Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to______________
Commission File Number 1-7534
___________________________
STORAGE TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 84-0593263
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
Number)
2270 South 88th Street, Louisville, Colorado 80028-4309
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (303) 673-5151
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. /X/ YES / / NO
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common stock ($.10 Par Value) - 44,026,267 shares outstanding at October 28,
1994.
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Form 10-Q
Page 2
STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
INDEX TO FORM 10-Q
SEPTEMBER 30, 1994
PAGE
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheet 3
Consolidated Statement of Operations 4
Consolidated Statement of Cash Flows 5
Supplementary Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 22
Item 6 - Exhibits and Reports on Form 8-K 23
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Form 10-Q
Page 3
STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands of Dollars)
09/30/94
(Unaudited) 12/31/93
--------- ---------
ASSETS
Cash, including cash equivalents $ 188,366 $ 255,062
Short-term investments 16,042
Accounts receivable, net 256,541 218,701
Notes and installment receivables 5,879 9,973
Net investment in sales-type leases 162,178 171,165
Inventories (Note 2) 279,568 203,257
--------- ---------
Total current assets 892,532 874,200
Notes and installment receivables 9,117 13,968
Net investment in sales-type leases 241,477 252,678
Computer equipment, at cost (net) 130,110 97,324
Spare parts for field service, at cost (net) 51,882 50,150
Property, plant and equipment, at cost (net) 322,685 306,034
Deferred income tax assets, net 51,788 52,260
Other assets 141,940 146,395
--------- ---------
$1,841,531 $1,793,009
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Nonrecourse borrowings secured by lease commitments $ 75,574 $ 74,191
Current portion of other long-term debt and revolving
credit agreement borrowings 65,555 32,581
Accounts payable and accrued liabilities 292,149 284,764
Income taxes payable 2,659 14,167
--------- ---------
Total current liabilities 435,937 405,703
8% Convertible subordinated debentures 145,645 145,645
Nonrecourse borrowings secured by lease commitments 107,307 96,975
Other long-term debt 106,379 119,098
Deferred income tax liabilities 6,545 8,285
--------- ---------
Total liabilities 801,813 775,706
--------- ---------
Contingencies (Note 3)
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 40,000,000 shares
authorized; 3,450,000 shares of $3.50 Convertible
Exchangeable Preferred Stock issued at
September 30, 1994, and December 31, 1993,
$172,500,000 aggregate liquidation preference 35 35
Common stock, $.10 par value, 150,000,000 shares
authorized; 44,061,804 shares issued at
September 30, 1994, and 43,097,788 shares issued
at December 31, 1993 4,406 4,310
Capital in excess of par value 1,438,560 1,421,860
Accumulated deficit (397,354) (401,623)
Treasury stock of 35,537 shares at September 30, 1994,
and 34,349 shares at December 31, 1993 (770) (735)
Unearned compensation (5,159) (6,544)
--------- ---------
Total stockholders' equity 1,039,718 1,017,303
--------- ---------
$1,841,531 $1,793,009
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
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Form 10-Q
Page 4
<TABLE>
STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In Thousands of Dollars, Except Per Share Amounts)
<CAPTION>
Quarter Ended Nine Months Ended
----------------------- ------------------------
09/30/94 09/24/93 09/30/94 09/24/93
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Sales $287,131 $182,958 $ 732,240 $ 632,516
Service and rental revenue 125,143 124,100 376,573 372,037
-------- -------- --------- ---------
Total revenue 412,274 307,058 1,108,813 1,004,553
-------- -------- --------- ---------
Cost of sales 180,478 148,347 486,222 462,557
Cost of service and rental revenue 82,894 80,060 240,960 240,290
-------- -------- --------- ---------
Total cost of revenue 263,372 228,407 727,182 702,847
-------- -------- --------- ---------
Gross profit 148,902 78,651 381,631 301,706
Research and product development costs 45,782 46,862 122,223 120,754
Marketing, general, administrative and other
income and expense, net 80,695 85,720 242,746 237,335
Restructuring and other charges (Note 4) 69,537 69,900
-------- -------- --------- ---------
Operating profit (loss) 22,425 (123,468) 16,662 (126,283)
Interest expense 10,453 10,517 30,884 33,322
Interest income (11,278) (13,008) (34,247) (40,964)
-------- -------- --------- ---------
Income (loss) before income taxes and
cumulative effect of accounting change 23,250 (120,977) 20,025 (118,641)
Provision for income taxes 4,700 1,900 6,700 5,500
-------- -------- --------- ---------
Income (loss) before cumulative effect
of accounting change 18,550 (122,877) 13,325 (124,141)
Cumulative effect on prior years of change in
method of accounting for income taxes (Note 5) 40,000
-------- ------- --------- ---------
Net income (loss) 18,550 (122,877) 13,325 (84,141)
Preferred stock dividend 3,018 3,019 9,056 6,786
-------- -------- --------- ---------
Income (loss) applicable to common shares $ 15,532 $(125,896) $ 4,269 $ (90,927)
======== ======== ========= =========
EARNINGS (LOSS) PER COMMON SHARE
Income (loss) before cumulative effect of
accounting change $ 0.35 $ (2.94) $ 0.10 $ (3.06)
Cumulative effect on prior years of change
in method of accounting for income taxes 0.93
-------- -------- --------- ---------
$ 0.35 $ (2.94) $ 0.10 $ (2.13)
======== ======== ========= =========
Weighted average common shares
and equivalents 44,733 42,846 44,481 42,725
======== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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Form 10-Q
Page 5
STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In Thousands of Dollars)
Nine Months Ended
---------------------------
09/30/94 09/24/93
---------- ----------
OPERATING ACTIVITIES
Cash received from customers $ 1,107,321 $ 1,135,603
Cash paid to suppliers and employees (1,144,660) (1,050,787)
Interest received 34,247 40,800
Interest paid (27,237) (32,148)
Income taxes paid (19,940) (15,271)
---------- ----------
Net cash from (used in) operating activities (50,269) 78,197
---------- ----------
INVESTING ACTIVITIES
Short-term investments, net 16,042 (15,418)
Purchase of property, plant and equipment (72,537) (47,494)
Other assets, net (12,458) (7,295)
---------- ----------
Net cash used in investing activities (68,953) (70,207)
---------- ----------
FINANCING ACTIVITIES
Borrowings under revolving credit agreement 35,000
Proceeds from nonrecourse borrowings 130,884 70,886
Repayments of nonrecourse borrowings (119,550) (111,955)
Proceeds from other debt 17,010 5,627
Repayments of other debt (35,625) (19,665)
Proceeds from employee stock plans and warrants 14,262 5,639
Proceeds from preferred stock offering, net 166,479
Preferred stock dividends paid (9,056) (6,440)
---------- ----------
Net cash from financing activities 32,925 110,571
---------- ----------
Effect of exchange rate changes on cash 19,601 (2,616)
---------- ----------
Increase (decrease) in cash and cash equivalents (66,696) 115,945
Cash and cash equivalents - beginning
of the period 255,062 117,954
---------- ----------
Cash and cash equivalents - end of the period $ 188,366 $ 233,899
========== ==========
RECONCILIATION OF NET INCOME (LOSS) TO NET CASH
FROM (USED IN) OPERATING ACTIVITIES
Net income (loss) $ 13,325 $ (84,141)
Cumulative effect of accounting change (Note 5) (40,000)
Restructuring and other charges (Note 4) 69,505
Depreciation and amortization expense 132,402 111,791
Deferred income taxes (1,673) (6,326)
Translation (gain) loss (16,287) 1,798
Other non-cash adjustments to income 1,685 1,779
(Increase) decrease in accounts receivable (31,836) 95,977
Decrease in notes receivable and sales-type leases 35,094 57,970
Increase in inventories (80,728) (52,793)
Increase in computer equipment, net (75,065) (42,127)
Increase in spare parts, net (20,163) (15,636)
Increase (decrease) in accounts payable and
accrued liabilities 4,544 (16,155)
Decrease in income taxes payable (11,567) (3,445)
---------- ----------
Net cash from (used in) operating activities $ (50,269) $ 78,197
========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
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Form 10-Q
Page 6
STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PREPARATION
- -----------------------------
The accompanying consolidated financial statements of Storage Technology
Corporation and its subsidiaries (StorageTek or the Company) have been prepared
in accordance with the Securities and Exchange Commission requirements for Form
10-Q. In the opinion of management, these statements reflect all adjustments
necessary for the fair presentation of results for the periods presented, and
such adjustments are of a normal, recurring nature. For further information,
refer to the consolidated financial statements and footnotes included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1993.
NOTE 2 - INVENTORIES
- --------------------
Inventories consist of the following (in thousands of dollars):
09/30/94 12/31/93
-------- --------
Raw Materials $ 54,396 $ 38,991
Work-In-Process 112,937 66,668
Finished Goods 112,235 97,598
------- -------
$279,568 $203,257
======= =======
NOTE 3 - LITIGATION
- -------------------
In the second quarter of 1992, seven purported class actions were filed in the
U.S. District Court for the District of Colorado against the Company and certain
of its officers and directors. These actions were subsequently consolidated
into a single action, and a consolidated amended complaint was filed on July 7,
1992, seeking an unspecified amount of damages. The complaint alleged that the
defendants failed to properly disclose the status of development of a new
product and the Company's business prospects. The complaint further alleged
that the individual defendants sold shares of the Company's common stock based
on material inside information, in violation of federal securities and common
law. Following the court's ruling on the defendants' motion to dismiss, a
ruling which dismissed several of the fraud and insider trading claims against a
number of the individual defendants, the class plaintiffs filed a second, and
then a third, amended complaint which renewed many of the dismissed fraud and
insider trading claims and sought to extend the class period to November 9,
1992. In response to the defendants' second motion to dismiss, the court
refused to extend the class period, but did not dismiss any of the claims as
pleaded in the third amended complaint. The court has certified a class
consisting (with certain exceptions) of those who purchased StorageTek's common
stock and related securities from December 23,
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Form 10-Q
Page 7
1991, to August 8, 1992. Depositions of Company employees and other potential
witnesses commenced in August 1993 and are expected to continue through 1994.
In addition to the class action, a shareholder derivative action was filed in
the second quarter of 1992 based on substantially similar factual allegations
and the derivative action has been consolidated with the class action. No trial
dates have been established. The Company believes the suits are without merit
and intends to vigorously defend against them. There can be no guarantee,
however, that the cases will result in decisions favorable to the Company. In
the event of an adverse decision, neither the amount nor the likelihood of any
potential liability which might result is reasonably estimable. In the
derivative action, any recovery would be the property of the Company.
In January 1994, Stuff Technology Partners II, a Colorado Limited Partnership
(Stuff), filed suit in Boulder County, Colorado, District Court against the
Company and certain subsidiaries. The suit alleges that the Company breached a
1990 settlement agreement which had resolved earlier litigation between the
parties. The suit seeks injunctive relief and damages in the amount of
$2,400,000,000. The Company believes that the claims in the suit are barred by
the 1990 settlement between the Company and Stuff, the claims are without merit,
and the Company intends to vigorously defend against them. The Company has
filed a motion to dismiss the complaint, as well as an alternative motion to
bifurcate certain of the claims. On July 1, 1994, the Court partially granted
the Company's motion to dismiss, dismissing claims based on facts or conduct
occurring before the 1990 settlement of the previous litigation. The case is
now in the discovery phase as to the remaining claims.
On September 23, 1994, EMC Corp. filed suit in U.S. District Court in
Wilmington, Delaware, alleging infringement of a patent pertaining to disk
storage technology. The complaint seeks an injunction, treble damages in an
unspecified amount and an award of attorney fees and costs. The Company has
filed an answer. The Company believes the suit is without merit and intends to
vigorously defend against the suit.
In addition, the Company is involved in various other less significant legal
proceedings. The outcomes of these legal proceedings are not expected to have a
material adverse effect on the financial condition or operations of the Company
based on the Company's current understanding of the relevant facts and law.
NOTE 4 - RESTRUCTURING AND OTHER CHARGES
- ----------------------------------------
In the third quarter and nine months of 1993, the Company recorded restructuring
and other charges of $69,537,000 and $69,900,000, respectively. The
restructuring component of these charges, which totaled $69,250,000, principally
relates to the reorganization of the Company's midrange business. The
restructuring charge represented specific, incremental and direct costs
resulting from the adoption by the Company of a formal action plan during the
third quarter of 1993 for restructuring its midrange business. The
restructuring charges included the writedown of residual interests associated
with net investments in sales-type leases of approximately $19,400,000;
inventory writedowns of approximately $13,500,000; the writedown of
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Form 10-Q
Page 8
goodwill associated with midrange products which were de-emphasized or
discontinued of approximately $12,800,000; and estimated severance costs of
approximately $8,500,000. Merger and consolidation expenses of $287,000, and
$650,000 were also recognized during the third quarter and nine months of 1993,
respectively, in connection with the merger with Amperif Corporation.
NOTE 5 - ACCOUNTING FOR INCOME TAXES
- ------------------------------------
Effective as of the beginning of fiscal 1993, the Company changed its method of
accounting for income taxes to comply with the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. A
one-time benefit of $40,000,000 was recognized in 1993 as a result of the
adoption of the new income tax accounting standard on a prospective basis.
NOTE 6 - NETWORK SYSTEMS MERGER
- -------------------------------
On August 8, 1994, the Company entered into an Agreement and Plan of Merger with
Network Systems Corporation (Network Systems). When the merger is consummated,
Network Systems will become a wholly owned subsidiary of the Company. The
transaction is expected to be completed in January 1995. If the merger has not
been consummated, either party may terminate the agreement after February 28,
1995. In the proposed transaction, each share of Network Systems common stock
will be exchanged for 0.2618 of a share of the Company's common stock. The
Company currently expects to issue approximately 7.9 million shares of common
stock in exchange for Network Systems' outstanding common stock and will reserve
an additional 600,000 shares for outstanding employee stock options. In the
event the average price of the Company's common stock is below $30.37 per share
during a ten-day period immediately preceding the closing, as calculated
pursuant to the agreement, the parties will have the option of renegotiating the
value of the transaction or terminating the agreement. The merger is intended
to be accounted for as a pooling of interests. Completion of the merger is
subject to, among other things, approval of the shareholders of Network Systems.
Network Systems designs, manufactures, markets and services, worldwide, computer
networking products. The following schedule presents selected financial data
for Network Systems as reported for the nine-month period ended September 30,
1994, and for each of the three years ended December 31, 1993 (in thousands of
dollars).
Nine Months
Ended Year Ended
-------- -----------------------------
09/30/94 12/31/93 12/31/92 12/31/91
-------- -------- -------- --------
Revenue $176,426 $215,558 $219,118 $198,728
Net income (loss) 2,705 2,207 (39,674) 15,214
Total assets 295,821 305,481 293,425 342,811
Total debt 1,000 1,000 1,000 2,822
Stockholders' equity 231,655 223,381 229,949 274,143
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Form 10-Q
Page 9
STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1994
GENERAL
- -------
Storage Technology Corporation and its subsidiaries (StorageTek or the Company)
reported net income for the third quarter ended September 30, 1994, of $18.6
million on revenue of $412.3 million, compared to a net loss for the third
quarter ended September 24, 1993, of $122.9 million on revenue of $307.1
million. Net income of $13.3 million was reported for the nine months of 1994
on revenue of $1.1 billion, compared to a net loss of $84.1 million for the nine
months of 1993 on revenue of $1.0 billion.
Revenue increased 34% and 10% in the third quarter and nine months of 1994,
compared to the same periods in 1993, respectively. The Company experienced
increased sales of Silverton 4490 (Silverton), a 36-track tape offering;
PowderHorn 9310 (PowderHorn), an Automated Cartridge System (ACS) library; and
incremental sales revenue from the Iceberg 9200 Disk Array Subsystem (Iceberg).
These increases were partially offset by decreased sales of the Company's first
generation 4400 ACS Library and midrange products. The Company's improved
operating results in the nine months of 1994 resulted from increased gross
profit contributions associated with sales of Iceberg, Silverton, and
PowderHorn. Operating results for the nine months of 1993 were reduced by
restructuring and other charges of $69.9 million principally relating to the
reorganization of the Company's midrange business. While the Company's midrange
business is currently operating near breakeven, revenue and profit margins from
the midrange business continued to fall short of the Company's expectations.
The Company's operating results in the third quarter of 1994 were also pressured
by the discontinuance of austerity measures, including salary reductions,
instituted in late 1992.
The Company's cash and short-term investments decreased by $82.7 million during
the nine months of 1994 primarily as a result of significant investment
associated with the ramp-up of production for new products, and delivery of
these products to customers for evaluation and acceptance prior to cash
collection of the associated revenue. The Company anticipates its operating and
capital requirements will diminish in 1995, as product ramp-up activities level
off.
The Company anticipates its operating results will improve in the fourth quarter
of 1994. While the Company has not fully established its operating plan for
1995, it anticipates improving operating results. Improvements are, however,
significantly dependent upon the continuing success of its new products and
attaining targeted expense ratios. The Company is currently evaluating various
activities it should take to further improve its
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Form 10-Q
Page 10
product margins and reduce operating expenses based on anticipated product
development schedules and the competitive environment. Other factors which may
affect future results include the Company's ability to develop and ship new
products on a timely basis, the introduction of new products by competitors, and
technological advances within the computer industry, among others. See "OTHER
FACTORS THAT MAY AFFECT FUTURE RESULTS," below.
See Supplementary Note 6 to the Company's Consolidated Financial Statements and
"NETWORK SYSTEMS MERGER," below, for further discussion of the anticipated
merger with Network Systems Corporation (Network Systems). The transaction is
expected to be completed in January 1995 and result in one-time merger and
consolidation charges of between $6 million and $8 million.
The following table, stated as a percentage of total revenue, presents
consolidated statement of operations information and revenue by product line
which includes product sales, service and rental, and software revenue.
Quarter Ended Nine Months Ended
------------------- -------------------
09/30/94 09/24/93 09/30/94 09/24/93
-------- -------- -------- --------
Revenue:
Serial Access Subsystems 63.5% 61.1% 65.1% 61.0%
Random Access Subsystems 17.1 8.8 12.0 10.3
Midrange Systems 14.7 22.7 17.7 22.3
Other 4.7 7.4 5.2 6.4
----- ----- ----- -----
Total revenue 100.0 100.0 100.0 100.0
Cost of revenue 63.9 74.4 65.6 70.0
----- ----- ----- -----
Gross profit 36.1 25.6 34.4 30.0
Research and product development
costs 11.1 15.3 11.0 12.0
Marketing, general, administrative
and other income and expense, net 19.6 27.9 21.9 23.6
Restructuring and other charges 22.6 7.0
----- ----- ----- -----
Operating profit (loss) 5.4 (40.2) 1.5 (12.6)
Interest (income) expense, net (0.2) (0.8) (0.3) (0.8)
----- ----- ----- -----
Income (loss) before income
taxes and cumulative effect
of accounting change 5.6 (39.4) 1.8 (11.8)
Provision for income taxes 1.1 0.6 0.6 0.6
----- ----- ----- -----
Income (loss) before cumulative
effect of accounting change 4.5 (40.0) 1.2 (12.4)
Cumulative effect on prior years of
change in method of accounting
for income taxes 4.0
----- ----- ----- -----
Net income (loss) 4.5% (40.0)% 1.2% (8.4)%
===== ===== ===== =====
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Form 10-Q
Page 11
REVENUE
- -------
SERIAL ACCESS SUBSYSTEMS
Revenue from serial access subsystem products increased 39% and 18% in the third
quarter and nine months of 1994, respectively, compared to the same periods in
1993. Sales of PowderHorn and Silverton were partially offset by decreased
sales of the Company's first generation 4400 ACS library. Sales of the
Company's 4480 18-track cartridge system also declined slightly during the third
quarter and nine months of 1994.
The Company anticipates its serial access product revenue will continue to
increase through 1995, primarily due to increased sales associated with
PowderHorn, Silverton, and other new serial access products, including
Timberline, a 36-track high-performance tape subsystem which began production
shipments in October 1994. Increased sales from these tape and library products
are expected to more than offset declining revenue from the Company's first
generation library and tape products. The serial access product family
generates more revenue than any other product line of the Company and continues
to be a major element of the Company's plans for the foreseeable future.
RANDOM ACCESS SUBSYSTEMS
Revenue from random access subsystem products increased 161% and 29% in the
third quarter and nine months of 1994, respectively, compared to the same
periods in 1993. These increases reflect the manufacturing ramp-up and
broadening customer acceptance of Iceberg. Iceberg reached general availability
during the second quarter of 1994. Since the inception of the program, more
than 90 Iceberg subsystems had been revenue recognized through the end of the
third quarter. Initial revenue was received during the third quarter from the
Company's new Nordique 9100 Disk Array Subsystem (Nordique), an IBM mainframe
and open systems attachment disk array product targeted at the lower end of
large systems marketplace, as well as the UNIX marketplace.
The Company is committing substantial resources to develop additional functions
and features for Iceberg. The Company anticipates Iceberg sales will continue
to increase through 1995 as these new features and functions become available.
Significant revenue contribution from Iceberg is, however, dependent upon
continued customer acceptance of Iceberg in light of existing and anticipated
competitive offerings in the direct access storage device (DASD) marketplace.
The Company anticipates that the marketplace for Nordique will be intensely
price competitive. Other new DASD products are targeted for availability in the
first half of 1995. While the Company believes the development and introduction
schedules for its new DASD products are achievable, there is no assurance that a
they can be met.
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Form 10-Q
Page 12
MIDRANGE SYSTEMS
Revenue from midrange system products decreased 13% in both the third quarter
and nine months of 1994, compared to the respective periods in 1993. While the
Company's midrange business is currently operating near breakeven, midrange
revenue and operating profits continue to be adversely affected by steep price
erosion in the midrange DASD marketplace. Further, the restructuring plan
adopted in the third quarter of 1993 has resulted in reduced midrange revenues
as was anticipated at the time the restructuring was adopted.
Going forward, the Company plans to continue to expand its marketing efforts on
open systems and value-added AS/400 tape products and to reduce emphasis on
certain segments of the midrange DASD marketplace. These actions are expected
to strengthen the midrange business; however, price erosion in this intensely
competitive marketplace is expected to continue. Accordingly, there can be no
assurance that the Company's midrange business will be profitable in the future.
OTHER
Revenue from other products decreased 14% and 10% in the third quarter and nine
months of 1994, respectively, compared to the same periods in 1993, due to a
decrease in printer product revenue. Printer product revenue will continue to
decline as the Company continues to wind down these operations. Sales of the
Company's NearNet network storage manager (NearNet) have not yet met the
Company's expectations and no significant revenue contribution from NearNet is
anticipated in the near term.
GROSS PROFIT
- ------------
Overall gross profit increased to 36% and 34% for the third quarter and the nine
months of 1994, respectively, compared to 26% and 30% for the same periods of
1993, primarily due to increased product sales margins.
Gross profit on product sales increased to 37% and 34% for the third quarter and
nine months of 1994, respectively, compared to 19% and 27% for the same periods
of 1993, primarily as a result of a favorable mix of higher margin products sold
during the quarter and reduced revenue contribution from midrange products,
which generally have lower margins. These favorable trends in product sales
margins more than offset charges of approximately $12 million associated with
the writedown of midrange inventory during the nine months of 1994 resulting
from continued price erosion in the midrange DASD marketplace.
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Form 10-Q
Page 13
Gross profit on service and rental revenue was 34% and 36% in the third quarter
and nine months of 1994, respectively, compared to 35% in the same periods of
1993. The decrease in service and rental margins in the third quarter of 1994
was primarily due to higher operating costs as a result of the discontinuance of
austerity measures instituted in 1992.
While the Company anticipates its product sales margins will improve during the
fourth quarter of 1994, future sales margins are significantly dependent upon
the mix of products sold and price competition in the marketplace. These
factors, coupled with rapid technological changes in the industry, may also
result in inventory writedowns. Service margins also may be adversely affected
in the future due to increased costs associated with the installation of new
products, and longer warranty periods for Iceberg and other products.
RESEARCH AND PRODUCT DEVELOPMENT
- --------------------------------
Research and product development expenditures were largely unchanged in both the
third quarter and nine months of 1994, compared to the same periods of 1993, as
the Company completed several of its major product development programs and
shifted resources to the development of enhancements for these recently
introduced products. The Company anticipates investment in research and
development activities in 1995 at levels similar to that in 1994.
MARKETING, GENERAL, ADMINISTRATIVE AND OTHER
- --------------------------------------------
Marketing, general, administrative and other income and expense (MG&A) decreased
6% in the third quarter of 1994, compared to the third quarter of 1993,
primarily due to lower operating expenses resulting from the 1993 restructuring
associated with the Company's midrange business. This decrease was partially
offset by increased operating expenses as a result of higher sales volumes and
the discontinuance of austerity measures. Gains and losses associated with
foreign currency transactions and translation adjustments, net of associated
hedging results, aggregated a net gain of $0.5 million in the third quarter of
1994, compared to a net loss of $1.1 million in the same period of 1993.
MG&A was largely unchanged for the nine months of 1994, compared to the same
period of 1993. Increases in MG&A were primarily due to an increase in
operating expenses as a result of the introduction of new products and higher
sales volumes. These increases were offset by lower operating expenses related
to the Company's restructured midrange business and favorable movements in
foreign currency exchange rates. Gains and losses associated with foreign
currency transactions and translation adjustments, net of associated hedging
results, aggregated a net loss of $0.5 million for the nine months of 1994,
compared to a net loss of $6.7 million in the same period of 1993.
<PAGE>
Form 10-Q
Page 14
See "INTERNATIONAL OPERATIONS AND HEDGING ACTIVITIES" for further discussion of
the foreign exchange risks associated with the Company's international
operations and the related foreign currency hedging activities.
RESTRUCTURING AND OTHER CHARGES
- -------------------------------
As further discussed in Supplementary Note 4 to the Company's Consolidated
Financial Statements, the Company recorded restructuring and other charges of
$69.5 million and $69.9 million during the third quarter and nine months of
1993, respectively, principally relating to the reorganization of its midrange
business. The restructuring was made in an effort to yield both improved
operating performance and expense reductions. The restructuring yielded expense
reductions of $10 million in the fourth quarter of 1993 and is expected to yield
expense reductions of almost $40 million during 1994. As of the end of the
third quarter of 1994, substantially all of the accruals taken in connection
with the restructuring had been paid out by the Company. No material cash
outflows are anticipated to result from this restructuring in the future.
INTEREST INCOME AND EXPENSE
- ---------------------------
Interest income decreased 13% and 16% in the third quarter and nine months of
1994, respectively, compared to the same periods of 1993, due primarily to a
reduction in net investment in sales-type lease balances and lower interest
rates.
Interest expense was largely unchanged in the third quarter of 1994, compared to
the same period of 1993. Interest expense decreased 7% for the nine months of
1994, compared to the same period of 1993, due primarily to lower interest rates
and lower levels of nonrecourse borrowings in the first half of 1994, as
compared to the same period in 1993.
INCOME TAXES
- ------------
A one-time benefit of $40 million was recognized in the first quarter of 1993 as
a result of the required adoption of SFAS No. 109, Accounting for Income Taxes,
on a prospective basis.
SFAS No. 109 requires that deferred income tax assets be recognized to the
extent realization of such assets is more likely than not. The Company
evaluates a variety of factors in determining the amount of the deferred income
tax assets to be recognized pursuant to SFAS No. 109, including the number of
years the Company's operating loss and tax credits can be carried forward, the
existence of taxable temporary differences, the Company's earnings history, the
Company's near-term earnings expectations and possible reductions in the
Company's net operating loss carryforwards as a result of proposed adjustments
by the Internal Revenue Service to the Company's previously filed federal income
tax returns. Based on the currently available information, management has
determined that the Company will more likely than not realize $52 million of its
deferred income tax assets as of September 30, 1994.
<PAGE>
Form 10-Q
Page 15
The Company's provision for income taxes relates primarily to taxable earnings
associated with its international operations. The Company's effective tax rate
can be subject to significant fluctuations due to dynamics associated with the
mix of its U.S. and international taxable earnings.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
WORKING CAPITAL
The Company's cash balances decreased $66.7 million and short-term investments
decreased $16.0 million from December 31, 1993, to September 30, 1994. The
current ratio decreased from 2.2 as of December 31, 1993, to 2.0 as of September
30, 1994. Net cash used in operating activities was $50.3 million for the nine
months of 1994, compared to net cash provided by operations of $78.2 million for
the nine months of 1993. The decrease in cash and short-term investments during
the nine months of 1994 primarily resulted from a significant investment in
inventory and computer equipment as the Company continues to ramp-up production
for new products and delivers these products to customers for evaluation and
acceptance prior to recognizing the associated revenue. Accounts receivable
increased from $218.7 million as of December 31, 1993, to $256.5 million as of
September 30, 1994, due primarily to increased sales volume near the end of the
third quarter of 1994.
AVAILABLE FINANCING LINES
On September 28, 1994, the Company amended its secured multicurrency credit
agreement with a group of U.S. and international banks (the Revolver) to
increase the credit facility from $150 million to $200 million and to extend the
facility through March 1996. In addition, the Revolver was modified to increase
the total amount available under the borrowing base. The interest rates
available under the Revolver depend on the type of advance selected; however,
the primary advance rate is the agent bank's prime lending rate (7.75% at
September 30, 1994). The total amount available under the Revolver is limited
to a percentage of the Company's eligible accounts receivable, lease assets
(primarily net investments in sales-type leases not previously utilized for
other secured borrowings), and computer equipment awaiting revenue recognition.
To obtain funds under the Revolver, the Company is required to comply with
certain financial and other covenants, including restrictions on the payment of
cash dividends on its common stock. As of September 30, 1994, the Company had
outstanding advances of $35 million and, based on the amount of eligible
accounts receivable, lease assets and computer equipment assigned to the
Revolver, had approximately $84 million of available credit remaining.
In addition to the Revolver, the Company had lease assets in excess of $90
million available for financing as of September 30, 1994. Subject to credit
approval, the Company can borrow against a portion of these lease assets through
existing unused committed lease discounting lines. The Company believes it can
increase these lease discounting lines, if needed, or fund its operating and
capital requirements through
<PAGE>
Form 10-Q
Page 16
other forms of asset-backed financings. At the Company's option, a portion of
these lease assets can also be utilized for borrowings under the Revolver.
In order to sustain desired levels of cash balances, StorageTek may from time-to
- -time borrow against its Revolver. StorageTek believes it has adequate working
capital and financing capabilities to meet its anticipated operating and capital
requirements for the next twelve months, including new product offerings. Over
the longer term, StorageTek intends to continue to commit substantial amounts of
its resources to research and development projects and may, from time to time,
as market and business conditions warrant, invest in or acquire complementary
businesses, products or technologies. StorageTek may seek to fund these
activities or possible transactions through the issuance of additional equity or
debt. The issuance of equity or convertible debt securities could result in
dilution to StorageTek's stockholders. There can be no assurance that such
additional financing, if required, can be completed on terms acceptable to
StorageTek.
LONG-TERM DEBT-TO-EQUITY
The Company's long-term debt-to-equity ratio decreased to 35% as of September
30, 1994, from 36% as of December 31, 1993. These debt-to-equity ratios include
$107.3 million and $97.0 million, respectively, of long-term nonrecourse
borrowings secured by customer lease commitments included within total assets
(primarily net investment in sales-type leases). Excluding long-term
nonrecourse borrowings, the Company's long-term debt-to-equity ratio decreased
to 24% as of September 30, 1994, from 26% as of December 31, 1993.
REPAYMENT OBLIGATIONS
Pursuant to the indenture related to the Company's 8% Convertible Subordinated
Debentures due 2015 (Convertible Debentures), the Company is required to make
semiannual interest payments on the $145.6 million principal amount of
Convertible Debentures outstanding. The Convertible Debentures are currently
redeemable at the option of StorageTek at a premium of 4.8%, and are redeemable
at decreasing premiums through May 30, 2000. Convertible Debentures in the
principal amount of $8 million per annum, plus accrued interest, must be
redeemed beginning May 31, 2000, through a sinking fund which provides for the
retirement of 75% of the Convertible Debentures prior to their maturity on
May 31, 2015. Convertible Debentures purchased by the Company in the open
market and Convertible Debentures converted to common stock may be applied to
the sinking fund requirements. As of September 30, 1994, the Company held
Convertible Debentures in the principal amount of $14.3 million available for
sinking fund payments.
In connection with the Company's 9.53% Senior Secured Notes due August 31, 1996
(the Notes), the Company is required to make semiannual interest payments on the
$55 million principal amount outstanding. The Notes are redeemable at the
option of the Company, in whole or in part, from time to time, at a premium
which is determined
<PAGE>
Form 10-Q
Page 17
based on current interest rates and the time remaining until maturity. Any
principal amounts not previously redeemed are due and payable on August 31,
1996.
The Company's Preferred Stock provides for cumulative dividends payable
quarterly in arrears at an annual rate of $3.50 per share, when and as declared
by the Company's board of directors. Based on the 3.45 million shares
outstanding, annual dividends will aggregate $12.1 million. The Notes contain
restrictions which limit the payment of dividends; however, these restrictions
are not expected to limit the ability of the Company to pay dividends on its
Preferred Stock.
INTERNATIONAL OPERATIONS AND HEDGING ACTIVITIES
- -----------------------------------------------
Currently, over 35 percent of the Company's revenue is generated by its
international operations. As a result, the Company's operations and financial
results can be materially affected by changes in foreign currency exchange
rates. An increase in the exchange value of the U.S. dollar reduces the value
of revenue and profits generated by the Company's international operations as a
significant portion of the Company's product sales and service costs associated
with this revenue is denominated in U.S. dollars.
In an attempt to mitigate the impact of foreign currency fluctuations, the
Company employs a hedging program which utilizes foreign currency options and
forward exchange contracts. The Company utilizes foreign currency options,
generally with maturities of less than one year, to hedge its exposure to
exchange-rate fluctuations in connection with anticipated sales revenue from its
international operations. Gains and losses on the options are deferred and
recognized as an adjustment to the hedged sales revenue. The Company also
utilizes forward exchange contracts, generally with maturities of less than two
months, to hedge its exposure to exchange-rate fluctuations in connection with
net monetary assets held in foreign currencies. The forward contracts are
marked-to-market each month with any gains or losses recognized within MG&A as
an adjustment to the foreign exchange gains and losses on the translation of net
monetary assets.
OTHER FACTORS THAT MAY AFFECT FUTURE RESULTS
- --------------------------------------------
The Company believes that successful and timely development and shipment of its
new products will play a key role in determining its competitive strength during
the next several years. The Company has recently introduced many new and
enhanced products and has plans to introduce additional products in 1995. There
can be no assurance that the Company will successfully develop, manufacture or
market these products.
The Company's strategic plans assume that its Iceberg and new DASD products in
development will serve as a significant source of revenue in 1995. While the
Company believes the development and introduction schedules for these products
are achievable, there is no assurance that they can be met. If, as part of the
development and testing of these DASD products, significant problems arise which
result in material
<PAGE>
Form 10-Q
Page 18
delays in their availability, expected revenue would be delayed or lost, and
such delays would adversely affect the Company's financial results.
The Company competes with several large, multinational companies having
substantially greater resources than the Company's, principally, IBM, Fujitsu
Limited and Hitachi Ltd., as well as other midsized companies. Because of the
significance of the IBM mainframe and midrange operating environments, many of
the Company's products are designed to be compatible with certain IBM operating
systems and many of its products function like IBM equipment. As a result, the
Company's business has been and in the future may be adversely affected by a
number of factors including, among others, modifications in the design or
configuration of IBM computer systems; the announcement and introduction of new
products by competitors; continuing changes in customer requirements such as
migration toward networked computing; and price competition for comparable
systems, equipment or services. The Company's ability to sustain or increase
sales levels depends to a significant extent upon acceptance of and continued
demand for the many recently introduced products, and products planned for
introduction in the future. There can be no assurance that the Company's
current product offerings, products in development, or products in the early
stages of market introduction will achieve or sustain market acceptance.
The market for the Company's products is characterized by rapid technological
advances which can result in frequent product introductions and enhancements,
unpredictable product transitions and shortened product life cycles. To be
successful in this market, the Company must make significant investments in
research and product development and introduce competitive new products and
enhancements to existing products on a timely basis. These factors can reduce
the effective life of product-line-specific assets. There can be no assurance
that new products developed by the Company will be accepted in the marketplace.
Moreover, certain components of the Company's products operate near the present
limits of electronic and physical capabilities of performance and are designed
and manufactured with relatively small tolerances. If flaws in design or
production occur, the Company may experience a rate of failure in its products
that results in substantial costs for the repair or replacement of defective
products and potential damage to the Company's reputation.
The Company's manufacturing processes have increased in complexity as it has
increased the number and diversity of products offered to customers. The
Company generally uses standard parts and components for its products and
believes that, in most cases, there are a number of alternative, competent
vendors for most of those parts and components. The Company purchases certain
important components and products from single suppliers that the Company
believes are currently the only manufacturers of the particular components that
meet the Company's specifications. In addition, the Company manufactures some
key components or its products include components for which alternative sources
of supply are not readily available. In the past, certain suppliers have
experienced occasional technical, financial or other problems that have delayed
deliveries to the Company, without significant effect on it. An unanticipated
failure of any sole-source supplier to meet the Company's requirements for an
extended period, or an interruption of the Company's ability to
<PAGE>
Form 10-Q
Page 19
secure comparable components, could have a material adverse effect on its
revenue and profitability. In addition, the Company markets a number of
products acquired from other manufacturers on an original equipment manufacturer
(OEM) basis. These products are often available only from a single
manufacturer. Some of these OEM suppliers are, or may in the future be,
competitors of the Company. In the event that an OEM product is no longer
available, second sourcing is not always feasible and there could be a material
adverse effect on the Company's profitability.
The Company's earnings can fluctuate significantly from quarter to quarter due
to the effects of (i) customers' tendencies to make purchase decisions near the
end of the calendar year, (ii) the timing of the announcement and availability
of products and product enhancements by the Company and its competitors, and
(iii) fluctuating foreign currency exchange rates.
NETWORK SYSTEMS MERGER
- ----------------------
As more fully discussed in Supplementary Note 4 to the Consolidated Financial
Statements, on August 8, 1994, the Company entered into an Agreement and Plan of
Merger with Network Systems. When the merger is consummated, Network Systems
will become a wholly owned subsidiary of the Company. The transaction is
expected to be completed in January of 1995.
One-time merger and consolidation charges of between $6 and $8 million are
expected to be recognized at the time the merger is consummated. These one-time
charges may have a material impact on the results of operations in the quarter
the merger is consummated, however, the charges are not expected to materially
impact StorageTek's liquidity.
<PAGE>
Form 10-Q
Page 20
SUPPLEMENTAL INFORMATION TO FORM 10-Q
- -------------------------------------
NEW PRODUCT DEVELOPMENT
StorageTek has three principal information storage and retrieval product lines:
serial access subsystems (tape devices and automated library systems); random
access subsystems (disk array, solid-state and rotating DASD); and midrange
computer products. The following table lists certain significant products
recently introduced or currently being developed by StorageTek and the
development status of each product as of October 31, 1994:
Product Status
------------------------- --------------------
Serial Access Subsystems
------------------------
PowderHorn....................................... Available
Silverton.........................................Available
Timberline.................................Early production
Redwood...................................Prototype testing
Random Access Subsystems
------------------------
Iceberg (1).......................................Available
Nordique..........................................Available
Arctic Fox................................Prototype testing
Kodiak................................Prototype engineering
Midrange Systems
----------------
Alpine............................................Available
Highlands.........................................Available
Northfield........................................Available
Twin Peaks............................Prototype engineering
Other Products
--------------
Nearnet ..........................................Available
________________________
(1) Various Iceberg software, including Iceberg Extended Facilities Product
and Iceberg Extended Operator Facility, designed for use with Iceberg, became
generally available in Q2 1994.
INTELLECTUAL PROPERTY
StorageTek's policy is to apply for patents, or other appropriate proprietary or
statutory protection when it develops new or improved technology which are
important to StorageTek's business. StorageTek holds over 220 U.S. patents and
foreign counterparts to many of these patents in relevant markets, covering
various aspects of its products, that expire from 1995 through 2001, and has
pending 135 U.S. patent applications, including 20 that have been allowed and
are expected to be formally issued, and pending foreign counterparts to many of
these applications. StorageTek
<PAGE>
Form 10-Q
Page 21
also has licenses to use patents held by others. StorageTek owns, has license
rights to, and/or has applied to register, over 40 trademarks, mask works and
copyrights. Taken as a whole, these assets are material to StorageTek's
business. However, no individual patent, trademark or other item of proprietary
information is singly material to StorageTek's business.
From time to time, StorageTek has commenced actions against other companies to
protect or enforce its intellectual property rights. Similarly, StorageTek from
time to time has been notified that it may be infringing certain patent or other
intellectual property rights of others. Although licenses are generally offered
in such situations, there can be no assurance that litigation will not be
commenced in the future regarding patents, mask works, copyrights, trademarks or
trade secrets, or that any licenses or other rights can be obtained on
acceptable terms. StorageTek is currently engaged in certain proceedings
relating to its intellectual property and patent infringement. See Part II,
Item 1 of this Form 10-Q.
ENVIRONMENT
Compliance by StorageTek with provisions of federal, state and local laws
regulating the discharge of materials into the environment, or otherwise
relating to the protection of the environment, has not had a material adverse
effect on StorageTek. For the current year and for fiscal year 1995, StorageTek
does not have pending and has not budgeted any material estimated expenditures
for environmental control facilities. However, liability under environmental
legislation is ongoing, regardless of whether or not StorageTek has complied
with existing governmental guidelines. Moreover, government regulation of the
environment and related compliance costs have increased in recent years. Based
upon currently available information, StorageTek does not expect that future
compliance with environmental regulations will have a material effect on
StorageTek.
<PAGE>
Form 10-Q
Page 22
STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
- --------------------------
See Part II, Item 1, of the Forms 10-Q for the periods ended April 1, 1994, and
July 1, 1994.
In the second quarter of 1992, seven purported class actions were filed in the
U.S. District Court for the District of Colorado against the Company and certain
of its officers and directors. These actions were subsequently consolidated
into a single action, and a consolidated amended complaint was filed on July 7,
1992, seeking an unspecified amount of damages. The complaint alleged that the
defendants failed to properly disclose the status of development of a new
product and the Company's business prospects. The complaint further alleged
that the individual defendants sold shares of the Company's common stock based
on material inside information, in violation of federal securities and common
law. Following the court's ruling on the defendants' motion to dismiss, a
ruling which dismissed several of the fraud and insider trading claims against a
number of the individual defendants, the class plaintiffs filed a second, and
then a third, amended complaint which renewed many of the dismissed fraud and
insider trading claims and sought to extend the class period to November 9,
1992. In response to the defendants' second motion to dismiss, the court
refused to extend the class period, but did not dismiss any of the claims as
pleaded in the third amended complaint. The court has certified a class
consisting (with certain exceptions) of those who purchased StorageTek's common
stock and related securities from December 23, 1991, to August 8, 1992.
Depositions of Company employees and other potential witnesses commenced in
August 1993 and are expected to continue through 1994. In addition to the class
action, a shareholder derivative action was filed in the second quarter of 1992
based on substantially similar factual allegations and the derivative action has
been consolidated with the class action. No trial dates have been established.
The Company believes the suits are without merit and intends to vigorously
defend against them. There can be no guarantee, however, that the cases will
result in decisions favorable to the Company. In the event of an adverse
decision, neither the amount nor the likelihood of any potential liability which
might result is reasonably estimable. In the derivative action, any recovery
would be the property of the Company.
