liability for any actions taken or
not taken by it while it was an Agent under this Agreement.
10.15. Agent's Fee.
The Borrower shall pay to the Agent a nonrefundable fee (the
"Agent's Fee") as set forth in that the Side Letter.
10.16. Availability of Funds.
Unless the Agent shall have been notified by a Bank prior to
the date upon which a Loan is to be made that such Bank does not intend to make
available to the Agent such Bank's portion of such Loan, the Agent may assume
that such Bank has made or will make such proceeds available to the Agent on
such date and the Agent may, in reliance upon such assumption (but shall not be
required to), make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Agent by such Bank,
the Agent shall be entitled to recover such amount on demand from such Bank
(or, if such Bank fails to pay such amount forthwith upon such demand from the
Borrower) together with interest thereon, in respect of each day during the
period commencing on the date such amount was made available to the Borrower
and ending on the date the Agent recovers such amount, at a rate per annum
equal to the Federal Funds Effective Rate.
10.17. Calculations.
In the absence of gross negligence or willful misconduct, the
Agent shall not be liable for any error in computing the amount payable to any
Bank whether in respect of the Loans, fees or any other amounts due to the
Banks under this Agreement. In the event an error in computing any amount
payable to any Bank is made, the Agent, the Borrower and each affected Bank
shall, forthwith upon discovery of such error, make such adjustments as shall
be required to
-71-
<PAGE> 78
correct such error, and any compensation therefor will be calculated at the
Federal Funds Effective Rate.
10.18. Beneficiaries.
Except as expressly provided herein, the provisions of this
Article 10 are solely for the benefit of the Agent and the Banks, and the Loan
Parties shall not have any rights to rely on or enforce any of the provisions
hereof. In performing its functions and duties under this Agreement, the Agent
shall act solely as agent of the Banks and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust
with or for any of the Loan Parties.
11. MISCELLANEOUS
11.1. Modifications, Amendments or Waivers.
With the written consent of the Required Banks, the Agent,
acting on behalf of all the Banks, and the Borrower on behalf of the Loan
Parties may from time to time enter into written agreements amending or
changing any provision of this Agreement or any other Loan Document or the
rights of the Banks or the Loan Parties hereunder or thereunder, or may grant
written waivers or consents to a departure from the due performance of the
obligations of the Loan Parties hereunder or thereunder. Any such agreement,
waiver or consent made with such written consent shall be effective to bind all
the Banks and the Loan Parties; provided, that, without the written consent of
all the Banks, no such agreement, waiver or consent may be made which will:
(a) Reduce the amount of the Commitment Fee or
any other fees payable to any Bank hereunder, or amend Sections 5.2 [Pro Rata
Treatment of Banks], 10.6 [Exculpatory Provisions], 10.13 [Equalization of
Banks] hereof and 11.19 [Limitation of Liability];
(b) Whether or not any Loans are outstanding,
extend the time for payment of principal or interest of any Loan or any fees,
or reduce the principal amount of or the rate of interest borne by any Loan or
the amount of any fees, or otherwise affect the terms of payment of the
principal of or interest of any Loan or any fees or increase the amount of the
commitments or extend the Revolving Credit Expiration Date;
(c) Release any Guarantor from its obligations
under the Guaranty Agreement; or
(d) Amend this Section 11.1, change the
definition of Required Banks, or change any requirement providing for the Banks
or the Required Banks to authorize the taking of any action hereunder.
-72-
<PAGE> 79
11.2. No Implied Waivers; Cumulative Remedies; Writing
Required.
No course of dealing and no delay or failure of the Agent or
any Bank in exercising any right, power, remedy or privilege under this
Agreement or any other Loan Document shall affect any other or future exercise
thereof or operate as a waiver thereof; nor shall any single or partial
exercise thereof or any abandonment or discontinuance of steps to enforce such
a right, power, remedy or privilege preclude any further exercise thereof or of
any other right, power, remedy or privilege. The rights and remedies of the
Agent and the Banks under this Agreement and any other Loan Documents are
cumulative and not exclusive of any rights or remedies which they would
otherwise have. Any waiver, permit, consent or approval of any kind or
character on the part of any Bank of any breach or default under this Agreement
or any such waiver of any provision or condition of this Agreement must be in
writing and shall be effective only to the extent specifically set forth in
such writing.
11.3. Reimbursement and Indemnification of Banks by the
Borrower; Taxes.
The Borrower agrees unconditionally upon demand to pay or
reimburse to each Bank (other than the Agent, as to which the Borrower's
obligations are set forth in Section 10.5) and to save such Bank harmless
against (i) liability for the payment of all reasonable out-of-pocket costs,
expenses and disbursements (including fees and expenses of counsel for each
Bank except with respect to (a) and (b) below), incurred by such Bank (a) in
connection with the administration and interpretation of this Agreement, and
other instruments and documents to be delivered hereunder, (b) relating to any
amendments, waivers or consents pursuant to the provisions hereof, (c) in
connection with the enforcement of this Agreement or any other Loan Document,
or collection of amounts due hereunder or thereunder or the proof and
allowability of any claim arising under this Agreement or any other Loan
Document, whether in bankruptcy or receivership proceedings or otherwise, and
(d) in any workout, restructuring or in connection with the protection,
preservation, exercise or enforcement of any of the terms hereof or of any
rights hereunder or under any other Loan Document or in connection with any
foreclosure, collection or bankruptcy proceedings, or (ii) all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against such Bank, in its capacity as such, in any
way relating to or arising out of this Agreement or any other Loan Documents or
any action taken or omitted by such Bank hereunder or thereunder, provided that
the Borrower shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements to the extent such portion resulted from (A) such
Bank's gross negligence or willful misconduct, or (B) the failure to provide
the Borrower with notice of the subject claim and the opportunity to
participate in the defense thereof, at its expense, or (C) a compromise or
settlement agreement entered into without the consent of the Borrower. The
Banks will attempt to minimize the fees and expenses of legal counsel for the
Banks which are subject to reimbursement by the Borrower hereunder by
considering the usage of one law firm to represent the Banks and the Agent if
appropriate under the circumstances. The Borrower agrees unconditionally to pay
all stamp, document, transfer, recording or filing taxes or fees and similar
impositions now or hereafter determined by the Agent or any Bank to be payable
in connection with this Agreement or any other Loan
-73-
<PAGE> 80
Document, and the Borrower agrees unconditionally to save the Agent and the
Banks harmless from and against any and all present or future claims,
liabilities or losses with respect to or resulting from any omission to pay or
delay in paying any such taxes, fees or impositions.
11.4. Holidays.
Whenever any payment or action to be made or taken hereunder
shall be stated to be due on a day which is not a Business Day, such payment or
action shall be made or taken on the next following Business Day (except as
provided in Section 4.2 with respect to Interest Periods), and such extension
of time shall be included in computing interest or fees, if any, in connection
with such payment or action.
11.5. Funding by Branch, Subsidiary or Affiliate.
(a) Notional Funding.
Each Bank shall have the right from time to time,
without notice to the Borrower, to deem any branch, subsidiary or affiliate
(which for the purposes of this Section 11.5 shall mean any corporation or
association which is directly or indirectly controlled by or is under direct or
indirect common control with any corporation or association which directly or
indirectly controls such Bank) of such Bank to have made, maintained or funded
any Loan to which the Euro-Rate Option applies at any time, provided that
immediately following (on the assumption that a payment were then due from the
Borrower to such other office) and as a result of such change, the Borrower
would not be under any greater obligation pursuant to Section 5.5 hereof than
it would have been in the absence of such change. Notional funding offices may
be selected by each Bank without regard to the Bank's actual methods of making,
maintaining or funding the Loans or any sources of funding actually used by or
available to such Bank.