On June 10, 1993, the Company filed suit against EMC Corp. in U.S. District
Court for the District of Colorado. The suit currently alleges infringement of
a patent pertaining to the Company's disk storage technology. The complaint
seeks an injunction prohibiting further infringement, treble damages in an
unspecified amount, and an award of attorney fees and costs. EMC Corp. filed an
answer and counterclaim on July 20, 1993, alleging, among other things, patent
misuse and seeking the invalidation of the Company's patents, damages in an
unspecified amount and an award of attorney fees, costs and interest. Discovery
has commenced and a trial has been scheduled for early 1995.
<PAGE>
Form 10-Q
Page 23
In January 1994, Stuff Technology Partners II, a Colorado Limited Partnership
(Stuff), filed suit in Boulder County, Colorado, District Court against the
Company and certain subsidiaries. The suit alleges that the Company breached a
1990 settlement agreement which had resolved earlier litigation between the
parties. The suit seeks injunctive relief and damages in the amount of
$2,400,000,000. The Company believes that the claims in the suit are barred by
the 1990 settlement between the Company and Stuff, the claims are without merit,
and the Company intends to vigorously defend against them. The Company has
filed a motion to dismiss the complaint, as well as an alternative motion to
bifurcate certain of the claims. On July 1, 1994, the Court partially granted
the Company's motion to dismiss, dismissing claims based on facts or conduct
occurring before the 1990 settlement of the previous litigation. The case is
now in the discovery phase as to the remaining claims.
On September 23, 1994, EMC Corp. filed suit in U.S. District Court in
Wilmington, Delaware, alleging infringement of a patent pertaining to disk
storage technology. The complaint seeks an injunction, treble damages in an
unspecified amount and an award of attorney fees and costs. The Company has
filed an answer. The Company believes the suit is without merit and intends to
vigorously defend against the suit.
In addition, the Company is involved in various other less significant legal
proceedings. The outcomes of these legal proceedings are not expected to have a
material adverse effect on the financial condition or operations of the Company
based on the Company's current understanding of the relevant facts and law.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits
* 10.0 Amended and Restated Multicurrency Credit
Agreement dated as of September 28, 1994.
* 11.0 Computation of Earnings (Loss) Per Common
Share.
* 27.0 Financial Data Schedule
(b) Reports on Form 8-K
None.
* Indicates Exhibits filed with this Quarterly Report on Form 10-Q.
<PAGE>
Form 10-Q
Page 24
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.
STORAGE TECHNOLOGY CORPORATION
(Registrant)
November 14, 1994 /s/ GREGORY A. TYMN
- ----------------- ------------------------------
(Date) Gregory A. Tymn
Senior Vice President and
Chief Financial Officer
November 14, 1994 /s/ DAVID E. LACEY
- ----------------- ------------------------------
(Date) David E. Lacey
Corporate Vice President
and Controller
STORAGE TECHNOLOGY CORPORATION
INDEX TO EXHIBITS
Exhibit Description
- ------- --------------------------------------------------------
10.0 Amended and Restated Multicurrency Credit Agreement dated
as of September 28, 1994.
11.0 Computation of Earnings (Loss) Per Common Share.
27.0 Financial Data Schedule
$200,000,000
AMENDED AND RESTATED
MULTICURRENCY CREDIT AGREEMENT
Dated as of September 28, 1994
Among
STORAGE TECHNOLOGY CORPORATION,
STORAGETEK FINANCIAL SERVICES CORPORATION,
STORAGE TECHNOLOGY DE PUERTO RICO, INC., and
XL/DATACOMP, INC.
as Borrowers
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
as Agent, Swing Line Bank and Issuing Bank
and
THE OTHER BANKS AND
FINANCIAL INSTITUTIONS
PARTIES HERETO
TABLE OF CONTENTS
Section Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1
1.01. Certain Defined Terms 1
1.02. Accounting Terms 46
1.03. Computation of Time Periods 46
1.04. Names, Successors, Etc. 46
1.05. Currency Equivalents Generally 46
1.06. Prior Loan Documents; Effect of this Agreement 46
(a) Prior Loan Documents 46
(b) Effect of this Agreement 47
ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES 47
2.01. The Advances 47
(a) Revolving Advances 47
(b) Swing Line Advances 48
(c) Determination of Equivalent Amounts 48
2.02. Making the Advances 49
(a) Revolving Advances 49
(b) Swing Line Advances 50
(c) Notices Irrevocable, Etc. 51
(d) Advances by Lenders 52
(e) Disbursement of Advances 52
(f) Nature of Lender's Obligations 53
2.03. The Auction Advances 53
2.04. Fees 58
(a) Agent's Fees 58
(b) Commitment Fee 58
(c) Commitment Fee Calculations 58
(d) Closing Fee 59
(e) Nature of Obligation 59
2.05. Repayment of Advances 59
(a) Revolving Advances 59
(b) Swing Line Advances 59
(c) Auction Advances 59
2.06. Interest Rate Provisions, Etc. 59
(a) Base Rate Advances 59
(b) Interest Periods 60
(c) Adjusted CD Rate Advances 60
(d) Eurocurrency Rate Advances Denominated in
Dollars 61
(e) Eurocurrency Rate Advances Denominated in
Alternative Currencies 62
(f) Auction Advances 62
(g) Utilization-Based Interest Adjustments 63
(h) Interest Rate Quotations 63
(i) Change in Circumstances 63
(j) Failure to Notify 64
(k) Minimum Amounts 64
(l) Illegality 64
(m) Reference Banks 65
2.07. Voluntary Conversion, Continuation and Redenomination
of Revolving Advances 65
(a) Conversion and Continuation 65
(b) Redenomination 66
(c) Notices Irrevocable 67
2.08. Reduction of Commitments 67
2.09. Mandatory Prepayments 67
(a) Declines in Borrowing Base 67
(b) Alternative Currency Exchange Rate Fluctuations 68
2.10. Optional Prepayments 68
2.11. Increased Costs 69
2.12. Loan Accounts 70
2.13. Payments and Computations 71
2.14. Taxes 73
2.15. Payments on Business Days 77
2.16. Sharing of Payments, Etc 77
2.17. Use of Proceeds 77
ARTICLE III AMOUNT AND TERMS OF LETTERS OF CREDIT AND PARTICIPATIONS
THEREIN 78
3.01. Letters of Credit 78
3.02. Issuing the Letters of Credit 79
3.03. Reimbursement Obligations 80
3.04. Participations Purchased by the Lenders 81
3.05. Letter of Credit Fees 82
3.06. Indemnification; Nature of the Issuing Bank's Duties 83
3.07. Increased Costs 84
(a) Change in Law 84
(b) Capital 85
(c) Survival 86
3.08. Uniform Customs and Practice 86
3.09. Cash Collateral 86
ARTICLE IV CONDITIONS OF LENDING 86
4.01. Conditions Precedent to Initial Borrowing, Swing Line
Advance, Auction Advance or Letter of Credit 86
4.02. Conditions Precedent to All Borrowings, All Swing Line
Advances and All Issuances 87
4.03. Conditions Precedent to Each Auction Borrowing 88
ARTICLE V REPRESENTATIONS AND WARRANTIES 89
5.01. Representations and Warranties of the Borrowers 89
(a) Existence, Etc. 89
(b) Subsidiaries 89
(c) Authorization 90
(d) Approvals 90
(e) Enforceability 91
(f) Properties 91
(g) Financial Statements 91
(h) Material Adverse Effect 91
(i) Litigation 91
(j) Taxes 91
(k) Information 92
(l) Indebtedness 92
(m) Lease Obligations 92
(n) Strikes, Acts of God 92
(o) ERISA Events 92
(p) Multiemployer Plans 92
(q) Plan Terminations 92
(r) Margin Stock 93
(s) Regulated Entities 93
(t) Copyrights, Patents, Trademarks and
Licenses, Etc. 93
(u) Environmental Laws 93
(v) Filings 94
(w) Lockbox Accounts 94
(x) Solvency 94
(y) Insurance Coverage 94
ARTICLE VI COVENANTS OF THE BORROWERS 95
6.01. Affirmative Covenants 95
(a) Payment of Taxes, Etc. 95
(b) Preservation of Corporate Existence, Etc. 95
(c) Compliance with Laws, Etc. 95
(d) Visitation and Audit Rights 96
(e) Keeping of Books 96
(f) Maintenance of Properties, Etc. 97
(g) Maintenance of Insurance 97
(h) Employment of Technology, Disposal of Hazardous
Materials, Etc. 97
(i) Environmental Matters 97
6.02. Negative Covenants 98
(a) Liens, Etc. 98
(b) Product Transfer Agreements 99
(c) Contingent Obligations 100
(d) Dividends, Etc. 100
(e) Capital Expenditures 102
(f) Mergers, Etc. 103
(g) Sales, Etc. of Assets 103
(h) Investments in Other Persons 104
(i) Subordinated Debt 105
(j) Accounting Changes 106
(k) Change in Nature of Business 106
(l) Capital Stock 106
(m) Limitation on Negative Pledges, Etc. 106
(n) Limitation on Transactions with Affiliates 106
(o) Intercompany Obligations 107
6.03. Financial Covenants 107
(a) Maintenance of Consolidated Tangible Net Worth 107
(b) Maintenance of Quick Ratio 107
(c) Maintenance of Fixed Charge Coverage Ratio 107
(d) Net Income 108
(e) Leverage Ratio 108
(f) Total Leverage Ratio 108
(g) FAS 109 108
6.04. Reporting Requirements 108
(a) Quarterly Financials 108
(b) Annual Financials 109
(c) Operating Plan, Projections. 109
(d) Default 110
(e) Environmental 110
(f) Plan Filings 110
(g) ERISA Event 110
(h) Plan Termination 110
(i) Multiemployer Plan 110
(j) Proceedings 111
(k) SEC Reports 111
(l) Borrowing Base Certificate 111
(m) Investment Grade Obligor Report 111
(n) Mergers 112
(o) Other Information 112
6.05. Cash Concentration and Lockbox Accounts 112
ARTICLE VII EVENTS OF DEFAULT 113
7.01. Events of Default 113
(a) Payment 113
(b) Representations and Warranties 113
(c) Covenants 113
(d) Cross-Default 113
(e) Voluntary Proceedings 114
(f) Involuntary Proceedings 114
(g) Judgments 114
(h) Material Adverse Change 115
(i) ERISA Event 115
(j) Withdrawal Liability 115
(k) Plan Termination 115
(l) Change in Control 115
(m) Ownership 115
(n) Collateral Documents 116
(o) Guaranties 116
(p) Subordination Agreements 116
ARTICLE VIII THE AGENT AND ISSUING BANK 117
8.01. Authorization and Action 117
8.02. Agent's Reliance, Etc. 118
8.03. BofA and Affiliates 119
8.04. Notice of Default 119
8.05. Credit Decision 119
8.06. Indemnification 120
8.07. Successor Agent 121
8.08. Audits 122
8.09. Collateral Matters; Bank Responses 122
ARTICLE IX MISCELLANEOUS 123
9.01. Amendments, Etc. 123
9.02. Notices, Etc. 125
9.03. No Waiver; Remedies 126
9.04. Costs and Expenses 126
9.05. Right of Setoff 127
9.06. Indemnification 128
9.07. Consent to Jurisdiction 129
9.08. Binding Effect 129
9.09. Assignments and Participations 129
9.10. Severability of Provisions 132
9.11. Judgment 132
9.12. Independence of Provisions 133
9.13. Headings 133
9.14. Entire Agreement 133
9.15. Execution in Counterparts 133
9.16. Governing Law 133
9.17. Confidentiality 134
9.18. Joint and Several Obligations; Obligations Absolute 134
9.19. Automatic Debits of Fees, Etc. 136
9.20. Arbitration; Reference 137
(a) Mandatory Arbitration 137
(b) Real Property Collateral 137
(c) Judicial Reference 137
(d) Provisional Remedies and Self-Help 137
SCHEDULES
Schedule 1.01(c)(1) - Cash Equivalents
Schedule 1.01(c)(2) - Lending Offices and Addresses
Schedule 1.01(e)(1) - Initial Approved Governmental Authorities
Schedule 1.01(e)(2) - Eligible International Account Debtors
and Letter of Credit Issuers
Schedule 1.01(p) - Existing Liens
Schedule 2.04 - Closing Fees
Schedule 3.01(b) - Prior Letters of Credit
Schedule 5.01(b) - Subsidiaries
Schedule 5.01(d) - Regulatory Approvals
Schedule 5.01(i) - Litigation
Schedule 5.01(j) - Taxes
Schedule 5.01(l) - Existing Debt and Contingent Obligations
Schedule 5.01(m) - Operating Leases
Schedule 5.01(o) - ERISA Matters
Schedule 5.01(u) - Environmental Exceptions
Schedule 5.01(v) - Special Filings or Recordings
Schedule 5.01(w) - Lockbox Accounts
Schedule 6.02(h) - Closing Date Investments
EXHIBITS
Exhibit A - Form of Assignment and Acceptance
Exhibit B-1 - U.S. Security Agreement
Exhibit B-2 - Factor's Lien Contract
Exhibit B-3 - Assignment of Accounts Receivable
Agreement
Exhibit C - Intercompany Subordination Agreement
Exhibit D - [Intentionally Omitted]
Exhibit E - Form of Notice of Borrowing
Exhibit F - Form of Notice of Swing Line Advance
Exhibit G-1 - Form of Competitive Bid Request
Exhibit G-2 - Form of Invitation for Competitive Bids
Exhibit G-3 - Form of Competitive Bid
Exhibit H - Form of Notice of Conversion/Continuation
Exhibit I - Form of Notice of Redenomination
Exhibit J-1 - Form of Opinion of Shearman & Sterling
Exhibit J-2 - Form of Opinion of Company Counsel
Exhibit J-3 - Form of Opinion of McConnell Valdes Kelley
Sifre Griggs & Ruiz-Suria
Exhibit K - Form of Quarterly Investment Grade Obligor
Report
Exhibit L - Form of Compliance Certificate
Exhibit M - Form of Borrowing Base Certificate
Exhibit N - Form of Lease Receivables Collateral Report
Exhibit O - Guaranty
Exhibit P - Pledge Agreement
Exhibit Q - Form of Periodic Release Certificate
Exhibit R - Form of Request for Consent to Governmental
Receivables
Exhibit S - Form of Acknowledgment of Pledge
Exhibit T - Form of Acceptable Permitted Affiliate Lien
Promissory Note
Exhibit U - Form of Program Collateral Release Certificate
AMENDED AND RESTATED MULTICURRENCY CREDIT AGREEMENT
This AMENDED AND RESTATED MULTICURRENCY CREDIT AGREEMENT is entered
into as of September 28, 1994, among STORAGE TECHNOLOGY CORPORATION, a Delaware
corporation ("STK"), STORAGETEK FINANCIAL SERVICES CORPORATION, a Delaware
corporation ("SFSC"), STORAGE TECHNOLOGY DE PUERTO RICO, INC., a Delaware
corporation ("STPR"), XL/DATACOMP, INC., a Delaware corporation ("XL/DC") (each
individually a "Borrower" and collectively the "Borrowers"), the banks listed on
the signature pages hereof and the other Lenders (as such term is defined in
Section 1.01) from time to time parties hereto, and BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, a national banking association, as agent for the
Lenders, and as Swing Line Bank and Issuing Bank (as hereinafter defined).
PRELIMINARY STATEMENTS:
A. The Borrowers, the Lenders and the Agent are parties to that
certain $150,000,000 Multicurrency Credit Agreement, dated as of March 31, 1993,
as amended by that certain First Amendment to Credit Agreement, dated as of
August 6, 1993, that certain Second Amendment to Credit Agreement, dated as of
September 24, 1993, that certain Third Amendment to Credit Agreement, dated as
of March 1, 1994, that certain Fourth Amendment to Credit Agreement, dated as of
May 31, 1994 and that certain Fifth Amendment to Credit Agreement, dated as of
June 29, 1994 (collectively, the "Prior Credit Agreement"), pursuant to which
the Agent and the Lenders have extended certain credit facilities and other
financial accommodations to the Borrowers.
B. The Borrowers have requested that the Lenders agree to amend and
restate the Prior Credit Agreement as provided herein in order to make certain
amendments thereto.
C. The Lenders are willing to extend certain credit facilities to the
Borrowers and to amend and restate the Prior Credit Agreement, in each case as
provided in this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement and unless
otherwise expressly indicated, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined and, where appropriate, to import the masculine,
feminine and neuter forms of pronouns and possessive adjectives):
"AAA" has the meaning specified in Section 9.20(a).
"Absolute Rate" has the meaning specified in Section 2.03(d).
"Absolute Rate Auction" means a solicitation of Competitive Bids
setting forth Absolute Rates pursuant to Section 2.03(d).
"Absolute Rate Auction Advance" means an Auction Advance that bears
interest at a rate determined with reference to the Absolute Rate.
"Account Debtor" means the Person which is obligated on or under an
Account or a Lease Receivable.
"Account" means (i) a present or future right of any Borrower (or, in
the case of Eligible Foreign Accounts, any Foreign Subsidiary) to payment
for goods sold (including pursuant to a NISA), consigned or leased, or for
services rendered, except any right evidenced by an instrument, and
including the Current Portion (and only the Current Portion) of a Lease
Receivable, including without limitation, with respect to STK, SFSC and
XL/DC, an "account" (as such term is defined in the UCC) and, with respect
to STPR, an "account" (as such term is defined in the Puerto Rico Factors
Lien Act as in effect in Puerto Rico from time to time) and (ii) the
proceeds thereof; but not including any such right that is a general
intangible under the UCC, such as software license rights. "Accounts" means
all such property of any or all applicable Borrowers in the aggregate.
"Adjusted CD Rate" means, for each Interest Period for each Adjusted CD
Rate Advance comprising part of the same Borrowing, an interest rate per
annum (rounded upward to the nearest whole multiple of 1/100 of 1% per annum
if such percentage is not such a multiple) equal to the sum of:
(a) the rate per annum obtained by dividing (i) the rate of
interest determined by the Agent to be the average (rounded upward to
the nearest whole multiple of 1/100 of 1% per annum, if such average is
not such a multiple) of the average bid rate determined by the Agent
for the bid rates per annum, at 8:00 a.m. (San Francisco time) on the
first day of such Interest Period, of two certificate of deposit
dealers of recognized standing selected by the Agent for the purchase
at face value of certificates of deposit issued by major U.S. banks in
an amount substantially equal to BofA's Adjusted CD Rate Advance
comprising part of such Borrowing and with a maturity equal to such
Interest Period, by (ii) a percentage equal to 100% minus the Adjusted
CD Rate Reserve Percentage for such Interest Period, plus
(b) the Assessment Rate for such Interest Period.
The Adjusted CD Rate for each Interest Period for each Adjusted CD Rate
Advance comprising part of the same Borrowing shall be determined by the
Agent on the first day of such Interest Period on the basis of applicable
rates furnished to and received by the Agent.
"Adjusted CD Rate Advance" means a Revolving Advance denominated in
Dollars which bears interest according to the Adjusted CD Rate.
"Adjusted CD Rate Reserve Percentage" means, for each Interest Period
for each Adjusted CD Rate Advance comprising part of the same Borrowing, the
reserve percentage (rounded upward to the nearest whole multiple of 1/100 of
1% per annum, if such percentage is not such a multiple) applicable on the
first day of such Interest Period under regulations issued from time to time
by the Board of Governors of the Federal Reserve System (or any successor)
for determining the maximum reserve requirement (including, but not limited
to, any ordinary emergency, supplemental, special or other marginal reserve
requirement), for member banks of the Federal Reserve System with deposits
exceeding one billion dollars, with respect to liabilities consisting of or
including (among other liabilities) U.S. dollar nonpersonal time deposits in
the United States with a maturity equal to such Interest Period and in an
amount of $100,000 or more.
"Adjusted Value" means, as of any time of determination, the present
value of the income stream arising from any Product Transfer Agreement,
discounted by a rate selected by the applicable Borrower (expressed as a
decimal, rounded upward to the nearest 1/100 of 1%) provided that such rate
shall be no less than the Treasury Rate plus 3.50% per annum. For purposes
of this definition, the "Treasury Rate" shall mean the then most recent two-
year U.S. Treasury Note Rate for constant maturities published in the most
current edition of Federal Reserve Statistical Release H.15 (519), Selected
Interest Rates, under the heading "Treasury Constant Maturities".
"Advance" means a Revolving Advance or a Swing Line Advance.
"Affiliate" means, with respect to any Person, any other entity that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person.
"Affiliate Transaction" has the meaning specified in Section 6.02(n).
"Agent" means BofA in its capacity as agent for the Lenders, the Swing
Line Bank and the Issuing Bank under the Loan Documents, or any successor
Agent appointed or chosen pursuant to Section 8.07 hereof.
"Agent-Related Person" has the meaning specified in Section 8.02.
"Agent's Account" means the account and address for payments set forth
on Schedule 1.01(c)(2) in relation to the Agent or such other address as the
Agent may from time to time specify in accordance with Section 9.02.
"Aggregate Borrowing" means, collectively, each of two or more
Borrowings made on the same Business Day pursuant to the same Notice of
Borrowing.
"Aggregate Borrowing Base" means, as of any date of determination prior
to and including September 30, 1995, the sum of the Domestic Borrowing Bases
and Foreign Borrowing Bases for all of the Borrowers as of such date and, as
of any date of determination after September 30, 1995, the sum of the
Domestic Borrowing Bases for all of the Borrowers as of such date, provided,
however, that the Foreign Borrowing Bases cannot constitute more than 30% of
the Aggregate Borrowing Base in 1994 or more than 25% of the Aggregate
Borrowing Base thereafter.
"Aggregate Exposure Amount" means, as of any date of determination, the
sum of the Exposure Amounts in respect of all of the Borrowers as of such
date.
"Alternative Currencies" means Pounds Sterling, Deutsche Marks, Swiss
Francs, French Francs and Japanese Yen.
"Alternative Currency Sublimit" means, in respect of any and all
outstanding Revolving Advances and Letter of Credit Liabilities of the
Borrowers, which are denominated in Alternative Currencies, $45,000,000, as
to all Alternative Currencies in the aggregate, and $20,000,000 as to any
single Alternative Currency.
"Amperif" means Amperif Corporation.
"Amperif Acquisition" means the acquisition of Amperif Corporation by
merger of StorageTek Trident Corporation with and into Amperif Corporation,
pursuant to terms and conditions substantially as set forth in the Agreement
and Plan of Reorganization dated as of May 22, 1993 in the form attached to
Amendment No. 1 to Form S-4 filed by Storage Technology Corporation with the
Securities and Exchange Commission on August 24, 1993.
"Apparent Affiliates" means Persons known by the Responsible Officers
of the Borrowers to be Affiliates of an Account Debtor.
"Applicable Lending Office" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of a Base Rate Advance, such
Lender's CD Lending Office in the case of an Adjusted CD Rate Advance and
such Lender's Eurocurrency Lending Office in the case of a Eurocurrency Rate
Advance, and the office of such Lender notified by such Lender in writing to
the Agent as its applicable Lending Office in the case of an Auction
Advance.
"Assessment Rate" means, for each Interest Period, the rate determined
by the Agent as equal to the annual assessment rate in effect on the first
day of such Interest Period payable to the FDIC by a member of the Bank
Insurance Fund that is classified as adequately capitalized and within
supervisory subgroup "A" (or a comparable successor assessment risk
classification within the meaning of 12 C.F.R. Section327.3(d)) for insuring
time deposits at offices of such member in the United States; or, in the
event that the FDIC shall at any time hereafter cease to assess time
deposits based upon such classifications or successor classifications, equal
to the maximum annual assessment rate in effect on the first day of such
Interest Period that is payable to the FDIC by commercial banks (whether or
not applicable to the Banks) for insuring time deposits at offices of such
banks in the United States.
"Assignment and Acceptance" means an assignment and acceptance entered
into by an assigning Lender and an Eligible Assignee, and accepted by the
Agent, in accordance with Section 9.09 and in substantially the form of
Exhibit A.
"Attorney Costs" means and includes all fees and disbursements of any
law firm or other external counsel, the allocated cost of internal legal
services and all disbursements of internal counsel.
"Auction Advance" means an advance denominated in Dollars by a Lender
to a Borrower as part of an Auction Borrowing resulting from the auction
bidding procedure described in Section 2.03.
"Auction Borrowing" means one or more borrowings by one or more
Borrowers consisting of simultaneous Auction Advances from each of the
Lenders whose offer to make one or more Auction Advances as part of such
borrowings has been accepted by the applicable Borrower or Borrowers under
the auction bidding procedure described in Section 2.03.
"Auction Reduction" has the meaning specified in Section 2.01(a).
"Bank Affiliate" means a Person engaged primarily in the business of
commercial banking and that is a Subsidiary of a Lender or of a Person of
which a Lender is a Subsidiary.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. Section 101, et seq.).
"Base Rate" means a fluctuating interest rate per annum as shall be in
effect from time to time, which rate per annum shall at all times be equal
to the higher of:
(a) the rate of interest publicly announced from time to
time by BofA in San Francisco, California, as its "reference rate." It
is a rate set by BofA based upon various factors including BofA's costs
and desired return, general economic conditions and other factors, and
is used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate; and
(b) 0.50% per annum above the latest Federal Funds Rate.
Any change in the reference rate announced by BofA shall take
effect at the opening of business on the day specified in the public
announcement of such change.
"Base Rate Advance" means an Advance denominated in Dollars which bears
interest according to the Base Rate.
"BofA" means Bank of America National Trust and Savings Association, a
national banking association.
"Borrowing" means a borrowing consisting of Revolving Advances of the
same Interest Type made on the same Business Day to a Borrower pursuant to
the provisions of Section 2.02(a).
"Borrowing Base Certificate" means a certificate signed by a
Responsible Officer, in substantially the form of Exhibit M.
"Business Day" means a day of the year on which banks are not required
or authorized to close in the City of New York, the City of San Francisco,
the City of Chicago and, with respect to Eurocurrency Rate Advances, such a
day on which dealings are carried on in the London interbank market and
banks are open for business in London and (if denominated in any Alternative
Currency) in the country of issue of the currency of such Eurocurrency Rate
Advance.
"Capital Expenditures" means, with respect to any Person for any
period, the aggregate of all expenditures by such Person during such period
that, in accordance with GAAP, should be included in or reflected by the
property, plant or equipment, but not any spare parts account, in each case
as reflected in the balance sheets of such Person.
"Capital Lease" of any Person means any lease of any property (whether
real, personal or mixed) by such Person as lessee, which lease should, in
accordance with GAAP, be required to be accounted for as a capital lease on
the balance sheet of such Person.
"Cash Equivalent" means, as of any date of determination, any deposit,
instrument or security owned by STK or any of its Subsidiaries and described
on Schedule 1.01(c)(1).
"CD Lending Office" means, with respect to any Lender, the office of
such Lender specified as its "CD Lending Office" on Schedule 1.01(c)(2)
hereto or on the signature page of the Assignment and Acceptance pursuant to
which it became a Lender, or such other office or Affiliate of such Lender
as such Lender may from time to time specify in writing to the Borrowers and
the Agent.
"CEP Stock" means convertible exchangeable preferred stock issued by
STK on or about March 4, 1993.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.), and
any regulations promulgated thereunder.
"Change of Control" means the occurrence, after the date of this
Agreement, of any of the following: (i) any Person or two or more Persons
acting in concert acquiring beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934), directly or indirectly, of securities of STK (or
other securities convertible into such securities) representing 30% or more
of the combined voting power of all securities of STK entitled to vote in
the election of directors; or (ii) during any period of up to 12 consecutive
months, commencing after the Closing Date, individuals who at the beginning
of such 12-month period were directors of STK ceasing for any reason to
constitute a majority of the Board of Directors of STK unless the Persons
replacing such individuals were nominated by the Board of Directors of STK;
or (iii) any Person or two or more Persons acting in concert acquiring by
contract or otherwise, or entering into a contract or arrangement which upon
consummation will result in its or their acquisition of, or control over,
securities of STK (or other securities convertible into such securities)
representing 30% or more of the combined voting power of all securities of
STK entitled to vote in the election of directors; provided, however, that,
for the purposes of clauses (i) and (iii) above, any acquisition of such
voting securities of STK by an employee stock ownership plan or related
trust, within the meaning of Section 4975 of ERISA, sponsored or contributed
to by STK or its Subsidiaries (an "ESOP") shall not, so long as such ESOP is
not acting in concert with any other Person (whether before or after such
acquisition by such ESOP), be deemed a Change of Control within the meaning
of such clauses (i) and (iii) unless the number of voting securities
acquired, controlled or held by such ESOP exceeds 50% of the combined voting
power of all securities of STK entitled to vote in the election of
directors, other than securities having such power only by reason of the
happening of a contingency.
"Closing Date" means the date on which all conditions precedent set
forth in Section 4.01 are satisfied or waived by all Lenders.
"Collateral" means all property and interests in property now owned or
hereafter acquired by the Borrowers in or upon which a Lien is granted or
purported to be granted to the Agent for its benefit and for the benefit of
the Lenders, the Swing Line Bank or the Issuing Bank to secure payment of
the Obligations, or any part thereof, whether pursuant to any Collateral
Document or any other document executed by any of the Borrowers or any of
their respective Subsidiaries from time to time.
"Collateral Documents" means the U.S. Security Agreements, the P.R.
Security Agreements, the Pledge Agreements, and all other agreements or
instruments (including, without limitation, all UCC financing statements)
delivered to the Agent from time to time to secure payment of any of the
Obligations, in each case as amended, supplemented or otherwise modified
from time to time.
"Commitment" means, as to any Lender, the amount set forth opposite
such Lender's name on the signature pages hereof under the caption
"Commitment", as such amounts may be reduced from time to time pursuant to
this Agreement or pursuant to any Assignment and Acceptance.
"Competitive Bid" means an offer by a Lender to make an Auction Advance
in accordance with Section 2.03(b).
"Competitive Bid Request" has the meaning specified in Section 2.03(b).
"Computation Date" means the last day of each Fiscal Month and any such
other days as may from time to time be specified by the Majority Lenders
pursuant to Section 2.01(d).
"Consolidated", "Consolidating" and any derivative thereof each means,
with reference to the accounts or financial reports of any Person, the
consolidated accounts or financial reports of such Person and each
Subsidiary of such Person determined in accordance with GAAP.
"Contingent Obligations" of any Person means, without duplication,
Third Party Guaranty Obligations, L/C Obligations and Uncovered Hedge
Obligations.
"Convert", "Conversion" and "Converted" each refers to a conversion of
Revolving Advances of one Interest Type into Revolving Advances of another
Interest Type pursuant to Section 2.07(a).
"Conversion Election" has the meaning specified in Section 3.03(a).
"Convertible Subordinated Debentures" means the $160,000,000 8%
Convertible Subordinated Debentures issued by STK pursuant to the Indenture
dated as of May 31, 1990, between STK and Manufacturers Hanover Trust
Company of California as Trustee, as such Indenture may be amended from time
to time.
"Current Assets" of any Person means, as of any date of determination,
all assets of such Person which should, in accordance with GAAP, be
classified as current assets of a company conducting a business which is the
same as, or is similar to, that of such Person.
"Current Liabilities" of any Person means, as of any date of
determination, all liabilities (including estimated accrued taxes) of such
Person (other than, in the case of the Borrowers, any Debt consisting of
Advances or Auction Advances made under this Agreement) which in accordance
with GAAP should be classified as current liabilities of a company
conducting a business which is the same as, or is similar to, that of such
Person, including the amount of any redeemable preferred stock of such
Person that is redeemable at the option of the holder thereof or that is
mandatorily redeemable by such Person within one year of such date of
determination, valued at the applicable redemption price, plus accrued and
unpaid dividends payable in respect of such redeemable preferred stock;
provided, however, that Current Liabilities shall not include deferred taxes
to the extent recognizable solely due to FAS 109.
"Current Liquid Assets" of any Person means, as of any date of
determination, all cash, short-term investments, accounts receivable, the
current portion of notes and installment receivables, and net investment in
sales-type leases, in each case as shown on the most recent balance sheet of
such Person and determined in accordance with GAAP.
"Current Portion" means, in respect of rights to payment from any
Product Transfer Agreement, at any time, the amount evidenced by an invoice
delivered to the applicable Account Debtor and that is due and payable at
such time.
"Debt" of any Person means, without duplication, (i) all indebtedness
of such Person for borrowed money or for the deferred purchase price
(excluding any deferred purchase price that constitutes an account payable
incurred in the ordinary course of business), (ii) all obligations of such
Person in connection with any agreement to purchase, redeem, exchange,
convert or otherwise acquire for value any capital stock of such Person or
any warrants, rights or options to acquire such capital stock, now or
hereafter outstanding, (iii) all obligations of such Person evidenced by
bonds, notes, debentures, convertible debentures or other similar
instruments, (iv) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (even though the rights and remedies of the seller or lender
under such agreement in the event of default, acceleration, or termination
are limited to repossession or sale of such property), (v) all Capital Lease
obligations of such Person, (vi) all redeemable (at the option of the
holder, or mandatorily redeemable by the issuer prior to the Termination
Date) preferred stock, valued at the applicable redemption price, plus
accrued and unpaid dividends payable in respect of such redeemable preferred
stock, and (vii) if an ERISA Event shall have occurred with respect to any
Plan, the Insufficiency (if any) of such Plan (or, in the case of a Plan
with respect to which an ERISA Event described in clauses (iii) through (v)
of the definition of ERISA Event shall have occurred, the liability related
thereto).
"Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise
remedied during such time) constitute an Event of Default.
"Default Rate" has the meaning specified in Section 2.06(a).
"Discount", "Discounted" and similar derivatives thereof, means, when
applied to a Product Transfer Agreement, a transaction in which the rights
to such Product Transfer Agreement, and, at the election of the parties
thereto, the equipment subject thereto, are sold, pledged, assigned and/or
transferred to a third party, for consideration in the form of cash payable
at closing and notes issued by the purchaser, with or without recourse,
pursuant to a written agreement which specifies the effective date of the
transaction, which effective date if retroactive, is not retroactive beyond
the first day of the month in which such transactions occur (provided that
any such retroactive effective date shall not affect the date on which any
release of Collateral by the Agent or the Lenders is deemed given hereunder
or under any Security Agreement), whereby the transferee obtains an
ownership or a security interest in all or part of such Product Transfer
Agreement or the rights of the applicable Borrower or any of its
Subsidiaries thereunder, with or without title to the equipment subject
thereto. For purposes hereof, "Discount" includes the grant of a security
interest in a Product Transfer Agreement subsequent to the Initial Transfer
and pursuant to an obligation to maintain a specified collateral value as
set forth in any agreement governing Discount arrangements ("Gross Up
Discount").
"Dollars" and the sign "$" each means lawful money of the United
States.
"Domestic Accounts Borrowing Base" means, as of any date of
determination, as to STK, SFSC, STPR and XL/DC, 80% of the then-outstanding
principal balance (net of all refunds, rebates, allowances, discounts,
credits, concessions or other reductions which are taken by or granted to
the Account Debtors thereof) of the then Eligible Accounts owned by such
Borrower.
"Domestic Borrowing Base" means, as of any date of determination, for
any Borrower, the sum of (i) the Lease Receivables Borrowing Base for such
Borrower, (ii) the Domestic Accounts Borrowing Base for such Borrower, and
(iii) the SNRR Inventory Borrowing Base; provided, however, that in no event
shall the portion of the Domestic Borrowing Base attributable to Eligible
XL/DC-Originated Lease Receivables for all Borrowers together ever exceed
$37,500,000. Unless redetermined as provided below or elsewhere herein
(including Section 6.02(b)), such Domestic Borrowing Base shall be the
Domestic Borrowing Base for the purposes of this Agreement until the date of
the next determination thereof. During the existence of an Event of
Default, at the request of the Majority Lenders, the Agent may request the
Borrowers to (and promptly upon such request, the Borrowers shall)
redetermine the Domestic Borrowing Base, and may, at any time, request, and
the Borrowers agree promptly to provide, such additional information as the
Agent or the Majority Lenders reasonably require to review any such
redetermination.
"Domestic Lending Office" means, with respect to any Lender, the office
of such Lender specified as its "Domestic Lending Office" under its name on
Schedule 1.01(c)(2) or on the signature page of the Assignment and
Acceptance pursuant to which it became a Lender, or such other office or
Affiliate of such Lender as such Lender may from time to time specify to the
Borrowers and the Agent.
"Domestic Subsidiaries" means those Subsidiaries of any Borrower which
are incorporated under the laws of any State of the United States or Puerto
Rico and which are engaged in business primarily in the United States or
Puerto Rico.
"Earnings" of any Person for any period means the sum of (i) Net Income
of such Person (after provision for income taxes) for such period, plus
(ii) depreciation, amortization and all other non-cash expenses and items of
such Person for such period to the extent deducted in determining Net
Income, and plus (iii) Interest Expense of such Person for such period, to
the extent deducted in determining Net Income for such period.
"Eligible Accounts" means, at any time of determination as to any
Borrower other than STPR, and as to STPR at any time of determination after
satisfaction of the STPR Conditions, the Accounts of such Borrower which
meet each of the following requirements:
(a) if the Account arises with respect to a Product Transfer
Agreement, (i) the goods or Inventory subject thereto shall have been
shipped to the Account Debtor and, with respect to end-user leases or
sales, shall have been delivered and made ready for operation for the
benefit of the Account Debtor under such Product Transfer Agreement,
and (ii) such Product Transfer Agreement shall not have been Discounted
or otherwise transferred or subject to any Lien (other than in favor of
the Agent pursuant to a Collateral Document or in favor of STK or any
of its Domestic Subsidiaries pursuant to a Permitted Affiliate Lien);
(b) the Account is a valid, legally enforceable obligation
of the Account Debtor thereunder, and is not subject to any valid
offset, counterclaim or other defense on the part of such Account
Debtor, arising in connection with such Account, or to any valid claim
on the part of such Account Debtor denying liability thereunder in
whole or in material part;
(c) the Account is subject to a perfected, first priority
security interest established by a Collateral Document, and is not
subject to any other Lien other than a Permitted Affiliate Lien;
(d) the Account is evidenced by an invoice rendered to the
Account Debtor thereunder or, if the Account Debtor of such Account is
a Governmental Authority, such Account relates to lease rentals and/or
services and is not yet evidenced by an invoice solely because such
Account Debtor has not yet obtained its fiscal spending approval for
such Account;
(e) the Account shall not have been outstanding for more
than, in the case of Accounts of STK and Accounts relating to Eligible
STK-Originated Lease Receivables and held by SFSC, 90 days after the
due date or, if there is not a specified due date on the invoice, and
in any event for all Accounts of XL/DC, SFSC (other than Accounts
relating to Eligible STK-Originated Lease Receivables) and STPR, 90
days after the original invoice date of the Account;
(f) the Account, when combined with all other Accounts owing
by the Account Debtor and its Apparent Affiliates to the Borrower would
not exceed 10% of the total Eligible Accounts of such Borrower, except
to the extent that such Account would, together with all other such
Accounts, not exceed 10% of total Eligible Accounts of such Borrower;
(g) in respect of any Account having a face value in excess
of $750,000, the Account is not the obligation of an Account Debtor as
to whom the Borrower is or may become liable for goods sold or services
rendered by the Account Debtor or any of its Apparent Affiliates to
such Borrower, except to the extent that it exceeds the amount of such
Borrower's obligations to such Account Debtor and Apparent Affiliates;
(h) the Account does not arise with respect to goods which
are delivered on a cash-on-delivery basis or placed on consignment,
guaranteed sale or other terms by reason of which the payment by the
Account Debtor may be conditional;
(i) the Account does not arise from the sale or lease of
goods which remain in the Borrower's (or any of its Affiliates')
possession or under the control of such Borrower (or any of its
Affiliates);
(j) the Account Debtor is not a Subsidiary or other
Affiliate of any Borrower;
(k) if the Account is the Current Portion of a Lease
Receivable, the Account Debtor of such Account is not the U.S.
Government, or any department or agency thereof, unless the Majority
Lenders have consented to the inclusion of such Account as an Eligible
Account by their consent to a Request for Consent to Governmental
Receivables specifying such Account (or the Lease Receivable relating
thereto, if any), and all representations and warranties contained in
such Request for Consent to Governmental Receivables are true; and the
Account Debtor of such Account is not a Governmental Authority other
than the U.S. Government (or any department or agency thereof), unless
(A) the Account Debtor is listed on Schedule 1.01(e)(1) or the Majority
Lenders have consented to such Account Debtor, and (B) the Borrower has
complied with any and all laws relating to such Account (and the
assignment or pledging thereof to the Agent);
(l) if the Account Debtor of such Account is not principally
located or doing business in the United States or any territory
thereof, (i) the Account Debtor of such Account is identified on
Schedule 1.01(e)(2) or has been otherwise consented to by the Majority
Lenders, or (ii) such Account is secured by a letter of credit
reasonably satisfactory in form and substance to the Majority Lenders
and issued or confirmed by a bank listed on Schedule 1.01(e)(2) or any
other bank consented to for purposes of this clause (l) by the Majority
Lenders; provided, however, that, unless otherwise consented to by the
Majority Lenders, any such Account shall be excluded if such letter of
credit does not expressly permit its transfer to the Agent; and,
provided, further, that the portion of total Eligible Accounts
attributable to Accounts from Account Debtors described in this
paragraph (l) which are not supported by transferable letters of credit
shall in no event exceed 10% of total Eligible Accounts of such
Borrower; and
(m) the Account Debtor of such Account shall not have failed
(which failure is continuing) to pay more than 50% of such Account
Debtor's total Accounts owing to such Borrower or to STK and its
Subsidiaries within, in the case of Accounts of STK, 90 days after the
due date or, if there is not a specified due date, and in any event for
Accounts of XL/DC, SFSC and STPR, 90 days after the original invoice
date of such Accounts; and the Account Debtor of such Account is not
the subject of any Insolvency Proceeding;
provided, however, that the Majority Lenders shall have the right to review
from time to time, on the basis of audits performed from time to time by the
Agent or its representative pursuant to Section 6.01(d), the foregoing
eligibility requirements (including, without limitation, the payment terms
of all invoices) and, if reasonably warranted, the Agent shall adjust such
requirements in such manner as the Majority Lenders deem necessary in their
reasonable discretion to cause such adjusted requirements to more nearly
reflect Accounts which will be readily collectible in the ordinary course of
business. An Account which is at any time an Eligible Account, but which
subsequently fails to meet any of the foregoing requirements and
restrictions, shall forthwith cease, for so long as any such failure shall
continue, to be an Eligible Account. At any and all times prior to
satisfaction of the STPR Conditions, the Domestic Borrowing Base in respect
of STPR shall be deemed equal to zero ($0).
"Eligible Assignee" means (i) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined
capital and surplus of at least $200,000,000; (ii) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development, or a political
subdivision of any such country, and having a combined capital and surplus
of at least $200,000,000, provided that such bank is acting through a branch
or agency located in the United States; and (iii) any Bank Affiliate.