(b) Actual Funding.
Each Bank shall have the right from time to time to
make or maintain any Loan by arranging for a branch, subsidiary or affiliate of
such Bank to make or maintain such Loan subject to the last sentence of this
Section 11.5(b). If any Bank causes a branch, subsidiary or affiliate to make
or maintain any part of the Loans hereunder, all terms and conditions of this
Agreement shall, except where the context clearly requires otherwise, be
applicable to such part of the Loans to the same extent as if such Loans were
made or maintained by such Bank, but in no event shall any Bank's use of such a
branch, subsidiary or affiliate to make or maintain any part of the Loans
hereunder cause such Bank or such branch, subsidiary or affiliate to incur any
cost or expenses payable by the Borrower hereunder or require the Borrower to
pay any other compensation to any Bank (including, without limitation, any
expenses incurred or payable pursuant to Section 5.5 hereof) which would
otherwise not be incurred.
11.6. Notices.
All notices, requests, demands, directions and other
communications (collectively "notices") given to or made upon any party hereto
under the provisions of this Agreement shall
-74-
<PAGE> 81
be by telephone in person (as opposed to voice mail or answering machine
message) or in writing (including telex or facsimile communication, PROVIDED
receipt of such telex or facsimile communication is confirmed within
twenty-four (24) hours of receipt) unless otherwise expressly permitted
hereunder and shall be delivered or sent by telex or facsimile to the
respective parties at the addresses and numbers set forth under their
respective names on the signature pages hereof or in accordance with any
subsequent unrevoked written direction from any party to the others. All
notices shall, except as otherwise expressly herein provided, be effective (a)
in the case of telex or facsimile, when received, (b) in the case of
hand-delivered notice, when hand delivered, (c) in the case of telephone, when
telephoned, provided, however, that in order to be effective, telephonic
notices must be confirmed in writing no later than the next day by letter,
facsimile or telex, (d) if given by mail, four (4) days after such
communication is deposited in the mail with first class postage prepaid, return
receipt requested, and (e) if given by any other means (including by air
courier), when delivered; PROVIDED, that notices to the Agent shall not be
effective until received. Any Bank giving any notice to any Loan Party shall
simultaneously send a copy thereof to the Agent, and the Agent shall promptly
notify the other Banks of the receipt by it of any such notice.
11.7. Severability.
The provisions of this Agreement are intended to be
severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.
11.8. Governing Law.
This Agreement shall be deemed to be a contract under the
laws of the State of Ohio and for all purposes shall be governed by and
construed and enforced in accordance with the laws of the State of Ohio without
regard to its conflict of laws principles.
11.9. Prior Understanding.
This Agreement supersedes all prior understandings and
agreements, whether written or oral, between the parties hereto and thereto
relating to the transactions provided for herein and therein, including any
prior confidentiality agreements and commitments, except the Side Letter which
remains in force and effect.
11.10. Duration; Survival.
All representations and warranties of the Loan Parties
contained herein or made in connection herewith shall survive the making of
Loans and shall not be waived by the execution and delivery of this Agreement,
any investigation by the Agent or the Banks, the making of Loans, or payment in
full of the Loans. All covenants and agreements of the Loan Parties contained
herein shall continue in full force and effect from and after the date hereof,
so long as the Borrower may borrow hereunder and until termination of the
Revolving Credit
-75-
<PAGE> 82
Commitments, payment in full of the Loans and termination or
expiration of all Letters of Credit. All covenants and agreements of the
Borrower contained herein relating to the payment of principal, interest,
premiums, additional compensation or expenses and indemnification, including
those set forth in the Notes, Article 5 and Sections 10.5, 10.7, and 11.3
hereof, shall survive payment in full of the Loans, termination of the
Revolving Credit Commitments and termination or expiration of all Letters of
Credit.
11.11. Successors and Assigns.
This Agreement shall be binding upon and shall inure
to the benefit of the Banks, the Agent, the Borrower and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights and obligations hereunder or any interest herein. Each Bank may,
at its own cost and without the Borrower's consent, sell participations in all
on any part of its Commitments and the Loans made by it. Each Bank may, at its
own cost, make assignments of all or any part of its Revolving Credit
Commitment and the Loans made by it, PROVIDED that each of the following
conditions is met: (i) the Commitments and Loans that are assigned to any
assignee, in the aggregate, must equal or exceed $10,000,000, and (ii) the
Agent and, except during the continuance of an Event of Default, the Borrower
shall consent to the assignee, such consent not to be unreasonably withheld.
In the case of an assignment, upon receipt by the
Agent of the Assignment and Assumption Agreement, the assignee shall have, to
the extent of such assignment (unless otherwise provided therein), the same
rights, benefits and obligations as it would have if it had been a signatory
Bank hereunder, the Commitments in Section 2.1 shall be adjusted accordingly,
and upon surrender of any Note subject to such assignment, the Borrower shall
execute and deliver new Notes to the assignee in an amount equal to the amount
of the Commitments assumed by it and new Notes to the assigning Bank in an
amount equal to the Commitments retained by it hereunder. The assigning Bank
shall pay to the Agent a service fee in the amount of $2,000 for each
assignment.
In the case of a participation, the participant
shall only have the rights specified in Section 9.2(c) (the participant's
rights against such Bank in respect of such participation to be those set forth
in the agreement executed by such Bank in favor of the participant relating
thereto and not to include any voting rights except with respect to changes of
the type referenced in clauses (a), (b), or (c) under Section 11.1 hereof), all
of such Bank's obligations under this Agreement or any other Loan Document
shall remain unchanged, and all amounts payable by any of the Loan Parties
hereunder or thereunder shall be determined as if such Bank had not sold such
participation. Each Bank may furnish any publicly available information
concerning any of the Loan Parties and any other information concerning any of
the Loan Parties in the possession of such Bank from time to time to assignees
and participants (including prospective assignees or participants), PROVIDED
such assignees and participants agree to be bound by the provisions of Section
11.12 hereof.
-76-
<PAGE> 83
11.12. Confidentiality.
The Agent and the Banks each agree to keep confidential all
information obtained from the Borrower which is nonpublic and confidential or
proprietary in nature (including any information the Borrower specifically
designates as confidential), except as provided below, and to use such
information only in connection with their respective capacities under this
Agreement and for the purposes contemplated hereby. The Agent and the Banks
shall be permitted to disclose such information (i) to affiliates of the Agent
and the Banks and to outside legal counsel, accountants and other professional
advisors who need to know such information in connection with the
administration and enforcement of this Agreement, subject to agreement of such
persons to maintain the confidentiality, (ii) assignees and participants as
contemplated by Section 11.11, (iii) to the extent requested by any bank
regulatory authority or, with notice to the Borrower, as otherwise required by
applicable Law or by any subpoena or similar legal process, or in connection
with any investigation or proceeding arising out of the transactions
contemplated by this Agreement, (iv) if it becomes publicly available other
than as a result of a breach of this Agreement or becomes available from a
source not subject to confidentiality restrictions, or (v) the Borrower shall
have consented to such disclosure.
11.13. Counterparts.
This Agreement may be executed by different parties hereto on
any number of separate counterparts, each of which, when so executed and
delivered, shall be an original, and all such counterparts shall together
constitute one and the same instrument.
11.14. Agent's or Bank's Consent.
Whenever the Agent's or any Bank's consent is required to be
obtained under this Agreement or any of the other Loan Documents as a condition
to any action, inaction, condition or event, the Agent and each Bank shall be
authorized to give or withhold such consent in its sole and absolute discretion
and to condition its consent upon the giving of additional collateral, the
payment of money or any other matter.