"Eligible Foreign Accounts" means, at any time of determination as to
any Borrower, the Accounts owned by such Borrower's wholly-owned Foreign
Subsidiaries which meet each of the following requirements:
(a) the Account is a valid, legally enforceable obligation
of the Account Debtor thereunder, and is not subject to any valid
offset, counterclaim or other defense on the part of such Account
Debtor, arising in connection with such Account, or to any valid claim
on the part of such Account Debtor denying liability thereunder in
whole or in material part;
(b) the Account is evidenced by an invoice rendered to the
Account Debtor thereunder or, if the Account Debtor of such Account is
a Governmental Authority, such Account relates to lease rentals and/or
services and is not yet evidenced by an invoice solely because such
Account Debtor has not yet obtained its fiscal spending approval for
such Account;
(c) the Account shall not have been outstanding for more
than 90 days after the due date or, if there is not a specified due
date on the invoice, 90 days after the original invoice date of the
Account;
(d) the Account Debtor is not a Subsidiary or other
Affiliate of any Borrower;
(e) the Account does not arise with respect to goods which
are delivered on a cash-on-delivery basis or placed on consignment,
guaranteed sale or other terms by reason of which the payment by the
Account Debtor may be conditional; and
(f) the Account does not arise from the sale or lease of
goods which remain in the Borrower's (or any of its Affiliates')
possession or under the control of the Borrower (or any of its
Affiliates);
provided, however, that the Majority Lenders shall have the right to review
from time to time, on the basis of audits performed from time to time by the
Agent or its representative pursuant to Section 6.01(d), the foregoing
eligibility requirements (including, without limitation, the payment terms
of all invoices) and, if reasonably warranted, the Agent shall adjust such
requirements in such manner as the Majority Lenders deem necessary in their
reasonable discretion to cause such adjusted requirements to more nearly
reflect Accounts which will be readily collectible in the ordinary course of
business. An Account which is at any time an Eligible Foreign Account, but
which subsequently fails to meet any of the foregoing requirements and
restrictions, shall forthwith cease, for so long as any such failure shall
continue, to be an Eligible Foreign Account. An Account which is at any
time an Eligible Foreign Account, but which previously was an Account (but
not an Eligible Account) owned by a Borrower, shall not constitute an
Eligible Foreign Account.
"Eligible Lease Receivables" means, at any time of determination, as to
STK, SFSC and XL/DC, the Lease Receivables of such Borrower, other than the
Current Portion thereof, which meet each of the following requirements:
(a) the Borrower has elected to include such receivable as a
Lease Receivable to be included in the Domestic Borrowing Base by
delivering to the Agent a current Lease Receivables Collateral Report
describing such Lease Receivable and, if requested by the Agent on
behalf of the Lenders, the Product Transfer Agreement pertaining
thereto;
(b) the goods or Inventory subject thereto shall have been
shipped to the Account Debtor and shall have been delivered and made
ready for operation for the benefit of the Account Debtor within the
United States under the applicable Product Transfer Agreement;
(c) the Lease Receivable is a valid, legally enforceable
obligation of the Account Debtor thereunder, and is not subject to any
valid offset, counterclaim or other defense on the part of such Account
Debtor, arising in connection with such Lease Receivable, or to any
valid claim on the part of such Account Debtor denying liability
thereunder in whole or in material part;
(d) the Borrower has (i) in the case of a Product Transfer
Agreement that is a true lease, ownership of the PTA Equipment subject
thereto, and (ii) otherwise, a perfected security interest under the
Uniform Commercial Code in the PTA Equipment subject to such Product
Transfer Agreement to secure performance by the Account Debtor of its
obligations under the Product Transfer Agreement;
(e) the Lease Receivable, the Product Transfer Agreement and
the underlying PTA Equipment are subject to a perfected, first priority
security interest under the Uniform Commercial Code established by a
Collateral Document, and are not subject to any other Lien other than,
in the case of the PTA Equipment, the interest of the purchaser or
lessee thereof and Permitted Affiliate Liens;
(f) any Account then existing and associated with such
Product Transfer Agreement is an Eligible Account;
(g) the Lease Receivable, when combined with the Adjusted
Value of all other Lease Receivables owing by the Account Debtor and
its Apparent Affiliates to the Borrower, would not exceed 10% (or,
solely in the case of those Account Debtors that are Investment Grade
Obligors, 30%) of the total Adjusted Value of Eligible Lease
Receivables of the Borrower in the aggregate, except to the extent that
the Adjusted Value of such Lease Receivable would, together with the
Adjusted Value of all such other Lease Receivables, not exceed 10% (or,
solely in the case of those Account Debtors that are Investment Grade
Obligors, 30%) of the Adjusted Value of total Eligible Lease
Receivables of such Borrower;
(h) the Product Transfer Agreement relating to such Lease
Receivable shall not have been Discounted or otherwise transferred; and
the Borrower maintains actual and sole possession of the Product
Transfer Agreement relating thereto (including any schedule specifying
the PTA Equipment relating to such Lease Receivable);
(i) the Account Debtor is not a Subsidiary or other
Affiliate of any Borrower;
(j) the Account Debtor of such Lease Receivable is not the
U.S. Government, or any department or agency thereof, unless the
Majority Lenders have elected to include such Lease Receivable as an
Eligible Lease Receivable by their consent on a Request for Consent to
Governmental Receivables specifying such Lease Receivable, and all
representations and warranties contained in such Request for Consent to
Governmental Receivables are true; and the Account Debtor of such Lease
Receivable is not a Governmental Authority other than the U.S.
Government (or any department or agency thereof), unless (A) the
Account Debtor is listed on Schedule 1.01(e)(1) or the Majority Lenders
have consented to such Account Debtor, and (B) the Borrower has
complied with any and all laws relating to such Lease Receivable (and
the assignment or pledging thereof to the Agent);
(k) as to any Lease Receivable having an Adjusted Value in
excess of $750,000, the Lease Receivable is not the obligation of an
Account Debtor as to whom the Borrower is or may become liable for
goods sold or services rendered by the Account Debtor or any of its
Apparent Affiliates to such Borrower, except to the extent that it
exceeds the amount of such Borrower's obligation to such Account Debtor
and Apparent Affiliates;
(l) the Lease Receivable does not arise with respect to
goods which are delivered on a cash-on-delivery basis or placed on
consignment, guaranteed sale or other terms by reason of which the
payment by the Account Debtor may be conditional (other than, in the
case of Lease Receivables owing by any Governmental Authority, a
condition in respect of amounts coming due in fiscal years after the
then-current fiscal year solely as a result of the absence of an
appropriation for such future fiscal year by or in favor of such
Governmental Authority); and as to any Product Transfer Agreement other
than the Initial Product Transfer Agreements, such Product Transfer
Agreement pertaining to such Lease Receivable contains a Hell and High
Water Clause;
(m) the Lease Receivable does not arise from the sale or
lease of goods which remain in the Borrower's (or any of its
Affiliates') possession or under the control of such Borrower (or any
of its Affiliates);
(n) if the Account Debtor of such Lease Receivable is not
principally located or doing business in the United States or any
territory thereof, (i) the Account Debtor of such Lease Receivable is
identified on Schedule 1.01(e)(2) or has been otherwise consented to
for purposes of this clause (n) by the Majority Lenders (which consent
may be conditional) or (ii) such Lease Receivable is secured by a
letter of credit reasonably satisfactory in amount, form and substance
to the Majority Lenders and issued or confirmed by a bank listed on
Schedule 1.01(e)(2) or any other bank consented to for purposes of this
clause (n) by the Majority Lenders; provided, however, that, unless
otherwise consented to by the Majority Lenders, any such Lease
Receivable shall be excluded if such letter of credit does not
expressly permit its transfer to the Agent; and, provided, further,
that the portion of total Eligible Lease Receivables attributable to
Lease Receivables from Account Debtors described in this clause (n)
which are not supported by transferable letters of credit shall in no
event exceed 10% of total Eligible Lease Receivables of such Borrower;
(o) the Account Debtor of such Lease Receivable shall not
have failed (which failure is continuing) to pay within 90 days of the
date when due any amount with respect to more than 10% of the Adjusted
Value of such Account Debtor's total Lease Receivables owing to such
Borrower or to STK and its Subsidiaries; and the Account Debtor of such
Lease Receivable is not the subject of any Insolvency Proceeding; and
(p) as to STK only, if the Account Debtor is not at such
time an Investment Grade Obligor (as reflected in the most recent
Quarterly Investment Grade Obligor Report), the Adjusted Value of such
Lease Receivable, when added to the Adjusted Values of all other
Eligible Lease Receivables of that and other Account Debtors of STK
that are not at such time Investment Grade Obligors (as reflected in
the then most recent Quarterly Investment Grade Obligor Report), does
not exceed 60% of the Adjusted Value of all Eligible Lease Receivables
of STK, with the amount of such excess, if any, not being deemed an
Eligible Lease Receivable;
provided, however, that the Majority Lenders shall have the right to review
from time to time, on the basis of audits performed from time to time by the
Agent or its representative pursuant to Section 6.01(d), the foregoing
eligibility requirements (including, without limitation, the payment terms
of all invoices) and, if reasonably warranted, the Agent shall adjust such
requirements in such manner as the Majority Lenders deem necessary in their
reasonable discretion to cause such adjusted requirements to more nearly
reflect Lease Receivables which will be readily collectible in the ordinary
course of business. A Lease Receivable which is at any time an Eligible
Lease Receivable, but which subsequently fails to meet any of the foregoing
requirements and restrictions, shall forthwith cease, for so long as any
such failure shall continue, to be an Eligible Lease Receivable.
"Eligible Other Lease Receivables" means Eligible Lease Receivables
other than Eligible STK-Originated Lease Receivables or Eligible XL/DC-
Originated Lease Receivables.
"Eligible SNRR Equipment" means, as of any date of determination,
computer equipment of STK, SFSC or STPR that, pursuant to a valid and
binding contract between STK, SFSC or STPR, on the one hand, and an end-
user, on the other hand, for the purchase or lease of such equipment has
been shipped to such end-user and constitutes, or would have constituted,
"equipment shipped awaiting revenue recognition" for purposes of STK's most
recent consolidated balance sheet and notes thereto.
"Eligible STK-Originated Lease Receivables" means Eligible Lease
Receivables as to which the underlying Product Transfer Agreement (as
originally executed) is between STK or SFSC and the purchaser or lessee.
"Eligible XL/DC-Originated Lease Receivables" means Eligible Lease
Receivables as to which the underlying Product Transfer Agreement (as
originally executed) is between XL/DC and the purchaser or lessee.
"Environmental Activity" means any past, present or future storage,
holding, existence, release, threatened release, emission, discharge,
generation, processing, abatement, disposition, handling or transportation
of any Hazardous Substance (i) from, under, into or on any real property
owned or occupied by any of the Borrowers or their respective Subsidiaries,
or (ii) relating to any such real property or the ownership, use, operation
or occupancy thereof, or any threat of such activity.
"Environmental Laws" means any and all laws, statutes, ordinances,
rules, regulations, judgments, orders, decrees, permits, licenses, or other
governmental restrictions or requirements relating to the environment, any
Hazardous Substance or any Environmental Activity which are in effect in any
and all jurisdictions in which the Borrowers or any of their respective
Subsidiaries is or from time to time may be doing business, or where any
real property owned or occupied by any Borrower or any Subsidiary of any
Borrower is located and which are applicable to any Borrower or any of its
Subsidiaries or any of their respective properties, including without
limitation CERCLA and RCRA.
"Equivalent Amount" means the equivalent amount:
(a) in Dollars of an amount expressed in an Alternative
Currency calculated at the Spot Rate for the purchase of such
Alternative Currency with Dollars; or
(b) in an Alternative Currency of an amount expressed in
Dollars calculated at the Spot Rate for the purchase of Dollars with
such Alternative Currency.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated pursuant thereto
and the rulings issued thereunder.
"ERISA Affiliate" means any Person who for purposes of Title IV of
ERISA is a member of any Borrower's controlled group, or under common
control with any Borrower, within the meaning of Section 414 of the IRC and
the regulations promulgated pursuant thereto and the rulings issued
thereunder.
"ERISA Event" means (i) the occurrence of a reportable event, within
the meaning of Section 4043 of ERISA, unless the 30-day notice requirement
with respect thereto has been waived by the PBGC; (ii) the provision by the
administrator of any Plan of a notice of intent to terminate such Plan,
pursuant to Section 4041(a)(2) of ERISA (including any such notice with
respect to a plan amendment referred to in Section 4041(e) of ERISA);
(iii) the cessation of operations at a facility in the circumstances
described in Section 4068(f) of ERISA; (iv) the withdrawal by any Borrower
or an ERISA Affiliate from a Multiple Employer Plan during a plan year for
which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (v) the failure by any Borrower or any ERISA Affiliate to make a
payment to a Plan required under Section 302(f)(1) of ERISA; (vi) the
adoption of an amendment to a Plan requiring the provision of initial or
additional security to such Plan, pursuant to Section 307 of ERISA; or
(vii) the institution by the PBGC of proceedings to terminate a Plan,
pursuant to Section 4042 of ERISA, or the occurrence of any event or
condition which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, a Plan.
"Eurocurrency Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Eurocurrency Lending Office" on
Schedule 1.01(c)(2) hereof or on the signature page of the Assignment and
Acceptance pursuant to which it became a Lender (or, if no such office is
specified, its Domestic Lending Office), or such other office or Affiliate
of such Lender as such Lender may from time to time specify to the Borrowers
and the Agent.
"Eurocurrency Liabilities" has the meaning specified in Regulation D
promulgated by the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurocurrency Rate" means, for each Interest Period for each
Eurocurrency Rate Advance comprising part of the same Borrowing and for each
LIBOR Auction Advance, as the case may be, a rate of interest per annum
equal at all times during such Interest Period to the rate per annum
(rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if
such percentage is not such a multiple), obtained by dividing (i) the rate
of interest determined by the Agent to be equal to the average (rounded
upward to the nearest whole multiple of 1/16 of 1% if such percentage is not
such a multiple) of the rate per annum at which deposits in Dollars (in the
case of a LIBOR Auction Advance, or a Eurocurrency Rate Advance denominated
in Dollars) or the relevant Alternative Currency (in the case of a
Eurocurrency Rate Advance denominated in an Alternative Currency) are
offered by the principal office of each of the Reference Banks in London to
prime banks in the London interbank market at 11:00 a.m. (London time) two
Business Days before the first day of such Interest Period for a period
equal to such Interest Period and in an amount substantially equal to such
Reference Bank's Eurocurrency Rate Advance comprising part of such
Borrowing, by (ii) a percentage equal to 100% minus the Eurocurrency Rate
Reserve Percentage for such Interest Period. The Eurocurrency Rate for the
Interest Period for each Eurocurrency Rate Advance comprising part of the
same Borrowing and for each LIBOR Auction Advance shall be determined by the
Agent on the basis of applicable rates furnished to and received by the
Agent from the Reference Banks two Business Days before the first day of
such Interest Period, subject, however, to the provisions of
Section 2.06(m). For purposes of the foregoing, the Eurocurrency Rate for
purposes of any LIBOR Auction Advance shall be determined at all times as
though the Eurocurrency Rate Reserve Percentage were zero (0.0%).
"Eurocurrency Rate Advance" means an Advance which bears interest
according to the Eurocurrency Rate.
"Eurocurrency Rate Reserve Percentage" for each Interest Period for
each Eurocurrency Rate Advance means the maximum reserve percentage
(expressed as a decimal, rounded upward to the nearest whole multiple of
1/100 of 1%, if such percentage is not such a multiple) determined by the
Agent as applicable on the first Business Day of such Interest Period under
regulations issued from time to time by the Board of Governors of the
Federal Reserve System or any successor and, in the case of Eurocurrency
Rate Advances denominated in Alternative Currencies, the reserve percentage
determined by the Agent as applicable on the first Business Day of such
Interest Period under regulations (if any) issued from time to time by the
central bank of such nation, for determining the maximum reserve requirement
(including, without limitation, any ordinary, emergency, supplemental,
special or other marginal reserve requirement) for the Agent with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities
having a term equal to such Interest Period.
"Event of Default" has the meaning specified in Section 7.01.
"Evergreen Letter of Credit" means any Letter of Credit providing for
automatic extensions of its expiry date unless the Issuing Bank shall have
provided some notice or taken other specified action to preclude any such
further extension.
"Expected Gross Up Discounts" means, in respect of any agreement
relating to Discounting and containing a requirement for Gross Up Discounts,
the aggregate Adjusted Value of Product Transfer Agreements that foreseeably
will be required to be pledged by any Borrower by Gross Up Discount during
the term of such agreement, based solely upon comparison of (a) the term of
such agreement with (b) the amortization rates applicable to all Product
Transfer Agreements previously Discounted under such agreement.
"Exposure Amount" means, as of any date of determination, for any
Borrower, the sum of the then outstanding aggregate principal amount
(including the Equivalent Amount in respect of amounts denominated in
Alternative Currencies) of all Revolving Advances, Swing Line Advances, the
then-Outstanding Auction Advance Liability and the then-Outstanding Letter
of Credit Liability, in each case, in respect of such Borrower.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York. If on any relevant
day the appropriate rate for such day is not yet published, the rate for
such day will be the arithmetic mean of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York time) on
that day by each of three leading brokers of Federal funds transactions in
New York City selected by the Agent.
"Fiscal Month" means any month in any Fiscal Year.
"Fiscal Quarter" means any quarter in any Fiscal Year.
"Fiscal Year" means a fiscal year of STK and its Subsidiaries.
"Fixed Charges" of any Person for any period means, without
duplication, the sum of (i) Interest Expense of such Person for such period
plus (ii) cash dividends paid during such period in respect of all preferred
and common stock of such Person, plus (iii) the aggregate current maturities
of long term debt of such Person (excluding the current portion of
non-recourse Debt secured by lease commitments), as determined in accordance
with GAAP and as shown on the balance sheet of such Person as of the end of
such period (excluding, in the case of the Borrowers, any Debt consisting of
Advances or Auction Advances made under this Agreement) and plus (iv) the
amount of any redeemable preferred stock of such Person that is redeemable
at the option of the holder thereof or that is mandatorily redeemable by
such Person within one year from the end of such period.
"Fixed Charge Coverage Ratio" means, with respect to any Person at any
date of determination, the ratio that (i) Consolidated Earnings of such
Person bears to (ii) Consolidated Fixed Charges of such Person.
"Foreign Accounts Borrowing Base" means, as of any date of
determination, as to any Borrower, 50% of the then-outstanding principal
balance (net of all refunds, rebates, allowances, discounts,
credits,concessions or other reductions which are taken by or granted to the
Account Debtors thereof) of the then Eligible Foreign Accounts owned by such
Borrower's wholly-owned Foreign Subsidiaries.
"Foreign Borrowing Base" means, as of the date of determination, for
any Borrower, the Foreign Accounts Borrowing Base for such Borrower. Unless
redetermined as provided below, such Foreign Borrowing Base shall be the
Foreign Borrowing Base for the purposes of this Agreement until the date of
the next determination thereof. During the existence of an Event of
Default, at the request of the Majority Lenders, the Agent may request the
Borrowers to (and promptly upon such request, the Borrowers shall)
redetermine the Foreign Borrowing Base, and may, at any time, request, and
the Borrowers agree promptly to provide, such additional information as the
Agent or the Majority Lenders reasonably require to review any such
redetermination.
"Foreign Subsidiaries" means those Subsidiaries of any Borrower which
are not Domestic Subsidiaries.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the accounting
profession), or in such other statements by such other entity as may be in
general use by significant segments of the U.S. accounting profession, which
are applicable to the circumstances.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary
or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Gross Up Discount" has the meaning specified in the definition of
"Discount."
"Guaranties" means the Guaranties executed and delivered by each of the
Borrowers pursuant to the Prior Credit Agreement, copies of which Guaranties
are attached hereto as Exhibit O, as the same may be amended, supplemented
or otherwise modified from time to time.
"Hazardous Substance" means (i) any hazardous substance and toxic
substance as such terms are presently defined or used in Section 101(14) of
CERCLA (42 U.S.C. Section 9601(14)), in 33 U.S.C. Section 1251 et.seq.
(Clean Water Act), or 15 U.S.C. Section 2601 et.seq. (Toxic Substances
Control Act), (ii) any additional substances or materials which are now or
hereafter hazardous or toxic substances under any applicable laws relating
to any real property owned or occupied by any of the Borrowers or their
respective Subsidiaries, and (iii) as of any date of determination, any
additional substances or materials which are hereafter incorporated in or
added to the definition of "hazardous substance" or "toxic substance" for
purposes of CERCLA or any other applicable law.
"Hell and High Water Clause" means a provision in a Product Transfer
Agreement stating that payment obligations of the lessee or purchaser are
absolute and unconditional, irrespective of any claim of any nature by such
Person against the lessor/seller, whether related to the PTA Equipment, the
Product Transfer Agreement or otherwise.
"Honor Date" has the meaning specified in Section 3.03(a).
"Indemnitee" has the meaning specified in Section 9.06.
"Individual Borrowing Base" means, for any Borrower, as of any date of
determination, prior to and including September 30, 1995, the sum of the
Domestic Borrowing Base and the Foreign Borrowing Base (without duplication)
for such Borrower as of such date and, as of any date of determination after
September 30, 1995, the Domestic Borrowing Base for such Borrower as of such
date.
"Initial Product Transfer Agreements" means those Product Transfer
Agreements specified on the Borrowing Base Certificate delivered by the
Borrowers pursuant to Section 4.01(e), but not including any amendments
thereof undertaken after the Closing Date, other than amendments consisting
solely of the addition or deletion of Lease Receivables or PTA Equipment.
"Initial Transfer" has the meaning specified in Section 6.02(b).
"Insolvency Proceeding" means (a) any case, action or proceeding before
any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-
up or relief of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors or other,
similar arrangement in respect of its creditors generally or any substantial
portion of its creditors; in each case ((a) and (b)) undertaken under U.S.
Federal, State or foreign law, including the Bankruptcy Code.
"Insufficiency" means, with respect to any Plan, the amount, if any, of
its unfunded benefit liabilities, as defined in Section 4001(a)(18) of
ERISA.
"Intercompany Subordination Agreement" means an intercompany
subordination agreement executed and delivered by the Borrowers and each of
their respective Material Domestic Subsidiaries pursuant to the Prior Credit
Agreement, a copy of which intercompany subordination agreement is attached
hereto as Exhibit C, as the same may be amended, supplemented or otherwise
modified from time to time.
"Interest Expense" of any Person means for any period the aggregate
amount of interest accrued in respect of any Debt and Contingent Obligations
(including the interest portion of rentals under Capital Leases) and all but
the principal component of payments in respect of conditional sales,
equipment trust or other title retention agreements or under a Capital Lease
accrued by such Person during such period, in each case determined in
accordance with GAAP; or in the case of STK for any period means the line
item for interest expense as shown on its Consolidated income statement for
such period and delivered to the Agent pursuant to Section 6.04(a) or (b),
determined in accordance with GAAP.
"Interest Period" means, for each Adjusted CD Rate Advance or
Eurocurrency Rate Advance comprising part of the same Borrowing, or for any
Auction Advance, the period commencing on the date of such Advance or
Auction Advance or, in the case of a Revolving Advance, the effective date
of any Notice of Conversion/Continuance with respect to such Advance, and
ending on the last day of the period selected by the applicable Borrower
pursuant to the provisions below. The duration of each such Interest Period
shall be (i) in the case of an Adjusted CD Rate Advance, 30, 60, 90 or 180
days, (ii) in the case of a Eurocurrency Rate Advance comprising part of the
same Borrowing and denominated in Dollars, or a LIBOR Auction Advance, 1, 2,
3 or 6 months, (iii) in the case of a Eurocurrency Rate Advance comprising
part of the same Borrowing and denominated in an Alternative Currency, 1, 2
or 3 months, and (iv) in the case of any Absolute Rate Auction Advance, a
period of not less than 7 days and not more than 365 days as selected by the
Borrower in its Competitive Bid Request; provided, however, that:
(A) Interest Periods commencing on the same date for Revolving
Advances comprising part of the same Borrowing shall be of the same
duration;
(B) no Interest Period for any Advance or Auction Advance shall
extend beyond the Termination Date;
(C) the first day of an Interest Period shall be, for any
Eurocurrency Rate Advance or Adjusted CD Rate Advance, the last day of
any then current Interest Period for such Eurocurrency Rate Advance or
Adjusted CD Rate Advance, or, if there shall be no then current
Interest Period for such Advance, and in all other cases, any Business
Day; and
(D) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest
Period shall be extended to occur on the next succeeding Business Day,
provided, in the case of any Interest Period for a Eurocurrency Rate
Advance, that if such extension would cause the last day of such
Interest Period to occur in the next following month, the last day of
such Interest Period shall occur on the next preceding Business Day.
"Interest Type" means, with respect to any Revolving Advance, a Base
Rate Advance, an Adjusted CD Rate Advance or a Eurocurrency Rate Advance.
"Inventory" of any Person means all goods, now owned or hereafter
acquired by such Person and wherever located that are held for sale or lease
or are to be furnished under any contract of service, including raw
materials, work in process, or materials used or consumed in the business of
such Person, and including goods the sale or other disposition of which has
given rise to Accounts or Lease Receivables and which have been returned to
or repossessed or stopped in transit by such Person, and including PTA
Equipment.
"Investment Grade Obligor" means, at any time of determination, an
Account Debtor (a) that has outstanding at such time long-term senior
securities rated at or above BBB- by Standard & Poor's Corporation or at or
above Baa3 by Moody's Investors Service, Inc., or (b) that has outstanding
at such time no long-term senior securities, but that has outstanding long-
term subordinated securities rated at a rating that would yield an implied
long-term senior debt rating at or above BBB- by Standard & Poor's
Corporation or at or above Baa3 by Moody's Investors Services, Inc.
"Investment Grade Obligor Report" means a report signed by a
Responsible Officer, in substantially the form of Exhibit R.
"Invitation for Competitive Bids" has the meaning set forth in Section
2.03(c).
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time.
"ISA" has the meaning specified in the definition of "Product Transfer
Agreement."
"Issue" means, with respect to any Letter of Credit, either to issue,
or to extend the expiry of, or to renew, or to increase the amount of, such
Letter of Credit, and the term "Issued" or "Issuance" shall have
corresponding meanings.
"Issuing Bank" means BofA or any Affiliate of BofA that may from time
to time Issue Letters of Credit for the account of any Borrower.
"L/C Obligations" of any Person means obligations of such Person with
respect to undrawn letters of credit or unpaid bankers' guarantees or
similar items.
"Lease" has the meaning set forth in the definition of "Product
Transfer Agreement."
"Lease Receivable" means any present or future right (other than the
Current Portion thereof) of any Borrower to payment for goods sold or leased
pursuant to a Product Transfer Agreement (other than a NISA) and evidenced
by chattel paper. "Lease Receivables" means all such property of any or all
applicable Borrowers in the aggregate.
"Lease Receivables Borrowing Base" means, as of any date of
determination, the sum of (i) 90% of the Adjusted Value of Eligible STK-
Originated Lease Receivables, plus (ii) 80% of the Adjusted Value of
Eligible XL/DC-Originated Lease Receivables, plus (iii) 50% of the Adjusted
Value of Eligible Other Lease Receivables.
"Lease Receivables Collateral Report" means a report signed by a
Responsible Officer, in substantially the form of Exhibit N.
"Lenders" means the banks listed on the signature pages hereof and each
Eligible Assignee that becomes a party hereto pursuant to Section 9.09.
"Letter of Credit" means any letter of credit (whether a standby letter
of credit or a commercial documentary letter of credit), in form
satisfactory to the Issuing Bank, which is at any time Issued by the Issuing
Bank pursuant to Article III hereof, in each case as amended, supplemented
or otherwise modified from time to time.
"Letter of Credit Liability" means, as of any date of determination,
all then-existing liabilities of the Borrowers to the Issuing Bank in
respect of the Letters of Credit Issued for the account of any and all of
the Borrowers, whether such liability is contingent or fixed, and shall, in
each case, consist of the sum of (i) the aggregate maximum amount (including
the Equivalent Amount of any Letter of Credit denominated in an Alternative
Currency) then available to be drawn under such Letters of Credit (the
determination of such maximum amount to assume compliance with all
conditions for drawing) and (ii) the aggregate amount (including the
Equivalent Amount of any Letter of Credit denominated in an Alternative
Currency) which has then been paid by, and not been reimbursed to, the
Issuing Bank under such Letters of Credit.
"Letter of Credit Termination Date" means the later of (a) the
Termination Date, and (b) the date on which the Issuing Bank's commitment to
issue Letters of Credit has expired and there exists no Letter of Credit
Liability.
"Leverage Ratio" means, with respect to any Person, the ratio that
(i) Total Liabilities of such Person bears to (ii) Tangible Net Worth of
such Person.
"LIBOR Auction" means a solicitation of Competitive Bids setting forth
a LIBOR Auction Margin pursuant to Section 2.03.
"LIBOR Auction Advance" means any Auction Advance that bears interest
at a rate determined with reference to the Eurocurrency Rate.
"LIBOR Auction Margin" has the meaning specified in Section 2.03(d).
"Lien" means any assignment, chattel mortgage, pledge or other security
interest or any mortgage, deed of trust or other lien, or other charge or
encumbrance, upon property or rights (including after-acquired property or
rights), or any preferential arrangement with respect to property or rights
(including after-acquired property or rights) which has the practical effect
of constituting a security interest or lien, and any contingent or other
agreement to provide any of the foregoing.
"Loan Documents" means this Agreement, the Collateral Documents, the
Intercompany Subordination Agreement, the Letters of Credit and any
application agreement executed in connection therewith, and all certificates
and other agreements and documents ratified, reaffirmed, required or
contemplated hereunder or under any other Loan Document and delivered to the
Agent, the Swing Line Bank, the Issuing Bank or the Lenders in connection
herewith or therewith (including, without limitation, the Prior Loan
Documents, other than the Prior Credit Agreement), in each case as amended,
supplemented or otherwise modified from time to time.
"Majority Lenders" means Lenders at any time holding at least 66-2/3%
of the then aggregate unpaid principal amount of the Revolving Advances
owing to the Lenders, or, if no such principal amount is at such time
outstanding, Lenders having at least 66-2/3% of the Commitments of all
Lenders.
"Material Adverse Change" means a material adverse change in the
operations, business, properties, condition (financial or otherwise) or
prospects of STK and its Subsidiaries taken as a whole.
"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties,
condition (financial or otherwise) or prospects of any Borrower, or of STK
and its Subsidiaries taken as a whole; (b) a material impairment of the
ability of any Borrower to perform under any Loan Document and to avoid any
Event of Default; or (c) a material adverse effect upon (i) the legality,
validity, binding effect or enforceability of any Loan Document, or (ii) the
perfection or priority of any Lien granted to the Lenders or to the Agent
for the benefit of the Lenders under any of the Collateral Documents.
"Material Domestic Subsidiary" means any Domestic Subsidiary that is
also a Material Subsidiary.
"Material Subsidiary" means any Subsidiary of STK that at any time
either (i) owns or holds title to 5% or more of the Consolidated assets of
STK and its Consolidated Subsidiaries or (ii) accounts for 5% or more of the
Consolidated revenue of STK and its Consolidated Subsidiaries, in each case
as determined in accordance with GAAP.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA to which any Borrower or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any of
the preceding five plan years made or accrued an obligation to make
contributions, such plan being maintained pursuant to one or more collective
bargaining agreements.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, which (i) is maintained for employees of any
Borrower or an ERISA Affiliate and at least one Person other than the
Borrowers and their ERISA Affiliates or (ii) was so maintained and in
respect of which the Borrower or an ERISA Affiliate could have liability
under Section 4064 or 4069 of ERISA in the event such plan has been or was
to be terminated.
"Net Income" means, with respect to any Person for any period, net
income of such Person before extraordinary items (including cumulative
effects of accounting changes), as determined by such Person in accordance
with GAAP.
"Net Loss" means, with respect to any Person for any period, negative
Net Income of such Person before extraordinary items (including cumulative
effects of accounting changes), as determined by such Person in accordance
with GAAP.
"NISA" has the meaning specified in the definition of "Product Transfer
Agreement."
"Normal Course Repurchase Agreement" means an agreement between STK and
any officer, director, employee or consultant of STK entered into in the
ordinary course of STK's business wherein STK is obligated or has the option
to repurchase from such officer, director, employee or consultant shares of
common stock of STK upon such Person's termination of employment or services
with STK.
"Notice of Assignment" means a notice duly executed by a Borrower,
substantially in the form of Schedule 3 to Exhibit B-1, providing notice to
a U.S. Government agency or department regarding the assignment to the Agent
of rights relating to a specific Account or Lease Receivable.
"Notice of Borrowing" means a written notice, substantially in the form
of Exhibit E hereto, delivered in accordance with, and within the period
specified in, Section 2.02(a) hereof, wherein one or more Borrowers request
one or more Borrowings.
"Notice of Conversion/Continuation" means a written notice,
substantially in the form of Exhibit H hereto, delivered in accordance with,
and within the period specified in, Section 2.07(a) hereof, wherein a
Borrower elects to Convert Revolving Advances and/or elects an Interest
Period and Interest Type for such Converted Revolving Advances or
outstanding Revolving Advances.
"Notice of Redenomination" means a written notice, substantially in the
form of Exhibit I hereto, delivered in accordance with, and within the
period specified in, Section 2.07(b) hereof, wherein a Borrower elects to
Redenominate Revolving Advances from Dollars into an Alternative Currency or
from an Alternative Currency into Dollars or another Alternative Currency.
"Notice of Swing Line Advance" means a written notice, substantially in
the form of Exhibit F hereto, delivered in accordance with, and within the
period specified in, Section 2.02(b) hereof, wherein a Borrower requests a
Swing Line Advance.
"NSC" means Network Systems Corporation.
"NSC Acquisition" means the proposed acquisition of NSC by merger of
NSC with and into a Subsidiary of STK pursuant to the terms and conditions
substantially as set forth in the Agreement and Plan of Merger, dated as of
August 8, 1994, as amended, in the form attached to Form S-4 filed by STK
with the Securities and Exchange Commission on September 2, 1994.
"Obligations" means all obligations of the Borrowers now or hereafter
existing under the Loan Documents, whether for principal (including
reimbursement for amounts drawn under Letters of Credit), interest, fees,
expenses, indemnification, or otherwise.
"Operating Lease" means any lease of real, personal or mixed property
which is not a Capital Lease.
"Original Currency" has the meaning set forth in Section 9.11(a).
"Other Currency" has the meaning set forth in Section 9.11(a).
"Other Borrowers' Obligations" has the meaning set forth in Section
9.18(a).
"Other Taxes" has the meaning specified in Section 2.14(b).
"Outstanding Advances" means, as of any date of determination, the
aggregate principal amount (including the Equivalent Amount of Advances
denominated in an Alternative Currency) of Advances outstanding on such
date.
"Outstanding Auction Advance Liability" means, as of any date of
determination, as to any Borrower, the amount equal to (a) the aggregate
principal amount of outstanding Auction Advances requested by such Borrower
plus the amount of interest that has accrued and will accrue thereon until
the maturity thereof, less (b) the amount of cash collateral pledged by such
Borrower as security therefor pursuant to Section 2.09(a).
"Outstanding Letter of Credit Liability" means, as of any date of
determination, the aggregate amount of Letter of Credit Liability
outstanding on such date, as reduced to the extent that such Letter of
Credit Liability has been cash collateralized pursuant to the terms hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor.
"Percentage" of each Lender at any time means the percentage
(calculated to nine digits) which the then-existing aggregate amount of the
initial Commitment of such Lender as set forth on the signature pages hereof
is of the aggregate Commitments of all Lenders, as such percentage may
change due to Assignments and Acceptances entered into by such Lender
pursuant to Section 9.09(c).
"Periodic Release Certificate" means a certificate signed by a
Responsible Officer, in substantially the form of Exhibit Q.
"Permitted Affiliate Lien" means a security interest securing
obligations to the extent evidenced by a promissory note in form
satisfactory to the Agent and Majority Lenders, provided that such note is
delivered to the Agent as collateral for the Obligations, together with an
acknowledgment of pledge in the form attached hereto as Exhibit S. Attached
hereto as Exhibit T is a copy of a promissory note to be delivered to the
Agent in connection with the creation of a Permitted Affiliate Lien. The
Agent and the Lenders hereby agree that this promissory note, and other
promissory notes substantially in the form of the promissory note attached
hereto as Exhibit T, are satisfactory to the Agent and the Lenders for
purposes of complying with the definition of Permitted Affiliate Lien.
"Permitted Lien" means:
(i) Liens for taxes, assessments or governmental charges or
levies, and to the extent not past due or to the extent contested, in
good faith, by appropriate proceedings and for which adequate reserves
have been established in accordance with GAAP;
(ii) Liens imposed by law, such as materialman's, mechanic's,
carrier's, workman's, and repairman's Liens and other similar Liens
arising in the ordinary course of business which relate to obligations
which are not overdue for a period of more than 45 days or which are
being contested in good faith, by appropriate proceedings and for which
adequate reserves have been established in accordance with GAAP;
(iii) pledges or deposits (other than of any of the
Collateral) in the ordinary course of business to secure nondelinquent
obligations under workman's compensation or unemployment laws or
similar legislation or to secure the performance of leases or trade
contracts entered into in the ordinary course of business or of public
or nondelinquent statutory obligations, bids, or appeal bonds;
(iv) Liens upon or in any property acquired or held by the
Borrowers or any of their respective Subsidiaries to secure the
purchase price or construction costs (and, to the extent financed,
sales and excise taxes, delivery and installation costs and other
related expenses) of such property or to secure indebtedness incurred
solely for the purpose of financing or refinancing the acquisition or
construction of any such property to be subject to such Liens, or Liens
existing on any such property at the time of acquisition, or
extensions, renewals or replacements of any of the foregoing for the
same or a lesser principal amount, provided that no such Lien shall
extend to or cover any property other than the property being acquired
and no such extension, renewal or replacement shall extend to or cover
any property not theretofore subject to the Lien being extended,
renewed or replaced, and provided, further, that the aggregate
principal amount of the Debt secured by the Liens permitted by this
clause (iv) and clause (v) shall not exceed the amount specified in
Section 6.02(e);
(v) Liens consisting of the interest of a lessor upon any
assets subject to a Capital Lease and securing payment of the
obligations arising under such Capital Lease, provided that the
aggregate amount of Debt secured by Liens permitted by this clause (v)
and by clause (iv) shall not exceed the amount specified in
Section 6.02(e);
(vi) zoning restrictions, easements, licenses, landlord's
Liens or restrictions on the use of any real property occupied by the
Borrowers or their respective Subsidiaries, which do not materially
impair the use of such property in the operation of the business of the
Borrowers or any of their respective Subsidiaries or the value of such
property for the purpose of such business;
(vii) Liens associated with judgments and awards to the extent
such judgments and awards do not create an Event of Default under
Section 7.01(g) hereof, provided, that such Liens are not, to any
extent, prior to the Lien of the Agent under the Collateral Documents;
(viii) Liens in favor of the issuer of a documentary commercial
letter of credit, provided, that such Liens are limited exclusively to
the goods covered by such letter of credit;
(ix) Liens listed on Schedule 1.01(p) securing Debt
outstanding on the Closing Date;
(x) Liens consisting of the interest of a lessor under
Operating Leases made in the ordinary course of business, or existing
on property leased by STK or its Subsidiaries under an Operating Lease
in the ordinary course of business;
(xi) Permitted Affiliate Liens and Liens granted by a Foreign
Subsidiary on the property of such Foreign Subsidiary;
(xii) Liens arising in connection with the Discounting of
Product Transfer Agreements otherwise permitted hereunder, provided,
that (A) no such Lien shall extend to or cover any property other than
the Discounted Product Transfer Agreement or any PTA Equipment
transferred, cash payable or Accounts or Lease Receivables arising
therefrom and (B) the Agent or the Majority Lenders have released the
Lien of the Agent and Lenders on the Product Transfer Agreement and (if
applicable) PTA Equipment so transferred pursuant to Section 6.02(b)
hereof;
(xiii) Liens arising in connection with any mortgage financing
or sale/leaseback transaction involving any real property now owned or
hereafter acquired by the Borrowers or any of their respective
Subsidiaries, provided, that no such Lien shall extend to or cover any
property other than the real property and improvements thereon subject
to such transaction;
(xiv) Consensual Liens not described in subclauses (i) through
(xiii) above that do not encumber Accounts or Lease Receivables and
that relate to liabilities other than borrowed money debt and securing
obligations not in excess of $20,000,000 in the aggregate at any time
for all such Liens for STK and its Subsidiaries together; and
(xv) Liens on the Securitized Assets arising in connection
with the Program, provided that no such Lien shall extend to or cover
any property other than the Securitized Assets.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or a country or political subdivision thereof
or any agency or instrumentality of such country or subdivision.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Pledge Agreements" means pledge agreements executed and delivered by
each of the Borrowers pursuant to the Prior Credit Agreement, copies of
which pledge agreements are attached hereto as Exhibit P, as the same may be
amended, supplemented or otherwise modified from time to time.
"P.R. Security Agreements" means, with respect to Collateral pledged by
STPR, a factor's lien contract and an assignment of accounts receivable
agreement executed and delivered pursuant to the Prior Credit Agreement,
copies of which factor's lien contract and assignment of accounts receivable
agreement are attached hereto as Exhibit B-2 and Exhibit B-3, respectively,
in each case as may be amended, supplemented or otherwise modified from time
to time.
"Prior Letters of Credit" has the meaning specified in Section 3.01(b).
"Prior Loan Documents" means the Prior Credit Agreement and all
instruments, agreements and documents executed and delivered (or, as the
case may be, ratified and reaffirmed) in connection therewith or pursuant
thereto.
"Product Transfer Agreement" means a Lease, an ISA or a NISA, and in
each case shall include the software, books and records and other assets
related thereto (including the rights and remedies of the respective
Borrowers in respect thereof), and the proceeds thereof. For purposes of
this definition, "Lease" means an agreement for lease of equipment or
inventory, by a Borrower to a Person other than an Affiliate of the
Borrower. If a Lease pertains to more than one item of equipment or
inventory, each such item shall constitute a separate Lease for purposes
hereof to the extent and only to the extent that the Lease (a) specifically
identifies such item by serial number, and (b) permits such Borrower
effectively to transfer rights or grant security interests in separate items
to different third parties. "ISA" means an agreement under which any of the
Borrowers as seller sells, on an installment payment basis, equipment or
inventory to third parties. If an ISA pertains to more than one item of
equipment or inventory, each such item shall constitute a separate ISA for
purposes hereof to the extent and only to the extent that the installment
sales contract (a) specifically identifies such item by serial number, and
(b) permits such Borrower or any of its Subsidiaries effectively to transfer
rights or grant security interests in separate items to different third
parties. "NISA" means an agreement under which one of the Borrowers as
seller sells equipment to third parties on other than an installment payment
basis.
"Program" means the securitization of certain computer leases, computer
equipment and related assets pursuant to a Receivables Financing Agreement
dated as of June 30, 1994 (as amended and supplemented from time to time)
among the Trust as borrower, SFSC as servicer, STK as performance guarantor,
Pooled Accounts Receivable Capital Corporation as lender and Bank of
Montreal as agent (the "Receivables Financing Agreement").
"PTA Equipment" means equipment or inventory transferred by a Borrower
pursuant to a Product Transfer Agreement other than a NISA.
"Quarterly Investment Grade Obligor Report" means a report signed by a
Responsible Officer, in substantially the form of Exhibit K.
"Quick Ratio" means, for any Person for any period, the ratio that
(i) Current Liquid Assets of such Person bears to (ii) Current Liabilities
of such Person.
"RCRA" means the Resource Conservation and Recovery Act of 1976, as
amended (42 U.S.C. Section 6901 et seq.), and any regulations promulgated
thereunder.