11.15. Exceptions.
The representations, warranties and covenants contained
herein shall be independent of each other, and no exception to any
representation, warranty or covenant shall be deemed to be an exception to any
other representation, warranty or covenant contained herein unless expressly
provided, nor shall any such exceptions be deemed to permit any action or
omission that would be in contravention of applicable Law.
11.16. Consent to Forum; Waiver of Jury Trial.
Each of the Loan Parties hereby irrevocably consents to the
nonexclusive jurisdiction of the Court of Common Pleas of Hamilton County, Ohio
and the United States District Court for the Southern District of Ohio, and
waives personal service of any and all process upon it and consents that all
such service of process be made by certified or registered
-77-
<PAGE> 84
mail directed to such Loan Party at the addresses provided for in Section 11.6
hereof and service so made shall be deemed to be completed upon actual receipt
thereof. Each Loan Party waives any objection to jurisdiction and venue of any
action instituted against it as provided herein and agrees not to assert any
defense based on lack of jurisdiction or venue. Each Loan Party, the Agent and
the Banks hereby waive trial by jury in any action, suit, proceeding or
counterclaim of any kind arising out of or related to this Agreement or any
other Loan Document to the full extent permitted by Law.
11.17. Tax Withholding Clause.
At least five (5) Business Days prior to the first date on
which interest or fees are payable hereunder for the account of any Bank, each
Bank that is not incorporated under the laws of the United States of America or
a state thereof agrees that it will deliver to each of the Borrower and the
Agent two (2) duly completed copies of (i) Internal Revenue Service Form W-9,
4224 or 1001, or other applicable form prescribed by the Internal Revenue
Service, certifying in either case that such Bank is entitled to receive
payments under this Agreement and the other Loan Documents without deduction or
withholding of any United States federal income taxes, or is subject to such
tax at a reduced rate under an applicable tax treaty, or (ii) Form W-8 or other
applicable form or a certificate of the Bank indicating that no such exemption
or reduced rate is allowable with respect to such payments. Each Bank which so
delivers a Form W-8, W-9, 4224 or 1001 further undertakes to deliver to each of
the Borrower and the Agent two (2) additional copies of such form (or a
successor form) on or before the date that such form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent form so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by the Borrower or the Agent,
either certifying that such Bank is entitled to receive payments under this
Agreement and the other Loan Documents without deduction or withholding of any
United States federal income taxes or is subject to such tax at a reduced rate
under an applicable tax treaty or stating that no such exemption or reduced
rate is allowable. The Agent shall be entitled to withhold United States
federal income taxes at the full withholding rate unless the Bank establishes
an exemption or at the applicable reduced rate as established pursuant to the
above provisions.
11.18. Joinder of Guarantors.
Any Subsidiary of the Borrower which is
required to join this Agreement pursuant to Section 8.2(i) must execute and
deliver to Agent (i) a Guarantor Joinder attached hereto as EXHIBIT 1.1(G)(1),
(ii) an Intercompany Subordination Joinder attached hereto as EXHIBIT
1.1(I)(2), and (iii) documents in the forms described in Section 7.1, modified
as appropriate to relate to such Subsidiary. The Loan Parties shall deliver
the foregoing documents specified in the preceding clauses (i)-(iii) to the
Agent within fourteen (14) Business Days after the date of the filing of the
articles of incorporation, certificate of limited partnership or other
equivalent effective date of the organization of such Subsidiary if such
Subsidiary is not a limited partnership or corporation. Upon execution and
delivery of such documents, a Subsidiary shall be a party hereto and an obligor
under the Guaranty, and one of the Loan Parties and Guarantors hereunder, and
under each of the other Loan Documents for all purposes.