"Redenominate", "Redenomination" and "Redenominated" each refers to
redenomination of each Revolving Advance comprising part of the same
Borrowing comprised of Eurocurrency Rate Advances from Dollars into an
Alternative Currency, or from an Alternative Currency into Dollars, or
another Alternative Currency pursuant to Section 2.07(b).
"Reference Banks" means BofA or any successor Agent, Continental Bank
N.A. and The First National Bank of Boston.
"Request for Consent to Governmental Receivables" means a request of
one or more Borrowers submitted by one or more Responsible Officers,
substantially in the form of Exhibit R.
"Responsible Officer" means, with respect to any certificate, report or
notice to be delivered or given hereunder, unless the context otherwise
requires, the president, chief executive officer, chief financial officer,
treasurer or assistant treasurer of any Person, and, in addition, in respect
of all Borrowers, the Director of Treasury Operations of STK.
"Revolving Advance" means an advance by a Lender to a Borrower pursuant
to Section 2.01(a), which advance may be an Adjusted CD Rate Advance, a Base
Rate Advance or a Eurocurrency Rate Advance.
"Securitized Assets" means (a) the original equipment leases, schedules
to such leases, original installment purchase agreements or schedules to
such agreements owned from time to time by the Trust, in each case which are
included in the Program, together with a copy of the master lease relating
to each such lease or schedule, if applicable, and all UCC financing
statements filed in connection therewith, (b) all payments due thereunder,
(c) all rights and privileges thereunder, (d) with respect to such equipment
leases or schedules and such installment purchase agreements or schedules,
all of the Trust's right, title and interest in and to such lease or
schedule, such installment purchase agreement or schedule or other
agreements relating thereto including each master lease to the extent it
relates thereto; all of the Trust's interest in the computer equipment
related to such lease or schedule or such installment purchase agreement or
schedule, and all parts, accessories, upgrades and appliances related
thereto, all substitutions therefor and replacements thereof; all security
interests or liens and property subject thereto from time to time purporting
to secure payment of such lease or schedule or such installment purchase
agreement or schedule, whether pursuant thereto or otherwise, including any
security deposits and prepaid rent; all UCC financing statements covering
any collateral securing payment of such equipment lease or schedule or such
installment purchase agreement or schedule; all guarantees and other
agreements or arrangements of whatever character from time to time
supporting or securing payment of such equipment lease or schedule or such
installment purchase agreement or schedule whether pursuant thereto or
otherwise; and all funds that are received in payment of any amounts owed in
respect thereof (including funds received by the Trust as the purchase price
thereof) or applied to such amounts, (e) the bank accounts established
pursuant to the Program and the investments therein, (f) the Trust's rights
and claims under the Contribution Agreement dated as of April 2, 1994 (as
amended and supplemented from time to time) entered into by SFSC, STK and
the Trust in connection with the Program and all payments due thereunder,
(g) all proceeds of, and rights to enforce, each of the foregoing, (h) any
interest rate hedging arrangements entered into from time to time by the
Trust, and (i) all other agreements, papers, books and records (including
computerized data and computer tapes and disks) of whatever kind or
description, relating to or evidencing any of the foregoing, in each case
wherever located and whether now or hereafter arising.
"Security Agreements" means the U.S. Security Agreements and the P.R.
Security Agreements.
"SFSC" means Storagetek Financial Services Corporation, a Delaware
corporation.
"Single-Employer Plan" means a single-employer plan, as defined in
Section 4001(a)(15) of ERISA, which (i) is maintained for employees of any
Borrower or an ERISA Affiliate and no Person other than such Borrower and
its ERISA Affiliates or (ii) was so maintained and in respect of which any
Borrower or an ERISA Affiliate could have liability under Section 4069 of
ERISA in the event such plan has been or was to be terminated.
"SNRR Borrowing Base" means, as of any date of determination, as to
STK, SFSC and STPR, 60% of the aggregate of the contract prices for each
respective unit of Eligible SNRR Equipment.
"Solvent" means, as to any Person at any time, that (a) the fair value
of the property of such Person is greater than the amount of such Person's
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated for purposes of Section
101(31) of the Bankruptcy Code and, in the alternative, for purposes of the
Uniform Fraudulent Transfer Act or Uniform Fraudulent Conveyance Act, as
applicable; (b) the present fair saleable value of the property of such
Person is not less than the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute and matured;
(c) such Person is able to realize upon its property and pay its debts and
other liabilities (including disputed, contingent and unliquidated
liabilities) as they mature in the normal course of business; (d) such
Person does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and
liabilities mature; and (e) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for
which such Person's property would constitute unreasonably small capital.
"Specified Amount" means, at any time of determination, the lesser of
(a) $55,000,000 and (b) the amount equal to 30% of the then-applicable
Aggregate Borrowing Base.
"Spot Rate" for a currency means the rate quoted by BofA as the spot
rate for the purchase by BofA of such currency with another currency through
its Foreign Exchange Trading Center #5193, San Francisco, California (or
such other of its offices as BofA may designate from time to time) at
approximately 8:00 a.m. (San Francisco time) on the date two Business Days
prior to the date on which the foreign exchange computation is made.
"STK" means Storage Technology Corporation, a Delaware corporation.
"STPR" means Storage Technology de Puerto Rico, Inc., a Delaware
corporation.
"STPR Conditions" means the delivery to the Agent of a favorable
opinion of McConnell Valdes Kelley Sifre Griggs & Ruiz-Suria, special Puerto
Rican counsel to the Borrower, in substantially the form of Exhibit J-3, and
addressing such other matters as the Majority Lenders through the Agent may
reasonably request.
"Subordinated Debt" means (i) Debt under the Convertible Subordinated
Debentures, (ii) Debt owed by any Borrower to any of its Domestic
Subsidiaries or by any Domestic Subsidiary of any Borrower to any Borrower
or another Domestic Subsidiary and subordinated pursuant to the Intercompany
Subordination Agreement, (iii) Debt incurred upon exchange of any CEP Stock,
and (iv) Debt which is expressly subordinated to the Obligations on terms
consented to by the Majority Lenders.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, trust or other Person of which more than 50% of the outstanding
capital stock (or similar equity interest in the case of partnerships and
trusts) having ordinary voting power to elect a majority of the board of
directors of such corporation (or similar governing body or Person with
respect to partnerships and trusts) (irrespective of whether or not at the
time capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency) is at the
time directly or indirectly owned by such Person, by such Person and one or
more other Subsidiaries of such Person, or by one or more other Subsidiaries
of such Person.
"Swing Line Advance" means an Advance made by the Swing Line Bank
pursuant to Section 2.01(b).
"Swing Line Bank" means BofA.
"Swing Line Commitment" means $10,000,000.
"Tangible Net Worth" means, with respect to any Person as of any date
of determination, Total Assets of such Person as of such date minus Total
Liabilities of such Person as of such date and minus the carrying value of
(i) goodwill, organizational expenses, patents, patent applications,
trademarks, trademark applications, trade names, service marks, service mark
applications, copyrights, designs and other intellectual property and
licenses therefor and rights therein, and other similar intangibles,
(ii) all amortizing debt issuance expenses carried as an asset, (iii) all
reserves carried and not deducted from assets or not reflected as a
liability, and (iv) cash held in a sinking or other analogous fund
established for the purpose of redemption, retirement or prepayment of any
capital stock or any Debt or Contingent Obligation, if no offsetting
liability exists with respect to such Debt or Contingent Obligation on the
balance sheet of such Person.
"Taxes" has the meaning specified in Section 2.14.
"Termination Date" means March 29, 1996 or such earlier date upon which
the Advances are due in full pursuant to Section 7.01 or the date upon which
the Commitments are cancelled, terminated or otherwise reduced to zero.
"Third Party Guaranty Obligations" of any Person means, without
duplication, (i) any direct or indirect liability, contingent or otherwise,
of such Person with respect to any Debt, Uncovered Hedge Obligation, L/C
Obligation or any other obligation of another Person (other than
Subsidiaries whose accounts are Consolidated with such Person's), including,
without limitation, any obligation directly or indirectly guaranteed,
endorsed (other than for collection or deposit in the ordinary course of
business), co-made, discounted or sold with recourse by such Person, or in
respect of which such Person is otherwise directly or indirectly liable
(including, without limitation, liable through any agreement to purchase,
repurchase or otherwise acquire such obligation or provide or purchase any
security therefor, or to provide funds for the payment or discharge of such
obligation, or to maintain any financial condition of the obligor of such
obligation, or to make payment for any products, materials or supplies or
for any transportation, services or lease (regardless of the non-delivery or
non-furnishing thereof), in any such case if the purpose or intent of such
agreement is to provide assurance that such obligation will be paid or
discharged, or that any agreements relating thereto will be complied with,
or that the holders of such obligation will be protected against loss in
respect thereof) and (ii) all Debt of third parties of the type referred to
in clause (i), (ii), (iii), (iv), or (v) of the definition of Debt secured
by (or for which the holder of such Debt has an existing right, contingent
or otherwise, to be secured by) any lien, security interest or other charge
or encumbrance upon or in property (including, without limitation, accounts
and contract rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Debt.
"Total Assets" of any Person means all property, whether real,
personal, tangible, intangible or otherwise, which, in accordance with GAAP,
should be included in determining total assets as shown on the assets
portion of a balance sheet of such Person.
"Total Leverage Ratio" means, with respect to any Person, the ratio
that (i) Total Obligations of such Person bears to (ii) Tangible Net Worth
of such Person.
"Total Liabilities" of any Person means all obligations, including,
without limitation, all Debt of such Person, which, in accordance with GAAP,
should be included in determining total liabilities as shown on the
liabilities portion of a balance sheet of such Person.
"Total Obligations" means, with respect to any Person, without
duplication, the sum of Total Liabilities plus Contingent Obligations of
such Person.
"Transfer" has the meaning specified in Section 6.02(g).
"Trust" means SFSC Receivables Trust 1994-1, a Delaware Business Trust.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of California.
"UCP" has the meaning specified in Section 3.08.
"Unadjusted Value" means, in respect of any Product Transfer Agreement,
the total, non-discounted amount of payments (including, if applicable,
principal plus interest) required to be made thereunder during the entire
term of such agreement.
"Uncovered Hedge Obligations" of any Person means obligations of such
Person with respect to any interest rate protection, hedge, cap, collar or
similar agreement or any foreign exchange or forward sale agreement, or any
similar agreement, which is not entered into in connection with a bona fide
hedging operation that provides offsetting benefits to such Person, in each
case as marked to market on a current basis as required by GAAP.
"United States" and "U.S." each mean the United States of America.
"U.S. Security Agreements" means, with respect to Collateral assigned
by STK, XL/DC and SFSC, security agreements executed and delivered pursuant
to the Prior Credit Agreement, copies of which security agreements are
attached hereto, as the same may be amended, supplemented or otherwise
modified from time to time.
"Utilization Rate" means, as calculated by the Agent at any time, (a)
the sum of all Advances and Auction Advances then outstanding and the face
amount of all undrawn Letters of Credit then outstanding, including the
Equivalent Amount thereof in the case of Advances or Letters of Credit
denominated in an Alternative Currency, divided by (b) the aggregate
Commitments of the Lenders, at such time.
"Value Date" means, (a) in respect of any Revolving Advance denominated
in an Alternative Currency, the most recent date on which such Advance was
Redenominated, if any, or, if such Advance was not Redenominated, the date
such Advance was disbursed; and (b) in respect of any Letter of Credit
Liability denominated in an Alternative Currency, the date of Issuance of
the applicable Letter of Credit.
"Welfare Plan" means a welfare plan, as defined in Section 3(1) of
ERISA, which section covers plans, funds and programs providing (among other
things) medical, surgical, or hospital care or benefits, or benefits in the
event of sickness, accident, disability, death, or unemployment, together
with plans which provide worker's compensation, unemployment compensation,
or disability insurance benefits.
"Withdrawal Liability" has the meaning given such term under Part I of
Subtitle E of Title IV of ERISA.
"XL/DC" means XL/Datacomp, Inc., a Delaware corporation.
SECTION 1.02. Accounting Terms. Unless the context otherwise clearly
requires, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with GAAP as in effect
from time to time, applied on a basis consistent (except for changes concurred
in by the Borrowers' independent public accountants in a writing delivered to
the Agent and the Lenders) with the most recent audited consolidated financial
statements of STK and its Consolidated Subsidiaries delivered to the Lenders;
provided that, if STK notifies the Agent that the Borrower wishes to amend any
covenant in Section 6.03 to eliminate the effect of any change in GAAP on the
operation of such covenant (or if the Agent notifies STK that the Majority
Lenders wish to amend Section 6.03 for such purpose), then STK's compliance with
such covenant shall be determined on the basis of GAAP in effect immediately
before the relevant change in GAAP became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to STK and the
Majority Lenders.
SECTION 1.03. Computation of Time Periods. In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
unless otherwise stated, the word "from" or "commencing" means "from and
including" and the word "to" or "until" each means "to but excluding".
SECTION 1.04. Names, Successors, Etc. Each reference herein to a Person
means a reference to the successors and assigns of such Person and a reference
to the legal name of such Person from time to time.
SECTION 1.05. Currency Equivalents Generally. For all purposes of this
Agreement (but not for purposes of the preparation of any financial statements
delivered pursuant to this Agreement), the equivalent in any Alternative
Currency of an amount in Dollars, and the equivalent in Dollars of an amount in
any Alternative Currency, shall be determined at the Spot Rate.
SECTION 1.06. Prior Loan Documents; Effect of this Agreement.
(a) Prior Loan Documents. In connection with the Prior Credit
Agreement, each Borrower made, executed, delivered, ratified and reaffirmed (as
the case may be) the Prior Loan Documents. Subject to the terms and conditions
of this Agreement, each Borrower hereby (i) ratifies and reaffirms all of its
indebtedness, obligations and duties under the Prior Loan Documents pursuant to
which any security interest, lien or encumbrance was granted by such Borrower in
favor of the Agent on behalf of the Lenders and (ii) confirms that all such
Prior Loan Documents (including, without limitation, the Collateral Documents)
continue to constitute valid and binding obligations of such Borrower that are
enforceable in accordance with their express terms.
(b) Effect of this Agreement. This Agreement amends, restates and
supersedes the Prior Credit Agreement (including, without limitation, all
Indebtedness owing under the Prior Credit Agreement) in its entirety. All
references in the Prior Loan Documents to the Prior Credit Agreement, regardless
of how such term is defined in any such Prior Loan Document, shall be deemed to
refer to this Agreement.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. (a) Revolving Advances. Each Lender
severally agrees, on the terms and conditions hereinafter set forth, to make
Revolving Advances to any Borrower, from time to time on any Business Day from
the date hereof to the Termination Date, in an aggregate amount (determined in
Dollars, including, where applicable, according to the Equivalent Amount) not to
exceed at any time outstanding for all Borrowers together the Dollar amount of
such Lender's Commitment; provided, however, that such Lender shall not be
obligated to make any Revolving Advance if, after giving effect to such
Revolving Advance and the other Revolving Advances to be made by the other
Lenders as part of the same Aggregate Borrowing, (i) the Aggregate Exposure
Amount shall exceed the lesser of (A) the total of the Commitments of the
Lenders and (B) the then-applicable Aggregate Borrowing Base, or (ii) the
Exposure Amount in respect of any Borrower shall exceed the then-applicable
Individual Borrowing Base of such Borrower; provided, further, that such Lender
shall not be obligated to make any Revolving Advance in an Alternative Currency
if, after giving effect to such Revolving Advance and the other Revolving
Advances to be made by the other Lenders as part of the same Aggregate
Borrowing, the then outstanding aggregate principal amount (determined in
Dollars at the Equivalent Amount) of all Revolving Advances and then-existing
Letter of Credit Liabilities denominated in Alternative Currencies, in respect
of all Borrowers in the aggregate, shall exceed the Alternative Currency
Sublimit; and, provided, further, that the aggregate amount of the Commitments
of the Lenders shall (subject to Section 2.04(c)) be deemed used from time to
time to the extent of the aggregate amount of the Auction Advances then
outstanding and such deemed use of the aggregate amount of the Commitments shall
be applied ratably to their respective Commitments (such deemed use of the
aggregate amount of the Commitments being an "Auction Reduction"). Each
Borrowing under this Section 2.01(a) shall be in an aggregate amount not less
than $3,000,000 (or the Equivalent Amount in any Alternative Currency), or an
integral multiple of $1,000,000 (or the Equivalent Amount in any Alternative
Currency) in excess thereof, and shall consist of Revolving Advances of the same
Interest Type made in the same currency on the same Business Day by the Lenders
ratably according to their respective Commitments, subject, however, to the
provisions of Section 2.02(d). Within the limits of each Lender's Commitment
and subject to the terms and provisions hereof, the Borrowers may from time to
time borrow under this Section 2.01(a), prepay pursuant to Section 2.10, and
reborrow under this Section 2.01(a).
(b) Swing Line Advances. The Swing Line Bank agrees, on the terms and
conditions hereinafter set forth, to make Swing Line Advances to any Borrower,
in Dollars only, from time to time on any Business Day from the date hereof to
the Business Day immediately preceding the Termination Date, in an aggregate
amount not to exceed at any time outstanding as to all Borrowers together the
Swing Line Commitment; provided, however, that the Swing Line Bank shall not be
obligated to make any Swing Line Advance if, after giving effect to such Swing
Line Advance, (i) the Aggregate Exposure Amount shall exceed the lesser of
(A) the total of the Commitments of the Lenders and (B) the then-applicable
Aggregate Borrowing Base or (ii) the Exposure Amount in respect of any Borrower
shall exceed the then-applicable Individual Borrowing Base of such Borrower.
Each Swing Line Advance shall be in an integral multiple of $100,000. Within
the limits of the Swing Line Commitment and subject to the terms and provisions
hereof, the Borrowers may from time to time borrow under this Section 2.01(b),
prepay pursuant to Section 2.10, and reborrow under this Section 2.01(b).
(c) Determination of Equivalent Amounts. For purposes of determining
as of any time the Aggregate Exposure Amount, any Exposure Amount, or the amount
of any outstanding Advances denominated in an Alternative Currency, the
Equivalent Amount of any and all Revolving Advances denominated in an
Alternative Currency shall be determined for each such Advance as of the later
of (i) the Value Date of such Advance, and (ii) the most recent Computation
Date.
(d) Computation Dates. The Agent will, as of each Computation Date,
compute the Equivalent Amount of (i) the Aggregate Exposure Amount, (ii) the
Exposure Amount in respect of each Borrower, and (iii) each outstanding
Revolving Advance and Letter of Credit Liability denominated in an Alternative
Currency. The Majority Lenders may at any time and from time to time instruct
the Agent to compute such Equivalent Amounts as of a date in addition to the
last day of each Fiscal Month, in which case such alternative date or dates
shall also be Computation Dates.
SECTION 2.02. Making the Advances. (a) Revolving Advances. Each
Borrowing consisting of Revolving Advances shall be of the same Interest Type
and denominated in the same currency, and shall be made by a Notice of Borrowing
received by the Agent:
(w) not later than 9:00 a.m. (San Francisco time) on the Business Day
prior to the date of such Borrowing if such Borrowing consists of Base Rate
Advances;
(x) not later than 9:00 a.m. (San Francisco time) on the second
Business Day prior to the date of such Borrowing if such Borrowing consists
of Adjusted CD Rate Advances;
(y) not later than 9:00 a.m. (San Francisco time) on the third
Business Day prior to the date of such Borrowing if such Borrowing consists
of Eurocurrency Rate Advances denominated in Dollars; and
(z) not later than 9:00 a.m. (San Francisco time) on the fourth
Business Day prior to the date of such Borrowing if such Borrowing consists
of Eurocurrency Rate Advances denominated in an Alternative Currency.
Each such Notice of Borrowing shall specify for each Borrower requesting an
Advance the requested (i) date of such Borrowing, (ii) Interest Type of
Revolving Advances comprising such Borrowing, (iii) in the case of a proposed
Borrowing comprised of Eurocurrency Rate Advances, currency of such Borrowing,
(iv) aggregate amount and Borrower of such Borrowing and (v) in the case of a
proposed Borrowing comprised of Adjusted CD Rate Advances or Eurocurrency Rate
Advances, initial Interest Period for each such Revolving Advance, and such
notice shall be given in accordance with Section 9.02. The Agent will promptly
forward to each Lender a copy of each Notice of Borrowing.
In the case of a proposed Borrowing comprised of Eurocurrency Rate
Advances in an Alternative Currency, the obligation of each Lender to make its
Eurocurrency Rate Advance in the requested Alternative Currency as part of such
Borrowing is subject to notice by the Lenders (or any of them) to the Agent by
5:00 p.m. (San Francisco time) four Business Days prior to the day of such
Borrowing that they (or any of them) cannot provide Advances in the requested
Alternative Currency, in which event notice will be given by the Agent to the
relevant Borrower not later than 9:00 a.m. (San Francisco time) on the third
Business Day prior to the requested date of such Borrowing that Borrowings in
the requested Alternative Currency are not then available, and notice thereof
will be given promptly by the Agent to the Lenders. If the Agent shall have
notified the relevant Borrower that Borrowings in the requested Alternative
Currency are not then available, such Borrower may, by notice to the Agent not
later than the 5:00 p.m. (San Francisco time) three Business Days prior to the
requested date of such Borrowing, withdraw the Notice of Borrowing relating to
such requested Borrowing. If the relevant Borrower does so withdraw such Notice
of Borrowing, the Borrowing requested in such Notice of Borrowing shall not
occur and the Agent will promptly so notify each Lender. If the relevant
Borrower does not so withdraw such Notice of Borrowing, the Agent will promptly
so notify each Lender and such Notice of Borrowing shall be deemed to be a
Notice of Borrowing which requests a Borrowing comprised of Base Rate Advances
in an aggregate Equivalent Amount to the amount of the originally requested
Borrowing for such Borrower in an Alternative Currency; and in such notice by
the Agent to each Lender the Agent will state such aggregate Equivalent Amount
of such Borrowing for such Borrower in Dollars and such Lender's ratable portion
of such Borrowing.
(b) Swing Line Advances. Each Swing Line Advance shall consist of a
single advance made in Dollars on notice from the applicable Borrower to the
Swing Line Bank and the Agent, given not later than 11:00 a.m. (San Francisco
time) on the date of the proposed Swing Line Advance. Each Notice of Swing Line
Advance shall be given in accordance with Section 9.02 setting forth the
information required by a Notice of Swing Line Advance, and shall specify
therein the requested (i) date of such Swing Line Advance and (ii) amount and
Borrower of such Swing Line Advance. The Swing Line Bank will make the amount
thereof available to the Agent on such date by depositing in the Agent's Account
same day funds in such amount. After the Agent's receipt of such funds and upon
fulfillment of the applicable conditions set forth in Article IV hereof, the
Agent will make such funds available to the requesting Borrower at the office of
the Agent where the Agent's Account is located.
Upon the occurrence of any Default or Event of Default, the Swing Line
Bank shall have the option, which shall be exercisable by the Swing Line Bank in
its sole discretion, to sell and transfer to each Lender, pursuant to the terms
and conditions set forth herein, an undivided interest and participation, to the
extent of such Lender's Percentage, in all outstanding Swing Line Advances.
Forthwith upon notice from the Swing Line Bank to the Agent that the Swing Line
Bank has elected to exercise the option set forth in the immediately preceding
sentence, the Swing Line Bank shall be deemed irrevocably and unconditionally to
have sold and transferred to each Lender without recourse and warranty, and each
Lender shall be deemed to have irrevocably and unconditionally purchased and
received, an undivided interest and participation, to the extent of such
Lender's Percentage, in all outstanding Swing Line Advances. Upon any such
occurrence, the Agent will promptly notify the Lenders of the amount of such
outstanding Swing Line Advances and each Lender will promptly (and in any event
within two Business Days) pay to the Swing Line Bank, in Dollars and in same day
funds, an amount equal to such Lender's Percentage then in effect of the
outstanding principal amount of such Swing Line Advances. Any amount payable to
the Swing Line Bank pursuant to this Section 2.02(b) and not paid within one
Business Day of the day on which notice of such required payment is received
from the Agent shall bear interest until paid at the Federal Funds Rate. If
the Lenders make any payments in respect of Swing Line Advances as contemplated
by this Section 2.02(b) and thereafter the Swing Line Bank receives a payment on
account of any such Advance, the Swing Line Bank shall promptly pay to the
Agent, and the Agent will promptly pay to each Lender which funded its
participation therein, in the kind of funds so received, an amount equal to such
Lender's ratable share thereof. The obligation of each Lender to make payments
under this Section 2.02(b) shall be unconditional and irrevocable and shall be
made under all circumstances. If any payment received on account of any Swing
Line Advance and distributed to a Lender as a participant under this
Section 2.02(b) is thereafter recovered from the Swing Line Bank in connection
with any Insolvency Proceeding relating to any Borrower or otherwise, each
Lender which received such distribution shall, upon demand by the Agent, repay
to the Swing Line Bank such Lender's ratable share of the amount so recovered
together with an amount equal to such Lender's ratable share (according to the
proportion of (A) the amount of such Lender's required repayment to (B) the
total amount so recovered) of any interest or other amount paid or payable by
the Swing Line Bank in respect of the total amount so recovered.
(c) Notices Irrevocable, Etc. Except as otherwise provided in
Sections 2.02(a) and (b), each Notice of Borrowing and Notice of Swing Line
Advance shall be irrevocable and binding on the Borrower or Borrowers delivering
any such notice. In the case of any Borrowing which the related Notice of
Borrowing specifies is to be comprised of Adjusted CD Rate Advances or
Eurocurrency Rate Advances, the Borrowers shall indemnify each Lender against
any loss or reasonable direct out-of-pocket cost or expense incurred by such
Lender as a result of any failure to fulfill on or before the date specified in
such Notice of Borrowing the applicable conditions set forth in Article IV
hereof, including, without limitation, any loss or reasonable direct out-of-
pocket cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by any Lender or the Swing Line Bank, as the
case may be, to fund the Advance to be made by such Lender or the Swing Line
Bank, as the case may be, as part of such Borrowing or Swing Line Advance when
such Borrowing or Swing Line Advance, as a result of such failure, is not made
on such date.
(d) Advances by Lenders. The Agent will promptly give each Lender
notice of each Notice of Borrowing received by it. Each Lender shall, before
11:00 a.m. (San Francisco time) (or, in the case of any Borrowing involving an
Alternative Currency, such other time as the Agent may reasonably specify), on
the date of the Borrowing covered by each such Notice of Borrowing, make
available for the account of its Applicable Lending Office to the Agent such
Lender's ratable portion of such Borrowing by depositing the amount of such
portion in the applicable currency and in same day funds in the Agent's Account,
or (in the case of any Borrowing involving any Alternative Currency) such other
place as the Agent may specify. Unless the Agent shall have received written
notice from a Lender prior to the date of any such Borrowing that such Lender
will not make available to the Agent such Lender's ratable portion of such
Borrowing, the Agent may assume that such Lender has made such portion available
to the Agent on the date of such Borrowing in accordance with this
Section 2.02(d) and the Agent may, in reliance upon such assumption, but without
any obligation so to do, make available to the Borrower or Borrowers on such
date a corresponding amount pursuant to Section 2.02(e). If and to the extent
any Lender shall not have made available to the Agent on the date of the
Borrowing such Lender's ratable portion of such Borrowing, such Lender and the
applicable Borrower or Borrowers agree to pay to the Agent forthwith on demand
such amount together with interest thereon, for each day from the date such
amount is made available to the applicable Borrower until the date such amount
is repaid to the Agent, at an interest rate equal to, in the case of a Borrower,
the interest rate (plus the applicable margin) stated in the Notice of Borrowing
applicable thereto, or, in the case of a Lender, the Federal Funds Rate. If
such Lender shall pay to the Agent such amount, such amount so paid shall
constitute such Lender's Advance as part of such Borrowing for purposes of this
Agreement.
(e) Disbursement of Advances. Upon fulfillment of the applicable
conditions set forth in Article IV hereof, the Agent will make funds for any
Borrowing or Swing Line Advance, as the case may be, available to the applicable
Borrower, subject to the Agent's receipt of such funds from the Lenders, in the
case of a Borrowing, and from the Swing Line Bank, in the case of a Swing Line
Advance. The funds so made available to the applicable Borrower, subject to the
preceding sentence, will be same-day funds if received by the Agent prior to
12:00 noon (San Francisco time) on the day received. Upon request of the
applicable Borrower, the Agent will disburse such funds to such accounts as are
designated by such Borrower.
(f) Nature of Lender's Obligations. The failure of any Lender to make
any Revolving Advance to be made by it as part of any Borrowing shall not
relieve any other Lender of its obligation, if any, hereunder to make its
Revolving Advance on the date of such Borrowing, but no Lender shall be
responsible for the failure of any other Lender to make the Revolving Advance to
be made by such other Lender on the date of any Borrowing.
SECTION 2.03. The Auction Advances. (a) Each Lender severally agrees that
any Borrower may make Auction Borrowings in Dollars under this Section 2.03 from
time to time on any Business Day during the period from the date hereof until
the date occurring 30 days prior to the Termination Date in the manner set forth
below; provided, however, that following the making of each Auction Borrowing,
(x) the Aggregate Exposure Amount shall not exceed the lesser of (A) the
aggregate amount of the Commitments of the Lenders (computed for this purpose
without regard to any Auction Reductions) and (B) the then-applicable Aggregate
Borrowing Base, (y) the Exposure Amount in respect of any Borrower shall not
exceed the then-applicable Individual Borrowing Base of such Borrower, and (z)
the aggregate principal amount outstanding (in respect of all Borrowers
together) of Auction Advances shall not exceed $50,000,000.
(b) When any Borrower wishes to request the Lenders to submit offers
to make Auction Advances hereunder, it shall transmit to the Agent by telephone
call followed promptly by facsimile transmission a notice in substantially the
form of Exhibit G-1 (a "Competitive Bid Request") so as to be received no later
than 8:00 a.m. (San Francisco time) (x) four Business Days prior to the date of
a proposed Auction Advance in the case of a LIBOR Auction, or (y) two Business
Days prior to the date of a proposed Auction Advance in the case of an Absolute
Rate Auction, specifying:
(i) the identity of the requesting Borrower;
(ii) the date of such Auction Borrowing, which shall be a
Business Day;
(iii) the aggregate amount of such Auction Borrowing, which
shall be a minimum amount of $5,000,000 or in multiples of $1,000,000 in
excess thereof;
(iv) whether the Competitive Bids requested are to be for
LIBOR Auction Advances or Absolute Rate Auction Advances or both; and
(v) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of "Interest Period."
Subject to Section 2.03(d), the Borrowers may not request Competitive Bids for
more than three Interest Periods in a single Competitive Bid Request and may not
request Competitive Bids more than once in any period of five Business Days.
(c) Upon receipt of a Competitive Bid Request, the Agent will promptly
send to the Lenders by facsimile transmission an Invitation for Competitive Bids
substantially in the form of Exhibit G-2 ("Invitation for Competitive Bids"),
which shall constitute an invitation by the Borrowers to each Lender to submit
Competitive Bids offering to make the Auction Advances to which such Competitive
Bid Request relates in accordance with this Section 2.03.
(d) (i) Each Lender may at its sole discretion (and without any
obligation whatsoever so to do) submit a Competitive Bid containing an
offer or offers to make Auction Advances in response to any Invitation
for Competitive Bids. Each Competitive Bid must comply with the
requirements of this Section 2.03 and must be submitted to the Agent by
facsimile transmission at the Agent's office for notices set forth in
Schedule 1.01(c)(2) not later than 6:30 a.m. (San Francisco time) three
Business Days prior to the proposed date of Auction Borrowing, in the
case of a LIBOR Auction, or 6:30 a.m. (San Francisco time) on the
proposed date of Auction Borrowing, in the case of an Absolute Rate
Auction; provided that Competitive Bids submitted by the Agent (or any
Affiliate of the Agent) in the capacity of a Lender may be submitted,
and may only be submitted, if the Agent or such Affiliate notifies the
requesting Borrower of the terms of the offer or offers contained
therein not later than 6:15 a.m. (San Francisco time) three Business
Days prior to the proposed date of Borrowing, in the case of a LIBOR
Auction or 6:15 a.m. (San Francisco time) on the proposed date of
Auction Borrowing, in the case of an Absolute Rate Auction.
(ii) Each Competitive Bid shall be in substantially the form
of Exhibit G-3, specifying therein:
(A) the applicable Borrower;
(B) the proposed date of Auction Borrowing;
(C) the principal amount of each Auction Advance
for which such Competitive Bid is being made, which principal
amount (x) may be equal to, greater than or less than the
Commitment of the quoting Lender, (y) must be $5,000,000 or in
multiples of $1,000,000 in excess thereof, and (z) may not exceed
the principal amount of the auction for which Competitive Bids were
requested;
(D) in case the Borrower elects a LIBOR Auction,
the margin above or below the Eurocurrency Rate (the "LIBOR Auction
Margin") offered for each such Auction Advance, expressed as a per
centage (rounded upward to the nearest whole multiple of 1/16th of
1% if such percentage is not such a multiple) to be added to or
subtracted from the applicable Eurocurrency Rate and the Interest
Period applicable thereto;
(E) in case the Borrower elects an Absolute Rate
Auction, the rate of interest per annum (rounded upward to the
nearest whole multiple of 1/100th of 1% if such percentage is not
such a multiple) (the "Absolute Rate") offered for each such
Auction Advance; and
(F) the identity of the quoting Lender.
A Competitive Bid may contain up to three separate offers by the quoting
Lender with respect to each Interest Period specified in the related
Invitation for Competitive Bids.
(iii) Any Competitive Bid shall be disregarded if it:
(A) is not substantially in conformity with
Exhibit G-2 or does not specify all of the information required by
subsection (c)(ii) of this Section;
(B) contains qualifying, conditional or similar
language;
(C) proposes terms other than or in addition to
those set forth in the applicable Invitation for Competitive Bids;
or
(D) arrives after the time set forth in Section
2.03(d)(i).
(e) Promptly on receipt and not later than 7:00 a.m. (San Francisco
time) three Business Days prior to the proposed date of Auction Borrowing in the
case of a LIBOR Auction, or 7:00 a.m. (San Francisco time) on the proposed date
of Auction Borrowing, in the case of an Absolute Rate Auction, the Agent will
notify the requesting Borrower or Borrowers of the terms (i) of any Competitive
Bid submitted by a Lender that is in accordance with Section 2.03(d), and (ii)
of any Competitive Bid that amends, modifies or is otherwise inconsistent with a
previous Competitive Bid submitted by such Lender with respect to the same
Competitive Bid Request. Any such subsequent Competitive Bid shall be
disregarded by the Agent unless such subsequent Competitive Bid is submitted
solely to correct a manifest error in such former Competitive Bid and only if
received within the times set forth in Section 2.03(b). The Agent's notice to
the Borrower shall specify (1) the aggregate principal amount of Auction
Advances for which offers have been received for each Interest Period specified
in the related Competitive Bid Request; and (2) the respective principal amounts
and LIBOR Auction Margins or Absolute Rates, as the case may be, so offered.
Subject only to the provisions of Sections 2.05, 4.01 and 4.03 hereof and the
provisions of this subsection (e), any Competitive Bid shall be irrevocable
except with the written consent of the Agent given on the written request of the
applicable Borrower.
(f) Not later than 7:30 a.m. (San Francisco time) three Business Days
prior to the proposed date of Auction Borrowing, in the case of a LIBOR Auction,
or 7:30 a.m. (San Francisco time) on the proposed date of Auction Borrowing, in
the case of an Absolute Rate Auction, the requesting Borrower shall notify the
Agent of its acceptance or non-acceptance of the offers so notified to it
pursuant to Section 2.03(e). The requesting Borrower shall be under no
obligation to accept any offer and may choose to reject all offers. In the case
of acceptance, such notice shall specify the aggregate principal amount of
offers for each Interest Period that is accepted. The Borrower may accept any
Competitive Bid in whole or in part; provided that:
(i) the aggregate principal amount of each Auction Borrowing
may not exceed the applicable amount set forth in the related
Competitive Bid Request;
(ii) the principal amount of each Auction Borrowing must be
$5,000,000 or in any multiple of $1,000,000 in excess thereof;
(iii) acceptance of offers may only be made on the basis of
ascending LIBOR Auction Margins or Absolute Rates within each Interest
Period, as the case may be; and
(iv) the Borrower may not accept any offer that is described
in Section 2.03(d)(iii) or that otherwise fails to comply with the
requirements of this Agreement.
(g) If offers are made by two or more Lenders with the same LIBOR
Auction Margins or Absolute Rates, as the case may be, for a greater aggregate
principal amount than the amount in respect of which such offers are accepted
for the related Interest Period, the principal amount of Auction Advances in
respect of which such offers are accepted shall be allocated by the Agent among
such Lenders as nearly as possible (in such multiples, not less than $1,000,000,
as the Agent may deem appropriate) in proportion to the aggregate principal
amounts of such offers. Determination by the Agent of the amounts of Auction
Advances shall be conclusive in the absence of manifest error.
(h) (i) The Agent will promptly notify each Lender having submitted a
Competitive Bid if its offer has been accepted and, if its offer has been
accepted, of the amount of the Auction Advance or Auction Advances to be
made by it on the date of the Auction Borrowing.
(ii) Each Lender which has received notice pursuant to
Section 2.03(h)(i) that its Competitive Bid has been accepted shall make
the amounts of such Auction Advance available to the Agent for the
account of the Borrower at the Agent's Account, by 11:00 a.m. (San
Francisco time) on such date of Auction Borrowing, in funds immediately
available to the Agent for the account of the applicable Borrower or
Borrowers at the Agent's Account.
(iii) Promptly following each Auction Borrowing, the Agent
shall notify each Lender of the ranges of bids submitted and the highest
and lowest Competitive Bids accepted for each Interest Period requested
by each requesting Borrower and the aggregate amount borrowed pursuant
to such Auction Borrowing.
(iv) From time to time, the Borrowers and the Lenders shall
furnish such information to the Agent as the Agent may request relating
to the making of Auction Advances, including the amounts, interest
rates, dates of borrowings and maturities thereof, for purposes of the
allocation of amounts received from the Borrowers for payment of all
amounts owing hereunder.
(i) If, on or prior to the proposed date of any Auction Borrowing, the
Commitments have not been terminated and if, on such proposed date of Auction
Borrowing all applicable conditions to funding referenced in Sections 4.01 and
4.03 hereof are satisfied, the Lender or Lenders whose offers the Borrower has
accepted will fund each Auction Advance so accepted. Nothing in this
Section 2.03 shall be construed as a right of first offer in favor of the
Lenders or to otherwise limit the ability of the Borrowers to request and accept
credit facilities from any Person (including any of the Lenders), provided that
no Default or Event of Default would otherwise arise or exist as a result of the
Borrowers executing, delivering or performing under such credit facilities.
SECTION 2.04. Fees.
(a) Agent's Fees. STK agrees to pay to the Agent, for its own
account, the fees referred to in the letter dated September 28, 1994 between STK
and the Agent.
(b) Commitment Fee. The Borrowers jointly and severally agree to pay
to the Agent, for the account of each Lender, a commitment fee on the average
daily unused portion of such Lender's Commitment (as calculated in accordance
with Section 2.04(c)) at the rate of 3/8 of 1% per annum for all periods on and
after the Closing Date, payable in arrears on the last day of each March, June,
September and December in each year, commencing September 30, 1994, and on the
Termination Date.
(c) Commitment Fee Calculations. For purposes of calculating each
Lender's commitment fee pursuant to Section 2.04(b), outstanding standby Letters
of Credit shall be considered a ratable usage of such Lender's Commitment based
on the Letter of Credit Liability attributable from time to time to such Letters
of Credit, but the outstanding amount of Auction Advances, Swing Line Advances
and outstanding (undrawn) commercial documentary Letters of Credit shall not be
considered a ratable usage of such Lender's Commitment. For purposes of
determining the unused portion of each Lender's Commitment solely in order to
calculate the commitment fee under Section 2.04(b), the Equivalent Amount of
each Eurocurrency Rate Advance made by such Lender in an Alternative Currency as
determined on the date of the making of such Advance shall be the amount of such
Lender's Commitment used in connection with such Advance, and no further
adjustments shall be made with respect to the unused portion of such Lender's
Commitment based upon fluctuations thereafter in the value of the Alternative
Currency of such Advance. For purposes of determining the unused portion of
each Lender's Commitment solely in order to calculate the commitment fee under
Section 2.04(b), the Equivalent Amount of each Letter of Credit Issued in an
Alternative Currency as determined on the date of the Issuance of such Letter of
Credit shall be the amount of such Lender's Commitment used in connection with
such Letter of Credit, and no further adjustments shall be made with respect to
the unused portion of such Lender's Commitment based upon fluctuations
thereafter in the value of the Alternative Currency relating to such Letter of
Credit.
(d) Closing Fee. The Borrowers shall pay to each Lender on the
Closing Date the closing fee set forth on Schedule 2.04.
(e) Nature of Obligation. The Borrowers' obligation hereunder to pay
the fees referred to in this Section 2.04 shall be absolute and unconditional
and shall survive the making and repaying of Advances and Auction Advances.
SECTION 2.05. Repayment of Advances.
(a) Revolving Advances. Each Borrower severally agrees to repay on
the Termination Date the outstanding principal amount of all Revolving Advances
made at its request.
(b) Swing Line Advances. Each Borrower severally agrees to repay the
principal amount of each Swing Line Advance made at its request on the earlier
of (i) the seventh (7th) Business Day after the date such Swing Line Advance was
made and (ii) the Termination Date.
(c) Auction Advances. Each Auction Advance shall mature, and the
principal amount thereof shall be due and payable, on the last day of the
Interest Period applicable thereto.
SECTION 2.06. Interest Rate Provisions, Etc.
(a) Base Rate Advances. Except to the extent that the applicable
Borrower shall have elected in the applicable Notice of Borrowing or Notice of
Conversion/Continuation to pay interest on any Revolving Advances denominated in
Dollars and comprising part of the same Borrowing for an Interest Period
pursuant to subsection (c) or (d) of this Section 2.06 and subject to subsection
(g) hereof, each Borrower severally agrees to pay interest on the unpaid
principal amount of each Advance denominated in Dollars made at the request of
such Borrower, from the date of such Advance until such principal amount is paid
in full, payable quarterly on the last day of each March, June, September and
December in each year, commencing September 30, 1994, and on the Termination
Date, at a fluctuating interest rate per annum equal to (i) in the case of
Revolving Advances, the Base Rate in effect from time to time and (ii) in the
case of Swing Line Advances, the sum of the Base Rate in effect from time to
time plus 0.25% per annum; provided, however, that with respect to any Revolving
Advance made prior to September 30, 1995, if after giving effect to such
Revolving Advance and the other Revolving Advances to be made by the other
Lenders as part of the same Aggregate Borrowing, the Aggregate Exposure Amount
is in excess of the then-applicable Domestic Borrowing Base, then, with respect
to such excess amount, the fluctuating rate per annum shall equal the sum of the
Base Rate in effect from time to time plus 0.75% per annum; provided, further,
however, that during any period in which an Event of Default has occurred and is
continuing, each Borrower shall pay interest on the unpaid principal amount of
each Base Rate Advance made at the request of such Borrower, payable from the
date such Event of Default occurs and due upon written demand by the Agent on
behalf of the Lenders to the Borrower, at a fluctuating interest rate per annum
(the "Default Rate") equal to the sum of the Base Rate in effect from time to
time plus 2.0% per annum.
(b) Interest Periods. Unless otherwise consented to by the Agent and
the Majority Lenders, after giving effect to any Borrowing or Auction Borrowing,
there shall not be in effect more than ten (10) different Interest Periods
(provided that solely for purposes of this provision, all Base Rate Advances
together shall be deemed to comprise one Interest Period).
(c) Adjusted CD Rate Advances. If a Borrower has made an election for
Adjusted CD Rate Advances pursuant to Section 2.02(a) or 2.07(a), for any
Interest Period, such Borrower shall, subject to subsection (g) of this Section,
pay interest on the unpaid principal amount of each such Adjusted CD Rate
Advance during such Interest Period, payable (i) in the case of any Interest
Period which is 30, 60 or 90 days, on the last day of such Interest Period and
(ii) in the case of an Interest Period which is 180 days, on the ninetieth day
of such Interest Period and on the last day of such Interest Period, at a rate
equal to the sum of the Adjusted CD Rate for such Interest Period for such
Adjusted CD Rate Advance plus 1.50% per annum; provided, however, that with
respect to any Adjusted CD Rate Advance made prior to September 30, 1995, if
after giving effect to such Adjusted CD Rate Advance and the other CD Rate
Advances to be made by the other Lenders as part of the same Aggregate
Borrowing, the Aggregate Exposure Amount is in excess of the then applicable
Domestic Borrowing Base, then, with respect to such excess amount, the rate
shall be equal to the sum of the Adjusted CD Rate for such Interest Period for
such Adjusted CD Rate Advance plus 2.25% per annum; provided, further, however,
that during any period in which an Event of Default has occurred and is
continuing, each Borrower shall pay interest on the unpaid principal amount of
each Adjusted CD Rate Advance made at its request, payable from the date such
Event of Default occurs and due upon written demand by the Agent on behalf of
the Lenders, at the rate of 3.50% per annum above the Adjusted CD Rate for such
Adjusted CD Rate Advance in effect at the time of the occurrence of such Event
of Default until the last day of the then current Interest Period for such
Advance, and thereafter at the Default Rate in effect from time to time. On the
last day of each Interest Period for any Adjusted CD Rate Advance, the unpaid
principal balance thereof shall automatically become and bear interest as a Base
Rate Advance, except to the extent that the applicable Borrower of such Advance
has elected to pay interest on all or any portion of such amount for a new
Interest Period commencing on such day in accordance with this Section 2.06 and
by timely delivery of a Notice of Conversion/Continuation pursuant to Section
2.07(a).
(d) Eurocurrency Rate Advances Denominated in Dollars. If a Borrower
has made an election for Eurocurrency Rate Advances pursuant to Section 2.02(a)
or 2.07(a) for any Interest Period, such Borrower shall, subject to
subsection (g) of this Section, pay interest on the unpaid principal amount of
each such Eurocurrency Rate Advance during such Interest Period, payable (i) in
the case of any Interest Period which is one, two or three months, on the last
day of such Interest Period and (ii) in the case of an Interest Period which is
six months, on the last day of the third month of such Interest Period and on
the last day of such Interest Period, at a rate equal to the sum of the
Eurocurrency Rate for such Interest Period for such Eurocurrency Rate Advance
plus 1.25% per annum; provided, however, that with respect to any Eurocurrency
Rate Advance made prior to September 30, 1995, if after giving effect to such
Eurocurrency Rate Advance and the other Eurocurrency Rate Advances to be made by
the other Lenders as part of the same Aggregate Borrowing, the Aggregate
Exposure Amount is in excess of the then applicable Domestic Borrowing Base,
then, with respect to such excess amount, the rate shall be equal to the sum of
the Eurocurrency Rate Advance plus 2.00% per annum; provided, further, however,
that during any period in which an Event of Default has occurred and is
continuing, each Borrower shall pay interest on the unpaid principal amount of
each such Eurocurrency Rate Advance made at its request, payable from the date
such Event of Default occurs and due upon written demand by the Agent on behalf
of the Lenders, at the rate of 3.25% per annum above the Eurocurrency Rate for
such Eurocurrency Rate Advance in effect at the time of the occurrence of such
Event of Default, until the last day of the then current Interest Period for
such Advance, and thereafter at the Default Rate in effect from time to time.
On the last day of each Interest Period for any Eurocurrency Rate Advance
denominated in Dollars, the unpaid principal balance thereof shall automatically
become and bear interest as a Base Rate Advance, except to the extent that the
applicable Borrower of such Advance has elected to pay interest on all or any
portion of such amount for a new Interest Period commencing on such day in
accordance with this Section 2.06 and by timely delivery of a Notice of
Conversion/Continuation pursuant to Section 2.07(a).
(e) Eurocurrency Rate Advances Denominated in Alternative Currencies.
Each Borrower shall pay interest on the unpaid principal amount of each
Revolving Advance denominated in an Alternative Currency and comprising part of
the same Borrowing made at the request of such Borrower, from the date of such
Advance until such principal amount is paid in full at a rate per annum equal to
the sum of the Eurocurrency Rate, determined with regard to the applicable
Alternative Currency of such Advance and the Interest Period selected by such
Borrower pursuant to Section 2.02(a) or 2.07(a), for such Interest Period plus
1.25% per annum payable on the last day of the Interest Period for such Advance;
provided, however, that with respect to any Eurocurrency Rate Advance made prior
to September 30, 1995, if after giving effect to such Eurocurrency Rate Advance
and the other Eurocurrency Rate Advances to be made by the other Lenders as part
of the same Aggregate Borrowing, the Aggregate Exposure Amount is in excess of
the then applicable Domestic Borrowing Base, then, with respect to such excess
amount, the rate shall be equal to the sum of the Eurocurrency Rate Advance plus
2.00% per annum; provided, further, however, that during any period in which an
Event of Default has occurred and is continuing, each Borrower shall pay
interest on the unpaid principal amount of each Revolving Advance denominated in
an Alternative Currency and made at its request, payable from the date such
Event of Default occurs and due upon written demand by the Agent on behalf of
the Lenders, at the rate of 3.25% per annum above the Eurocurrency Rate for such
Revolving Advance in effect at the time of the occurrence of such Event of
Default, until the principal amount of such Revolving Advance is paid in full.
On the last day of each Interest Period for any Revolving Advance denominated in
an Alternative Currency, the unpaid principal balance thereof shall
automatically become and bear interest as a Eurocurrency Rate Advance on the
basis of a one month Interest Period, except to the extent that the applicable
Borrower has elected to pay interest on all or any portion of such Advance for a
new Interest Period commencing on such day in accordance with this Section 2.06
and by timely delivery of a Notice of Conversion/Continuation pursuant to
Section 2.07(a).
(f) Auction Advances. Each Borrower at whose request any Auction
Advance is made shall pay interest on the outstanding principal amount of such
Auction Advance from the date when made until the maturity date thereof, at a
rate per annum equal to the Eurocurrency Rate plus (or minus) the LIBOR Auction
Margin, or at the Absolute Rate, as the case may be, on the maturity date of
such Auction Advance and on such other dates as may be specified on the related
Competitive Bid Request. From and after the maturity date of each Auction
Advance, interest on any unpaid Auction Advance shall accrue at the Default Rate
and shall be paid upon demand.
(g) Utilization-Based Interest Adjustments. The applicable interest
rate (other than the Default Rate) in respect of any and all Advances (including
any Advances then outstanding, including any as to which the applicable Interest
Period has not expired) as described in subsections (a), (c), (d) and (e) of
this Section (other than as set forth in the first proviso of each such
subsection) shall at any and all times as the Utilization Rate is greater than
33_%, be 0.25% per annum in excess of the rates referenced in such subsections.
(h) Interest Rate Quotations. If fewer than two Reference Banks
timely furnish information to the Agent for determining the Eurocurrency Rate
for any Eurocurrency Rate Advances denominated in Dollars, or in an Alternative
Currency, then:
(i) the Agent will forthwith notify the Borrowers and the Lenders
that the interest rate cannot be determined for such Eurocurrency Rate
Advances denominated in Dollars or in such Alternative Currency, as the case
may be;
(ii) each such Revolving Advance denominated in Dollars will
automatically, on the last day of the then-existing Interest Period
therefor, Convert into a Base Rate Advance (or, if such Advance is then a
Base Rate Advance, will continue as a Base Rate Advance);
(iii) each such Revolving Advance denominated in such Alternative
Currency will automatically, on the last day of the then-existing Interest
Period therefor, be Redenominated into Dollars and bear interest as a Base
Rate Advance; and
(iv) the obligation of the Lenders to make, or to Convert
Advances into, Eurocurrency Rate Advances, or to Redenominate Advances into
Advances denominated in such Alternative Currency, as the case may be, shall
be suspended until the Agent shall notify the Borrowers and the Lenders that
the circumstances causing such suspension no longer exist.
(i) Change in Circumstances. If, with respect to any Eurocurrency
Rate Advances denominated in Dollars, the Majority Lenders notify the Agent that
the Eurocurrency Rate for any Interest Period for such Advances will not
adequately reflect the cost to such Majority Lenders of making or maintaining
their respective Eurocurrency Rate Advances for such Interest Period, the Agent
shall forthwith so notify the Borrowers and the Lenders, whereupon (i) each
Eurocurrency Rate Advance denominated in Dollars will automatically, on the last
day of the then-existing Interest Period therefor, Convert into a Base Rate
Advance, and (ii) the obligation of the Lenders to make or Convert Revolving
Advances denominated in Dollars into Eurocurrency Rate Advances shall be
suspended, and the obligation of any Lender to make a LIBOR Auction Advance
pursuant to a Competitive Bid accepted by a Borrower but not yet funded at the
time of such notification shall be terminated, until the Agent shall notify the
Borrowers and the Lenders that the circumstances causing such suspension no
longer exist.
(j) Failure to Notify. If any Borrower shall fail to select the
duration of any Interest Period for any Adjusted CD Rate Advances or any
Eurocurrency Rate Advances made to such Borrower in accordance with
Section 2.06(c), (d) or (e) or Section 2.07(a), the Agent will promptly so
notify such Borrower and the Lenders, and such Advances will automatically, on
the funding date or the last day of the then-existing Interest Period therefor,
Convert into Base Rate Advances; provided, however, that if such failure to
select an Interest Period relates to any Eurocurrency Rate Advance denominated
in an Alternative Currency, such Advance will automatically, on the funding date
or the last day of the existing Interest Period for such Advance, unless there
exists a Default or an Event of Default) be continued as a Eurocurrency Rate
Advance with an Interest Period of one month.
(k) Minimum Amounts. On the date on which the aggregate unpaid
principal amount of Revolving Advances comprising any Borrowing shall be
reduced, by payment or prepayment or otherwise, to less than $3,000,000 (or the
Equivalent Amount in the case of Eurocurrency Rate Advances in Alternative
Currencies), such Advances shall, if they are Advances of an Interest Type other
than Base Rate Advances, automatically Convert into Base Rate Advances, and on
and after such date the right of the Borrower to Convert such Advances into
Advances of an Interest Type other than Base Rate Advances shall terminate.
(l) Illegality. Notwithstanding any other provision of this
Agreement, if the enactment or issuance of or any change in or in the
interpretation of any law or regulation shall make it unlawful, or any central
bank or other governmental authority shall assert in writing that it is
unlawful, for any Lender or its Eurocurrency Lending Office or CD Lending Office
to fund or maintain Eurocurrency Rate Advances denominated in Dollars or in any
Alternative Currencies or Adjusted CD Rate Advances hereunder, then, on notice
thereof by such Lender to the Borrowers through the Agent, (i) the right of the
Borrowers to select the interest rate for any Advance pursuant to subsection
(c), (d) or (e) of this Section 2.06, as the case may be, shall thereupon be
suspended until the Agent shall notify (following its receipt of notice to such
effect from the Lender originally providing such notice of illegality) the
Borrowers and the Lenders that the circumstances causing such suspension no
longer exist and (ii) each such affected Advance denominated in Dollars, shall
automatically become a Base Rate Advance and (iii) the Borrowers shall forthwith
prepay in full all such affected Eurocurrency Rate Advances denominated in
Alternative Currency of all Lenders then outstanding, together with interest
accrued thereon, unless the applicable Borrower, within five Business Days of
notice from the Agent, Redenominates all such affected Eurocurrency Rate
Advances denominated in such Alternative Currency into another currency as to
which such circumstances do not exist.
(m) Reference Banks. Upon the Agent's request (which request may be
by telephone or facsimile), each Reference Bank agrees to timely furnish to the
Agent information for the purpose of determining each Eurocurrency Rate. If any
one or more of the Reference Banks shall not so timely furnish such information
to the Agent for the purpose of determining any such interest rate, the Agent
(subject to subsection (h) above) will determine such interest rate on the basis
of timely information furnished by the remaining Reference Banks. The Agent
will give prompt (and in any event within one Business Day) notice to the
Borrowers and the Lenders of the applicable interest rate determined by the
Agent for the purposes of Section 2.06(a), (c), (d) or (e), and the applicable
rate, if any, furnished by each Reference Bank for the purpose of determining
the applicable rate under Section 2.06(c), (d) or (e).
SECTION 2.07. Voluntary Conversion, Continuation and Redenomination of
Revolving Advances. (a) Conversion and Continuation. The Borrowers may, from
time to time and on the condition that no Default or Event of Default shall have
occurred and be continuing, on any Business Day, upon delivery of a Notice of
Conversion/Continuation given to the Agent not later than 9:00 a.m. (San
Francisco time) on the fourth Business Day prior to the date of the proposed
Conversion or continuation and subject to the other provisions of Section 2.06
and this Section 2.07, (i) continue Revolving Advances of the same Interest Type
and Interest Period and comprising the same Borrowing as Revolving Advances of
such Interest Type and Interest Period or (ii) Convert such Revolving Advances,
if such Revolving Advances are denominated in Dollars, into Revolving Advances
of another Interest Type denominated in Dollars; provided, however, that any
Conversion of any Adjusted CD Rate Advances or Eurocurrency Rate Advances into
Revolving Advances of another Interest Type shall be made on, and only on, the
last day of an Interest Period for such Adjusted CD Rate Advances or
Eurocurrency Rate Advances; and, provided, further, that Eurocurrency Rate
Advances denominated in an Alternative Currency may only be continued as
Eurocurrency Rate Advances with the same or a different Interest Period. Each
such Notice of Conversion/Continuation shall be delivered in accordance with
Section 9.02, and shall be delivered or given to the Agent within the time
period specified above, and shall specify (i) the date of such Conversion,
(ii) the Revolving Advances to be Converted, (iii) if such Conversion is into
Adjusted CD Rate Advances or Eurocurrency Rate Advances, the duration of the
Interest Period for each such Advance and (iv) the Revolving Advances to be
continued as Revolving Advances of the same Interest Type and the duration of
the Interest Periods therefor.
(b) Redenomination. The Borrowers may, from time to time and on the
condition that no Default or Event of Default shall have occurred and be
continuing, on any Business Day, upon delivery of a Notice of Redenomination
given to the Agent not later than 9:00 a.m. (San Francisco time) on the fourth
Business Day prior to the date of the proposed Redenomination (which notice the
Agent will promptly forward to each Lender), request that all Eurocurrency Rate
Advances comprising the same Aggregate Borrowing be Redenominated from Dollars
into the Equivalent Amount of an Alternative Currency or from an Alternative
Currency into the Equivalent Amount of Dollars or another Alternative Currency;
provided, however, that any Redenomination shall be made on, and only on, the
last day of an Interest Period for such Eurocurrency Rate Advances; and,
provided, further, that no Redenomination shall be permitted hereunder if, after
giving effect to the proposed Redenomination (i) the Aggregate Exposure Amount
exceeds the lesser of (A) the aggregate Commitments of the Lenders and (B) the
then-applicable Aggregate Borrowing Base, or (ii) the Exposure Amount in respect
of any Borrower exceeds the then-applicable Individual Borrowing Base of such
Borrower, or (iii) any Alternative Currency Sublimit is exceeded. Each such
Notice of Redenomination shall be delivered in accordance with Section 9.02, and
delivered or given to the Agent within the time period specified above, and
shall specify (1) the Revolving Advances comprising the Borrowing to be
Redenominated, (2) the date of the proposed Redenomination, (3) the currency
into which such Revolving Advances are to be Redenominated, and (4) the duration
of the Interest Period for such Revolving Advances upon being so Redenominated.
In the case of a Notice of Redenomination which requests a Redenomination of
Revolving Advances into an Alternative Currency, such Redenomination is subject
to notice by the Lenders (or any of them) to the Agent by 5:00 p.m. (San
Francisco time) four Business Days prior to the date of such Redenomination that
they (or any of them) cannot provide Redenominations in the requested
Alternative Currency, in which event notice will be given by the Agent to the
applicable Borrower not later than 9:00 a.m. (San Francisco time) on the third
Business Day before the requested date of such Redenomination that
Redenominations in the requested Alternative Currency are not then available,
which notice will be sent promptly by the Agent to the Lenders. If the Agent
shall have so provided the relevant Borrower such notice, the requested
Redenomination will not occur and the Agent will promptly notify the relevant
Borrower and each Lender that the requested Redenomination will not occur. If
the Agent shall have not provided such notice to the relevant Borrower or if
such Notice of Redenomination requests a Redenomination of Revolving Advances
into Dollars, each Revolving Advance so requested to be Redenominated will be
Redenominated, on the date specified therefor in such Notice of Redenomination,
into an Equivalent Amount thereof in the currency requested in such Notice of
Redenomination, and, upon being so Redenominated, will have an initial Interest
Period as requested in such Notice of Redenomination.
(c) Notices Irrevocable. Each notice by a Borrower under this
Section 2.07 shall be irrevocable, and each Borrower severally agrees to
indemnify each Lender against any reasonable direct loss, cost or out-of-pocket
expense incurred by such Lender as a result of any failure to fulfill on or
before the date specified by such notice the applicable conditions set forth in
this Section 2.07 or Article IV.
SECTION 2.08. Reduction of Commitments. The Borrowers (acting jointly, and
not singly) shall have the right, upon at least five Business Days' notice to
the Agent, to terminate permanently in whole or reduce permanently and ratably
in part the unused portions of the respective Commitments of the Lenders;
provided, however, that each partial reduction shall be in the amount of
$5,000,000 or any multiple of $1,000,000 in excess thereof; and, provided,
further, that the aggregate amount of the Commitments of the Lenders shall not
be reduced to an amount which is less than the aggregate principal amount of
Auction Advances then outstanding.
SECTION 2.09. Mandatory Prepayments. (a) Declines in Borrowing Base. If,
at any time, (i) the Aggregate Exposure Amount shall exceed the then-applicable
Aggregate Borrowing Base, the Borrowers shall, within five Business Days, (A)
prepay at least such amount of the outstanding principal amount of their
respective Advances and/or (B) cash collateralize at least such amount of their
respective Outstanding Letter of Credit Liability and/or outstanding Auction
Advances, as is necessary to make the then-applicable Aggregate Exposure Amount
less than or equal to the then-applicable Aggregate Borrowing Base, or (ii) the
Exposure Amount for any Borrower shall exceed the then-applicable Individual
Borrowing Base in respect of such Borrower, such Borrower shall, within five
Business Days, (A) prepay at least such amount of the outstanding principal
amount of its respective Advances and/or (B) cash collateralize at least such
amount of its respective Outstanding Letter of Credit Liability and/or
outstanding Auction Advances, as is necessary to make the then-existing Exposure
Amount in respect of such Borrower less than or equal to the then-applicable
Individual Borrowing Base for such Borrower. All such prepayments and/or cash
collateralization shall be made in the order set forth in Section 2.13(d). All
prepayments of Advances pursuant to this Section 2.09(a) shall be made together
with accrued interest to the date of such payment on the principal amount
repaid, together with any amounts payable under Section 9.04(b).
(b) Alternative Currency Exchange Rate Fluctuations. If on any date
of determination of an Equivalent Amount, including any Computation Date, (i)
the Equivalent Amount of the aggregate outstanding principal amount of all
Revolving Advances and Letter of Credit Liabilities denominated in Alternative
Currencies shall exceed the Alternative Currency Sublimit by more than $500,000,
upon notice from the Agent, the Borrowers shall (A) repay to the Agent, for the
account of each Lender, within two Business Days after delivery of such notice,
an amount of such outstanding Revolving Advances, together with accrued interest
thereon to the date of payment, and/or (B) cash collateralize Letter of Credit
Liabilities, such that the aggregate outstanding principal amount of such
Revolving Advances and Letter of Credit Liabilities (after giving effect to such
repayment and pledge of cash collateral) is equal to or less than the
Alternative Currency Sublimit, or (ii) the then-Aggregate Exposure Amount shall
exceed the aggregate Commitments of the Lenders due to a change in applicable
rates of exchange between Dollars and Alternative Currencies, upon notice from
the Agent, the Borrowers shall (A) repay to the Agent, for the account of each
Lender, on such Business Day, an amount of outstanding Revolving Advances,
together with accrued interest thereon to the date of payment, and/or (B) cash
collateralize Letter of Credit Liabilities, such that the then-Aggregate
Exposure Amount (after giving effect to such repayment and pledge of cash
collateral) is equal to or less than the aggregate Commitments of the Lenders.
Concurrently with such prepayment, the Borrowers shall specify the Revolving
Advances denominated in an Alternative Currency to be prepaid, and the Borrowers
shall be obligated to reimburse the Lenders in respect thereof pursuant to
Section 9.04(b). The amount payable to each Lender shall be equal to such
Lender's then applicable Percentage of such payment.
SECTION 2.10. Optional Prepayments. The Borrowers may, upon at least three
Business Days' notice to the Agent in the case of Adjusted CD Rate Advances and
Eurocurrency Rate Advances and one Business Day's notice to the Agent (received
by no later than 9:00 a.m. San Francisco time) in the case of Base Rate Advances
stating the proposed date and aggregate principal amount of the prepayment (and
if such notice is given, the Borrowers shall), prepay, in whole or ratably in
part, the outstanding principal amounts of the Advances comprising the same
Borrowing or Swing Line Advances, as the case may be, together with (i) accrued
interest to the date of such prepayment on the principal amounts prepaid and
(ii) in the case of prepayment of Eurocurrency Rate Advances and Adjusted CD
Rate Advances, any additional amount for which the Borrower shall be obligated
pursuant to Section 9.04(b); provided, however, that each partial prepayment
(A), in the case of Revolving Advances, shall be in an aggregate principal
amount not less than $3,000,000 or any multiple of $1,000,000 (or the Equivalent
Amount in an Alternative Currency) in excess thereof and shall be applied in
accordance with Section 2.13(d) and (B), in the case of Swing Line Advances,
shall be in an aggregate principal amount of not less than $100,000 and shall be
applied to outstanding Swing Line Advances in the inverse order of maturity
thereof; and, provided, further, that no partial prepayment of any Eurocurrency
Rate Advances denominated in an Alternative Currency and comprising part of the
same Borrowing shall be permitted if less than $3,000,000 Equivalent Amount
(principal) of such Advances shall remain outstanding after giving effect to
such prepayment. No Auction Advances may be prepaid prior to the applicable
maturity date thereof under this Section 2.10.
SECTION 2.11. Increased Costs. (a) If, due to either (i) the enactment or
issuance of or any change (including, without limitation, any change by way of
imposition or increase of reserve requirements other than as provided in the
definition of Eurocurrency Rate Reserve Percentage and Adjusted CD Rate Reserve
Percentage in Section 1.01) in or in the interpretation of any law or regulation
by any governmental or regulatory body or agency having jurisdiction over the
Lenders or the Swing Line Bank or (ii) the compliance by any Lender or the Swing
Line Bank with any written guideline or request from any central bank or other
governmental authority (a copy of which shall be sent by such Lender or the
Swing Line Bank, as the case may be, to the Agent and the Borrowers), whether or
not having the force of law, there shall be any increase in the cost to any
Lender of agreeing to make or making, funding or maintaining Adjusted CD Rate
Advances or Eurocurrency Rate Advances or participating in Swing Line Advances
or to the Swing Line Bank of agreeing to make the Swing Line Advances, then the
Borrowers shall from time to time, upon demand by such Lender or the Swing Line
Bank, as the case may be (with a copy of such demand to the Agent), promptly
(and in any event within 30 days) pay to the Agent for account of such Lender or
the Swing Line Bank, as the case may be, additional amounts sufficient to
reimburse such Lender or the Swing Line Bank, as the case may be, for such
increased cost. A certificate as to the amount of such increased cost setting
forth in reasonable detail the basis for the calculations of such increased
costs shall be submitted to the Borrowers and the Agent by such Lender or the
Swing Line Bank, as the case may be, and such certificate shall be conclusive
and binding for all purposes, absent manifest error.
(b) If, at any time after the Closing Date, any Lender or the Swing
Line Bank determines that compliance with any law or regulation as adopted,
amended or otherwise modified after the Closing Date or with any written
guideline or request from any central bank or other governmental authority
published after the Closing Date (a copy of which shall be sent by such Lender
or the Swing Line Bank, as the case may be, to the Agent and the Borrowers),
whether or not having the force of law, has or would have the effect of reducing
the rate of return on the capital of such Lender or the Swing Line Bank or any
corporation controlling such Lender or the Swing Line Bank (whether by
increasing the amount of capital required or expected to be maintained by such
Lender or Swing Line Bank or any corporation controlling such Lender or Swing
Line Bank or otherwise) as a consequence of, or with reference to, such Lender's
Commitments or its making or maintaining Advances or participating in Swing Line
Advances or the Swing Line Bank's Swing Line Commitment or its making Swing Line
Advances below the rate that the Lender, the Swing Line Bank or any such other
corporation, as the case may be, could have achieved but for compliance
therewith (taking into account the policies of such Lender, the Swing Line Bank
or any such corporation with regard to capital), then the Borrowers shall from
time to time, upon demand by such Lender or the Swing Line Bank, as the case may
be (with a copy of such demand to the Agent), promptly (and in any event within
30 days) pay to such Lender or the Swing Line Bank, as the case may be,
additional amounts sufficient to compensate such Lender, the Swing Line Bank or
any such other corporation, as the case may be, for such reduction. A
certificate setting forth in reasonable detail the basis for the calculation of
such amounts shall be submitted to the Borrowers and the Agent by such Lender or
the Swing Line Bank, as the case may be, which certificate shall be conclusive
and binding for all purposes, absent manifest error.
(c) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers contained
in this Section 2.11 shall survive the payment in full of the Obligations (after
occurrence of the Termination Date and the Letter of Credit Termination Date)
for a period of 180 days.
SECTION 2.12. Loan Accounts. The Advances and Auction Advances made by
each Lender shall be evidenced by one or more loan accounts maintained by such
Lender in the ordinary course of business. The loan accounts or records
maintained by the Agent and each Lender shall be conclusive absent manifest
error as to the amount of the Advances and Auction Advances made by the Lenders
to the Borrower and the interest and payments thereon. Any failure so to record
or any error in doing so shall not, however, limit or otherwise affect the
obligation of any Borrower hereunder to pay any amount owing with respect to the
Advances and Auction Advances.
SECTION 2.13. Payments and Computations. (a) The Borrowers shall pay all
amounts due to the Agent, Lenders, the Swing Line Bank and the Issuing Bank
hereunder or under any other Loan Document to which it is a party irrespective
of, and without condition or deduction for, any counterclaim, defense,
recoupment or setoff (except, in each case, to the extent expressly provided
herein, with respect to principal of, interest on and other amounts relating to,
Advances denominated in an Alternative Currency), in lawful money of the United
States and in same day funds delivered to the Agent not later than 11:00 a.m.
(San Francisco time) on the day when due in Dollars by deposit of such funds to
the Agent's Account maintained for payments in Dollars. The Borrowers shall
make each payment due hereunder with respect to principal of, interest on and
other amounts relating to Advances denominated in an Alternative Currency not
later than 11:00 a.m. (San Francisco time) (or such other time as may be
specified by the Agent) on the day when due in such Alternative Currency to the
Agent in same day funds by deposit of such funds to the Agent's Account
maintained for payments in such Alternative Currency (or at such other place as
the Agent may specify). The Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal (including
reimbursement for payments under Letters of Credit), interest, or commitment
fees, or letter of credit fees ratably (other than amounts payable to any
Lender, the Swing Line Bank or the Issuing Bank pursuant to Section 2.04(a),
2.11, 3.07 or 9.04(b) or amounts subject to Taxes pursuant to Section 2.14) to
the Lenders for the account of their respective Applicable Lending Offices, the
Swing Line Bank or the Issuing Bank and like funds relating to the payment of
any other amount payable to any Lender, the Swing Line Bank or the Issuing Bank
to such Lender for the account of its Applicable Lending Office, the Swing Line
Bank or to the Issuing Bank, in each case to be applied in accordance with, and
subject to, the terms of this Agreement. Upon its receipt of an Assignment and
Acceptance and the satisfaction of the other conditions to the effectiveness
thereof, from and after the effective date specified in such Assignment and
Acceptance, the Agent will make all payments hereunder and under any other Loan
Document in respect of the interest assigned thereby to the Lender assignee
thereunder, and the parties to such Assignment and Acceptance shall make all
appropriate adjustments in such payments for periods prior to such effective
date directly between themselves.
(b) All computations of interest (whether based on the Base Rate, the
Eurocurrency Rate, the Adjusted CD Rate, an Absolute Rate, or the Federal Funds
Rate) and of commitment and letter of credit fees shall be made by the Agent on
the basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest or fees are payable; provided, however, that interest
payable in respect of Base Rate Advances at all times as such Base Rate is
determined by BofA's "reference rate" shall be made on the basis of year of 365
or 366 days, as the case may be, and actual days elapsed. Each determination by
the Agent of an interest rate hereunder shall be conclusive and binding for all
purposes, absent manifest error.
(c) Unless the Agent shall have received notice from the applicable
Borrower prior to the date on which any payment is due to the Lenders, the Swing
Line Bank or the Issuing Bank, as the case may be, hereunder that such Borrower
will not make such payment in full, the Agent may assume that such Borrower has
made such payment in full to the Agent on such date and the Agent may, in
reliance upon such assumption, but without any obligation to do so, cause to be
distributed to each Lender, the Swing Line Bank or the Issuing Bank, as the case
may be, on such due date an amount equal to the amount then due to such Lender,
the Swing Line Bank or the Issuing Bank, as the case may be. If and to the
extent such Borrower shall not have so made such payment in full to the Agent,
each Lender, the Swing Line Bank or the Issuing Bank, as the case may be, shall
repay to the Agent forthwith on demand such amount distributed to such Lender,
the Swing Line Bank or the Issuing Bank, as the case may be, together with
interest thereon, for each day from the date such amount is distributed to such
Lender, the Swing Line Bank or the Issuing Bank, as the case may be, until the
date such Lender, the Swing Line Bank or the Issuing Bank, as the case may be,
repays such amount to the Agent, at the Federal Funds Rate.
(d) Amounts received by the Agent for application to amounts owing to
the Agent, the Lenders, the Swing Line Bank or the Issuing Bank shall be
applied, if not specified by the applicable Borrower, if received by the Agent
pursuant to Section 2.09(a) or if received after the occurrence and during the
continuance of an Event of Default, first, to any amounts owing under Section
9.04(a), second, to the ratable payment of any accrued interest or fees that are
then due and payable, third, to the ratable payment of the outstanding Swing
Line Advances, fourth, to the ratable payment of the outstanding Revolving
Advances which are owing to the Lenders and constitute Base Rate Advances,
fifth, to the ratable payment of the outstanding Revolving Advances which are
owing to the Lenders and constitute Adjusted CD Rate Advances, sixth, to the
ratable payment of the outstanding Revolving Advances which are owing to the
Lenders and constitute Eurocurrency Rate Advances, seventh, to cash
collateralize Letter of Credit Liability, and eighth, to the ratable cash
collateralization of the outstanding Auction Advances; together with, in the
case of payment of Eurocurrency Rate Advances or Adjusted CD Rate Advances, any
additional amount for which the Borrowers shall be obligated in respect of the
payment of Eurocurrency Rate Advances or Adjusted CD Rate Advances pursuant to
Section 9.04(b). Any cash collateralization of Letter of Credit Liability or
Auction Advance obligations shall be effected pursuant to a Pledge Agreement.
Payments for reimbursement of amounts drawn under any Letter of Credit shall be
applied as set forth in Section 3.04(c).
SECTION 2.14. Taxes. (a) Subject to subsection (e) below, any and all
payments by the Borrowers hereunder or any other Loan Document shall be made, in
accordance with Section 2.13, free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, (i) in the
case of each Lender, the Swing Line Bank, the Issuing Bank and the Agent, taxes
imposed on its income, and franchise taxes imposed on it, by the jurisdiction
under the laws of which such Lender, the Swing Line Bank, the Issuing Bank or
the Agent (as the case may be) is organized or any political subdivision
thereof, (ii) in the case of each Lender, the Swing Line Bank, and the Issuing
Bank, taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction of such Lender's Applicable Lending Office, or of the Swing Line
Bank's office through which it funds Swing Line Advances or of the Issuing
Bank's office through which it Issues Letters of Credit, as the case may be, or
any political subdivision thereof and (iii) in the case of each Lender, the
Swing Line Bank, the Issuing Bank and the Agent, taxes imposed by the United
States by means of withholding taxes if and to the extent that such withholding
taxes shall be in effect and shall be applicable on the date hereof under
current laws and regulations (including judicial and administrative
interpretations thereof) to payments to be made for the account of such Lender's
Applicable Lending Office, to the Swing Line Bank or to the Issuing Bank or to
the Agent (all taxes, levies, imposts, deductions, charges, withholdings and
liabilities not described in subclauses (i), (ii) and (iii) being hereinafter
referred to as "Taxes"). If any Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder or under any other Loan
Document to any Lender, the Swing Line Bank, the Issuing Bank or the Agent,
(x) the sum payable shall be increased as may be necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 2.14) such Lender, Swing Line Bank, Issuing Bank or
the Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (y) such Borrower shall make such
deductions and (z) such Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.
(b) In addition, the Borrowers agree to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or under any other
Loan Document or from the execution, delivery or registration or filing or
recording of, or otherwise with respect to, this Agreement or any other Loan
Document (including, without limitation, tangible or intangible property or ad
valorem taxes) or document delivered hereunder or under any other Loan Document
(hereinafter referred to as "Other Taxes").
(c) The Borrowers shall indemnify each Lender, the Swing Line Bank,
the Issuing Bank and the Agent for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 2.14) paid by such Lender,
the Swing Line Bank, the Issuing Bank or the Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. This indemnification shall be made within 30 days from the
date such Lender, the Swing Line Bank, Issuing Bank or the Agent (as the case
may be) makes written demand therefor, which demand shall specify in reasonable
detail the basis for such demand.
(d) Within 30 days after the date of any payment of Taxes, the
Borrowers shall furnish to the Agent, at its address referred to in
Section 9.02, the original or a certified copy of a receipt or other evidence
satisfactory to the Agent of payment thereof.
(e) Prior to the date of the initial Borrowing in the case of each
Bank, the initial Swing Line Advance in the case of the Swing Line Bank or
Issuance of the initial Letter of Credit in the case of the Issuing Bank, on the
date of the Assignment and Acceptance pursuant to which it became a Lender in
the case of each other Lender, and within 30 days following the first day of
each calendar year or if otherwise requested from time to time by the Borrowers
or the Agent, (i) each Lender organized under the laws of a jurisdiction outside
the United States, (ii) the Swing Line Bank, if organized under the laws of a
jurisdiction outside the United States and (iii) the Issuing Bank, if organized
under the laws of a jurisdiction outside the United States, shall provide the
Agent and the Borrowers with three counterparts of each of the forms prescribed
by the Internal Revenue Service (Form 1001 or 4224, or successor form(s), as the
case may be) of the United States certifying as to such Lender's or the Swing
Line Bank's or Issuing Bank's (if applicable) status for purposes of determining
exemption from United States withholding taxes with respect to all payments to
be made to such Lender, the Swing Line Bank or the Issuing Bank under any Loan
Document. Unless the Borrowers and the Agent have received such forms or other
documents satisfactory to them indicating that payments under any Loan Document
are not subject to United States withholding tax, the Borrowers or the Agent (if
not withheld by the Borrowers) shall withhold taxes from such payments at the
applicable statutory rate, without any obligation to "gross-up" or make such
Lender, the Swing Line Bank, the Issuing Bank or the Agent whole under Section
2.14(a) hereof; provided, however, that the Borrowers shall have the obligation
to make such Lender, the Swing Line Bank, the Issuing Bank or the Agent whole
and to "gross-up" under Section 2.14(a) hereof, if the failure to so deliver
such forms or make such statements (other than the forms and statements required
to be delivered on or made prior to the date of the initial Borrowing, initial
Swing Line Advance or initial Issuance or on the date of the Assignment and
Acceptance pursuant to which an Eligible Assignee became a Lender) is the result
of the occurrence of an event (including, without limitation, any change in
treaty, law or regulation) which (alone or in conjunction with other events)
renders such forms inapplicable, that would prevent such Lender, the Swing Line
Bank, the Issuing Bank or the Agent from making the statements contemplated by
such forms or which removes or reduces an exemption (whether partial or
complete) from withholding tax previously available to such Lender, the Swing
Line Bank, the Issuing Bank or the Agent. Each Lender, the Swing Line Bank and
the Issuing Bank (and the Agent, if applicable) will promptly notify the
Borrower of the occurrence (when known to it) of an event contemplated by the
foregoing proviso. Upon request of the Borrowers, each Lender which is
organized under the laws of the United States or any State thereof and the Swing
Line Bank and Issuing Bank (if organized under the laws of the United States or
any State thereof) shall provide the Borrowers and the Agent with two duplicates
of a statement conforming to the requirements of Treasury Regulation 1.1441-5(b)
or any successor thereto and two duplicates of a duly completed Form W-9 or
successor form.
(f) Without affecting its rights under this Section 2.14 or any
provision of this Agreement, each Lender, the Swing Line Bank and the Issuing
Bank agree that if any Taxes or Other Taxes are imposed and required by law to
be paid or to be withheld from any amount payable to such Lender or its
Applicable Lending Office, the Swing Line Bank or the Issuing Bank, as the case
may be, with respect to which any Borrower would be obligated pursuant to this
Section 2.14 to increase any amounts payable to such Lender, the Swing Line Bank
or the Issuing Bank, as the case may be, or to pay any such Taxes or Other
Taxes, such Lender shall use reasonable efforts to select an alternative
Applicable Lending Office, the Swing Line Bank shall use reasonable efforts to
select an alternative office for purposes of making and receiving payments in
respect of Swing Line Advances, and the Issuing Bank shall use reasonable
efforts to select an alternative office for purposes of issuing and receiving
payments in respect of Letters of Credit, as the case may be, which would not
result in the imposition of such Taxes or Other Taxes; provided, however, that
none of the Lenders, the Swing Line Bank or the Issuing Bank shall be obligated
to select any such alternative office if such Lender, the Swing Line Bank or the
Issuing Bank, as the case may be, determines that (i) as a result of such
selection it would be in violation of an applicable law, regulation, or treaty,
or would incur additional costs or expenses or (ii) such selection would be
inadvisable for regulatory reasons or inconsistent with the interests of such
Lender, the Swing Line Bank or the Issuing Bank, as the case may be.
(g) Each Lender, the Swing Line Bank and the Issuing Bank agree with
the Borrowers that it will take all reasonable actions by all usual means (i) to
secure and maintain all benefits available to it under the provisions of any
applicable tax treaty concluded by the United States of America to which it may
be entitled, if such benefit would reduce the amount payable by the Borrowers in
accordance with this Section 2.14, (ii) otherwise to cooperate with the
Borrowers to minimize the amount payable by any Borrower pursuant to this
Section 2.14 and (iii) to assist the Borrowers, at the expense of the Borrowers,
in contesting any such Taxes or Other Taxes; provided, however, that none of the
Lenders, the Swing Line Bank or the Issuing Bank, as the case may be, shall be
obliged to disclose to any Borrower any information regarding its tax affairs or
tax computations nor to reorder its tax affairs or tax planning pursuant hereto.
(h) So long as no Default or Event of Default shall have occurred and
be continuing, STK may, within the 30-day period commencing on the day that any
Borrower receives a demand for the payment of Taxes or Other Taxes from any
Lender pursuant to this Section 2.14, demand that the Lender making such demand
be replaced with a Person that is an Eligible Assignee selected by STK and
subject to consent by the Agent. Upon any such demand by STK, if the Agent
shall have consented to the Eligible Assignee selected by STK, the Lender that
made a demand pursuant to this Section 2.14 shall execute and deliver an
Assignment and Acceptance to the Agent pursuant to which such Lender shall
assign all of its rights and obligations under this Agreement and the other Loan
Documents to the Eligible Assignee selected by STK.
(i) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers contained
in this Section 2.14 shall survive the payment in full of the Obligations
hereunder for a period expiring concurrently with the expiration of the statute
of limitations applicable to claims made by the tax authorities to collect Taxes
or Other Taxes.
SECTION 2.15. Payments on Business Days. Whenever any payment hereunder
shall be stated to be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest or commitment
fee, as the case may be; provided, however, that if such extension would cause
payment of interest on or principal of Eurocurrency Rate Advances to be made in
the next following month, such payment shall be made on the next preceding
Business Day.
SECTION 2.16. Sharing of Payments, Etc. If any Lender or the Issuing Bank
shall obtain any payment, whether voluntary, involuntary, through the exercise
of any right of setoff, or otherwise (other than pursuant to Section 2.04(a),
2.11, 2.14, 3.05(b), 3.05(c), 3.07, or 9.04(b)) in excess of its ratable share
of payments on account of the Revolving Advances or Letter of Credit Liability
owing to all the Lenders, such Lender or the Issuing Bank, as the case may be,
shall forthwith purchase from the other Lenders such participations in the
Revolving Advances or Letter of Credit Liability owing to them as shall be
necessary to cause such purchasing Lender or the Issuing Bank, as the case may
be, to share the excess payment ratably with each of them; provided, however,
that if all or any portion of such excess payment is thereafter recovered from
such purchasing Lender or the Issuing Bank, as the case may be, such purchase
from each Lender shall be rescinded and such Lender or the Issuing Bank, as the
case may be, shall repay to the purchasing Lender or the Issuing Bank, as the
case may be, the purchase price to the extent of such recovery, together with an
amount equal to such Lender's ratable share (according to the proportion of
(i) the amount of such Lender's required repayment to (ii) the total amount so
recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender or the Issuing Bank, as the case may be, in
respect of the total amount so recovered. The Borrower agrees that any Lender
or the Issuing Bank, as the case may be, purchasing a participation from another
Lender pursuant to this Section 2.16, Section 3.04 or 9.09(d) may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of setoff) with respect to such participation as fully as if such
Lender or the Issuing Bank, as the case may be, were the direct creditor of the
Borrower in the amount of such participation.
SECTION 2.17. Use of Proceeds. The Borrowers shall use the proceeds of
Advances and Auction Advances for the general working capital needs of the
Borrowers and for other general corporate purposes of the Borrowers.
ARTICLE III
AMOUNT AND TERMS OF LETTERS OF
CREDIT AND PARTICIPATIONS THEREIN
SECTION 3.01. Letters of Credit.