-78-
<PAGE> 85
11.19. Limitation of Liability.
TO THE FULLEST EXTENT PERMITTED BY LAW, NO CLAIM MAY BE MADE
BY THE BORROWER OR ANY OTHER LOAN PARTY OR ANY OTHER PERSON AGAINST THE AGENT
AND THE BANKS, OR ANY OF THEM, OR ANY AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE,
ATTORNEY OR AGENT OF THE AGENT OR THE BANKS FOR ANY SPECIAL, INDIRECT,
CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM ARISING FROM OR
RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY STATEMENT, COURSE OF
CONDUCT, ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH
(WHETHER FOR BREACH OF CONTRACT, TORT OR ANY OTHER THEORY OF LIABILITY); AND
THE BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR
ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED
TO EXIST IN ITS FAVOR.
11.20. Co-Agents.
The Co-Agents shall have no rights, obligations or duties
under this Agreement other than in their respective capacities as Banks
hereunder.
[SIGNATURE PAGES FOLLOW]
-79-
<PAGE> 86
[SIGNATURE PAGE 1 OF 7 TO THE CREDIT AGREEMENT]
IN WITNESS WHEREOF, the parties hereto, by their officers
thereunto duly authorized, have executed this Agreement as of the day and year
first above written.
<TABLE>
<S> <C>
BORROWER:
ATTEST: ZARING HOMES, INC.
__________________________ By:__________________________________
[Seal] Name: Ronald G. Gratz
Title: Vice President and Chief Financial
Officer
Address for Notices:
Zaring Homes, Inc.
300 Cornell Park Drive, Suite 300
Cincinnati, OH 45242-1825
Attention: Ronald G. Gratz
Telecopier No.: (513) 489-4425
Telephone No.: (513) 489-8849
GUARANTORS:
ATTEST: ZARING HOLDINGS, INC.
__________________________ By:__________________________________
[Seal] Name: Ronald G. Gratz
Title: Treasurer
Address for Notices:
Zaring Holdings, Inc.
11300 Cornell Park Drive, Suite 300
Cincinnati, OH 45242-1825
Attention: Ronald G. Gratz
Telecopier No.: (513) 489-4425
Telephone No.: (513) 489-8849
</TABLE>
-80-
<PAGE> 87
[SIGNATURE PAGE 2 OF 7 TO THE CREDIT AGREEMENT]
<TABLE>
<S> <C>
ATTEST: ZARING HOMES OF INDIANA, LLC
By: Zaring Homes, Inc., as member
__________________________ By:__________________________________
[Seal] Name: Ronald G. Gratz
Title: Vice President and Chief Financial
Officer
Address for Notices:
Zaring Homes of Indiana, LLC
11300 Cornell Park Drive, Suite 300
Cincinnati, OH 45242-1825
Attention: Ronald G. Gratz
Telecopier No.: (513) 489-4425
Telephone No.: (513) 489-8849
ATTEST: ZARING HOMES KENTUCKY, LLC,
By: Zaring Homes, Inc., as manager
__________________________ By:__________________________________
[Seal] Name: Ronald G. Gratz
Title: Vice President and Chief Financial
Officer
Address for Notices:
Zaring Homes Kentucky, LLC
11300 Cornell Park Drive, Suite 300
Cincinnati, OH 45242-1825
Attention: Ronald G. Gratz
Telecopier No.: (513) 489-4425
Telephone No.: (513) 489-8849
</TABLE>
-81-
<PAGE> 88
[SIGNATURE PAGE 3 OF 7 TO THE CREDIT AGREEMENT]
AGENT:
PNC BANK, OHIO, NATIONAL ASSOCIATION,
as Agent and as a Bank
By:__________________________________
Name: James A. Harmann,
Title: Assistant Vice President
Address for Notices:
PNC Bank, Ohio, National Association
201 East Fifth Street, 8th Floor
Cincinnati, OH 45202
Attention: Commercial Real Estate
Telecopier No. (513) 651-8931
Telephone No. (513) 651-8988
With a copy to:
PNC Bank, National Association
One PNC Plaza - Fourth Floor Annex
Fifth Avenue and Wood Street