(a) The Issuing Bank agrees, on the terms and conditions hereinafter
set forth, to Issue for the account of one or more of the Borrowers, one or more
Letters of Credit denominated in Dollars or an Alternative Currency from time to
time during the period from the Closing Date until the Termination Date in an
aggregate undrawn amount (including the Equivalent Amount of Letters of Credit
denominated in Alternative Currencies) not to exceed at any time $40,000,000,
each such Letter of Credit upon its Issuance to expire on or before the earlier
of (x) the date which occurs one year from the date of its Issuance or (y) the
date which occurs one year after the Termination Date; provided, however, that
the Issuing Bank shall not be obligated to Issue any Letter of Credit if:
(i) after giving effect to the Issuance of such Letter of Credit,
(A) the then-existing Aggregate Exposure Amount shall exceed the lesser of
(1) the total of the Commitments of the Lenders, and (2) the then-applicable
Aggregate Borrowing Base, or (B) the then-existing Exposure Amount of any
Borrower shall exceed the then-applicable Individual Borrowing Base of such
Borrower or (C) the then-outstanding aggregate principal amount of all
Revolving Advances and Letter of Credit Liabilities denominated in
Alternative Currencies, in respect of all Borrowers in the aggregate, shall
exceed the Alternative Currency Sublimit;
(ii) the Agent or the Majority Lenders shall have notified the
Issuing Bank and the Borrowers that no further Letters of Credit are to be
Issued by the Issuing Bank due to a continuing failure to meet any of the
applicable conditions set forth in Article IV, and such notice has not
expired or been withdrawn by the Agent or the Majority Lenders;
(iii) any order, judgment or decree of any Governmental Authority
or arbitrator shall by its terms purport to enjoin or restrain the Issuing
Bank from issuing such Letter of Credit, or any requirement of law or
regulation applicable to the Issuing Bank or any request or directive
(whether or not having the force of law) from any Governmental Authority
with jurisdiction over the Issuing Bank shall prohibit, or request that the
Issuing Bank refrain from, the issuance of letters of credit generally or
such Letter of Credit in particular or shall impose upon the Issuing Bank
with respect to such Letter of Credit any restriction, reserve or capital
requirement (for which the Issuing Bank is not otherwise compensated) not in
effect on the Closing Date and which results in an unreimbursed loss, cost
or expense that the Issuing Bank in good faith deems material, or shall
otherwise impose upon the Issuing Bank any unreimbursed loss, cost or
expense which was not applicable on the Closing Date and which the Issuing
Bank in good faith deems material;
(iv) any requested Letter of Credit does not provide for drafts,
or is not otherwise in form and substance acceptable to the Issuing Bank;
(v) any Letter of Credit is for the purpose of supporting the
issuance of any letter of credit by any Person other than the Issuing Bank;
or
(vi) in respect of any Letter of Credit to be denominated in an
Alternative Currency, the Issuing Bank has determined that it is unable to
fund obligations in that currency.
Within the limits of the obligations of the Issuing Bank set forth above, the
Borrowers may request the Issuing Bank to Issue one or more Letters of Credit,
reimburse the Issuing Bank for payments made thereunder pursuant to Section
3.03(a), and request the Issuing Bank to Issue one or more additional Letters of
Credit under this Section 3.01.
(b) The Borrower hereby requests that the Letters of Credit described
on Schedule 3.01(b) hereto (the "Prior Letters of Credit") be deemed Letters of
Credit Issued hereunder. Each of the Lenders acknowledges and agrees that the
Prior Letters of Credit constitute Letters of Credit outstanding under this
Agreement on and as of the Closing Date. The Lenders hereby severally and
unconditionally agree to participate in the Prior Letters of Credit under the
terms of Section 3.04 as of the Closing Date.
SECTION 3.02. Issuing the Letters of Credit. (a) Each standby Letter of
Credit shall be Issued on at least four Business Days' notice and each
commercial documentary Letter of Credit shall be Issued on at least three
Business Days' notice, in each case from the applicable Borrower to the Issuing
Bank, specifying the date, amount (and applicable Alternative Currency, if not
denominated in Dollars), expiry and beneficiary thereof, accompanied by such
application and agreement for letter of credit as the Issuing Bank may from time
to time specify to such Borrower, each in form and substance satisfactory to the
Issuing Bank. On the date specified by the applicable Borrower in such notice
and upon fulfillment of the applicable conditions set forth in Section 3.01 and
Article IV hereof, the Issuing Bank will Issue such Letter of Credit in the form
specified in such notice and such application and agreement for letter of credit
and will promptly notify the Agent thereof.
(b) The Borrowers each acknowledge and agree that the Issuing Bank
may, in connection with any Evergreen Letter of Credit, at its election (or as
required by the Agent at the direction of the Majority Lenders) deliver any
notices of termination or other communications to any Letter of Credit
beneficiary or transferee, or take any other action as necessary or appropriate
in order to cause the expiry date of such Letter of Credit to be a date not
later than the date that is one year after the Termination Date.
SECTION 3.03. Reimbursement Obligations.
(a) Notwithstanding any provisions to the contrary in any application
and agreement for letter of credit applicable to any Letter of Credit, each
Borrower requesting a Letter of Credit shall:
(i) on the date of any payment by the Issuing Bank on the Letter
of Credit (the "Honor Date") pay to the Issuing Bank an amount equal to, and
in reimbursement for, each amount which the Issuing Bank pays under any such
Letter of Credit, in the currency in which such Letter of Credit is payable;
except that the Issuing Bank may, at its election ("Conversion Election"),
require any payment in respect of any Letter of Credit payable in an
Alternative Currency to be made in Dollars at the Spot Rate in effect for
the Honor Date relating thereto; and
(ii) pay to the Issuing Bank interest on any amount remaining
unpaid under clause (i) above from the Honor Date until such amount is
reimbursed in full to the Issuing Bank pursuant to clause (i) above, payable
on demand, in the currency applicable under clause (i) above, at a
fluctuating rate per annum equal to the Default Rate in effect from time to
time.
(b) All amounts to be reimbursed to the Issuing Bank in accordance
with subsection (a) above may, subject to the limitations set forth in
Section 2.01, be paid from the proceeds of Revolving Advances or Swing Line
Advances, and, solely for such purposes, the minimum borrowing amount
limitations set forth in Section 2.01 shall not be applicable; provided,
however, that Swing Line Advances may not be used to reimburse obligations
relating to any Letter of Credit payable in an Alternative Currency, unless the
Issuing Bank shall have made a Conversion Election as to such Letter of Credit.
The Borrowers hereby authorize the Lenders to make pursuant to Section 2.02(a)
Revolving Advances and the Swing Line Bank to make pursuant to Section 2.02(b)
Swing Line Advances, in each case which are in the amounts of the reimbursement
obligations of the applicable Borrowers set forth in subsection (a) above, and
further authorize (without creating any obligation so to do) the Agent (i) to
give the Lenders, pursuant to Section 2.02(a), a Notice of Borrowing with
respect to the Borrowing comprised of such Advances (which shall be Base Rate
Advances), (ii) to give the Swing Line Bank, pursuant to Section 2.02(b), a
Notice of Swing Line Advance, if the applicable reimbursement obligation under
subsection (a) above is less than or equal to $3,000,000, and (iii) to
distribute the proceeds of such Advances to the Issuing Bank to pay such
amounts. The Borrowers each agree that all such Advances so made shall be
deemed to have been requested by them, respectively, and direct that all
proceeds thereof shall be used to pay such reimbursement obligations under
subsection (a) above.
SECTION 3.04. Participations Purchased by the Lenders. (a) On the date of
Issuance of each Letter of Credit the Issuing Bank shall be deemed irrevocably
and unconditionally to have sold and transferred to each Lender without recourse
or warranty, and each Lender shall be deemed to have irrevocably and
unconditionally purchased and received from such Issuing Bank, an undivided
interest and participation, to the extent of such Lender's Percentage, in effect
from time to time, in such Letter of Credit and all Letter of Credit Liability
relating to such Letter of Credit and all Loan Documents securing, guaranteeing,
supporting or otherwise benefiting the payment of such Letter of Credit
Liability. Promptly after the end of each calendar month, the Agent will notify
each Lender of the Letters of Credit Issued during the prior month and of their
dates of Issue, amounts, currencies, expiries and reference numbers.
(b) In the event that any reimbursement obligation under
Section 3.03(a) is not paid when due to the Issuing Bank with respect to any
Letter of Credit, including by virtue of Section 3.03(b), the Issuing Bank will
promptly notify the Agent to that effect, and the Agent will promptly notify the
Lenders of the amount and currency of such reimbursement obligation and each
Lender shall immediately pay to the Agent for the account of the Issuing Bank,
in lawful money of the United States, or, in the case of a Letter of Credit
denominated in an Alternative Currency, in such Alternative Currency (unless the
Issuing Bank shall have made a Conversion Election, in which event each Lender
shall immediately pay the Equivalent Amount in Dollars, based upon the Spot Rate
in effect for the applicable Honor Date), subject to subsection (e) of this
Section and in same day funds, an amount equal to such Lender's Commitment
Percentage then in effect of the amount of such unpaid reimbursement obligation
with interest at the Federal Funds Rate for each day after such notification
until such amount is paid to the Agent.
(c) Promptly after the Issuing Bank receives a payment on account of a
reimbursement obligation with respect to any Letter of Credit, the Issuing Bank
shall promptly pay to the Agent, and the Agent shall promptly pay to each Lender
which funded its participation therein, in the kind of funds and currency so
received, an amount equal to such Lender's ratable share thereof.
(d) Upon the request of any Lender, the Agent will furnish to such
Lender copies of any Letter of Credit and any application and agreement for
letter of credit and other documents related thereto as may be reasonably
requested by such Lender.
(e) The obligation of each Lender to make payments as and when
required under subsection (b) above shall be unconditional and irrevocable and
shall be made under all circumstances, including, without limitation, any of
the circumstances referred to in Section 3.06(b).
(f) If any payment received on account of any reimbursement obligation
with respect to a Letter of Credit and distributed to a Lender as a participant
under Section 3.04(c) is thereafter recovered from the Issuing Bank in
connection with any Insolvency Proceeding relating to any Borrower, each Lender
which received such distribution shall, upon demand by the Agent, repay to the
Issuing Bank such Lender's ratable share of the amount (and in the currency) so
recovered together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered) of any interest or other amount
paid or payable by the Issuing Bank in respect of the total amount so recovered.
SECTION 3.05. Letter of Credit Fees. (a) Each Borrower hereby severally
agrees to pay to each Lender (in accordance with its Percentage) a letter of
credit fee with respect to each standby Letter of Credit issued for its account
on the maximum amount available to be drawn under such Letter of Credit from
time to time after giving effect to scheduled reductions thereof (the
determination of such maximum amount to assume compliance with all conditions
for drawing) from the date of Issuance of such Letter of Credit until the expiry
date of such Letter of Credit at the rate per annum equal to 1.25%; provided,
however, that at any and all times as the Utilization Rate is greater than 33_%,
the applicable rate per annum shall be 1.50%; such fee payable in arrears on the
last of each March, June, September and December in each year, commencing
September 30, 1994 through the Letter of Credit Termination Date, and on the
Letter of Credit Termination Date.
(b) Each Borrower hereby severally agrees to pay to the Issuing Bank,
for its own account, in addition to the fees described in subsection (c) of this
Section, an issuance fee for each commercial documentary Letter of Credit Issued
hereunder equal to the greater of (i) $500 and (ii) the amount that is 0.25% of
the face amount of such commercial documentary Letter of Credit such fee payable
on the date of Issuance of each such Letter of Credit.
(c) Each Borrower severally agrees to pay to the Issuing Bank, for its
own account and on demand, sums equal to standard fees (other than its issuance
fee), charges and expenses that such Issuing Bank may impose, pay or incur in
connection with the Issuance, amendment, administration, transfer or
cancellation of any or all Letters of Credit issued for the account of such
Borrower or in connection with any payment by such Issuing Bank thereunder. The
Issuing Bank will give STK notice of any change in its standard fees, charges or
expenses payable by the Borrowers to the Issuing Bank pursuant to this
Section 3.05(c); provided, however, that any failure by the Issuing Bank to give
such notice shall not affect the Borrowers' obligations under this
Section 3.05(c) to pay the Issuing Bank's reasonable current standard fees,
charges or expenses in accordance herewith.
(d) All fees payable in respect of Letters of Credit shall be
nonrefundable.
SECTION 3.06. Indemnification; Nature of the Issuing Bank's Duties. (a)
The Borrowers agree to indemnify and save harmless the Agent, the Issuing Bank
and each Lender from and against any and all claims, demands, liabilities,
damages, losses, costs, charges and expenses (including reasonable Attorney
Costs) which the Agent, the Issuing Bank or such Lender may incur or be subject
to as a consequence, direct or indirect, of (i) the Issuance of any Letter of
Credit or (ii) any action or proceeding relating to a court order, injunction,
or other process or decree restraining or seeking to restrain the Issuing Bank
from paying any amount under any Letter of Credit.
(b) The obligations of the Borrowers hereunder with respect to Letters
of Credit shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms hereof under all circumstances, including, without
limitation, any of the following circumstances:
(i) any lack of validity or enforceability of any Letter of
Credit or Loan Document or any agreement or instrument relating thereto;
(ii) the existence of any claim, setoff, defense or other right
which any Borrower may have at any time against the beneficiary, or any
transferee, of any Letter of Credit, or the Issuing Bank, any Lender, or any
other Person;
(iii) any draft, 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;
(iv) any lack of validity, effectiveness, or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part;
(v) any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any Letter of Credit or
of the proceeds thereof;
(vi) the release or non-perfection of any Collateral or the
amendment, modification or termination of any Collateral Document;
(vii) any failure of the beneficiary of a Letter of Credit to
strictly comply with the conditions required in order to draw upon any
Letter of Credit; or any payment is made by the Issuing Bank under any
Letter of Credit to any Person purporting to be a trustee in bankruptcy,
debtor-in-possession, assignee for the benefit of creditors, liquidator,
receiver or other representative of or successor to any beneficiary or any
transferee of any Letter of Credit;
(viii) any misapplication by the beneficiary of any Letter of
Credit of the proceeds of any drawing under such Letter of Credit; or
(ix) any other circumstance or happening whatsoever, whether or
not similar to the foregoing;
provided, that, notwithstanding the foregoing, the Issuing Bank shall not be
relieved of any liability it may otherwise have as a result of its gross
negligence or willful misconduct.
SECTION 3.07. Increased Costs. (a) Change in Law. If any change after the
Closing Date in any law or regulation or in the interpretation thereof by any
court or administrative or governmental authority charged with the
administration thereof shall either (i) impose, modify or deem applicable any
reserve, special deposit or similar requirement against letters of credit issued
by the Issuing Bank or (ii) impose on the Issuing Bank or any Lender any other
condition regarding letters of credit or, in the case of such Lender, its
participation hereunder in Letters of Credit; and the result of any event
referred to in the preceding clause (i) or (ii) shall be to increase the cost to
the Issuing Bank of Issuing or maintaining or, in the case of such Lender,
having a participation in Letters of Credit, then, upon demand by the Issuing
Bank or such Lender (with a copy to the Agent), the Borrowers shall promptly
(and in any event within five Business Days) pay to the Issuing Bank or such
Lender from time to time as specified by such Issuing Bank or such Lender (with
a copy to the Agent) additional amounts which shall be sufficient to compensate
the Issuing Bank or such Lender for such increased cost. A certificate as to
such increased cost, and amount thereof, incurred by the Issuing Bank or any
Lender as a result of any event mentioned in clause (i) or (ii) above, shall be
submitted by the Issuing Bank or such Lender to the Borrowers and the Agent,
which certificate shall set out in reasonable detail the calculation of such
amounts and be conclusive and binding for all purposes, absent manifest error.
(b) Capital. If, at any time after the Closing Date, the Issuing Bank
or any Lender determines that compliance with any law or regulation as adopted,
amended or otherwise modified after the Closing Date or with any written
guideline or request from any central bank or other governmental authority
published after the Closing Date (a copy of which shall be sent by the Issuing
Bank or such Lender, as the case may be, to the Borrowers), whether or not
having the force of law, has or would have the effect of reducing the rate of
return on the capital of the Issuing Bank or such Lender or any corporation
controlling the Issuing Bank or such Lender (whether by increasing the amount of
capital required or expected to be maintained by the Issuing Bank or such Lender
or any corporation controlling the Issuing Bank or such Lender or otherwise) as
a consequence of, or with reference to, such Issuing Bank's commitment to issue,
the issuance of, or, with respect to such Lender's commitment, to participate
in, any Letter of Credit hereunder below the rate that the Issuing Bank or such
Lender or such other corporation could have achieved but for compliance
therewith (taking into account the policies of the Issuing Bank, such Lender or
corporation with regard to capital), then the Borrowers shall from time to time,
upon demand by the Issuing Bank or such Lender (with a copy of such demand to
the Agent), immediately pay to the Issuing Bank or such Lender additional
amounts sufficient to compensate the Issuing Bank or such Lender or other
corporation for such reduction. A certificate as to such amounts shall be
submitted to the Borrowers and the Agent by the Issuing Bank or such Lender, as
the case may be, which certificate shall be conclusive and binding for all
purposes, absent manifest error.
(c) Survival. Without prejudice to the survival of any other
agreement of the Borrowers hereunder, the agreements and obligations of the
Borrowers contained in this Section 3.07 shall survive the payment of all
Obligations (after the occurrence of the Termination Date) for a period of 180
days.
SECTION 3.08. Uniform Customs and Practice. The Uniform Customs and
Practice for Documentary Credits as most recently published by the International
Chamber of Commerce ("UCP") shall in all respects be deemed a part of this
Article III as if incorporated herein and shall apply to the Letters of Credit.
SECTION 3.09. Cash Collateral. Each Borrower severally agrees, upon the
Termination Date, to pledge to the Agent for the benefit of the Lenders,
pursuant to its Pledge Agreement, cash collateral in an amount such that the
Outstanding Letter of Credit Liability is zero, and to maintain such pledge and,
to the extent necessary, make further pledges, such that at all times thereafter
such that the Outstanding Letter of Credit Liability remains zero.
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.01. Conditions Precedent to Initial Borrowing, Swing Line
Advance, Auction Advance or Letter of Credit. The obligation of each Lender to
make its Revolving Advance on the occasion of the initial Borrowing, the
obligation of the Swing Line Bank to make its Swing Line Advance on the occasion
of the initial Swing Line Advance, the obligation of any Lender to make its
Auction Advance on the occasion of the initial Auction Borrowing and the
obligation of the Issuing Bank to Issue its initial Letter of Credit, are
subject to the conditions precedent that on or before the earlier of September
30, 1994, and the day of such Borrowing, Swing Line Advance, Auction Borrowing
or Letter of Credit, if any, the Agent shall have received the following, each
document dated September 30, 1994 (unless otherwise specified below), and, each
document, in form and substance satisfactory to the Agent and each Lender (which
satisfaction shall be deemed to exist upon execution and delivery by such Lender
of its respective counterpart signature pages) and in sufficient copies for each
Lender, the Swing Line Bank and the Issuing Bank:
(a) Certified copies of (i) the resolutions of (A) the Board of
Directors of each Borrower approving this Agreement and each other Loan Document
to which it is or is to be a party and the transactions contemplated hereby and
thereby, and (ii) all documents evidencing other necessary corporate action and
governmental approvals with respect to each Loan Document and the transactions
contemplated thereby.
(b) A certificate of the Secretary or an Assistant Secretary of each
Borrower certifying the names and true signatures of the officers of such
Borrower authorized to sign each Loan Document to which it is or is to be a
party and the other documents to be delivered by it hereunder which certificates
may be conclusively relied on by the Agent until the Agent shall receive a
further certification of the Secretary or Assistant Secretary of such Borrower
cancelling or amending the prior certificate of such Borrower and submitting the
names and signatures of the officers named in such further certificate.
(c) The Borrowers shall have paid all accrued and unpaid fees, costs
and expenses to the extent then due and payable on the Closing Date; including
any such costs, fees and expenses arising under or referenced in Sections
2.04(a), 2.04(d) and 9.04.
(d) A favorable opinion of Shearman & Sterling, counsel for the
Borrowers and a favorable opinion of the Borrowers' company counsel, in
substantially the form of Exhibits J-1 and J-2, respectively, and as to such
other matters as any Lender through the Agent may reasonably request.
(e) A Borrowing Base Certificate, dated and current as of September 2,
1994, together with a report describing any Discounts of Product Transfer
Agreements and sales of Accounts occurring after such date and prior to the
Closing Date.
(f) A certificate signed by a Responsible Officer of STK, dated as of
the Closing Date, stating that:
(i) the representations and warranties contained in Article V are
true and correct on and as of such date, as though made on and as of such
date;
(ii) no Default or Event of Default exists or would result from
the initial Borrowing; and
(iii) there has occurred since December 31, 1993, no event or
circumstance that has had or reasonably could be expected to have a Material
Adverse Effect.
(g) Such other documents and materials as the Agent or any Lender
through the Agent may request.
SECTION 4.02. Conditions Precedent to All Borrowings, All Swing Line
Advances and All Issuances. The obligation of each Lender to make an Advance on
the occasion of any Borrowing (including the initial Borrowing), the obligation
of the Swing Line Bank to make any Swing Line Advance (including the initial
Swing Line Advance), and the obligation of the Issuing Bank to Issue any Letter
of Credit (including the initial Letter of Credit), shall be subject to the
conditions precedent that on the date of such Borrowing, Swing Line Advance or
Issuance: (a) the following statements shall be true and each of the giving of
the applicable Notice of Borrowing, the applicable Notice of Swing Line Advance
or the applicable request for Issuance (as the case may be) and the acceptance
by any Borrower of the proceeds of such Borrowing or Swing Line Advance or the
Issuance of such Letter of Credit shall constitute a representation and warranty
by such Borrower that on the date of such Borrowing, Swing Line Advance or
Issuance, as the case may be, such statements are true:
(i) each representation and warranty contained in Section 5.01 hereof
and Section 4 of each Security Agreement is true and correct in all material
respects on and as of the date of such Borrowing, Swing Line Advance or
Issuance, before and after giving effect to such Borrowing or Swing Line
Advance and to the application of the proceeds therefrom or to such Issuance
(as the case may be), as though made on and as of such date; and
(ii) no event has occurred and is continuing, or would result from such
Borrowing or Swing Line Advance or from the application of the proceeds
therefrom or from such Issuance (as the case may be) which constitutes an
Event of Default or a Default;
and (b) the Agent shall have received such other approvals, opinions or
documents relating to the perfection or priority of security interests or liens
in the Collateral or the validity or enforceability of any Loan Documents as any
Lender through the Agent may reasonably request.
SECTION 4.03. Conditions Precedent to Each Auction Borrowing. The
obligation of each Lender which is to make an Auction Advance on the occasion of
an Auction Borrowing (including the initial Auction Borrowing) to make such
Auction Advance as part of such Auction Borrowing is subject to the conditions
precedent that (i) the Agent shall have received the written confirmatory
Competitive Bid Request with respect thereto, (ii) on or before the date of such
Auction Borrowing, but prior to such Auction Borrowing, the Agent shall have
received an original executed copy of each acceptance notice given by the
applicable Borrower with respect to such Auction Borrowing under Section
2.03(f), indicating the principal amount of the Auction Advance to be covered
thereby and otherwise on such terms as were agreed to for such Auction Advance
in accordance with Section 2.03, and (iii) on the date of such Auction Borrowing
the following statements shall be true (and each of the giving of the applicable
Competitive Bid Request and the acceptance by the applicable Borrower of the
proceeds of such Auction Borrowing shall constitute a representation and
warranty by such Borrower that on the date of such Auction Borrowing such
statements are true):
(a) The representations and warranties contained in Section 5.01
hereof and Section 4 of each Security Agreement are true and correct in all
material respects on and as of the date of such Auction Borrowing, before and
after giving effect to such Auction Borrowing and to the application of the
proceeds therefrom, as though made on and as of such date, and
(b) No event has occurred and is continuing, or would result from such
Auction Borrowing or from the application of the proceeds therefrom, which
constitutes an Event of Default or Default.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties of the Borrowers. Each of the
Borrowers represents and warrants as follows:
(a) Existence, Etc. Each Borrower, together with each of its Material
Subsidiaries, is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation, is duly
qualified as a foreign corporation and, as to any Borrower or Material Domestic
Subsidiary, is in good standing in each jurisdiction as to which the location of
its assets or the nature of its business makes qualification necessary (except
where the failure to do so would not have a Material Adverse Effect), and has
all power, corporate or otherwise, to conduct its business and to own, or hold
under lease, its assets (except where the failure to have such power would not
have a Material Adverse Effect), and to execute and deliver, and to perform all
of its obligations under, each of the Loan Documents to which it is or will be a
party; and no Material Subsidiary that is a Foreign Subsidiary has received from
any Governmental Authority any notice that it is not authorized to conduct its
business or own its assets under the laws of such Governmental Authority.
(b) Subsidiaries. Set forth in Schedule 5.01(b) is a complete and
accurate list of all of the Subsidiaries of each such Borrower and of all
Material Domestic Subsidiaries, showing as of the Closing Date (as to each such
Subsidiary) the legal name of such Subsidiary, the jurisdiction of its
organization, the number of shares of each class of its capital stock authorized
to be issued and the amount outstanding, and the number and percentage of the
outstanding shares of each such class owned directly or indirectly by each of
the Borrowers, and the number of shares covered by all outstanding options,
warrants, rights of conversion or purchase, and similar rights at the Closing
Date. No such shares, options, warrants or other rights are in existence except
as set forth on Schedule 5.01(b). All of the outstanding shares of capital
stock of each Borrower and each of its Material Subsidiaries has been duly
authorized and validly issued and is fully paid and nonassessable. As of the
Closing Date, each Borrower is the record and beneficial owner of all of that
portion of the presently existing shares ascribed to its ownership in
Schedule 5.01(b), in each case free and clear of all Liens except for Permitted
Liens.
(c) Authorization. The execution, delivery and performance by each
Borrower of each Loan Document to which it is or will be a party are within such
Borrower's corporate powers, have been duly authorized by all necessary
corporate action, do not contravene (i) such Borrower's charter or bylaws,
(ii) any law, rule, regulation (including, without limitation, Regulations G, T,
U or X of the Board of Governors of the Federal Reserve System), order, writ,
judgment, injunction, decree, determination or award binding on or affecting
such Borrower or any of its properties, or (iii) any contractual restriction
binding on or affecting such Borrower or any of its properties, except, in each
case, where any such contravention would not cause a Material Adverse Effect or
render any Loan Document unenforceable against such Borrower or any third party,
and do not result in or require the creation of any Lien (other than pursuant
hereto or pursuant to the Collateral Documents) upon or with respect to any of
its material properties; and no Borrower is in violation of any such law, rule,
regulation, order, writ, judgment, injunction, decree, determination, award or
restriction the violation of which would cause a Material Adverse Effect.
(d) Approvals. No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body or other
Person is required for the due execution, delivery and performance by any
Borrower of any Loan Document to which it is or will be a party, except for
those which relate to filings and recordings required to perfect the Liens
granted to the Agent pursuant to the Collateral Documents, each of which has
been or will be duly made and except for those set forth on Schedule 5.01(d),
each of which relates solely to performance, is obtainable in the ordinary
course without delay and, with respect to which if not so obtained, would not
have a Material Adverse Effect, or impair the Agent's, the Issuing Bank's, the
Swing Line Bank's or any Lender's rights and remedies hereunder or under any
Loan Document.
(e) Enforceability. This Agreement is the legal, valid and binding
obligation of each Borrower enforceable against such Borrower in accordance with
its terms. Each other Loan Document to which any Borrower is or will be a party
is or will be (when executed and delivered) the legal, valid and binding
obligation of such Borrower enforceable against such Borrower in accordance with
its terms.
(f) Properties. Each Borrower has good title to all of the presently
existing Collateral covered by the Collateral Documents to which it is a party,
free and clear of all Liens except for Liens created under the Collateral
Documents and Permitted Liens.
(g) Financial Statements. The Consolidated balance sheet of STK and
its Subsidiaries as at December 31, 1993 and the related Consolidated statements
of income and stockholder's equity and changes in cash flow of STK and its
Subsidiaries for the Fiscal Year then ended, audited by Price Waterhouse, copies
of each of which have been furnished to each Lender, fairly present the
Consolidated financial condition of STK and its Subsidiaries as at such date and
the Consolidated results of operations of STK and its Subsidiaries for the
period ended on such date, all in accordance with GAAP consistently applied,
except as indicated therein.
(h) Material Adverse Effect. Since December 31, 1993, there has
arisen no event or circumstance that has had a Material Adverse Effect.
(i) Litigation. Except as set forth on Schedule 5.01(i), there is no
action, suit, or proceeding pending or, to the best of such Borrower's
knowledge, threatened, in any court or a governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, (i) that relates
to any aspect of the transactions contemplated by any Loan Document or (ii) that
relates to such Borrower or any of its Subsidiaries or any of the properties of
such Borrower or any of its Subsidiaries and which, if adversely determined,
could have a Material Adverse Effect.
(j) Taxes. Except as is set forth on Schedule 5.01(j), each Borrower
and each of its Subsidiaries have filed all tax returns (federal, state and
local) required to be filed by it and have paid or caused to be paid all taxes
shown thereon to be due and payable for the periods covered thereby, including
interest and penalties, other than (i) taxes being contested in good faith and
by appropriate proceedings with respect to which adequate reserves have been
established in accordance with GAAP and (ii) taxes for which the failure to pay
would not have a Material Adverse Effect and would not result in any Lien upon
any of the Collateral that is, or will with the giving of notice or passage of
time or both, become, prior to any Lien under the Collateral Documents.
(k) Information. All information, exhibits and reports furnished in
writing by or on behalf of each Borrower or any of its Subsidiaries and made
available to the Agent or any Lender pursuant to Article IV hereof or
Section 6.04 relating to the condition (financial or otherwise), operations,
business, properties or prospects of such Borrower or such Subsidiary or
otherwise in connection with the transactions contemplated by the Loan
Documents, when taken as a whole, are true, correct and complete and not
misleading in any material respect.
(l) Indebtedness. Schedule 5.01(l) sets forth, as of the Closing
Date, all Debt and Contingent Obligations of each Borrower and its Subsidiaries
other than (i) Debt owing to any one creditor in an aggregate amount less than
$5,000,000 and (ii) Contingent Obligations which individually are less than
$1,000,000.
(m) Lease Obligations. Schedule 5.01(m) sets forth, as of the Closing
Date, a complete and accurate list of all current obligations of each Borrower
or any of its Subsidiaries as lessee for the payment of rental or hire for any
property under any Operating Lease entered into after December 25, 1992, having
a term of one year or more and which has base annual rental payments in excess
of $3,000,000 per year.
(n) Strikes, Acts of God. Neither the business nor the properties of
any Borrower or any of its Subsidiaries are affected by any strike, lockout,
fire, explosion, earthquake, embargo, act of God or of the public enemy or other
casualty which could have a Material Adverse Effect.
(o) ERISA Events. Except as set forth at Schedule 5.01(o), no ERISA
Event has occurred with respect to any Plan or is reasonably expected to occur
with respect to any Plan.
(p) Multiemployer Plans. Except as set forth at Schedule 5.01(o),
neither any Borrower nor any ERISA Affiliate has incurred or is reasonably
expected to incur any material Withdrawal Liability to any Multiemployer Plan.
(q) Plan Terminations. Except as set forth at Schedule 5.01(o),
neither any Borrower nor any ERISA Affiliate has been notified by the sponsor of
a Multiemployer Plan that such Multiemployer Plan is in reorganization or has
been terminated, within the meaning of Title IV of ERISA and no Multiemployer
Plan is reasonably expected to be in reorganization or to be terminated, within
the meaning of Title IV of ERISA.
(r) Margin Stock. None of the Borrowers nor any of their respective
Subsidiaries is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U issued
by the Board of Governors of the Federal Reserve System) and no proceeds of any
Advance or Auction Advance will be used (i) to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock, or (ii) to acquire any security in any transaction which is
subject to Section 13 or 14 of the Securities and Exchange Act of 1934.
(s) Regulated Entities. None of the Borrowers, any Person controlling
any Borrower, or any Subsidiary of any Borrower, is (a) an "Investment Company"
within the meaning of the Investment Company Act of 1940; or (b) subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, any state public utilities code, or any
other Federal or state statute or regulation limiting its ability to incur Debt.
(t) Copyrights, Patents, Trademarks and Licenses, Etc. STK or its
Subsidiaries own or are licensed or otherwise have the right to use all of the
patents, trademarks, service marks, trade names, copyrights, franchises,
authorizations and other rights that are reasonably necessary for the operation
of their respective material businesses, without conflict with the rights of any
other Person. To the best knowledge of the Borrowers, no slogan or other
advertising device, product, process, method, substance, part or other material
now employed, or now contemplated to be employed by the Borrowers or any of
their Subsidiaries infringes upon any rights held by any other Person; except as
specifically disclosed in Schedule 5.01(i), no claim or litigation regarding any
of the foregoing is pending or, to the best knowledge of the Borrowers,
threatened, and no patent, invention, device, application, principle is, to the
knowledge of the Borrowers, pending or proposed, which, in any case, could
reasonably be expected to have a Material Adverse Effect.
(u) Environmental Laws. Except as set forth on Schedule 5.01(u),
(i) each Borrower and its Subsidiaries is in compliance in all respects with the
provisions of all Environmental Laws relating to any real property owned or
occupied by such Borrower or any of its Subsidiaries and the ownership, use,
operation and occupancy thereof and (ii) no Borrower nor any Subsidiary of any
Borrower nor, to the knowledge of each Borrower, any other Person, has engaged
in any Environmental Activity, nor, to the knowledge of each Borrower, has any
Environmental Activity otherwise occurred, in violation of any provision of any
applicable Environmental Laws, in each case which could create any liability,
absolute or contingent, for any Borrower or any of its Subsidiaries in excess of
$5,000,000 for any one such failure to comply or violation or in excess of
$10,000,000 for all such failures to comply or violations. Except as set forth
on Schedule 5.01(u), no Borrower nor any Subsidiary of any Borrower is engaged
in any Environmental Activity which could materially impair the value of the
Collateral of such Borrower taken as a whole.
(v) Filings. Except as set forth on Schedule 5.01(v), to ensure the
legality, validity, enforceability or admissibility in evidence of this
Agreement and each Loan Document, it is not necessary that this Agreement or any
Loan Document be filed or recorded with any court or other authority or that any
stamp or other similar tax be paid.
(w) Lockbox Accounts. Schedule 5.01(w) sets forth, as of the Closing
Date, a true and correct list of all lockbox accounts of the Borrowers.
(x) Solvency. Each of the Borrowers is Solvent.
(y) Insurance Coverage. The insurance coverage of STK and its
Material Domestic Subsidiaries described in the certified copies of insurance
summaries previously delivered to the Agent pursuant to Section 4.01(f) of the
Prior Credit Agreement has not changed in any material respect since the closing
date for the Prior Loan Agreement, is and remains in full force and effect, and
such summaries are, in all material respects, true and accurate summaries of
insurance provided by, to the best of the Borrowers' knowledge, responsible and
reputable insurance companies or associations in such amounts and covering such
risks as required under Section 6.01(g), and include loss payee endorsements for
each policy of insurance covering any of the Collateral showing coverage of the
Agent for its benefit and the benefit of the Lenders, the Swing Line Bank and
the Issuing Bank.
The representations and warranties of each Borrower contained in this
Section 5.01 shall remain in full force and effect regardless of any
investigation made by or on behalf of the Agent, the Issuing Bank, the Swing
Line Bank or any Lender.
ARTICLE VI
COVENANTS OF THE BORROWERS
SECTION 6.01. Affirmative Covenants. So long as any Advance or Auction
Advance shall remain unpaid, any Letter of Credit Liability shall exist or any
Lender shall have any Commitment hereunder, each Borrower agrees that it shall,
unless the Majority Lenders shall otherwise consent in writing:
(a) Payment of Taxes, Etc. Pay and discharge, and cause each of its
Material Subsidiaries to pay and discharge, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or levies
imposed upon it or upon its property and (ii) all lawfully asserted claims
which, if unpaid, could by law become a Lien upon any material property of such
Borrower or Material Subsidiary; provided, however, that no Borrower nor any
Subsidiary of any Borrower shall be required for purposes of this Section
6.01(a) to pay or discharge any such tax, assessment, charge or claim (A) that
such Borrower reasonably believes in good faith is not due or owing or (B) that
is being contested in good faith and by proper proceedings, and (in the case of
both subclause (A) and (B)), for which adequate reserves have been established
in accordance with GAAP.
(b) Preservation of Corporate Existence, Etc. Preserve and maintain,
and cause each of its Subsidiaries to preserve and maintain, its corporate
existence, rights (charter and statutory), and franchises except if, in the
reasonable business judgment of such Borrower or such Subsidiary, as the case
may be, it is in its best economic interest not to preserve and maintain such
rights or franchises, or such failure to preserve and maintain such rights or
franchises or (solely in the case of Subsidiaries of the Borrowers, but not the
Borrowers themselves) existence would not materially adversely affect the rights
of the Lenders, the Swing Line Bank or the Issuing Bank hereunder or the value
of the Collateral or cause a Material Adverse Effect. Except as is otherwise
provided in Section 6.02(f), (g) and (l), maintain, and cause each of its
Subsidiaries to maintain, 100% (or if less, at least the percentage ownership in
effect on the Closing Date) ownership of each Material Subsidiary.
(c) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, with the requirements of all applicable laws, rules,
regulations and orders, including without limitation all Environmental Laws
relating to real property owned or occupied by any of the Borrowers or their
respective Subsidiaries and the ownership, use, operation and occupancy thereof,
except if such failure to comply with the requirements of such laws, rules,
regulations and orders would not materially adversely affect the rights of the
Lenders, the Swing Line Bank or the Issuing Bank hereunder or under each Loan
Document or the value of the Collateral or cause a Material Adverse Effect.
(d) Visitation and Audit Rights. Permit any Lender or any agent or
representative thereof (provided that the Borrower may deny access to any such
agent or representative that is engaged in a business in competition with the
primary business of such Borrower), at the expense of such Lender (unless there
shall exist an Event of Default, in which case it shall be at the expense of the
Borrowers), from time to time upon reasonable prior notice, to visit the
properties of such Borrower and its Subsidiaries during reasonable business
hours, without hindrance or delay, and to discuss the affairs, finances and
accounts of such Borrower and its Subsidiaries with any of their respective
officers or agents; permit the Agent or any agent or representative thereof, at
the expense of the Agent (unless there shall exist an Event of Default, in which
case it shall be at the expense of the Borrowers), from time to time upon
reasonable prior notice to examine and make copies of and abstracts from the
records and books of account of, and to visit the properties of, such Borrower
and its Subsidiaries during reasonable business hours, without hindrance or
delay, and to discuss the affairs, finances and accounts of such Borrower and
its Subsidiaries with any of their respective officers or agents; and permit the
Agent or any agent or representative thereof, at the expense of the Borrowers,
to conduct audits of the Collateral; provided, however, that all costs and
expenses incurred in connection with such audits shall be billed to the
Borrowers in accordance with the Agent's standard billing procedure and, so long
as no Default or Event of Default exists, the Agent shall not conduct such
audits more frequently than twice every Fiscal Year; provided, further, that the
Borrowers shall, if requested by the Agent, permit the Agent or any agent or
representative thereof, at the expense of the Borrowers, to conduct audits of
the records of the Borrowers at any time in order to verify any information
contained in any Borrowing Base Certificate; and, provided, further, that any
such agent or representative of any Lender or the Agent that is not an employee
of such Lender or the Agent, as the case may be, shall at all times as there
shall not exist a Default or Event of Default, be subject to the reasonable
approval of STK and shall agree to be bound by the terms of Section 9.17.
(e) Keeping of Books. Keep, and cause each of its Material
Subsidiaries to keep, proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets and
business of such Borrower and each of its Subsidiaries in accordance with GAAP.
(f) Maintenance of Properties, Etc. Except as is otherwise permitted
in the Loan Documents, maintain and preserve, and cause each of its Material
Subsidiaries to maintain and preserve, each of its material properties which are
used or useful in the conduct of its business in good working order and
condition, ordinary wear and tear excepted, consistent with sound business
practice.
(g) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance in amounts, from responsible and reputable
insurance companies or associations, with limitations, of types and on terms as
is customary for the industry and name the Agent as loss payee for the benefit
of itself and the Lenders under any insurance policy covering any Collateral, to
the extent requested by the Majority Lenders.
(h) Employment of Technology, Disposal of Hazardous Materials, Etc.
(i) Employ, and cause each of its Subsidiaries to employ, in connection with its
use, if any, of all real property owned or occupied by the Borrower or any such
Subsidiary, appropriate technology and compliance procedures to maintain
compliance with all applicable material Environmental Laws, (ii) obtain and
maintain, and cause each of its Subsidiaries to obtain and maintain, all
material permits required by applicable Environmental Laws in connection with
its or its Subsidiaries' operations and (iii) use its best efforts to dispose
of, and cause each of its Subsidiaries to use its best efforts to dispose of,
all Hazardous Substances only at facilities and with carriers reasonably
believed to possess valid permits under RCRA, if applicable, and any applicable
state and local Environmental Laws. Such Borrower shall use its best efforts,
and cause each of its Subsidiaries to use its best efforts, to obtain all
certificates required by law to be obtained by such Borrower and its
Subsidiaries from all contractors employed by such Borrower or any of its
Subsidiaries in connection with the transport or disposal of any Hazardous
Substances.
(i) Environmental Matters. If a Responsible Officer of such Borrower
shall:
(i) receive or become aware of a written notice that any
violation of any Environmental Laws may have been committed or is about to
be committed by such Borrower or any of its Subsidiaries that could create
any liability, absolute or contingent, for any Borrower or any of its
Subsidiaries in excess of $5,000,000 for any one such violation or in excess
of $10,000,000 for all such violations;
(ii) receive or become aware of a written notice that any
administrative or judicial complaint or order has been filed or is about to
be filed against such Borrower or any of its Subsidiaries alleging any
material violation of any Environmental Laws or requiring such Borrower or
any of its Subsidiaries to take any action (which, if taken, would result in
expenditures by such Borrower and its Subsidiaries exceeding $5,000,000) in
connection with the release or threatened release of Hazardous Substances or
solid waste into the environment; or
(iii) receive or become aware of a written notice from a federal,
state, foreign or local governmental agency or private party alleging that
such Borrower or any of its Subsidiaries is liable or responsible for costs
in excess of $10,000,000 associated with the response to cleanup,
stabilization or neutralization of any Environmental Activity;
then such Responsible Officer shall provide the Agent with a copy of such notice
within five Business Days after such Responsible Officer receives or becomes
aware of such written notice. Within ten days of the date that a Responsible
Officer of such Borrower shall have learned of the enactment or promulgation of
any Environmental Laws and such Responsible Officer shall have determined that
such Environmental Laws would have a Material Adverse Effect or would materially
impair the value of any Collateral, such Responsible Officer shall provide the
Agent with notice thereof. The Borrowers shall each maintain, at their sole
expense, a system to monitor compliance by the Borrowers and their respective
Subsidiaries with Environmental Laws applicable to any real property owned or
occupied by any Borrower or by any Subsidiary of such Borrower.
SECTION 6.02. Negative Covenants. So long as any Advance or Auction
Advance shall remain unpaid, any Letter of Credit Liability shall exist or any
Lender shall have any Commitment hereunder, each Borrower agrees that it shall
not, without the written consent of the Majority Lenders:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit
any of its Material Subsidiaries to create, incur, assume or suffer to exist,
any Lien upon or with respect to any of its properties of any character, whether
now owned or hereafter acquired, or assign any right to receive income, or sign
or file, or permit any of its Subsidiaries to sign or file, under the Uniform
Commercial Code of any U.S. jurisdiction, a financing statement, or under the
law of any other jurisdiction, a registration, filing or recordation, in either
case that names such Borrower or any of its Subsidiaries as debtor, mortgagor,
trustor or assignor or the equivalent or sign, or permit any of its Subsidiaries
to sign, any security agreement authorizing any secured party thereunder to file
such financing statement or other document, or assign, or permit any of its
Subsidiaries to assign, any Accounts, excluding, however, from the operation of
the foregoing restrictions the Liens created by or pursuant to the Loan
Documents and Permitted Liens; provided, however, that neither the terms of this
Section 6.02(a) nor any other provision of this Agreement shall restrict the
ability of a Foreign Subsidiary of a Borrower to Discount agreements for lease
of equipment or inventory to a Person other than an Affiliate of a Borrower.
(b) Product Transfer Agreements. Enter into or consummate any
Discounting of (or Discount or otherwise Transfer) any Product Transfer
Agreement or any PTA Equipment, in one or any series of related transactions,
except as provided in this subsection (b).
(i) If the sum of (A) the Adjusted Value of any and all Product
Transfer Agreements so Discounted or Transferred as of or in connection with
the closing of any agreement (other than the Product Transfer Agreements
Discounted pursuant to the Note Agreement, dated as of August 30, 1991, as
amended, among STK, SFSC and the holders of the notes issued thereunder)
relating to Discounting (the "Initial Transfers") plus (B) the Expected
Gross Up Discounts, if any, relating to such agreement, equals or exceeds
the Specified Amount, such agreement and the Initial Transfers shall be
subject to the prior consent of the Majority Lenders. All Gross Up
Discounts in connection with such agreement shall be subject to satisfaction
of clauses (A), (B), (C) and (D) of subsection (ii) below.
(ii) If the sum of (A) the Adjusted Value of any and all Initial
Transfers to be undertaken pursuant to any agreement relating to Discounting
plus (B) the Expected Gross Up Discounts, if any, relating to such agreement
does not equal or exceed the Specified Amount, the consummation of such
agreement and the Discount or Transfer of any Product Transfer Agreements
(and related PTA Equipment) thereunder shall be subject to the following
conditions: (A) the applicable Borrower shall deliver to the Agent a
Periodic Release Certificate properly completed, dated on or before the
closing date of such transaction and which shall identify the closing date
with respect to each such transaction, (B) no Default or Event of Default
shall exist or shall result from the consummation of such transaction, (C)
the Lien of the Agent on the applicable Product Transfer Agreement,
Accounts, Lease Receivables and PTA Equipment shall not be released unless
and until the Agent has executed and delivered the collateral release
attached to such Periodic Release Certificate; and (D) such transaction
shall be undertaken only with a financial institution that is not an
Affiliate of any Borrower. Release certificates shall not be delivered to
the Agent more than twice in any month, unless required in connection with
Gross Up Discounts to the extent resulting from early terminations or
cancellations of Product Transfer Agreements.
(iii) No Product Transfer Agreement may be subject to a Transfer
by a Borrower to any Affiliate of such Borrower other than in accordance
with this paragraph (iii) or in connection with the Discounting of such
Product Transfer Agreement or the Program. Any such Transfer may be
undertaken only if (A) no Default or Event of Default exists or shall result
from such Transfer, (B) such Transfer is effective only on and as of the
last day of a Fiscal Month, (C) such Transfer is undertaken for bona fide
business purposes independent of the Borrower's obligations under this
Agreement and not for purposes of maintaining or increasing the Aggregate
Borrowing Base availability as to the Borrowers as a whole, (D) such
Transfer shall not impair the Lien of the Agent under any Collateral
Document and shall be subject to such Lien, and (E) Eligible STK-Originated
Lease Receivables may be transferred only to SFSC and back to STK, and
Eligible XL/DC-Originated Lease Receivables may be transferred only to SFSC
or STK and back to XL/DC.
(c) Contingent Obligations. Create, incur, assume or suffer to exist,
or permit any of its Subsidiaries to create, incur, assume or suffer to exist,
any Contingent Obligations except (i) by reason of endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business, (ii) Contingent Obligations created pursuant to the Loan
Documents, (iii) Contingent Obligations listed on Schedule 5.01(1), and any
renewals, extensions or modifications of such Contingent Obligations, provided,
that none of such Contingent Obligations shall be renewed, extended or otherwise
modified on terms which, taken as a whole, are less favorable to the applicable
obligor under such Contingent Obligation (including, without limitation,
increasing the amount thereof) without the prior written consent of the Majority
Lenders, (iv) L/C Obligations created in the ordinary course of business, and
(v) Contingent Obligations arising in connection with Debt of or Discounts of
Product Transfer Agreements by any Subsidiary of any Borrower, provided, that
such Debt is otherwise permitted under Section 6.02(b).
(d) Dividends, Etc. Declare or make (or permit any Subsidiary to do
so) any dividend, payment or other distribution of assets, rights, obligations
or securities on account of any shares of any class of capital stock of such
Borrower (or any of its Subsidiaries), or purchase, redeem, or otherwise acquire
for value (or permit any of its Subsidiaries to do so) any shares of any class
of capital stock of such Borrower (or such Subsidiary) or any warrants, rights
or options to acquire any such shares, now or hereafter outstanding, except
that:
(i) any Subsidiary of any Borrower may declare and make cash
dividend payments or other distributions in respect of its equity interests
to such Borrower or to any other Subsidiary of such Borrower which is its
shareholder or holder of the equity interests therein;
(ii) such Borrower may declare and make any dividend payment or
other distribution (including pursuant to any stock split) payable solely in
its common stock (including any common stock, but not any other property of
STK, distributed by STK pursuant to STK's Rights Agreement dated as of
August 20, 1990);
(iii) STK may redeem or repurchase its securities in connection
with Normal Course Repurchase Agreements and may make the redemption of its
Convertible Subordinated Debentures to the extent permitted by
Section 6.02(i);
(iv) STK may declare and make cash dividend payments to its
stockholders in an amount not to exceed at any time on a cumulative basis
from and after the Closing Date the amount as determined from time to time
according to the following formula:
.50 (X - $125,000,000) - (Y + Z);
where
"X" equals Consolidated Net Income for STK and its
Subsidiaries for the period after December 25, 1992;
"Y" equals the cumulative amount paid in dividends under this
clause (iv) after the Closing Date; and
"Z" equals the cumulative amount paid under clause (v) of
this subsection after the Closing Date;
(v) STK may purchase, redeem or otherwise acquire shares of its
capital stock or warrants, rights or options to acquire such shares for cash
in an amount not to exceed at any time on a cumulative basis from and after
the Closing Date the amount as determined from time to time according to the
following formula:
.50 (X - $50,000,000) - (Y + Z);
where
"X" equals Consolidated Net Income for STK and its
Subsidiaries for the period after December 25, 1992;
"Y" equals the cumulative amount paid under this clause (v)
after the Closing Date; and
"Z" equals the cumulative amount paid under clause (iv) of
this subsection after the Closing Date;
(vi) STK may make cash dividend payments to the holders of any
redeemable preferred stock and may redeem any redeemable preferred stock;
and
(vii) STK may make cash dividend payments to the holders of any
CEP Stock, and additionally may redeem any CEP Stock to the extent permitted
by Section 6.02(i);
provided, that immediately after giving effect to any such proposed action set
forth in clauses (i) through (vi) above, no Event of Default or Default would
exist; or permit any Subsidiary with any Debt guaranteed by any Borrower or any
of their respective Subsidiaries to agree with any holder of such Debt or any
Affiliate of such holder, to any restriction on such Subsidiary's ability to pay
cash dividends to any of the Borrowers or any of their respective Subsidiaries.
STK shall not exchange any CEP Stock for debt prior to the Termination Date
without the consent of the Majority Lenders.
(e) Capital Expenditures. Make, or permit any of its Subsidiaries to
make, or commit to make, Capital Expenditures which would cause the difference
between (i) the aggregate of all such Capital Expenditures made or committed to
be made by the Borrowers and their respective Subsidiaries during any Fiscal
Year and (ii) the aggregate net cash proceeds from the sale of assets of the
Borrowers and their respective Subsidiaries during such Fiscal Year, other than
sales of assets (including inventory) in the ordinary course of business, to
exceed during any Fiscal Year specified below the amount set forth opposite such
Fiscal Year:
Fiscal Year Maximum Amount
1993 $130,000,000
1994 $150,000,000
1995 $150,000,000
provided, however, that the Borrowers and their respective Subsidiaries (on a
Consolidated basis) may carry forward and use in Fiscal Year 1994 up to a
maximum of $20,000,000 of the unused amount of Capital Expenditures available in
Fiscal Year 1993.
(f) Mergers, Etc. Merge with or into or consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to, or acquire all or substantially all of the
assets of, any Person, or permit any of its Subsidiaries to do so; provided,
however, that any such Subsidiary (other than a Borrower) may merge with, or
sell all or substantially all of its assets to, another such Subsidiary or to a
Borrower if the Lien (including the priority thereof and enforceability thereof)
of the Agent on the Collateral, if any, owned by each such Subsidiary is not
impaired by such transaction; and, provided, further, that nothing in this
Section 6.02(f) shall prevent any of the Borrowers or any of their respective
Subsidiaries from merging with, or acquiring all or substantially all of the
assets of any Person if (i) the Borrower or such Subsidiary party to such merger
is the surviving entity of such merger and (ii) the total assets (including
securities and all other assets) so acquired, together with the total assets for
all such transactions occurring after the Closing Date and prior to the
Termination Date, do not exceed the amount equal to 12.5% times the Tangible Net
Worth of STK and its Subsidiaries as such Tangible Net Worth is determined as of
the last day of the Fiscal Quarter ending immediately prior to the closing of
such merger or acquisition, and the aggregate consideration (including the
Dollar value of all cash, debt, equity or other property) paid in connection
with any such transaction does not (A) exceed $75,000,000 for any one such
transaction (other than the NSC Acquisition and the Amperif Acquisition) or
(B) cause the total consideration paid for all such transactions occurring after
March 31, 1993 and prior to the Termination Date (excluding the NSC Acquisition,
but including the Amperif Acquisition) to exceed $150,000,000.
(g) Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose
of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer,
any of its assets (whether now owned or hereafter acquired), except for
(i) Inventory (other than Inventory subject to a Product Transfer Agreement) in
the ordinary course of business, (ii) obsolete or worn out property,
(iii) Transfers (other than of Collateral, except to the extent permitted by
Section 6.02(b)) by a Borrower or any Subsidiary of such Borrower to such
Borrower or any other Borrower or any of their respective Subsidiaries, (iv)
Discounting Product Transfer Agreements, and Transfers of PTA Equipment subject
thereto, and Transfers of Product Transfer Agreements, in each case to the
extent permitted by Section 6.02(b), (v) Transfers in connection with a
sale/leaseback transaction involving real or personal property of the Borrowers
or their respective Subsidiaries, provided that any such sale/leaseback
transaction is otherwise permitted under the terms of this Agreement,
(vi) Transfers (other than of Collateral) by a Borrower or any Subsidiary of
such Borrower to any Person, provided, that the aggregate value of such property
transferred pursuant to this clause (vi) during any Fiscal Year in respect of
all Borrowers and their Subsidiaries in the aggregate does not exceed
$50,000,000 determined at the time of each such Transfer on the basis of the
greater of the book value and fair market value of the property transferred in
each such Transfer, and (vii) Transfers of the Securitized Assets pursuant to
the Program free and clear of any Lien granted to the Agent, provided that, as
of the time of each respective Transfer, the aggregate present value of the
income stream arising from all leases of equipment and all schedules to such
leases that constitute the Securitized Assets (discounted by a rate selected by
the applicable Borrower, expressed as a decimal, rounded upward to the nearest
1/100 of 1%, provided that such rate shall be no less than the Treasury Rate (as
such term is defined in the definition of "Adjusted Value" set forth in the
Credit Agreement) plus 3.50% per annum) shall not be in excess of $100,000,000.
(h) Investments in Other Persons. Make or maintain, or permit any of
its Subsidiaries to make or maintain, any loan or advance to, or guarantee of,
the obligations of, or investments in, any Person, or purchase, hold or
otherwise acquire, any capital stock, obligations or other securities of, or
make any capital contribution to, or otherwise invest in or extend credit to,
any Person, or permit any of its Subsidiaries to do so; provided, however, that
nothing in this subsection shall prevent such Borrower or any of its
Subsidiaries from:
(i) holding those investments maintained by the Borrowers and
their Subsidiaries as of the Closing Date and described on Schedule 6.02(h);
(ii) making any loan or advance to, or investing in, or making
any capital contribution to, or guarantee the obligations of, any Borrower
or any Subsidiary of STK, provided that any such loan, advance, or guarantee
is otherwise permitted under Section 6.02(c) and Section 6.02(o), and
provided further that (a) any Borrower may make investments in or capital
contributions to another Borrower, and (b) any Borrower may make an
investment of Securitized Assets in, or a contribution of Securitized Assets
to, the Trust;
(iii) purchasing or holding Cash Equivalents;
(iv) extending credit to its customers in the ordinary course of
business consistent with its past practice and the normal practice in the
industry;
(v) making loans to employees of STK or any of its Subsidiaries
in connection with travel advances or the housing or relocation of such
employees;
(vi) making other loans to employees of STK or any of its
Subsidiaries not to exceed $10,000,000 (valued without regard to any write-
down due to uncollectability) at any one time outstanding for all such loans
to all employees of STK and its Subsidiaries in the aggregate;
(vii) making investments in any distributor of STK products or
any supplier of raw materials or services useful to the business of such
Borrower and its Subsidiaries (not including the acquisition of such Person
by any Borrower or its Subsidiaries), or in any joint venture, partnership
or corporation with others, provided, that the amount invested under this
clause (vi) shall not as to STK and all of its Subsidiaries in the aggregate
at any time exceed $20,000,000 (valued without regard to any write-down)
minus the then-outstanding amount of Third Party Guaranty Obligations; and
(viii) other investments not exceeding as to STK and its
Subsidiaries in the aggregate at any time $15,000,000 (valued without regard
to any write-down) for all such investments.
(i) Subordinated Debt. Prepay, redeem, defease (whether actually or
in substance) or purchase in any manner (or deposit or set aside funds or
securities for the purpose of the foregoing), or make any payment (other than
for scheduled payments of interest due on the date of payment thereof, if such
payment is permitted to be made pursuant to the terms of the documents
evidencing or governing the applicable Subordinated Debt) in respect of, or
establish any sinking fund, reserve or like set aside of funds or other property
for the redemption, retirement or repayment of, any Subordinated Debt, or
transfer any property in payment of or as security for the payment of, or
violate the subordination terms of, any Subordinated Debt, or amend, modify or
change in any manner the terms of any Subordinated Debt or any instrument,
indenture or other document evidencing, governing or affecting the terms of any
Subordinated Debt, if any such amendment, modification or change has or would
have an adverse effect on the Agent's, any Lender's, the Swing Line Bank's or
the Issuing Bank's rights or remedies under any of the Loan Documents, or cause
or permit any of its Subsidiaries to do any of the foregoing; provided, however,
that nothing in this Section 6.02(i) shall prevent STK, so long as there exists
no Default or Event of Default, and none would arise therefrom, from redeeming
Convertible Subordinated Debentures with an aggregate fair market value of
$10,000,000 during the term of this Agreement; and, provided, further, that so
long as no Event of Default or Default has occurred and is continuing, Borrowers
and their Subsidiaries may pay or prepay intercompany Subordinated Debt if and
to the extent permitted in the Intercompany Subordination Agreement.
(j) Accounting Changes. Change its Fiscal Year, or the ending date of
any Fiscal Month; or make, or permit any of its Subsidiaries to make, any other
significant change in Consolidated or Consolidating accounting treatment and
reporting practices except as required by GAAP or as otherwise permitted by
Section 1.02.
(k) Change in Nature of Business. Make any material change in the
nature of such Borrower's business as conducted as of the Closing Date.
(l) Capital Stock. Permit any of its Subsidiaries to issue or sell
any of its capital stock or any rights, warrants or options to acquire any of
its capital stock, or permit any of its Subsidiaries to sell or otherwise
dispose of any capital stock of any of its Subsidiaries to any Person other than
STK or any of its Subsidiaries; provided, however, that nothing in this
Section 6.02(l) shall prevent any Foreign Subsidiary from selling up to 30% of
its outstanding shares of common stock to a third party.
(m) Limitation on Negative Pledges, Etc. Enter into, or permit any of
its Domestic Subsidiaries to enter into, any agreement (other than the Loan
Documents) which restricts the ability of such Borrower or any of its Domestic
Subsidiaries to create or suffer to exist any Lien upon or with respect to any
of its properties, whether now owned or leased or hereafter acquired or leased,
except that the Borrowers and their Domestic Subsidiaries may agree not to
further encumber any property (other than Collateral) subject to a Permitted
Lien, or enter into; or permit any of its Material Subsidiaries to enter into,
any agreement (other than the Loan Documents, and, to the extent such
restrictions therein exist on the Closing Date) which restricts the right of any
Material Subsidiary to issue or pay dividends or other distributions to any
Borrower or Material Subsidiary.
(n) Limitation on Transactions with Affiliates. Enter, or permit any
of its Subsidiaries to enter, into any transaction with any Affiliate, except
(a) as expressly permitted by this Agreement, or (b) in the ordinary course of
business or pursuant to the reasonable requirements of the business of the
Borrower or such Subsidiary; in each case (a) and (b), (i) upon the fair and
reasonable terms no less favorable to any Borrower than would obtain in a
comparable arm's-length transaction with a Person not an Affiliate, or (ii) in
the case of transfers of inventory and receivables, at a price not less than the
transferor's net book value (as determined in accordance with GAAP).
(o) Intercompany Obligations. Amend, modify or change in any manner
the terms of any Debt owing by any Subsidiary of STK to any Borrower or by such
Borrower to any such Subsidiary, or cancel, forgive or otherwise discharge
(except through payment or upon payment in full thereof) such Debt, or sell,
assign, pledge, encumber or otherwise dispose of such Debt except as permitted
under the Loan Documents; provided, however, that prior to the occurrence and
continuance of an Event of Default, the Borrowers or their respective
Subsidiaries may take any such actions that are consistent with past practices
as of the Closing Date and that do not otherwise result in a Default or Event of
Default. No Borrower or any Subsidiary thereof shall incur or suffer to exist
any Debt to any other Borrower or any other Subsidiary of any Borrower other
than Subordinated Debt.
SECTION 6.03. Financial Covenants. So long as any Advance or Auction
Advance shall remain unpaid, any Letter of Credit Liability shall exist or any
Lender shall have any Commitment hereunder, STK will, unless the Majority
Lenders shall otherwise consent in writing:
(a) Maintenance of Consolidated Tangible Net Worth. Maintain as at
the end of each Fiscal Quarter a Consolidated Tangible Net Worth of STK and its
Subsidiaries of not less than at any time the amount that is, $690,000,000 plus
the sum of (i) 75% of Consolidated Net Income (excluding any Net Loss) of STK
and its Subsidiaries from December 26, 1992 until such time, plus (ii) 75% of
the face amount of any Convertible Subordinated Debentures that are converted
into stock of STK prior to such time, plus (iii) 100% of the amount of
extraordinary gain recognized by STK and its Subsidiaries on or before such time
due to implementation of FAS 109, plus (iv) 75% of the amount of all proceeds
(net of costs and expenses) received pursuant to the issuance of any equity
securities issued by STK after March 1, 1993.
(b) Maintenance of Quick Ratio. Maintain as at the end of each Fiscal
Quarter a Consolidated Quick Ratio of STK and its Subsidiaries of not less than
1.25:1.00.
(c) Maintenance of Fixed Charge Coverage Ratio. Achieve for the
period consisting of the four consecutive Fiscal Quarters ending as of the end
of the Fiscal Quarter ending September 30, 1994 a Consolidated Fixed Charge
Coverage Ratio of STK and its Subsidiaries not less than 1.75:1.00, and, for
each period consisting of four consecutive Fiscal Quarters ending as of the end
of each Fiscal Quarter thereafter, a Consolidated Fixed Charge Coverage Ratio of
STK and its Subsidiaries not less than 2.75:1.00.
(d) Net Income. Not permit (i) any Consolidated Net Loss of STK and
its Subsidiaries to occur for each of any two consecutive Fiscal Quarters
(calculated as of the last day of each such Fiscal Quarter); (ii) Consolidated
Net Loss of STK and its subsidiaries for any Fiscal Quarter to be greater than
$10,000,000; or (iii) any Consolidated Net Loss of STK and its Subsidiaries for
any Fiscal Quarter to occur if STK and its Subsidiaries also incur a
Consolidated extraordinary loss, as determined in accordance with GAAP, of more
than $15,000,000 for such Fiscal Quarter.
(e) Leverage Ratio. Achieve as at each Fiscal Quarter end a
Consolidated Leverage Ratio of STK and its Subsidiaries of not greater than
1.10:1.00.
(f) Total Leverage Ratio Achieve as at each Fiscal Quarter end a
Consolidated Total Leverage Ratio of STK and its Subsidiaries of not greater
than 1.15:1.00.
(g) FAS 109. For purposes of Section 6.03(e) and (f), the Leverage
Ratio shall be computed without taking into account any extraordinary gain or
increase in liabilities initially recognized by STK and its Subsidiaries due to
implementation of FAS 109.
SECTION 6.04. Reporting Requirements. Unless the Majority Lenders shall
otherwise consent in writing, so long as any Advance or Auction Advance shall
remain unpaid, any Letter of Credit Liability shall exist or any Lender shall
have any Commitment hereunder, STK (unless otherwise indicated) shall furnish or
cause the applicable Borrower to furnish to the Agent for each Lender the
following (and the Agent will with reasonable promptness upon receipt remit a
copy thereof to each Lender):
(a) Quarterly Financials. As soon as available and in any event
within 55 days after the end of each Fiscal Quarter (except the fourth Fiscal
Quarter of any Fiscal Year), (i) Consolidated balance sheets of STK and its
Subsidiaries as of the end of such Fiscal Quarter and Consolidated statements of
operations and cash flows of STK and its Subsidiaries for such Fiscal Quarter
and for the period commencing at the end of the previous Fiscal Year and ending
with the end of such Fiscal Quarter, in each case in reasonable detail and duly
certified (subject to year-end audit adjustments and without footnotes) by a
Responsible Officer of STK as having been prepared in accordance with GAAP
(applied on a basis consistent with the application of such principles in the
preparation of STK's December 25, 1992 financial statements referred to in
Section 5.01(g), unless changed in accordance with Section 1.02), together with
(A) a copy of any available final management letters or reports from STK's
independent public accountants discussing the financial statements and
operations of STK and its Subsidiaries and (B) a certificate of a Responsible
Officer of STK in the form of Exhibit L (1) stating that no Event of Default or
Default has occurred and is continuing or, if an Event of Default or Default has
occurred and is continuing, a statement as to the nature thereof and the action
which STK proposes to take with respect thereto and (2) containing a schedule of
the computations used by STK in determining compliance with the covenants
contained in Section 6.02(e) and Section 6.03 and (ii) unconsolidated balance
sheets and income statements of STPR, SFSC and XL/DC as at the end of such
Fiscal Quarter in the form prepared internally from time to time by STK;
(b) Annual Financials. As soon as available and in any event within
100 days after the end of each Fiscal Year, (i) a copy of STK's annual report on
Form 10-K (or any successor form in substantially the same format) for such
Fiscal Year of STK and its Subsidiaries, including therein a Consolidated
balance sheet of STK and its Subsidiaries as of the end of such Fiscal Year and
Consolidated statements of operations and cash flows of STK and its Subsidiaries
for such Fiscal Year, certified in a manner acceptable to the Agent and the
Majority Lenders by independent public accountants of nationally recognized
standing acceptable to the Agent, together with (A) a copy of any available
final management letters or reports prepared by such accounting firm discussing
such financial statements and operations of STK and its Subsidiaries, and (B) a
certificate of the chief financial officer or the treasurer of STK in the form
of Exhibit L (1) stating that no Event of Default or Default has occurred and is
continuing or, if an Event of Default or Default has occurred and is continuing,
a statement as to the nature thereof and the action which STK proposes to take
with respect thereto and (2) containing a schedule of the computations used by
STK in determining compliance with the covenants contained in Section 6.02(d)
and 6.02(e) and Section 6.03 and (ii) unconsolidated balance sheets and income
statements of STPR, SFSC and XL/DC as at the end of such Fiscal Year in the form
prepared internally from time to time by STK or such Borrower. The Borrowers
each acknowledge that (without limitation) the Lenders are relying upon the
financial statements delivered from time to time pursuant to this Agreement,
including the annual audited financials referenced in this Section;
(c) Operating Plan, Projections. As soon as available and in any
event within 30 days after the end of each Fiscal Year, the operating plan of
STK and its Subsidiaries for the next Fiscal Year, including projected
consolidated and unconsolidated income statements, balance sheets and
consolidated cash flow statements of STK and its Subsidiaries setting forth the
Borrowers' good faith projections of such matters for the then-current Fiscal
Year;
(d) Default. Within five Business Days after a Responsible Officer of
any Borrower discovers the occurrence of any Event of Default or a Default
continuing on the date of such statement, a statement of a Responsible Officer
setting forth details of such Event of Default or Default and the action which
such Borrower proposes to take with respect thereto;
(e) Environmental. Within ten days after a Responsible Officer
becomes aware of the receipt thereof, copies of each environmental report
conducted by or at the direction of such Borrower which relates to a material
environmental liability of such Borrower or any of its Subsidiaries and which
(i) is to be filed with a governmental agency or (ii) indicates an environmental
liability payable by such Borrower and its Subsidiaries in excess of $5,000,000
not previously disclosed in writing to the Agent;
(f) Plan Filings. Promptly and in any event within 30 days after the
filing thereof with the Internal Revenue Service, copies of any Schedule B
(Actuarial Information) to the annual report (Form 5500 Series) with respect to
any Plan; within 30 days after the date of any payment of Taxes, such Borrower
will furnish to the Agent, at its address referred to in Section 9.02, the
original or a certified copy of a receipt or other evidence satisfactory to the
Agent of payment thereof;
(g) ERISA Event. Promptly and in any event within ten days after a
Responsible Officer of such Borrower or any ERISA Affiliate knows or has reason
to know that any ERISA Event has occurred, a statement of a Responsible Officer
of the Borrower describing such ERISA Event and the action, if any, which such
Borrower or such ERISA Affiliate proposes to take with respect thereto;
(h) Plan Termination. Within ten Business Days after a Responsible
Officer becomes aware of the receipt thereof by such Borrower or any ERISA
Affiliate, copies of each notice from the PBGC stating its intention to
terminate any Plan or to have a trustee appointed to administer any Plan;
(i) Multiemployer Plan. Within ten Business Days after a Responsible
Officer of such Borrower becomes aware of the receipt thereof by such Borrower
or any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each
notice received by such Borrower or any ERISA Affiliate concerning (i) the
imposition of Withdrawal Liability in excess of $2,000,000 by a Multiemployer
Plan, (ii) the reorganization or termination, within the meaning of Title IV of
ERISA, of any Multiemployer Plan or (iii) the amount of liability incurred, or
which may be incurred, by such Borrower or any ERISA Affiliate in connection
with any event described in clause (i) or (ii) above;
(j) Proceedings. Promptly after a Responsible Officer of such
Borrower becomes aware of the commencement thereof, notice of all actions, suits
and proceedings before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, affecting such Borrower
or any of its Subsidiaries of the type described in Section 5.01(i);
(k) SEC Reports. Promptly after the sending or filing thereof, copies
of all such proxy statements, financial statements, and reports that STK sends
to its stockholders generally, and copies of all regular, periodic and special
reports, and all registration statements, which STK files with the Securities
and Exchange Commission or any governmental authority that may be substituted
therefor, or with any national securities exchange;
(l) Borrowing Base Certificate. Not later than the 21st day of each
month (or, if there exists an Event of Default and the Majority Lenders so
require, more frequently as required by such Majority Lenders) commencing with
the month preceding the date hereof, (i) a completed Borrowing Base Certificate
with such additional detail as the Agent or the Lenders may reasonably request,
setting forth for each Borrower the amounts of the Eligible Accounts, the
Domestic Accounts Borrowing Base, the Eligible Lease Receivables, the Lease
Receivables Borrowing Base and the Foreign Accounts Borrowing Base, each as of
the end of the preceding STK accounting month (or such other dates as may be
required by Majority Lenders during the existence of an Event of Default), and
showing the Borrowers' calculations of the then-applicable Individual Borrowing
Base for each Borrower, (ii) if requested by the Agent or any Lender, (A) a
detailed aging of all Accounts and Lease Receivables showing all Accounts and
Lease Receivables outstanding over 30, 60 and 90 days from their respective
original invoice dates or (in the case of Lease Receivables) scheduled payment
dates, (B) a listing of the 25 largest Account Debtors of STK, showing the total
amount of Accounts and the Adjusted Value of Lease Receivables owing by each
Account Debtor, and (iii) a Lease Receivables Collateral Report in respect of
STK, XL/DC and SFSC;
(m) Investment Grade Obligor Report. Not later than the 21st day of
each month immediately following the end of a Fiscal Quarter, an Investment
Grade Obligor Report;
(n) Mergers. Not later than five Business Days before the closing of
any transaction which the Borrowers believe would be permitted under the second
proviso in Section 6.02(f) and which involves the payment of aggregate
consideration (including the Dollar value of all cash, debt, equity or other
property) in excess of $15,000,000, a written summary of such transaction and
evidence that, after giving effect to such transaction, no Default or Event of
Default would occur;
(o) Other Information. Such other information respecting the business
or properties or the condition, financial or otherwise, or operations of any
Borrower or any of its Subsidiaries as any Lender through the Agent may from
time to time reasonably request.
Notwithstanding the foregoing, upon the occurrence and during the continuance of
an Event of Default or a Default, each Borrower will, and will cause its
Subsidiaries to, provide to the Agent for each Lender additional information and
any and all of the above information more frequently to the extent requested by
the Agent or any Lender.
SECTION 6.05. Cash Concentration and Lockbox Accounts. So long as any
Advance or Auction Advance shall remain unpaid, any Letter of Credit Liability
shall exist or any Lender shall have any Commitment hereunder:
(a) STPR shall, unless the Majority Lenders shall otherwise consent in
writing, maintain with Banco Popular in Puerto Rico the cash concentration
account, Account No. 243-00662-5 into which STPR shall deposit on a daily basis
all cash receipts of STPR in Puerto Rico, which account in Puerto Rico shall be
on such terms as the Agent reasonably determines to be necessary to maintain
perfected security interests in the Collateral in Puerto Rico.
(b) STPR shall not, unless the Majority Lenders shall otherwise
consent, make any changes in its current lockbox accounts or establish any
additional lockbox accounts (it being understood that consent may not be
withheld on the ground that the additional lockbox accounts are with financial
institutions other than one of the Lenders). STPR will in each case exercise
best efforts to establish intercreditor agreements with any and all lockbox
banks which are not Lenders to restrict the ability of such lockbox banks to
exercise any setoff rights against such accounts and to subordinate such right
to the rights of the Agent and the Lenders.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01. Events of Default. If any of the following events (each an
"Event of Default") shall occur and be continuing:
(a) Payment. Any Borrower shall fail to pay any principal of any
Advance or Auction Advance when the same becomes due and payable, or any
Borrower shall fail to pay any interest on any Advance or Auction Advance or any
other amount payable hereunder or under any other Loan Document within two
Business Days after such interest or other amount shall become due and payable;
or
(b) Representations and Warranties. Any representation or warranty
made or deemed made by any Borrower (or any of its officers) in any Loan
Document or certificate or other writing delivered pursuant thereto shall prove
to have been incorrect in any material respect when made or deemed made; or
(c) Covenants. Any Borrower shall fail to perform or observe any
term, covenant or agreement contained in Section 6.01(b) or (d) or Section 6.02
or Section 6.04 of this Agreement or STK shall fail to perform or observe any
term, covenant or agreement contained in Section 6.03 of this Agreement; or any
Borrower shall fail to perform or observe any other term, covenant or agreement
contained in this Agreement or any other Loan Document on its part to be
performed or observed if the failure to perform or observe such other term,
covenant or agreement shall remain unremedied for thirty (30) days after the
earlier of (i) the date upon which a Responsible Officer of STK knew or should
have known of such failure or (ii) the date upon which written notice thereof is
given to the Borrowers by the Agent or any Lender; or
(d) Cross-Default. (i) Any Borrower or any of its Subsidiaries shall
fail to pay any amount of any Debt or Contingent Obligation (other than Debt or
Contingent Obligations hereunder) of any Borrower or any of its Subsidiaries
which Debt or Contingent Obligation has a principal amount (including undrawn
committed or available amounts and including amounts owing to or committed by
all creditors under any combined or syndicated credit facility or the like) in
excess of $7,500,000 or which Debts and Contingent Obligations in the aggregate
for all such Debts and Contingent Obligations exceed $7,500,000, or any interest
or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure shall continue
for five Business Days, or (ii) any default under any agreement or instrument
relating to any Debt or Contingent Obligations (other than Debt or Contingent
Obligations hereunder) of any Borrower or any of its Subsidiaries which Debt or
Contingent Obligation has a principal amount (including undrawn committed or
available amounts and including amounts owing to or committed by all creditors
under any combined or syndicated credit facility or the like) in excess of
$5,000,000, or any other event, shall occur and shall continue after the
applicable grace period, if any, specified in such agreement or instrument on
the date of such default, if the effect of such default or event is to cause, or
to permit the holder or holders of such Debt or Contingent Obligations to cause,
with the giving of notice if required, such Debt to be declared due and payable
prior to its stated maturity or such Contingent Obligation to become payable; or
(e) Voluntary Proceedings. Any Borrower ceases or fails to be
Solvent, or generally fails to pay, or admits in writing its inability to pay,
its debts as they become due, subject to applicable grace periods, if any,
whether at stated maturity or otherwise; or any Borrower or any Material
Subsidiary of any Borrower (i) voluntarily ceases to conduct its business in the
ordinary course; (ii) commences any Insolvency Proceeding with respect to
itself; or (iii) takes any action to effectuate or authorize any of the
foregoing; or
(f) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against any Borrower or any Material Subsidiary
of any Borrower, or any writ, judgment, warrant of attachment, execution or
similar process, is issued or levied against a substantial part of any
Borrower's or any of its Material Subsidiaries' properties, and any such
proceeding or petition shall not be dismissed, or such writ, judgment, warrant
of attachment, execution or similar process shall not be released, vacated or
fully bonded within 60 days after commencement, filing or levy; (ii) any
Borrower or any of its Material Subsidiaries admits the material allegations of
a petition against it in any Insolvency Proceeding, or an order for relief (or
similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or
(iii) any Borrower or any of its Material Subsidiaries acquiesces in the
appointment of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefor), or other similar Person for itself
or a substantial portion of its property or business;
(g) Judgments. Any judgment or order for the payment of money in
excess of $5,000,000 shall be rendered against any Borrower or any Subsidiary of
any Borrower and either (i) enforcement proceedings shall have been commenced by
any creditor upon such judgment or order, which proceedings shall not be
dismissed within 20 Business Days or (ii) there shall be any period of 30
consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect; or any non-
monetary judgment, order or decree shall be rendered against STK or any of its
Subsidiaries which does or would reasonably be expected to have a Material
Adverse Effect, and there shall be any period of 20 consecutive days during
which a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
(h) Material Adverse Change. A Material Adverse Change shall have
occurred and be continuing; or
(i) ERISA Event. Any ERISA Event shall have occurred with respect to
a Plan and, thirty days after notice thereof shall have been given to the
Borrower by the Agent, (i) such ERISA Event shall still exist and (ii) the sum
(determined as of the date of occurrence of such ERISA Event) of the
Insufficiency of such Plan and the Insufficiency of any and all other Plans with
respect to which an ERISA Event shall have occurred and then exist (or, in the
case of a Plan with respect to which an ERISA Event described in clauses (iii)
through (vi) of the definition of ERISA Event shall have occurred and then
exist, the liability related thereto) is equal to or greater than $2,000,000; or
(j) Withdrawal Liability. Any Borrower or any ERISA Affiliate shall
have been notified by the sponsor of a Multiemployer Plan that it has incurred
Withdrawal Liability to such Multiemployer Plan in an amount which, when
aggregated with all other amounts required to be paid to Multiemployer Plans by
such Borrower and its ERISA Affiliates as Withdrawal Liability (determined as of
the date of such notification), exceeds $2,000,000; or
(k) Plan Termination. Any Borrower or any ERISA Affiliate shall have
been notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or is being terminated, within the meaning of Title IV
of ERISA, if as a result of such reorganization or termination the aggregate
annual contributions of such Borrower and its ERISA Affiliates to all
Multiemployer Plans which are then in reorganization or being terminated have
been or will be increased over the amounts contributed to such Multiemployer
Plans for the respective plan year of each such Multiemployer Plan immediately
preceding the plan year in which the reorganization or termination occurs by an
amount exceeding $2,000,000; or
(l) Change in Control. There shall occur any Change in Control; or
(m) Ownership. STK shall cease to own 100% of the outstanding capital
stock of any of STPR, SFSC or XL/DC; or
(n) Collateral Documents. (i) Any material provision of any
Collateral Document shall for any reason cease to be valid and binding on or
enforceable against any Borrower party thereto or any Subsidiary of the Borrower
party thereto or STK or any Subsidiary of STK shall so state in writing or bring
an action to limit is obligations or liabilities thereunder; or (ii) any
Collateral Document shall for any reason (other than pursuant to the terms
thereof) cease to create a valid security interest in any Collateral purported
to be covered thereby having a fair market or book value in excess of $1,000,000
in the aggregate, or such security interest shall for any reason cease to be a
perfected and first priority security interest subject only to Permitted Liens;
or
(o) Guaranties. Any Borrower shall fail in any material respect to
perform or observe any material term, covenant or agreement in the Guaranty
executed by it; or any Guaranty shall for any reason be partially (including
with respect to future advances) or wholly revoked or invalidated, or otherwise
cease to be in full force and effect, or any Borrower or any Subsidiary of STK
shall contest in any manner the validity or enforceability thereof or deny that
it has any further liability or obligation thereunder;
(p) Subordination Agreements. The Intercompany Subordination
Agreement or the subordination provisions of any agreement or instrument
governing any Subordinated Debt shall for any reason be revoked or invalidated,
or otherwise cease to be in full force and effect, or any Person party thereto
(or any Affiliate thereof shall contest in any manner the validity or
enforceability thereof or deny that it has any further liability or obligation
thereunder, or the Obligations shall for any reason be subordinated or shall not
have the priority contemplated by this Agreement or the Intercompany
Subordination Agreement or such subordination provisions;
Then, and in any such event, the Agent shall at the request, or may with the
consent, of the Majority Lenders:
(i) declare the obligation of each Lender to make Advances or
Auction Advances, the obligation of the Swing Line Bank to make Swing Line
Advances and the obligation of the Issuing Bank to Issue Letters of Credit
to be terminated, whereupon the same shall forthwith terminate;
(ii) declare the Advances and Auction Advances, all interest
thereon and all other amounts payable under this Agreement to be forthwith
due and payable, whereupon the Advances and Auction Advances, all such
interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of
which are hereby expressly waived by each Borrower;
(iii) with respect to any and all undrawn Letters of Credit and all
other contingent, unmatured or unliquidated Obligations, declare and require
that cash in an amount equal to the aggregate amount of such Obligations be
paid over and pledged to the Agent pursuant to the Pledge Agreements to be
held as additional cash collateral, in which case such amounts shall be
immediately pledged and delivered to the Agent as demanded by the Agent;
(iv) exercise any and all remedies with respect to the Collateral
as set forth in the Collateral Documents or as provided by law; and
(v) exercise any other remedies provided hereunder or under any
other Loan Document or by law; provided, however, that in the event of an
actual or deemed entry of an order for relief with respect to any Borrower
under the Bankruptcy Code or similar foreign law, (A) any obligation of each
Lender to make Advances and Auction Advances, the obligation of the Swing
Line Bank to make Swing Line Advances and the obligation of the Issuing Bank
to Issue Letters of Credit shall automatically be terminated and (B) the
Advances and Auction Advances, all interest thereon and all other amounts
payable under this Agreement shall automatically become and be due and
payable, without presentment, demand, protest or any notice of any kind,
all of which are hereby expressly waived by the Borrowers.
ARTICLE VIII
THE AGENT AND ISSUING BANK
SECTION 8.01. Authorization and Action. (a) Each Lender, the Swing Line
Bank and the Issuing Bank hereby irrevocably appoint and authorize BofA to act
as Agent under this Agreement and the other Loan Documents, and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement and the other Loan Documents as are delegated to the Agent
by the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. The Borrowers shall be entitled to rely upon such
appointment in dealing with the Agent until such time as STK shall receive
notice from the Agent that it has been replaced pursuant to the terms of this
Article VIII. As to any matters not expressly provided for by this Agreement or
the other Loan Documents (including, without limitation, enforcement or
collection of the Advances, the Auction Advances and the other Loan Documents),
the Agent shall not be required to exercise any discretion or take any action,
but shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Majority Lenders, and such instructions shall be binding upon all Lenders and
owners of the Advances; provided, however, 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 applicable law. The Agent agrees to give to each
Lender prompt notice of each written notice given to it by any Borrower pursuant
to the terms of this Agreement.
(b) The Issuing Bank shall act on behalf of the Lenders with respect
to any Letters of Credit Issued by it and the documents associated therewith
until such time and except for so long as the Agent may agree at the request of
the Majority Lenders to act for such Issuing Bank with respect thereto;
provided, however, that the Issuing Bank shall have all of the benefits and
immunities (i) provided to the Agent in this Article VIII with respect to any
acts taken or omissions suffered by the Issuing Bank in connection with Letters
of Credit Issued by it or proposed to be Issued by it and the application and
agreements for letters of credit pertaining to the Letters of Credit as fully as
if the term "Agent", as used in this Article VIII, included the Issuing Bank
with respect to such acts or omissions, and (ii) as additionally provided in
this Agreement with respect to the Issuing Bank.
SECTION 8.02. Agent's Reliance, Etc. Neither the Agent, its Affiliates nor
any of their respective directors, officers, agents or employees (collectively,
the "Agent-Related Persons") shall be liable for any action taken or omitted to
be taken by it or them as Agent under or in connection with this Agreement,
except for its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, the Agent: (i) may treat the
obligee of any Advance as the owner thereof until the Agent receives and accepts
an Assignment and Acceptance providing for the assignment thereof, in accordance
with Section 9.09, or receives other written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to the Agent;
(ii) may consult with legal counsel (including counsel for any Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (iii) makes
no warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations made in or in
connection with this Agreement or any other Loan Document; (iv) shall not have
any duty to ascertain or to inquire as to the performance or observance of any
of the terms, covenants or conditions of this Agreement or any other Loan
Document on the part of any Borrower or to inspect the property (including the
books and records) of any Borrower; (v) shall not be responsible to any Lender
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document or other
instrument or document furnished pursuant hereto; and (vi) shall incur no
liability under or in respect of this Agreement or any other Loan Document by
acting upon any notice, consent, certificate or other instrument or writing
(which may be transmitted by facsimile) reasonably believed by it to be genuine
and signed or sent by the proper party or parties.
SECTION 8.03. BofA and Affiliates. With respect to its Commitment, the
Advances and Auction Advances made by it, the Advances and Auction Advances owed
to it, and the participations in Letter of Credit Liability purchased by it,
BofA shall have the same rights and powers under this Agreement and the other
Loan Documents as any other Lender and may exercise the same as though it were
not the Agent; and the term "Lender" or "Lenders" shall, unless otherwise
expressly indicated, include BofA in its individual capacity. BofA and its
Affiliates may accept deposits from, lend money to, issue letters of credit for
the account of, and generally engage in any kind of banking, trust, financial
advisory or other business with, any Borrower and any Subsidiary of any Borrower
and any Person who may do business with or own securities of any Borrower or any
such Subsidiary, all as if BofA were not the Agent and without any duty to
account therefor to the Lenders.