Pittsburgh, PA 15265
Attention: Multi-Bank Loan Administration
Telecopier No. (412) 762-8672
Telephone No. (412) 762-3627
-82-
<PAGE> 89
[SIGNATURE PAGE 4 OF 7 TO THE CREDIT AGREEMENT]
<TABLE>
<S> <C>
CO-AGENTS:
ATTEST: NATIONSBANK, N.A.,
as a Co-Agent and as a Bank
____________________________ By:____________________________________
[Seal] Name: Karen H. Morgan
Title:__________________________________
Address for Notices:
-----------------------------------
-----------------------------------
-----------------------------------
Attention:___________________________
Telecopier No.: (___) ___-____
Telephone No.: (___) ___-____
</TABLE>
-83-
<PAGE> 90
[SIGNATURE PAGE 5 OF 7 TO THE CREDIT AGREEMENT]
<TABLE>
<S> <C>
ATTEST: THE FIRST NATIONAL BANK OF CHICAGO,
as a Co-Agent and as a Bank
____________________________ By:____________________________________
[Seal] Name: Patricia Leung
Title:___________________________________
Address for Notices:
-----------------------------------
-----------------------------------
-----------------------------------
Attention:___________________________
Telecopier No.: (___) ___-____
Telephone No.: (___) ___-____
</TABLE>
-84-
<PAGE> 91
[SIGNATURE PAGE 6 OF 7 TO THE CREDIT AGREEMENT]
<TABLE>
<S> <C>
OTHER BANKS:
ATTEST: COMERICA BANK,
____________________________ By:____________________________________
[Seal] Name: Kurt R. Strehlke
Title:___________________________________
Address for Notices:
-----------------------------------
-----------------------------------
-----------------------------------
Attention:___________________________
Telecopier No.: (___) ___-____
Telephone No.: (___) ___-____
</TABLE>
-85-
<PAGE> 92
[SIGNATURE PAGE 7 OF 7 TO THE CREDIT AGREEMENT]
<TABLE>
<S> <C>
ATTEST: THE FIFTH THIRD BANK
____________________________ By:____________________________________
[Seal] Name: Charles D. Lanham
Title:___________________________________
Address for Notices:
-----------------------------------
-----------------------------------
-----------------------------------
Attention:___________________________
Telecopier No.: (___) ___-____
Telephone No.: (___) ___-____
</TABLE>
-86-
<PAGE> 93
SCHEDULE 1.1(B)
COMMITMENTS OF BANKS
<TABLE>
<CAPTION>
Amount of Commitment Amount of
for Revolving Credit Commitment for Ratable
Loans ($US) Term Loans ($US) Share (%)
--------------------- ---------------- ---------
<S> <C> <C> <C>
PNC Bank, Ohio,
National Association $18,639,800 $3,860,200 25.71%
NationsBank, N.A. $16,573,500 $3,426,500 22.86%
The First National
Bank of Chicago $16,573,500 $3,426,500 22.86%
Comerica Bank $12,426,500 $2,573,500 17.14%
The Fifth Third Bank $8,286,700 $1,713,300 11.43%
--------- --------- ------
TOTAL $72,500,000 $15,000,000 100%
=========== =========== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,322
<SECURITIES> 0
<RECEIVABLES> 184
<ALLOWANCES> 0
<INVENTORY> 77,621
<CURRENT-ASSETS> 0
<PP&E> 1,860
<DEPRECIATION> 0
<TOTAL-ASSETS> 88,933
<CURRENT-LIABILITIES> 0
<BONDS> 30,761
<COMMON> 25,136
0
0
<OTHER-SE> 19,085
<TOTAL-LIABILITY-AND-EQUITY> 88,933
<SALES> 27,255
<TOTAL-REVENUES> 27,255
<CGS> 22,464
<TOTAL-COSTS> 26,687
<OTHER-EXPENSES> (50)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 618
<INCOME-TAX> 240
<INCOME-CONTINUING> 378
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 378
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