SECTION 8.04. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to the Agent for the account of the Lenders, unless the Agent shall
have received written notice from a Lender or a Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Agent receives such a
notice, the Agent will give notice thereof to the Lenders. The Agent shall take
such action with respect to such Default or Event of Default as shall be
requested by the Majority Lenders in accordance with Article VII; provided,
however, that unless and until the Agent shall have received any such request,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable or in the best interest of the Lenders.
SECTION 8.05. Credit Decision. Each Lender expressly acknowledges that
none of the Agent-Related Persons has made any representation or warranty to it
and that no act by the Agent hereinafter taken, including any review of the
affairs of the Borrowers and their Subsidiaries shall be deemed to constitute
any representation or warranty by the Agent to any Lender. Each Lender
represents to the Agent that it has, independently and without reliance upon the
Agent and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Borrowers and their Subsidiaries, and all applicable bank regulatory laws
relating to the transactions contemplated thereby, and made its own decision to
enter into this Agreement and extend credit to the Borrowers hereunder. Each
Lender also represents that it will, independently and without reliance upon the
Agent and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit analysis, appraisals and decisions
in taking or not taking action under this Agreement and the other Loan
Documents, and to make such investigations as it deems necessary to inform
itself as to the business, prospects, operations, property, financial and other
condition and creditworthiness of the Borrowers. Except for notices, reports
and other documents expressly herein required to be furnished to the Lenders by
the Agent, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of any
Borrower or any Subsidiary of any Borrower which may come into the possession of
any of the Agent-Related Persons.
SECTION 8.06. Indemnification. Whether or not the transactions
contemplated hereby shall be consummated, the Lenders shall indemnify upon
demand the Agent-Related Persons (to the extent not reimbursed by or on behalf
of the Borrowers and without limiting the obligation of the Borrowers to do so),
ratably from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind whatsoever which may at any time (including at any time following the
repayment of the Obligations and the termination or resignation of the related
Agent) be imposed on, incurred by or asserted against any such Person any way
relating to or arising out of this Agreement or any document contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby
or any action taken or omitted by any such Person under or in connection with
any of the foregoing; provided, however, that no Lender shall be liable for the
payment to the Agent-Related Persons of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from such Person's gross negligence
or willful misconduct. Without limitation of the foregoing, each Lender shall
reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Borrowers. Without limiting
the generality of the foregoing, if the Internal Revenue Service or any other
Governmental Authority of the United States or other jurisdiction asserts a
claim that the Agent did not properly withhold tax from amounts paid to or for
the account of any Bank (because the appropriate form was not delivered, was not
properly executed, or because such Bank failed to notify the Agent of a change
in circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Bank shall indemnify the Agent
fully for all amounts paid, directly or indirectly, by the Agent as tax or
otherwise, including penalties and interest, and including any taxes imposed by
any jurisdiction on the amounts payable to the Agent under this Section,
together with all costs and expenses (including Attorney Costs). The obligation
of the Lenders in this Section shall survive the payment of all Obligations
hereunder and the cancellation or termination of the Commitments.
SECTION 8.07. Successor Agent. The Agent may resign at any time by giving
30 Business Days' written notice thereof to the Lenders and the Borrowers and
may be removed at any time with or without cause by the Majority Lenders. Upon
any such resignation or removal, the Majority Lenders shall have the right, with
the consent of STK (unless there then exists a Default or Event of Default, and
which consent shall not be unreasonably withheld), to appoint a successor Agent.
If no successor Agent shall have been so appointed by the Majority Lenders, and
shall have accepted such appointment, within 30 days after the retiring Agent's
giving of notice of resignation or having been removed, then the retiring or
removed Agent may, on behalf of the Lenders, appoint a successor Agent, which
shall be a commercial bank organized under the laws of the United States or of
any State thereof, having a combined capital and surplus of at least
$200,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement and the other Loan Documents. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this Article VIII
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement and the other Loan Documents.
Notwithstanding the foregoing, however, BofA may not be removed as the Agent at
the request of the Majority Lenders unless BofA shall also simultaneously be
replaced as "Issuing Bank" and "Swing Line Bank" hereunder pursuant to
documentation in form and substance satisfactory to BofA.
SECTION 8.08. Audits. The Agent or its representatives will, pursuant to
Section 6.01(d), at the expense of the Borrowers, conduct audits of the Accounts
and Lease Receivables of the Borrowers twice during each calendar year (unless a
Default or an Event of Default exists, in which event the Agent or its
representatives may, at the request of the Majority Lenders in their discretion,
at the expense of the Borrowers, conduct audits more frequently than twice
during each calendar year), and deliver copies of any written report produced as
a result of such audits to each of the Lenders. The Lenders shall, ratably in
accordance with their respective Percentages, reimburse the Agent for all costs
and expenses incurred by the Agent in connection with such audits which are not
reimbursed by the Borrowers.
SECTION 8.09. Collateral Matters; Bank Responses.
(a) The Agent is authorized on behalf of all the Lenders, without the
necessity of any notice to or further consent from the Lenders, from time to
time to take any action with respect to any Collateral or the Collateral
Documents which may be necessary to perfect and maintain perfected the security
interest in and Liens upon the Collateral granted pursuant to the Collateral
Documents.
(b) The Lenders irrevocably authorize the Agent, at its option and in
its discretion, without further action or decision by the Lenders, to release
any Lien granted to or held by the Agent for the benefit of the Lenders upon any
Collateral (i) upon termination of the Commitments and payment in full of all
Obligations payable under this Agreement and under any other Loan Document;
(ii) constituting property sold or to be sold or disposed of as part of or in
connection with any disposition permitted hereunder; (iii) constituting property
in which no Borrower owned any interest at the time the Lien was granted or at
any time thereafter; (iv) constituting property leased to any Borrower or any
Subsidiary of any Borrower under a lease which has expired or been terminated in
a transaction permitted under this Agreement or is about to expire and which has
not been, and is not intended by the Borrower or such Subsidiary to be, renewed
or extended; (v) consisting of an instrument evidencing Debt or other debt
instrument, if the Debt evidenced thereby has been paid in full; (vi) pursuant
to a Periodic Release Certificate delivered to the Agent in accordance with
Section 6.02(b); (vii) to the extent any such Collateral is financed under the
Program; or (viii) if approved, authorized or ratified in writing by the
Majority Lenders or all the Lenders, as the case may be, as provided in Section
9.01 and elsewhere in the Loan Documents. Without limitation, for purposes of
any release of Collateral pursuant to a Periodic Release Certificate, the Agent
may rely upon the representations of the Borrower delivering such certificate,
without investigation. Upon request by the Agent at any time, the Lenders will
confirm in writing the Agent's authority to release particular types or items of
Collateral pursuant to this Section 8.09(b).
The Lenders further authorize the Agent, without further action or
decision by the Lenders, to release upon the request of STK and in accordance
with the terms of the Loan Documents and the Program Collateral Release
Certificate (the form of which is attached hereto as EXHIBIT U), the Lien on the
Securitized Assets granted to the Agent for the benefit of the Lenders and
further authorize the Agent to take all reasonable actions requested by the
applicable Borrower in connection with such release, including the execution by
the Agent of all necessary or appropriate UCC partial releases or termination
statements (as determined by the Agent in its discretion) with respect to the
Securitized Assets.
(c) Each Lender agrees with and in favor of each other (which
agreement shall not be for the benefit of the Borrowers or any of their
Subsidiaries) that the Borrowers' obligation to such Lender under this Agreement
and the other Loan Documents is not and shall not be secured by any real
property collateral now or hereafter acquired by such Lender.
(d) Each Lender agrees with and solely in favor of the Agent (which
agreement shall not be for the benefit of any Borrower or create any setoff
claim or defense in favor of any Borrower) that it will exercise reasonable
efforts to respond fully to any request by the Agent for any consent, approval
or other action within five Business Days of the date such Lender has received
all information and documentation it deems necessary to undertake such consent,
approval or other action.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Amendments, Etc. No amendment or waiver of any provision of
any Loan Document, nor consent to any departure by any Borrower therefrom, nor
any approval, shall in any event be effective unless the same shall be in
writing and signed by the Majority Lenders and such Borrower and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver,
consent or approval with respect to any Loan Document shall, unless in writing
and signed by all the Lenders, do any of the following:
(a) waive any of the conditions specified in Section 4.01;
(b) increase the Commitments of the Lenders or subject the Lenders to
any additional monetary obligations;
(c) increase any applicable percentage advance rate set forth in the
definitions of Domestic Accounts Borrowing Base, Foreign Accounts Borrowing Base
or Lease Receivables Borrowing Base in Section 1.01, or amend the definition of
"Eligible Accounts" or "Eligible Lease Receivables" in any respect that would
reasonably be anticipated to increase the Domestic Borrowing Base or the Foreign
Borrowing Base, or waive any provision thereof that would reasonably be expected
to have such effect, except to the extent such defined terms provide for
amendment or modification by Majority Lenders;
(d) reduce the principal of, or interest on, the Advances, the Auction
Advances, or Letter of Credit Liability or any fees or other amounts payable
hereunder;
(e) amend or modify the definitions of Adjusted CD Rate, Base Rate or
Eurocurrency Rate set forth in Section 1.01, or add any new definitions for
determining applicable interest rates hereunder;
(f) postpone any date fixed for any payment of principal of, or
interest on, the Advances or Letter of Credit Liability or any fees or other
amounts payable hereunder;
(g) release any Collateral with a book value in excess of $100,000,
except as expressly provided herein (including Section 8.09) or in the Loan
Documents;
(h) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Advances, or the number of Lenders which shall be
required for the Lenders or any of them to take any action hereunder; or
(i) amend this Section 9.01; and
provided, further, that no amendment, waiver, consent or approval with respect
to any Loan Document shall, unless in writing and signed by the Agent, the Swing
Line Bank or the Issuing Bank in addition to the Lenders required above to take
such action, affect the rights or duties of the Agent, the Swing Line Bank or
the Issuing Bank, respectively, under this Agreement or any Loan Document.
Unless otherwise expressly provided herein, all consents and approvals may be
granted or withheld at the sole and absolute discretion of the Person referred
to. No course of dealing shall impair the discretionary nature of such consents
and approvals. Any discretionary consent contemplated hereby may be subject to
such conditions precedent and subsequent as the consenting Person may deem
appropriate in its discretion and, if so subject, shall be deemed given only if
such conditions are met.
SECTION 9.02. Notices, Etc.
(a) All notices, requests and other communications provided for
hereunder shall be in writing (including, unless the context expressly otherwise
provides, by facsimile transmission, provided that any matter transmitted by the
Borrowers by facsimile (i) shall be immediately confirmed by a telephone call to
the recipient at the number specified on Schedule 1.01(c)(2), and (ii) shall be
followed promptly by a hard copy original thereof) and mailed by first class
mail, faxed or delivered, to the address or facsimile number specified for
notices on Schedule 1.01(c)(2); or, as directed to the Borrowers or the Agent,
to such other address as shall be designated by such party in a written notice
to the other parties, and as directed to each other party, at such other address
as shall be designated by such party in a written notice to the Borrowers and
the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next day) delivery, or transmitted by facsimile machine,
respectively, or if delivered, upon delivery, or if mailed, three days after
being mailed, except that notices pursuant to Article II or VIII shall not be
effective until actually received by the Agent.
(c) The Borrowers acknowledge and agree that any agreement of the
Agent and the Lenders at Article II herein to receive certain notices by
telephone and facsimile is solely for the convenience and at the request of the
Borrowers. The Agent and the Lenders shall be entitled to rely on the authority
of any Person purporting to be a Person authorized by the Borrowers to give such
notice and the Agent and the Lenders shall not have any liability to the
Borrowers or other Person on account of any action taken or not taken by the
Agent or the Lenders in reliance upon such telephonic or facsimile notice. The
obligation of the Borrowers to pay the Obligations shall not be affected in any
way or to any extent by any failure by the Agent and the Lenders to receive
written confirmation of any telephonic or facsimile notice or the receipt by the
Agent and the Lenders of a confirmation which is at variance with the terms
understood by the Agent and the Lenders to be contained in the telephonic or
facsimile notice.
SECTION 9.03. No Waiver; Remedies. No failure on the part of the Agent,
the Swing Line Bank, the Issuing Bank or any Lender to exercise, and no delay in
exercising, any right under any Loan Document shall operate as a waiver thereof;
nor shall any single or partial exercise of any right under any Loan Document
preclude any other or further exercise thereof or the exercise of any other
right. The remedies provided in the Loan Documents are cumulative and not
exclusive of any remedies provided by law.
SECTION 9.04. Costs and Expenses. (a) The Borrowers jointly and severally
agree, whether or not the transactions contemplated hereby shall be consummated,
to:
(i) pay or reimburse the Agent on demand for all reasonable costs
and out-of-pocket expenses incurred in connection with: the development,
preparation, delivery, administration and execution of, and any amendment,
supplement, waiver or modification to, this Agreement, any Loan Document,
and any other documents prepared in connection herewith or therewith, and
the consummation of the transactions contemplated hereby and thereby
(including BofA's reasonable Attorney Costs); together with the reasonable
out-of-pocket costs and expenses for appraisal, audit, environmental
inspection, engineering, consultants' evaluation, title or lien search and
filing fees and expenses, and title or lien insurance premiums; and
(ii) pay or reimburse each Lender and the Agent on demand for all
costs and expenses incurred by them in connection with the enforcement or
preservation of any rights (including in connection with any "workout" or
restructuring and in connection with any Insolvency Proceeding) under this
Agreement, any Loan Document, and any such other documents (including
Attorney Costs), and including all appraisal, audit, environmental
inspection, consultants', evaluation, title or lien search and filing fees
and expenses, and title or lien insurance premiums (and the allocated cost
of internal environmental and appraisal services) incurred or sustained by
the Agent or the Lenders in connection therewith.
(b) If (i) any payment of principal of, or any Conversion or
Redenomination of, any Eurocurrency Rate Advance or Adjusted CD Rate Advance is
made by any Borrower to or for the account of a Lender other than on the last
day of the Interest Period for such Advance, as a result of a Conversion or
Redenomination pursuant to Section 2.07, a prepayment pursuant to Section 2.09
or 2.10, acceleration of the maturity of the Advances pursuant to Section 7.01
or for any other reason, (ii) any payment of principal of any Auction Advance is
made by any Borrower other than on the dates specified by such Borrower in the
applicable Competitive Bid Request, as a result of acceleration of the maturity
of the Auction Advances pursuant to Section 7.01 or for any other reason, or
(iii) any reimbursement obligation is not satisfied on the applicable Honor
Date, then the Borrowers shall, upon demand by any Lender (with a copy of such
demand to the Agent), pay to the Agent for the account of such Lender any
amounts required to compensate such Lender for any additional losses, costs or
expenses which it may reasonably incur as a result of such payment, Conversion
or Redenomination, or failure, including, without limitation, any reasonable
direct loss, cost or out-of-pocket expense incurred by reason of the liquidation
or re-employment of deposits or other funds acquired by any Lender to fund or
maintain such Advance, Auction Advance or Letter of Credit participation, as the
case may be.
SECTION 9.05. Right of Setoff. Upon (i) the occurrence and during the
continuance of any Event of Default and (ii) the making of the request or the
granting of the consent specified by Section 7.01 to authorize the Agent to
declare the Advances and the Auction Advances due and payable pursuant to the
provisions of Section 7.01, each Lender, the Swing Line Bank and the Issuing
Bank is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final or otherwise) at any time held and
other indebtedness at any time owing by such Lender or the Issuing Bank, as the
case may be, to or for the credit or the account of any Borrower against any and
all of the obligations of the Borrowers owing to such Lender, the Swing Line
Bank or the Issuing Bank, as the case may be, now or hereafter existing under
any Loan Document, irrespective of whether or not such Lender, the Swing Line
Bank or the Issuing Bank shall have made any demand under such Loan Document,
and although such obligations may be unmatured; provided, however, that none of
the Agent, the Lenders, the Swing Line Bank or the Issuing Bank shall exercise
any right of setoff against any trust or segregation account maintained for the
benefit of any Person that is not a Subsidiary or an Affiliate of the Borrowers.
Each Lender, the Swing Line Bank and the Issuing Bank agrees promptly to notify
the Borrowers after any such set-off and application made by such Lender, the
Swing Line Bank or the Issuing Bank, as the case may be, provided, that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of each Lender, the Swing Line Bank and the Issuing
Bank under this Section 9.05 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which such Lender, the
Swing Line Bank or the Issuing Bank, as the case may be, may have. Each Lender,
the Swing Line Bank and the Issuing Bank agrees to give the Agent prior notice
of any proposed set-off under this Section 9.05 or of any charge proposed to be
made by such Lender, the Swing Line Bank or Issuing Bank under Section 2.11(b),
provided, that the failure to give such notice shall not affect the validity of
any such set-off or charge.
SECTION 9.06. Indemnification. Each Borrower agrees to defend, protect,
indemnify and hold harmless the Agent, each Lender, the Swing Line Bank, the
Issuing Bank and their respective Affiliates and the directors, officers,
employees, attorneys and agents (including, without limitation, those retained
in connection with the satisfaction or attempted satisfaction of any of the
conditions precedent set forth in Section 4.01) of the Agent, the Issuing Bank,
each Lender and such Affiliates (each of the foregoing being an "Indemnitee" and
all of the foregoing being collectively the "Indemnitees") from and against any
and all claims, actions, damages, liabilities, costs and expenses (including,
without limitation, all fees and disbursements of counsel and consultants which
may be incurred in the investigation or defense of any matter) imposed upon,
incurred by or asserted against any Indemnitee by any Person not a party to this
Agreement, whether direct, indirect or consequential and whether based on any
federal, state or foreign laws or other statutes or regulations (including,
without limitation, securities laws, commercial laws and Environmental Laws and
regulations), under common law or on equitable cause, or on contract, tort or
otherwise, by reason of, relating to or in connection with any credit extended
or used under the Loan Documents or any act done or omitted by any Person, or
any event occurring, in connection therewith, or the exercise of any rights or
remedies thereunder, including, without limitation, the acquisition of any
Collateral by the Agent by way of foreclosure of the Lien thereof, deed in lieu
of such foreclosure or otherwise, or any Environmental Activity; provided,
however, that, notwithstanding the foregoing, the Borrowers shall not be liable
to any Indemnitee for any portion of such claims, damages, liabilities and
expenses resulting from such Indemnitee's or such Indemnitee's Affiliate's,
director's, officer's, employee's, attorney's or agent's gross negligence or
willful misconduct. In the event this indemnity is unenforceable as a matter of
law as to a particular matter or consequence referred to herein, it shall be
enforceable to the full extent permitted by law. This indemnification applies,
without limitation, to any act, omission, event or circumstance existing or
occurring on or prior to the later of the Termination Date or the date of
payment in full of the Obligations, including any Environmental Activity,
regardless of whether the act, omission, event or circumstance constituted a
violation of any Environmental Law at the time of its existence or occurrence.
The indemnification provisions set forth above shall be in addition to any
liability the Borrowers may otherwise have. Without prejudice to the survival
of any other obligation of the Borrowers hereunder, the indemnities and
obligations of the Borrowers contained in this Section 9.06 shall survive the
payment in full of the Obligations.
SECTION 9.07. Consent to Jurisdiction. (a) Each Borrower hereby
irrevocably submits to the jurisdiction of any California State or Federal court
sitting in the County of San Francisco, in any action or proceeding arising out
of or relating to this Agreement or any other Loan Document, and each Borrower
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such California State court or such
Federal court. Each Borrower hereby irrevocably waives, to the fullest extent
it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding. Each Borrower hereby irrevocably
consents to the service of copies of the summons and complaint and any other
process which may be served in any such action or proceeding by certified mail,
return receipt requested, or by delivering of a copy of such process to such
Borrower at its address specified in Section 9.02 or by any other method
permitted by law. Each Borrower agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or by any other manner provided by law.
(b) Nothing in this Section 9.07 shall affect the right of any Lender,
the Swing Line Bank, the Issuing Bank or the Agent to serve legal process in any
other manner permitted by law or affect the right of any Lender, the Swing Line
Bank, the Issuing Bank or the Agent to bring any action or proceeding against
any Borrower or its property in the courts of other jurisdictions, or to request
arbitration pursuant to Section 9.20.
SECTION 9.08. Binding Effect. This Agreement shall become effective when
it shall have been executed by the Borrowers and the Agent and when the Agent
shall have been notified by each Lender, the Swing Line Bank and the Issuing
Bank that such Lender, the Swing Line Bank and the Issuing Bank have executed it
and thereafter shall be binding upon and inure to the benefit of the Borrowers,
the Agent, the Swing Line Bank, the Issuing Bank and each Lender and their
respective successors and assigns, except that no Borrower shall have the right
to assign its rights hereunder or any interest herein.
SECTION 9.09. Assignments and Participations. (a) Each Lender may, with
the prior consent of the Agent and (unless such assignee is an Affiliate of any
Lender, or there exists at such time an Event of Default) STK (which consent of
STK shall not be unreasonably withheld), assign to one or more Eligible
Assignees all or a ratable portion of all of its rights and obligations under
this Agreement and the other Loan Documents (including, without limitation, all
or all of a portion of its Commitments, the Advances and Letter of Credit
Liability owing to it and the Advances owned by it); provided, however, that
(i) each such assignment shall be of a constant, and not a varying, percentage
of the assigning Lender's rights and obligations under this Agreement (other
than Auction Advances), (ii) the aggregate amount of the Commitments and
Advances of the assigning Lender being assigned pursuant to each such assignment
(determined as of the date of the Assignment and Acceptance with respect to such
assignment) shall in no event be less than $5,000,000 and shall be an integral
multiple of $1,000,000 in excess thereof, and (iii) the parties to each such
assignment shall execute and deliver to the Agent an Assignment and Acceptance,
together with a processing and recordation fee of $2,500. Upon such execution
and delivery, from and after the effective date specified in each Assignment and
Acceptance, (x) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto). Each Lender may assign to one or more banks or other entities any
Auction Advances owned by it without regard to the restrictions imposed by this
Section 9.09 on assignments.
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
any other Loan Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other Loan Document
or any other instrument or document furnished pursuant hereto or of any
Collateral; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of any
Borrower or the performance or observance by any Borrower of any of its
obligations under any Loan Document or any other instrument or document
furnished pursuant hereto or with respect to the taxability of payments to be
made hereunder or under the Loan Documents; (iii) such assignee confirms that it
has received a copy of this Agreement, together with copies of the financial
statements referred to in Section 5.01 and such other Loan Documents and other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the Agent, such assigning
Lender or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement and the other Loan Documents as are delegated
to the Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
(c) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee
satisfactory to the Agent, the Agent will, if such Assignment and Acceptance has
been properly completed and is in substantially the form of Exhibit A,
(i) accept such Assignment and Acceptance, and (ii) give prompt notice thereof
to the Borrowers.
(d) Each Lender may sell participations to one or more Eligible
Assignees in or to all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitments,
its pro rata share of Letter of Credit Liability, and the Advances and Auction
Advances owing to it); provided, however, that (i) such Lender's obligations
under this Agreement (including, without limitation, its Commitments to the
Borrowers hereunder) shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Lender shall remain the owner and holder of such
Advances and/or Auction Advances for all purposes of this Agreement, and
(iv) the Borrower, the Agent, and the Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement; provided, further, that, to the extent of any
such participation (unless otherwise stated therein and subject to the preceding
proviso), the assignee or purchaser of such participation shall, to the fullest
extent permitted by law, have the same rights and benefits hereunder (including
the right of set-off) as it would have if it were a Lender hereunder; and
provided, further, that each such participation shall be granted pursuant to an
agreement providing that the purchaser thereof shall not have the right to
consent or object to any action by the selling Lender (who shall retain such
right) other than an action relating to "money terms," including without
limitation any which would (i) reduce principal of or interest on any Advance,
Auction Advance, any Letter of Credit Liability or fees in which such purchaser
has an interest, (ii) postpone any date fixed for payment of principal of or
interest on any such Advance, Auction Advance, such Letter of Credit Liability
or such fees, or (iii) release any material portion of the Collateral other than
pursuant to the terms hereof or any other Loan Document. Each Lender may sell
participations to one or more banks or other entities in any Auction Advances
owned by it without regard to the restrictions imposed by this Section 9.09(d)
on participations.
(e) Any Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section 9.09, disclose
to the assignee or participant or proposed assignee or participant, any
information relating to the Borrowers furnished to such Lender by or on behalf
of the Borrowers; provided that, prior to any such disclosure, the assignee or
participant or proposed assignee or participant shall agree to preserve, in
accordance with terms not substantially less protective of the Borrowers than
provided in Section 9.17, the confidentiality of any confidential information
relating to the Borrowers received by it from such Lender.
(f) Notwithstanding any other provision contained in this Agreement or
any other Loan Document to the contrary, any Lender may assign all or any
portion of the Advances held by it to any Federal Reserve Bank or the United
States Treasury as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any Operating Circular issued by
such Federal Reserve Bank, provided that any payment in respect of such assigned
Advances made by the Borrowers to or for the account of the assigning or
pledging Lender in accordance with the terms of this Agreement shall satisfy the
Borrowers' obligations hereunder in respect to such assigned Borrowers' Advances
to the extent of such payment. No such assignment shall release the assigning
Lender from its obligations hereunder.
SECTION 9.10. Severability of Provisions. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 9.11. Judgment. (a) If for the purposes of obtaining judgment in
any court or an award in any arbitration proceeding it is necessary to convert a
sum due hereunder or under any instrument delivered hereunder in any currency
(the "Original Currency") into another currency (the "Other Currency"), the
parties hereto agree, to the fullest extent permitted by law, that the rate of
exchange used shall be that at which in accordance with normal banking
procedures the Agent could purchase the Original Currency with the Other
Currency on the Business Day preceding that on which final judgment is given.
(b) The obligation of the Borrowers in respect of any sum due from
them hereunder in the Original Currency shall, notwithstanding any judgment or
award in any Other Currency, be discharged only to the extent that on the
Business Day following receipt of any sum adjudged to be so due in such Other
Currency the Agent may in accordance with normal banking procedures purchase
Dollars with such Other Currency; if the amount of the Original Currency so
purchased is less than the sum originally due in the Original Currency, the
Borrower agrees, as a separate obligation and notwithstanding any such judgment,
to indemnify the Lender or Person to whom such amount was owing against such
loss.
SECTION 9.12. Independence of Provisions. All agreements and covenants
hereunder and under the Loan Documents shall be given independent effect such
that if a particular action or condition is prohibited by the terms of any such
agreement or covenant, the fact that such action or condition would be permitted
within the limitations of another agreement or covenant shall not be construed
as allowing such action to be taken or condition to exist.
SECTION 9.13. Headings. Article and Section headings in this Agreement are
included for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
SECTION 9.14. Entire Agreement. This Agreement sets forth the entire
agreement of the parties with respect to its subject matter and supersedes all
previous understandings, written or oral, in respect thereof, except for the fee
letter referenced in Section 2.04(a).
SECTION 9.15. Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
SECTION 9.16. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA WITHOUT
REFERENCE TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT, IN THE CASE OF
ARTICLE III, TO THE EXTENT SUCH LAWS ARE INCONSISTENT WITH THE UCP.
SECTION 9.17. Confidentiality. Each Lender, the Swing Line Bank, the
Issuing Bank and the Agent agrees that it will not disclose to any third party
any written information marked "Confidential", "Secret" or words of similar
import, provided to it by any Borrower or any oral information which is stated
to be confidential and which is confirmed as such in writing within seven days;
provided, however, that the foregoing will not (i) restrict the ability of the
Agent, the Issuing Bank, the Swing Line Bank, the Lenders and any loan
participants from freely exchanging such information among themselves (and their
respective employees, attorneys, auditors and other professional advisors), (ii)
restrict the ability to disclose such information to a prospective Eligible
Assignee or participant, provided, that such Eligible Assignee or participant
executes a confidentiality agreement with the selling Lender agreeing to be
bound by the terms hereof prior to disclosure of such information to such
Eligible Assignee or participant, or (iii) prohibit the disclosure of such
information to the extent such information (A) becomes publicly available other
than through a breach of this Section 9.17, (B) becomes available through a
Person not a Borrower or Subsidiary of any Borrower, (C) is required to be
disclosed pursuant to court order, subpoena, other legal process, regulatory
request or otherwise by law or (D) is disclosed in litigation with any Borrower
or any Subsidiary of any Borrower or in connection with the enforcement of
remedies by the Agent or Lenders after acceleration of the Advances or after the
Termination Date.
SECTION 9.18. Joint and Several Obligations; Obligations Absolute. (a)
Each Borrower hereby agrees that except as otherwise expressly provided herein
all of the Obligations set forth herein are the joint and several obligations of
all of the Borrowers and acknowledges that each Advance and Auction Advance to,
and each Letter of Credit Issued for the account of, any Borrower will benefit
each of the Borrowers. Each Borrower hereby further agrees and unconditionally
guarantees to the Lenders, the Swing Line Bank, the Issuing Bank and the Agent
that the obligations of the Borrowers other than such Borrower under this
Agreement, to the extent such obligations are the joint and several obligations
of all Borrowers in accordance with the preceding sentence (such obligations of
the other Borrowers being referred to herein, with respect to each Borrower, as
the "Other Borrowers' Obligations") will be paid strictly in accordance with the
terms of this Agreement, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Lenders, the Swing Line Bank, the Issuing Bank or the Agent with
respect thereto. The liability of each Borrower for the Other Borrowers'
Obligations shall be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of this Agreement, the
other Loan Documents or any other agreement or instrument relating hereto or
thereto;
(ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Other Borrowers' Obligations, or any
other amendment or waiver of or any consent to departure from this Agreement
or the other Loan Documents;
(iii) any exchange, release or non-perfection of any Collateral, or
any release or amendment or waiver of or consent to departure from any
guaranty, for all or any of the Other Borrowers' Obligations; or
(iv) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, any Borrower other than such
Borrower or a guarantor.
Each Borrower's obligations under this Agreement shall continue to be effective
or be reinstated, as the case may be, if at any time any payment of any of the
Other Borrowers' Obligations is rescinded or must otherwise be returned by the
Lenders, the Swing Line Bank, the Issuing Bank or the Agent upon the insolvency,
bankruptcy or reorganization of any Borrower or otherwise, all as though such
payment had not been made.
(b) Each Borrower hereby waives, to the extent permitted by applicable
law, with respect to the Other Borrowers' Obligations:
(i) any requirement that the Agent, any Lender, the Swing Line
Bank or the Issuing Bank secure or insure any security interest or lien on
any property subject thereto or exhaust any right or take any action against
any Borrower or any other Person or any Collateral;
(ii) any defense arising by reason of any claim or defense based
upon an election of remedies by the Agent, any Lender, the Swing Line Bank
or the Issuing Bank (including, without limitation, an election to
nonjudicially foreclose on any real or personal property collateral) which
in any manner impairs, reduces, releases or otherwise adversely affects its
subrogation, reimbursement or contribution rights or other rights to proceed
against any Borrower or any other Person or any Collateral;
(iii) any defense arising by reason of the failure of any Borrower
or any of its Subsidiaries to properly execute any Loan Document or
otherwise comply with applicable legal formalities;
(iv) any defense or benefits that may be derived from California
Civil Code SectionSection 2808, 2809, 2810, 2819, 2845 or 2850, or
California Code of Civil Procedure SectionSection 580a, 580d or 726, or
comparable provisions of the laws of any other jurisdiction and all other
suretyship defenses it would otherwise have under the laws of California or
any other jurisdiction;
(v) any duty on the part of the Agent, any Lender, the Swing Line
Bank or the Issuing Bank to disclose to such Borrower any matter, fact or
thing relating to the business, operation or condition of any of the other
Borrowers and their respective assets now known or hereafter known by the
Agent, any Lender, the Swing Line Bank or the Issuing Bank;
(vi) all benefits of any statute of limitations affecting such
Borrower's liability in respect of the Other Borrowers' Obligations;
(vii) all setoffs and counterclaims;
(viii) promptness, diligence, presentment, demand for performance
and protest;
(ix) notice of nonperformance, default, acceleration, protest or
dishonor;
(x) except for any notice otherwise required by applicable laws
that may not be effectively waived by such Borrower, notice of sale or other
disposition of any Collateral; and
(xi) notice of the existence, creation or incurring of any Other
Borrowers' Obligations.
SECTION 9.19. Automatic Debits of Fees, Etc. With respect to any
commitment fee, facility fee, or other fee, or any other cost or expense
(including Attorney Costs) due and payable to the Agent or BofA under the Loan
Documents, the Borrowers each hereby irrevocably authorize BofA to debit any of
their respective deposit accounts with BofA in an amount such that the aggregate
amount debited from all such deposit accounts does not exceed such fee or other
cost or expense. If there are insufficient funds in such deposit accounts to
cover the amount of the fee or other cost or expense then due, such debits will
be reversed (in whole or in part, in BofA's sole discretion) and such amount not
debited shall be deemed to be unpaid. No such debit under this Section 9.19
shall be deemed a setoff.
SECTION 9.20. Arbitration; Reference.
(a) Mandatory Arbitration. Any controversy or claim between or among
the parties, including but not limited to those arising out of or relating to
this Agreement or any agreements or instruments relating hereto or delivered in
connection herewith and any claim based on or arising from an alleged tort,
shall at the request of any party be determined by arbitration. The arbitration
shall be conducted in accordance with the United States Arbitration Act (Title
9, U.S. Code), notwithstanding any choice of law provision in this Agreement,
and under the Commercial Rules of the American Arbitration Association ("AAA").
The arbitrator(s) shall give effect to statutes of limitation in determining any
claim. Any controversy concerning whether an issue is arbitrable shall be
determined by the arbitrator(s). Judgment upon the arbitration award may be
entered in any court having jurisdiction. The institution and maintenance of an
action for judicial relief or pursuit of a provisional or ancillary remedy shall
not constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.
(b) Real Property Collateral. Notwithstanding the provisions of
subparagraph (a), no controversy or claim shall be submitted to arbitration
without the consent of all parties if, at the time of the proposed submission,
such controversy or claim arises from or relates to an obligation to the Agent,
Issuing Bank, Swing Line Bank or Lenders which is secured by real property
collateral. If not all parties consent to submission of such a controversy or
claim to arbitration, the controversy or claim shall be determined as provided
in subparagraph (c).
(c) Judicial Reference. At the request of any party a controversy or
claim which is not submitted to arbitration as provided and limited in
subparagraphs (a) and (b) shall be determined by a reference in accordance with
California Code of Civil Procedure Section 638 et seq. If such an election is
made, the parties shall designate to the court a referee or referees selected
under the auspices of the AAA in the same manner as arbitrators are selected in
AAA-sponsored proceedings. The presiding referee of the panel, or the referee
if there is a single referee, shall be an active attorney or retired judge.
Judgment upon the award rendered by such referee or referees shall be entered in
the court in which such proceeding was commenced in accordance with California
Code of Civil Procedure Sections 644 and 645.
(d) Provisional Remedies and Self-Help. No provision of this
paragraph shall limit the right of any party to this Agreement to exercise self-
help remedies such as setoff, foreclosure against or sale of any real or
personal property collateral or security, or obtaining provisional or ancillary
remedies from a court of competent jurisdiction before, after, or during the
pendency of any arbitration or other proceeding. The exercise of a remedy does
not waive the right of either party to resort to arbitration or reference.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE BORROWERS:
-------------
STORAGE TECHNOLOGY CORPORATION
------------------------------
By: /s/ Mark D. McGregor
------------------------------------
Name: Mark D. McGregor
Title: Assistant Treasurer
STORAGE TECHNOLOGY DE PUERTO RICO, INC.
---------------------------------------
By: /s/ Mark D. McGregor
------------------------------------
Name: Mark D. McGregor
Title: Assistant Treasurer
XL/DATACOMP, INC.
-----------------
By: /s/ Mark D. McGregor
------------------------------------
Name: Mark D. McGregor
Title: Assistant Treasurer
STORAGETEK FINANCIAL SERVICES CORPORATION
-----------------------------------------
By: /s/ Robert J. Kali
------------------------------------
Name: Robert Kali
Title: Vice President and Chief
Operating Officer
THE AGENT:
---------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
------------------------------
By: /s/ Wendy M. Young
-------------------------------------
Name: Wendy M. Young
Title: Vice President
THE SWING LINE BANK:
-------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Swing
Line Bank
-----------------------------------
By: /s/ Kevin McMahon
-------------------------------------
Name: Kevin McMahon
Title: Vice President
THE ISSUING BANK:
----------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Issuing
Bank
-------------------------------------
By: /s/ Kevin McMahon
------------------------------------
Name: Kevin McMahon
Title: Vice President
COMMITMENTS THE LENDERS:
AND PERCENTAGES:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
------------------------------
Commitment: $48,000,000
Percentage: 24%
By: /s/ Kevin McMahon
-------------------------------------
Name: Kevin McMahon
Title: Vice President
BANK OF MONTREAL
----------------
Commitment: $35,000,000
Percentage: 17.5%
By: /s/ Daniel A. Brown
------------------------------------
Name: Daniel A. Brown
Title: Director
NBD BANK, N.A.
--------------
Commitment: $35,000,000
Percentage: 17.5%
By: /s/ James R. Frye
-------------------------------------
Name: James R. Frye
Title: First Vice President
FIRST INTERSTATE BANK OF DENVER
-------------------------------
Commitment: $25,000,000
Percentage: 12.5%
By: /s/ Alex J. McCombs
------------------------------------
Name: Alex J. McCombs
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
---------------------------------
Commitment: $25,000,000
Percentage: 12.5%
By: /s/ Elizabeth C. Everett
--------------------------
Name: Elizabeth C. Everett
Title: Vice President
BANK OF AMERICA ILLINOIS
------------------------
Commitment: $17,000,000
Percentage: 8.5%
By: /s/ Kevin McMahon
------------------------------------
Name: Kevin McMahon
Title: Vice President
BANQUE NATIONALE DE PARIS
-------------------------
Commitment: $15,000,000
Percentage: 7.5%
By: /s/ C. Morio
------------------------------------
Name: C. Morio
Title: Vice President and Manager
By: /s/ Deborah Gohh
-----------------------------------
Name: Deborah Gohh
Title: Vice President
=================================
Total Commitments: $200,000,000
EXHIBIT 11
<TABLE>
STORAGE TECHNOLOGY CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(In thousands, except per share amounts)
<CAPTION>
Quarter Ended Nine Months Ended
---------------------- ----------------------
09/30/94 09/24/93 09/30/94 09/24/93
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PRIMARY (a)
Earnings (loss)
Income (loss) before cumulative
effect of accounting change $18,550 ($122,877) $13,325 ($124,141)
Cumulative effect on prior years of change
in method of accounting for income taxes 40,000
---------- ---------- ---------- ----------
Net income (loss) 18,550 (122,877) 13,325 (84,141)
Preferred stock dividend 3,018 3,019 9,056 6,786
---------- ---------- ---------- ----------
Income (loss) applicable to common shares $15,532 ($125,896) $4,269 ($90,927)
========== ========== ========== ==========
Shares
Weighted average common shares outstanding 43,979 42,846 43,605 42,725
Dilutive effect of outstanding options
and warrants (as determined under
the treasury stock method) 754 876
---------- ---------- ---------- ----------
Weighted average common shares
and equivalents 44,733 42,846 44,481 42,725
========== ========== ========== ==========
Earnings (loss) per common share
Income (loss) before cumulative
effect of accounting change $0.35 ($2.94) $0.10 ($3.06)
Cumulative effect on prior years of change
in method of accounting for income taxes 0.93
---------- ---------- ---------- ----------
$0.35 ($2.94) $0.10 ($2.13)
========== ========== ========== ==========
FULLY DILUTED (b)
Earnings (loss)
Income (loss) before cumulative
effect of accounting change $18,550 ($122,877) $13,325 ($124,141)
Adjustment for interest and amortization
of debt issue costs on 8% Convertible
Debentures, net of estimated tax effects 2,568 2,578 7,705 7,735
---------- ---------- ---------- ----------
Income (loss) before cumulative effect
of accounting change, as adjusted 21,118 (120,299) 21,030 (116,406)
Cumulative effect on prior years of change
in method of accounting for income taxes 40,000
---------- ---------- ---------- ----------
Net income (loss), as adjusted $21,118 ($120,299) $21,030 ($76,406)
========== ========== ========== ==========
Shares
Weighted average common shares outstanding 43,979 42,846 43,605 42,725
Dilutive effect of outstanding options
and warrants (as determined under
the treasury stock method) 754 840 876 800
Adjustment for shares issuable upon assumed
conversion of $3.50 Convertible
Exchangeable Preferred Stock 7,340 7,340 7,340 5,512
Adjustment for shares issuable upon assumed
conversion of 8% Convertible Debentures 4,132 4,132 4,132 4,132
---------- ---------- ---------- ----------
Weighted average common shares
and equivalents, as adjusted 56,205 55,158 55,953 53,169
========== ========== ========== ==========
Earnings (loss) per common share
Income (loss) before cumulative
effect of accounting change $0.38 ($2.18) $0.38 ($2.19)
Cumulative effect on prior years of change
in method of accounting for income taxes 0.75
---------- ---------- ---------- ----------
$0.38 ($2.18) $0.38 ($1.44)
========== ========== ========== ==========
</TABLE>
(a) These figures agree with the related amounts in the Consolidated
Statement of Operations.
(b) This calculation is submitted in accordance with Regulation S-K,
Item 601(b)(11) although it is contary to paragraph 40 of APB Opinion
No. 15 because it produces an anti-dilutive result.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S FORM 10-Q DATED SEPTEMBER 30, 1994 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000094673
<NAME> STORAGE TECHNOLOGY CORPORATION
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-30-1994 DEC-31-1993
<PERIOD-END> SEP-30-1994 DEC-31-1993
<CASH> 188,366 255,062
<SECURITIES> 0 16,042
<RECEIVABLES> 282,361 255,094
<ALLOWANCES> 10,824 12,452
<INVENTORY> 279,568 203,257
<CURRENT-ASSETS> 892,532 874,200
<PP&E> 728,794 672,818
<DEPRECIATION> 406,109 366,784
<TOTAL-ASSETS> 1,841,531 1,793,009
<CURRENT-LIABILITIES> 435,937 405,703
<BONDS> 359,331 361,718
<COMMON> 4,406 4,310
0 0
35 35
<OTHER-SE> 1,035,277 1,012,958
<TOTAL-LIABILITY-AND-EQUITY> 1,841,531 1,793,009
<SALES> 732,240 902,482
<TOTAL-REVENUES> 1,108,813 1,404,752
<CGS> 486,222 641,411
<TOTAL-COSTS> 727,182 965,913
<OTHER-EXPENSES> 122,223 238,058 <F1>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 30,884 43,670
<INCOME-PRETAX> 20,025 (112,796)
<INCOME-TAX> 6,700 5,000
<INCOME-CONTINUING> 13,225 (117,796)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 40,000
<NET-INCOME> 13,325 (77,796)
<EPS-PRIMARY> 0.10 (2.05)
<EPS-DILUTED> 0.10 (2.05)
<FN>
<F1> In 1993, StorageTek recognized restructuring and other
charges of $74,772,000.
</FN>
</TABLE>
